<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 JUNE 30, 1999
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 of (I.R.S. employer identification
incorporation or organization) number)
----------------------
41300 CHRISTY STREET THE MERCURY CENTRE, WYCOMBE LANE
FREMONT WOOBURN GREEN
CALIFORNIA 94538 HIGH WYCOMBE, BUCKS HP10 0HH
UNITED STATES OF AMERICA UNITED KINGDOM
(510) 360-3700 (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 August 3, 1999, there were 12,860,124 Ordinary shares of L0.20 each
nominal value, outstanding.
<PAGE>
INSIGNIA SOLUTIONS PLC
PART 1 - FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheet at June 30, 1999
and December 31, 1998 (Unaudited).....................................................3
Condensed Consolidated Statement of Operations for the three months
and six months ended June 30, 1999 and 1998 (Unaudited)...............................4
Condensed Consolidated Statement of Cash Flows for the six months
ended June 30, 1999 and 1998 (Unaudited)..............................................5
Notes to Unaudited Condensed Consolidated Financial Statements........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................................10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................21
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................................23
SIGNATURES .....................................................................................24
</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>
June 30, December 31,
1999 1998
-------------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,176 $ 6,798
Restricted cash 120 186
Cash and cash equivalents held in escrow 6,770 9,100
Accounts receivable, net of allowances
of $211 and $1,449, respectively 762 1,706
Prepaid and other current assets 1,301 1,515
-------------------- -------------------
Total current assets 10,129 19,305
Property and equipment, net 825 1,074
Restricted cash 250 250
Other noncurrent assets 325 382
-------------------- -------------------
$ 11,529 $ 21,011
-------------------- -------------------
-------------------- -------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 946 $ 1,608
Accrued liabilities 2,135 2,265
Accrued royalties 1,386 4,309
Income taxes payable 960 994
Deferred revenue 221 262
Customer deposits 95 104
Capital lease obligations 11 51
-------------------- -------------------
Total current liabilities 5,754 9,593
-------------------- -------------------
Contingency (Note 6)
Shareholders' equity:
Preferred shares - -
Ordinary shares 4,241 4,164
Additional paid-in capital 34,832 34,725
Accumulated deficit (32,837) (27,010)
Cumulative currency translation adjustment (461) (461)
-------------------- -------------------
Total shareholders' equity 5,775 11,418
-------------------- -------------------
$ 11,529 $ 21,011
-------------------- -------------------
-------------------- -------------------
</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 Six months ended
June 30, June 30,
-------------------------------- ----------------------------------
1999 1998 1999 1998
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net revenues:
License $ 1,418 $ 2,038 $ 3,598 $ 6,798
Service 89 296 217 518
---------------- --------------- ---------------- ----------------
Total net revenues 1,507 2,334 3,815 7,316
---------------- --------------- ---------------- ----------------
Cost of net revenues:
License 822 1,676 1,915 4,154
Service 130 248 308 689
---------------- --------------- ---------------- ----------------
Total cost of net revenues 952 1,924 2,223 4,843
---------------- --------------- ---------------- ----------------
Gross profit 555 410 1,592 2,473
---------------- --------------- ---------------- ----------------
Operating expenses:
Sales and marketing 1,432 2,038 3,060 4,601
Research and development 1,403 1,690 3,018 3,186
General and administrative 525 1,074 1,503 2,435
---------------- --------------- ---------------- ----------------
Total operating expenses 3,360 4,802 7,581 10,222
---------------- --------------- ---------------- ----------------
Operating loss (2,805) (4,392) (5,989) (7,749)
Interest income, net 101 358 256 509
Other income (expense), net (3) 40 (50) 14,831
---------------- --------------- ---------------- ----------------
Income (loss) before income taxes (2,707) (3,994) (5,783) 7,591
Provision (benefit) for income taxes 4 (317) 44 3,636
---------------- --------------- ---------------- ----------------
Net income (loss) $ (2,711) $ (3,677) $ (5,827) $ 3,955
---------------- --------------- ---------------- ----------------
---------------- --------------- ---------------- ----------------
Net income (loss) per share:
Basic $ (0.21) $ (0.30) $ (0.46) $ 0.33
---------------- --------------- ---------------- ----------------
---------------- --------------- ---------------- ----------------
Diluted $ (0.21) $ (0.30) $ (0.46) $ 0.32
---------------- --------------- ---------------- ----------------
---------------- --------------- ---------------- ----------------
Weighted average equivalent shares:
Basic 12,781 12,111 12,736 12,094
---------------- --------------- ---------------- ----------------
---------------- --------------- ---------------- ----------------
Diluted 12,781 12,111 12,736 12,358
---------------- --------------- ---------------- ----------------
---------------- --------------- ---------------- ----------------
</TABLE>
See accompanying notes.
Page 4
<PAGE>
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,827) $ 3,955
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation 324 354
Other (42) (14,731)
Net changes in assets and liabilities:
Restricted cash 66 -
Accounts receivable, net 944 5,223
Prepaid and other current assets 214 (439)
Prepaid income taxes - 864
Other noncurrent assets 57 84
Accounts payable (662) (668)
Accrued liabilities (130) 444
Customer deposits (9) (450)
Accrued royalties (2,923) (1,656)
Deferred revenue (41) (402)
Income taxes (34) 2,982
Noncurrent liabilities - 98
--------------- --------------
Net cash used in operating activities (8,063) (4,342)
--------------- --------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 101 70
Purchases of property and equipment (134) (394)
Purchases of short-term investments, net - (6,141)
Proceeds from sale of product line - 15,862
Product line sale proceeds held in escrow (170) (8,900)
Product line sale proceeds released from escrow 2,500 -
--------------- --------------
Net cash provided by investing activities 2,297 497
--------------- --------------
Cash flows from financing activities:
Payments made under capital leases (40) (70)
Proceeds from issuance of shares, net 184 195
--------------- --------------
Net cash provided by financing activities 144 125
--------------- --------------
Net decrease in cash and cash equivalents (5,622) (3,720)
Cash and cash equivalents at beginning of the period 6,798 10,641
--------------- --------------
Cash and cash equivalents at end of the period $ 1,176 $ 6,921
--------------- --------------
--------------- --------------
</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 six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the entire fiscal year,
which ends on December 31, 1999.
These unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the year ended
December 31, 1998 included in Insignia Solutions plc's ("Insignia") 1998 Annual
Report and Form 10-K.
NOTE 2. INCOME TAX PROVISION (BENEFIT)
Insignia's provision for income taxes for the six months ended June 30, 1999,
primarily represents certain non-U.S. taxes arising from sales to customers in
Japan. Insignia accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in
Insignia's financial statements or tax returns. In estimating future tax
consequences, Insignia generally considers all expected future events other than
enactments of changes in the tax law or rates.
NOTE 3. NET INCOME (LOSS) PER SHARE
Net income (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 warrants and stock options (using the modified treasury stock
method). Under the Basic method of calculation of EPS, ordinary equivalent
shares are excluded from the computation. Under the Diluted method of
calculation of EPS, ordinary share equivalents are excluded from the computation
if their effect is anti-dilutive.
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and
Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. This statement
becomes effective for all fiscal quarters of fiscal years beginning after June
15, 1999. In June 1999, the FASB issued Statement of Financial Accounting
Standard No. 137 "Accounting for Derivative Instruments - Deferral of the Effect
Date of FAS Statement No. 133" ("FAS 137"). FAS 137 defers the effective date of
FAS 133 until June 15, 2000. Insignia will adopt FAS 133 in 2001. Insignia
expects the adoption of FAS 133 will not affect results of operations.
Page 6
<PAGE>
In March 1998, the AICPA issued Statement of Position No. 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use and is effective for financial
statements for fiscal years beginning after December 15, 1998. Insignia has
adopted SOP 98-1 in 1999. The adoption of SOP 98-1 did not have a material
impact on the results of operations.
NOTE 5. COMPREHENSIVE INCOME (LOSS)
In 1998, Insignia adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130"). FAS 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. FAS 130 also requires that an entity classify
items of other comprehensive earnings by their nature in an annual financial
statement. The accumulated other comprehensive loss at June 30, 1999 and
December 31, 1998 related to cumulative currency translation adjustments.
Total comprehensive loss was not different from the net loss reported for the
six months ended June 30, 1999.
NOTE 6. CONTINGENCIES
MICROSOFT
Insignia has a non-exclusive, worldwide license from Microsoft ("Microsoft
Distribution Agreement") to reproduce, adapt and distribute the currently
available versions of Windows and MS-DOS that are included as a component of
Insignia's SoftWindows products. Insignia pays Microsoft a per unit royalty for
copies of Insignia's products sold that include a version of Windows and MS-DOS.
The current royalty amounts are based upon certain estimates of the volume of
Insignia's sales of SoftWindows. The Microsoft Distribution Agreement expired on
March 31, 1997, but was extended until September 30, 1998 on substantially the
same terms. Insignia subsequently entered into a new distribution agreement
dated October 1, 1998 on substantially the same terms, effective for one year.
In January 1999, pursuant to this agreement, Microsoft began an audit of the
royalties paid in 1997 and 1998. Insignia has not been notified of the outcome
of the audit by Microsoft. If it is shown that the Company has made an
underpayment of royalties under this agreement, Insignia may be subject to
penalties in addition to the payment of the underpaid royalties.
CITRIX
In February 1998, Insignia disposed of its NTRIGUE technology for $17.687
million. A substantial portion of the total purchase price paid by the Buyer
("Citrix") was placed in escrow to secure Insignia's agreement to indemnify
Citrix with respect to certain matters.
On January 29, 1999, Insignia received an indemnity claim from Citrix for an
amount estimated by Citrix to not exceed $6.25 million. The claim was made
pursuant to the Asset Purchase Agreement between Insignia and Citrix under which
Citrix purchased Insignia's NTRIGUE product line in February 1998.
Page 7
<PAGE>
Citrix' indemnity claim is based on a declaratory relief action that Citrix
filed against GraphOn Corporation ("GraphOn") in November 1998 in the United
States District Court, Southern District of Florida. Citrix' action against
GraphOn seeks a declaratory judgement that Citrix does not infringe any GraphOn
proprietary rights and that Citrix has not misappropriated any trade secrets or
breached an agreement to which GraphOn is a party. Citrix filed the action in
response to and to resolve assertions first made by GraphOn, and disclosed to
Citrix in January 1998, that Insignia used GraphOn's confidential information to
develop certain of Insignia's products, possibly including products Insignia
sold to Citrix in February 1998. The Court dismissed the complaint, but Citrix
has subsequently filed an appeal. GraphOn has not filed an action against either
Insignia or Citrix relating to its assertions and Insignia believes such
assertions by GraphOn are without merit or basis. Accordingly, Insignia
contests Citrix' indemnity claim.
NOTE 7. SEGMENT INFORMATION
In 1998, Insignia adopted Statement of Financial Accounting Standards 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"). FAS 131 supersedes FAS 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of Insignia's reportable segments. FAS 131
also requires disclosures about products and services, geographic areas, and
major customers. The adoption of FAS 131 did not affect results of operations
but did affect the disclosure of segment information.
Insignia operates in a single industry segment providing virtual machine
technology which enables software applications and operating systems to be
run on various computer platforms. In the second quarter of 1999, Ingram
Micro U.S. and Sun Microsystems, Inc. accounted for 14% and 21% of total
revenues, respectively. In the second quarter of 1998, Ingram Micro U.S. and
Sun Microsystems, Inc. accounted for 13% and 40% of total revenues,
respectively. No other customer accounted for 10% or more of Insignia's total
revenues during the second quarter of 1999 and 1998.
Page 8
<PAGE>
GEOGRAPHIC INFORMATION
Financial information by geographical region is summarized below (in
thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers:
United States $ 1,273 $ 1,307 $ 3,354 $ 5,973
International 234 1,027 461 1,343
------------- ------------ ------------ -------------
Consolidated $ 1,507 $ 2,334 $ 3,815 $ 7,316
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
Intercompany revenues:
United States $ 167 $ 86 $ 336 $ 551
International 51 450 162 990
------------- ------------ ------------ -------------
Consolidated $ 218 $ 536 $ 498 $ 1,541
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
Operating loss:
United States $ (710) $ (2,665) $ (1,794) $ (3,201)
International (2,095) (1,727) (4,195) (4,548)
------------- ------------ ------------ -------------
Consolidated $ (2,805) $ (4,392) $ (5,989) $ (7,749)
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
Identifiable assets:
United States $ 2,243 $ 7,774
International 22,225 32,083
Intercompany items and eliminations (12,939) (10,066)
------------ -------------
Consolidated $ 11,529 $ 29,791
------------ -------------
------------ -------------
</TABLE>
All of the international revenues and substantially all of the international
identifiable assets relate to Insignia's operations in the United Kingdom.
Intercompany sales are accounted for at prices intended to approximate those
that would be charged to unaffiliated customers.
Page 9
<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
Insignia's Form 10-K for the year ended December 31, 1998 (the "Form 10-K").
FUTURE OPERATING RESULTS
This Form 10-Q contains forward looking statements. These forward looking
statements concern matters which include the revenue model and market for Jeode,
international sales, gross margins, operating expenses, the availability of
licenses to third-party proprietary rights, Year 2000 compliance, exchange rate
fluctuations and Insignia's liquidity and capital needs and other statements
regarding matters that are not historical. 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,
among the other factors that could cause actual results to differ materially are
the following: the demand for Jeode; the performance and functionality of Jeode;
Insignia's ability to deliver on time, and market acceptance of new products or
upgrades of existing products; the timing of, or delay in, large customer
orders; continued availability of technology and intellectual property license
rights; product life cycles; quality control of products sold; competitive
conditions in the industry; economic conditions generally or in various
geographic areas; and the risks listed from time to time in the reports that
Insignia files with the U.S. Securities and Exchange Commission.
Insignia's future performance depends upon sales of products within Insignia's
Jeode product line, which is a new product. Jeode became available for sale in
March 1999. Jeode may not achieve or sustain market acceptance or provide the
desired revenue levels. The failure of the Jeode product to provide an adequate
level of performance and functionality, or the lack of market acceptance of this
product for any reason, would harm Insignia's business, financial condition and
results of operations. If the Jeode product is successful and developed on a
timely basis, Insignia will be required to further develop direct sales channels
in the embedded systems market and to hire and train more direct sales
personnel. Competition for qualified sales personnel is intense and Insignia may
not be able to attract the personnel needed to market and sell products in the
embedded systems market. Insignia anticipates increased operating expenses as it
develops the organization to market, sell and support the product, before any
revenue is recognized from sales of the product. Insignia may not experience
growth in revenues in any particular period when compared to prior periods. Any
quarterly or annual shortfall in net revenues in relation to expectations would
harm Insignia's business, operating results and financial condition. Insignia
may not be able to achieve or sustain profitability. If Insignia's revenues grow
more slowly than anticipated, or if Insignia's operating expenses exceed
expectations and cannot be adjusted, Insignia's operating losses would continue
or increase. In future periods, Insignia's operating results may fall below the
levels expected by securities analysts and shareholders, which would result in a
substantial decline in the trading price of Insignia's shares and could have an
adverse effect on the liquidity of Insignia's shares.
Insignia's Annual Report on Form 10-K for 1998 includes an analysis of certain
risks of Insignia's business, including risks which are inherent to software
development, as well as
Page 10
<PAGE>
specific risks relating to the competitive environment in which Insignia
operates. Although Insignia has sought to identify the most significant risks
to its business, Insignia cannot predict whether, or to what extent any such
risks may be realized. Also, Insignia may not have identified all possible
issues which Insignia might face. Potential risks and uncertainties include,
without limitation, those mentioned in Insignia's Form 10-K; and in
particular the continued acceptance by the marketplace of Insignia's products
and Insignia's ability to successfully develop new products in the future.
Investors should carefully read Insignia's filings with the Securities and
Exchange Commission, together with this Form 10-Q, and consider all trends
and uncertainties concerning Insignia's business before making an investment
decision with respect to Insignia's stock.
The following table sets forth the unaudited condensed consolidated results of
operations as a percentage of total revenues for the three and six month periods
ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------- ------------------------------------
1999 1998 1999 1998
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net revenues:
License 94.1% 87.3% 94.3% 92.9%
Service 5.9% 12.7% 5.7% 7.1%
----------------- ----------------- ---------------- -----------------
Total net revenues 100.0% 100.0% 100.0% 100.0%
----------------- ----------------- ---------------- -----------------
Cost of net revenues:
License 54.6% 71.8% 50.2% 56.8%
Service 8.6% 10.6% 8.1% 9.4%
----------------- ----------------- ---------------- -----------------
Total cost of net revenues 63.2% 82.4% 58.3% 66.2%
----------------- ----------------- ---------------- -----------------
Gross profit 36.8% 17.6% 41.7% 33.8%
----------------- ----------------- ---------------- -----------------
Operating expenses:
Sales and marketing 95.0% 87.3% 80.2% 62.9%
Research and development 93.1% 72.4% 79.1% 43.5%
General and administrative 34.8% 46.0% 39.4% 33.3%
----------------- ----------------- ---------------- -----------------
Total operating expenses 222.9% 205.7% 198.7% 139.7%
----------------- ----------------- ---------------- -----------------
Operating loss (186.1%) (188.1%) (157.0%) (105.9)%
Interest income, net 6.7% 15.3% 6.7% 7.0%
Other income (expense), net (0.2%) 1.7% (1.3%) 202.7%
----------------- ----------------- ---------------- -----------------
Income (loss) before income taxes (179.6%) (171.1%) (151.6%) 103.8%
Provision (benefit) for income taxes 0.3% (13.6%) 1.1% 49.7%
----------------- ----------------- ---------------- -----------------
Net income (loss) (179.9%) (157.5%) (152.7%) 54.1%
----------------- ----------------- ---------------- -----------------
----------------- ----------------- ---------------- -----------------
</TABLE>
Page 11
<PAGE>
OVERVIEW
Insignia, which commenced operations in 1986, develops, markets and supports
virtual machine technology which enables software applications and operating
systems to be run on various computer platforms.
Insignia's principal product line in recent years has been SoftWindows-TM-.
This product enables Microsoft Windows ("Windows"-Registered Trademark-)
applications to be run on most Apple Computer Inc. ("Apple"-Registered
Trademark-) Macintosh computers and many UNIX workstations. Revenues from
this product line have been declining since 1995 as a result of two factors.
One factor is the declining Macintosh market. The other factor is increased
competition which has led to reduced prices and margins. In late 1997,
Insignia began a strategic review of its business and explored new markets
that would leverage Insignia's 10 years of emulation software development
experience.
In January 1998, Insignia announced its intention to launch a new product
line. This product line, called Jeode-TM-, is based on Insignia's Embedded
Virtual Machine ("EVM"-TM-) technology. Jeode is Insignia's implementation of
Sun Microsystems, Inc.'s ("Sun") Java-Registered Trademark- technology
developed specifically for embedded systems. The Jeode platform is enabled by
Insignia's EVM and is designed to enable software developers to create
reliable, efficient and predictable embedded products. The product became
available for sale in March 1999 and is expected to be the principal product
line in 1999 and the foreseeable future. Insignia expects its Jeode product
line to generate revenue in 1999. Revenue from the Jeode product line will
initially be derived from three main sources: the sale of a development
license, the sale of annual maintenance and support, and a commercial use
royalty based on shipments of products that include Jeode technology.
Between December 1995 and May 1998, Insignia shipped NTRIGUE-TM-, a Windows
compatibility client/server product that supported multiple X-terminals,
workstation clients, Macintosh computers, PCs, network computers and Net PCs
from a Windows NT-based server. Insignia disposed of its NTRIGUE technology in
February 1998 for $17.687 million.
In the second quarter of 1999, Insignia shipped two product lines: SoftWindows
and Jeode. Insignia derived its revenue from the shipment of products and from
offering support services. The majority of revenues were derived from the
shipment of SoftWindows products.
REVENUES
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------------------- -------------------------------
1999 1998 1999 1998
-------------- --------------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C>
License revenue $ 1,418 $ 2,038 $ 3,598 $ 6,798
Service revenue 89 296 217 518
-------------- --------------- ------------- ------------
Total net revenue $ 1,507 $ 2,334 $ 3,815 $ 7,316
-------------- --------------- ------------- ------------
-------------- --------------- ------------- ------------
</TABLE>
Insignia derives its SoftWindows revenues from the sale of packaged software
products 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
Page 12
<PAGE>
engineering activities, training, and annual maintenance contracts are
classified as service revenue.
In the second quarter of 1999, total revenues declined by 35% compared to total
revenues for the second quarter of 1998. In the six months ended June 30, 1999,
total revenues declined by 48% compared to revenues for the first six months of
1998. The decline is primarily due to reduced demand for cross-compatibility
solutions and the sale of Insignia's NTRIGUE business.
License revenues in the three months ended June 30, 1999 were 94% of total
revenues. License revenues in the three months ended June 30, 1998 were 87% of
total revenues. In the six months ended June 30, 1999 license revenues were 94%
of total revenues. In the six months ended June 30, 1998, license revenues were
93% of total revenues. In the second quarter of 1999, license revenues declined
30% compared to license revenues in the second quarter of 1998. For the six
months ended June 30, 1999, license revenue declined 47% compared to the same
period in 1998.
Service revenue in the second quarter of 1999 was 70% lower than service revenue
in the second quarter of 1998. Service revenue for the six months ended June 30,
1999 was 58% lower than service revenue for the same period in 1998, primarily
as a result of a decreased number of UNIX support contracts resulting from lower
sales of UNIX products.
Sales of Macintosh-based products in the second quarter of 1999 increased by 31%
compared to sales in the second quarter of 1998, but decreased by 38% compared
to the first quarter of 1999. In the second quarter of 1998, Macintosh-based
sales decreased due to the impending release of a new version of the product in
the third quarter of 1998. For the six months ended June 30, 1999, sales of
Macintosh-based products decreased 34% compared to the same period in 1998.
Revenue from the sale of Insignia's products for Macintosh computers accounted
for 59% of total revenues in the three months ended June 30, 1999 and 29% of
total revenues in the three months ended June 30, 1998. Revenue from the sale of
Insignia's products for Macintosh computers accounted for 61% of total revenues
in the six months ended June 30, 1999 and 48% of total revenues in the six
months ended June 30, 1998.
Revenues from the sale of Insignia's products for UNIX computers accounted for
41% of total revenues in the three months ended June 30, 1999 and 69% of total
revenues in the three months ended June 30, 1998. Revenues from the sale of
Insignia's products for UNIX computers accounted for 39% of total revenues in
the six months ended June 30, 1999 and 42% of total revenues in the six months
ended June 30, 1998. In the second quarter of 1999, sales of UNIX-based products
decreased by 62% compared to sales in the second quarter of 1998. For the six
months ended June 30, 1999, UNIX sales decreased by 52% compared to the same
period in 1998.
Jeode service revenue accounted for less than one percent of revenue for the
three months ended June 30, 1999. There was no Jeode revenue in any previous
quarters.
In the three months ended June 30, 1998, revenue from the sale of NTRIGUE
products accounted for 4% of total revenues. In the six months ended June 30,
1998, revenue from the sale of NTRIGUE products accounted for 10% of total
revenues. There was no NTRIGUE revenue in 1999 as Insignia's NTRIGUE product
line was sold in early 1998.
Page 13
<PAGE>
Insignia distributes its packaged products within the United States and
internationally through multiple distributors and resellers. Insignia offers
certain return privileges to its customers including product exchange privileges
and price protection. Insignia recognizes revenues from packaged products upon
shipment with provisions for estimated future returns, exchanges and price
protection being recorded as a reduction of total revenues.
The Company is establishing a specialized direct sales force to sell the Jeode
product line. The Jeode product line revenue model is based on original
equipment manufacturers ("OEMs") customer transactions. Revenue from the Jeode
product is expected to be derived from three main sources: the sale of a
development license, the sales of annual maintenance and support, and a
commercial use royalty based on shipments of products that include Jeode
technology.
Sales to distributors and OEM's representing more than 10% of total revenue in
each period accounted for the following percentages of total revenue.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Distributors:
Software House International * * 14% *
Sun Microsystems 21% 40% 10% 24%
Mitsubishi * * 10% *
Ingram Micro 14% 13% * 21%
All Distributors: 73% 81% 54% 69%
* Less than 10%
</TABLE>
Sales to customers outside the United States, derived mainly from customers in
Europe and Asia, represented approximately 16% of total revenues in the three
months ended June 30, 1999 and 49% of total revenues in the three months ended
June 30, 1998, and 22% of total revenues in the six months ended June 30, 1999
and 21% of total revenues in the six months ended June 30, 1998. Movements in
currency exchange rates did not have a material impact on total revenues in the
three or six months ended June 30, 1999. However, movements in currency exchange
rates could affect Insignia's future revenues and results of operations.
COST OF REVENUES AND GROSS MARGIN
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
Cost of license revenue $ 822 $ 1,676 $ 1,915 $ 4,154
Gross margin: license revenue 42% 18% 47% 39%
Cost of service revenue 130 248 308 689
Gross margin: service revenue (46%) 16% (42%) (33%)
Total cost of revenues $ 952 $ 1,924 $ 2,223 $ 4,843
Gross margins: total revenues 37% 18% 42% 34%
</TABLE>
Page 14
<PAGE>
Cost of license revenue comprises mostly royalties to third parties, along with
the 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.
Insignia's distribution agreement with Microsoft Corporation expired on March
31, 1997, but was extended until September 30, 1998 on substantially the same
terms. Insignia subsequently entered into a new distribution agreement dated
October 1, 1998 on substantially the same terms, effective for one year.
Termination or expiration without renewal of the Microsoft Distribution
Agreement would result in the inability of Insignia to sell its SoftWindows
products. However, since 1995, revenues and margins from SoftWindows have been
declining, primarily as a result of competitive pricing pressure. Revenues and
margins on the SoftWindows product line are at a level where Insignia's future
can no longer depend on them.
Insignia believes that the significant factors affecting the Jeode gross margin
will include pricing of the development license, pricing of the unit usage and
royalties to third parties such as Sun Microsystems. In early 1999, Insignia
signed a five-year agreement with Sun Microsystems under which Sun established
Insignia as an authorized Virtual Machine provider. Under this agreement
Insignia will pay Sun a per unit royalty on each Jeode-enabled embedded product
shipped by Insignia's customers, plus a royalty on all development licenses put
in place between Insignia and its customers.
Insignia's gross margin for license revenue is significantly affected by many
factors, including pricing of Insignia's products, royalties paid to third
parties, the mix of products licensed, the channels through which Insignia's
products are distributed and product maturity. Insignia's gross margin for
license revenue can also be affected in particular periods by pricing strategies
and return privileges employed in connection with new product introductions and
upgrades. License revenue gross margins in the quarter ended June 30, 1999 were
42%, compared to 18% for the same period in 1998. The prior year quarterly gross
margin was low due to increased returns on the NTRIGUE product line. For the six
months ended June 30, 1999, license revenue gross margins were 47%, compared to
39% for the same period in 1998.
Gross margin for service revenue decreased in the second quarter of 1999 to
(46%) from 16% in the same period of 1998, and decreased for the six months
ending June 30, 1999 to (42%) from (33%) in the same period of 1998. The decline
is a result of the decreased UNIX service revenue.
Service revenue gross margins for 1999 are expected to increase due to the
required maintenance and upgrade contracts for each Jeode product sale.
Page 15
<PAGE>
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
Sales and marketing $ 1,432 $ 2,038 $ 3,060 $ 4,601
Percentage of total revenues 95% 87% 80% 63%
Research and development $ 1,403 $ 1,690 $ 3,018 $ 3,186
Percentage of total revenues 93% 72% 79% 44%
General and administrative $ 525 $ 1,074 $ 1,503 $ 2,435
Percentage of total revenues 35% 46% 39% 33%
</TABLE>
Sales and marketing expenses include advertising and promotional expenses, trade
shows, personnel and related overhead costs, and salesperson commissions. Sales
and marketing expenses decreased by 30% in the quarter ended June 30, 1999 from
the quarter ended June 30, 1998, and by 33% for the six months ended June 30,
1999 from the same period of 1998. The decrease is due to reduced spending on
advertising programs and staffing. Insignia anticipates sales and marketing
expenses to increase in the second half of 1999 as Insignia continues to ramp up
its marketing and direct sales organization for its Jeode product line.
Research and development expenses consist primarily of personnel costs, overhead
costs relating to occupancy and equipment depreciation. Research and development
expenses decreased by 17% in the three months ended June 30, 1999 over the same
period in 1998. The second quarter 1998 research and development expenses
included a one-time cost for technology purchased and expensed. Excluding this
one-time expense, the second quarter of 1999 increased 7% over the same period
in 1998. Research and development expenses decreased by 5% in the six months
ended June 30, 1999 over the six months ended June 30, 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 1999 and 1998, no development
expenditures 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 51% in the three
months ended June 30, 1999 over the same period of 1998 as a result of reducing
a large reserve for a debt that has now been collected. Excluding the impact of
the reserve adjustment, general and administrative expenses decreased by 11% in
the three months ended June 30, 1999 over the same period of 1998, and by 20%
for the six months ended June 30, 1999 over the same period of 1998. The decline
is due to reduced headcount and reduced legal fees.
Page 16
<PAGE>
INTEREST INCOME, NET
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
Interest income, net $ 101 $ 358 $ 256 $ 509
Percentage of total revenues 7% 15% 7% 7%
</TABLE>
Interest income, net decreased from $358,000 in the three months ended June 30,
1998 to $101,000 in the three months ended June 30, 1999 due primarily to
decreased interest income earned on Insignia's cash and cash equivalents. For
the six months ended June 30, 1999, interest income, net decreased from $509,000
to $256,000.
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
Other income (expense), net $ (3) $ 40 $ (50) $ 14,831
Percentage of total revenues -% 2% (1%) 203%
</TABLE>
Other income (expense), net decreased from income of $40,000 in the three months
ended June 30, 1998 to an expense of $3,000 in the three months ended June 30,
1999, and primarily comprised foreign exchange gains (losses) in both periods.
In the six months ended June 30, 1999, other income (expense), net decreased
from income of $14.831 million, for the same period last year, to an expense of
$50,000. The income in the first six months of 1998 was a result of the gain on
disposal of the NTRIGUE product line of $14.731 million in the first quarter of
1998. This gain comprised gross disposal proceeds of $17.687 million less $2.956
million of transaction expenses, employment terminations and costs and losses
related to the property and equipment sold or written down in value.
In the six months ended June 30, 1999, Insignia realized a foreign exchange loss
of $50,000 compared to a gain of $100,000 in the six months ended June 30, 1998.
Approximately 85% of Insignia's total revenues and over 40% of its operating
expenses are denominated in United States dollars. Most of the remaining
revenues and expenses of Insignia are pound sterling denominated and
consequently Insignia is exposed to fluctuations in pound sterling exchange
rates. To hedge against this currency exposure, Insignia 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 June 30,
1999 and December 31, 1998. However, currency fluctuations could harm Insignia's
results of operations in the future.
Page 17
<PAGE>
Insignia has, at times, 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 interest rate risk and will fall in
value if market interest rates increase. Insignia attempts to limit this
exposure by investing primarily in short-term securities.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Provision (benefit) for income $ 4 $ (317) $ 44 $ 3,636
taxes
Effective income tax rate - - - -
</TABLE>
Insignia's provision for income taxes for the three and six months ended June
30, 1999 primarily represents certain non-U.S. taxes arising from sales to
Japan. Insignia's benefit for income taxes for the three months ended June 30,
1998 primarily represent a refund from the prior year tax return. The six months
ended June 30, 1998 primarily represent a tax provision in 1998 reflecting
certain non-U.S. taxes arising upon the disposal of the Company's NTRIGUE
product line, net of offsetting operating losses. Insignia has recorded a full
valuation allowance against all deferred tax assets, primarily comprising net
operating losses, on the basis that significant uncertainty exists with respect
to realization.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- ------------------
(in thousands)
<S> <C> <C>
Cash, cash equivalents and $ 1,546 $ 7,234
investments
Cash and cash equivalents $ 6,770 $ 9,100
held in escrow
Working capital $ 4,375 $ 9,712
Net cash used in operating $ (8,063) $ (13,687)
activities
</TABLE>
Insignia is in the process of transitioning its product focus from compatibility
products to its Jeode product line based on Insignia's EVM technology. This
change in product focus has resulted in a redirection of available resources
from Insignia's historical revenue base towards the development and marketing
efforts associated with the Jeode platform, which was not released for general
availability until March 1999. As a result of this change in product strategy
and associated redirection of resources to new product development, Insignia's
financial position weakened during the first half of 1999.
Insignia's cash, cash equivalents and short-term investments, including cash and
cash equivalents of $6.77 million held in escrow, were $8.3 million at June 30,
1999, a decrease of $8.0 million from $16.3 million at December 31, 1998, while
working capital decreased to $4.4 million at
Page 18
<PAGE>
June 30, 1999, from $9.7 million at December 31, 1998. The principal source
of cash funding came from receivable collections and NTRIGUE product line
sales proceeds released from escrow.
Insignia continues to face significant risks associated with the successful
execution of its new product strategy. These risks include, but are not limited
to continued technology and product development, introduction and market
acceptance of new products, changes in the marketplace, liquidity, competition
from existing and new competitors which may enter the marketplace and retention
of key personnel. Due to the generally longer sales cycles expected to be
associated with the Jeode platform, Insignia does not currently have accurate
visibility of future order rates and demand for its products generally. Jeode
platform products may never achieve market acceptance.
Insignia believes that additional financing will be necessary before December
31, 1999, as its existing cash and cash equivalents are insufficient to meet
Insignia's operating and capital requirements for the next six months. Insignia
is currently considering various financing alternatives. Insignia may not be
able to obtain adequate funding when needed, on acceptable terms or at all. The
failure to raise additional funds on a timely basis and on sufficiently
favorable terms would jeopardize Insignia's business.
Insignia's liquidity may be reduced in the future by factors such as higher
interest rates, inability to borrow without collateral, availability of capital
financing and continued operating losses. Further, significant fluctuations in
quarterly operating results has had and, in the future, may continue to have a
negative affect on Insignia's liquidity. Factors such as price reductions, the
introduction and market acceptance of new products and product returns have
contributed to this quarterly variability. Moreover, Insignia's expense levels
are based in part on expectations of future sales levels, and a shortfall in
expected sales could therefore result in a disproportionate decrease in results
of operations. As such, the revenues or results of operations in some future
period may be below the expectations of investors, which would likely result in
a significant reduction in the market price of Insignia's shares. A decline in
the market price of Insignia's shares would have a negative effect on Insignia's
ability to raise needed capital on acceptable terms and conditions.
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, embedded 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.
Insignia's assessment of the impact of this issue has encompassed 1) software
held for resale; 2) internally utilized systems; 3) computerized information and
software provided by third parties which might be integral to customer usage of
Insignia's products; 4) compliance issues related entirely to the state of
readiness by customers and vendors and 5) Year 2000 cost. Set forth below is the
status of each review and the estimated impact, to the extent management can
determine at this time.
Page 19
<PAGE>
SOFTWARE HELD FOR RESALE
Based on Insignia's assessment to date, Insignia believes that all versions of
Jeode, SoftWindows 98 products, SoftWindows95 products, RealPC and NTRIGUE, a
product Insignia no longer ships, are Year 2000 compliant. Earlier versions of
SoftWindows and all versions of Soft PC, a product Insignia 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 Insignia's
customers will install the Year 2000 compliant version of Insignia's products in
a timely manner, which could lead to failure of customer systems and product
liability claims against Insignia. Even if Insignia's products are Year 2000
compliant, Insignia may in the future be subject to claims based on Year 2000
issues in the products of other companies, or 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 Insignia for Year
2000 damages, including consequential damages, could harm Insignia's business,
financial condition and results of operations.
INTERNAL SYSTEMS
Insignia has carried out an assessment of its own internal systems and
believes that they are all Year 2000 compliant.
THIRD-PARTY SYSTEMS
Insignia has reviewed its material third-party relationships such as key
suppliers and distributors. Insignia believes all computerized information and
software provided by third parties that might be integral to customer usage of
Insignia's products is Year 2000 compliant.
Although Insignia believes that its internal critical processes are Year 2000
ready, Insignia also recognizes that it is vulnerable, as are most
organizations, to the inability of third-party external interface suppliers and
utility organizations to achieve Year 2000 readiness. The most reasonable worst
case scenario could include failure of power and water supplies, major
transportation disruptions, and failures of communications and financial systems
- - any one of which could have a major and material effect on Insignia's ability
to produce its products and deliver services to its customers. While Insignia
has contingency plans in place to address most issues under its control, a
problem outside its control could result in a delay in product shipments
depending on the nature and severity of the problems.
CUSTOMERS AND VENDORS
Insignia'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 Insignia's customers
because of the failure of such noncompliant systems or software or for any other
reason, could also affect the perceived performance of Insignia's products,
which could have a negative effect on Insignia's competitive position. In
addition, Insignia 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 Insignia, which could
result in a material adverse effect on Insignia's business, financial condition
and results of operations.
Page 20
<PAGE>
YEAR 2000 COST
The total cost associated with preparation for the Year 2000 has not been, and
is not expected to be, material to Insignia's business, financial condition or
results of operations. Nevertheless, Insignia 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 Insignia or its customers or suppliers will not have a
material adverse effect on Insignia's business, financial condition and results
of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Insignia enters into derivative financial instruments such as currency option
contracts to hedge certain anticipated, but not yet committed, transactions
expected to be denominated in foreign currencies. Insignia does not use
derivative financial instruments for trading or speculative purposes. Insignia's
downside risk with respect to currency option contracts (British pounds) is
limited to the premium paid for the right to exercise the option. Premiums paid
for options outstanding as of June 30, 1999 were not material.
Page 21
<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 May 27, 1999. 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. Albert E. Sisto was re-elected and Vincent
S. Pino was elected as Directors at the meeting. The Directors whose term
of office continues after the meeting are Nicholas, Viscount Bearsted and
Richard M. Noling.
(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:
2. To re-appoint PricewaterhouseCoopers 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
3,359,950 1,950
3. To elect as a Director Vincent S. Pino.
FOR AGAINST
3,213,847 144,261
4. To re-elect as a Director Albert E. Sisto.
FOR AGAINST
3,208,408 147,100
5. To approve a resolution to amend the Company's 1995 Employee Share
Purchase Plan.
FOR AGAINST
2,838,659 519,469
6. To approve a resolution to amend the Company's UK Employee Share Option
Scheme 1996.
FOR AGAINST
2,836,639 520,269
7. To approve a resolution to amend the Company's 1995 Incentive Stock Option
Plan for US Employees.
FOR AGAINST
2,838,789 519,919
8. To approve a resolution to grant authority to the Directors to allot
relevant securities for a period of five years without further shareholder
approval.
FOR AGAINST
2,788,021 564,997
Page 22
<PAGE>
9. To approve a resolution to grant authority to the Directors to allot equity
securities for a period of five years without first offering such securities to
existing shareholders.
FOR AGAINST
2,791,871 562,147
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Report:
Exhibit 10.47 Registrant's 1995 Employee Share Purchase Plan, as amended
Exhibit 10.48 Registrant's U.K. Employee Share Option Scheme 1996, as
amended
Exhibit 10.49 Registrant's 1995 Incentive Stock Option Plan for U.S.
Employees, as amended
Exhibit 11.1 Statement Regarding Computation of Earnings (Loss) Per Share
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Page 23
<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: August ___, 1999
/s/ STEPHEN M. AMBLER
----------------------------
STEPHEN M. AMBLER
Chief Financial Officer
Page 24
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Exhibit 10.47 Registrant's 1995 Employee Share Purchase Plan, as amended
Exhibit 10.48 Registrant's U.K. Employee Share Option Scheme 1996, as
amended
Exhibit 10.49 Registrant's 1995 Incentive Stock Option Plan for U.S.
Employees, as amended
Exhibit 11.1 Statement Regarding Computation of Earnings (Loss) Per Share
Exhibit 27.1 Financial Data Schedule
</TABLE>
Page 25
<PAGE>
EXHIBIT 10.47
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 20, 1999
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 nine hundred thousand (900,000) 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 Disinterested Persons may
<PAGE>
Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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 20, 1999
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
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
(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 Date and shall continue
to the end of the Offering Period unless sooner altered or terminated as
provided in the Plan.
4
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
(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 in shares covered by his or
her option until such option has been exercised. Shares to be delivered
5
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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,
that conversion of any
7
<PAGE>
Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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 20, 1999
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 amended,
10
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Insignia Solutions plc
1995 Employee Share Purchase Plan
as Amended on April 20, 1999
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>
EXHIBIT 10.48
INSIGNIA SOLUTIONS PLC
THE RULES
OF THE
INSIGNIA SOLUTIONS
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
ADOPTED IN GENERAL MEETING ON 19 APRIL 1996
AND AMENDED IN GENERAL MEETING ON 29 MAY 1997
AND IN GENERAL MEETING ON MAY 1999
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<C> <S> <C>
1 Definitions 1
2 Grant of Options 5
3 Exercise Price 5
4 Limitations 6
5 Exercise and Lapse of Options 6
6 Payment of Exercise Price 9
7 Takeover and Liquidation 10
8 Variation in the Share Capital of the Company 14
9 Rights of Ordinary Shares Allotted 14
10 Availability of Shares 15
11 Buyout of Options 15
12 Transfers of Options 15
13 Employment with the Company 16
14 Documents 16
15 Administration 16
16 Governing Law 17
APPENDIX - Option Certificate
</TABLE>
<PAGE>
INSIGNIA SOLUTIONS
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
1 DEFINITIONS
1.1 In this Scheme references to the following words and expressions shall
bear the following meanings:-
ACT: the Income and Corporation Taxes Act 1988;
ADOPTION DATE: the date on which the Scheme is adopted by the Company
in general meeting;
AFFILIATE: any company that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common
control with the Company where "control" (including the terms
"controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the
management and policies of the company, whether through the ownership
of voting securities, by contract or otherwise;
AUDITORS: the auditors for the time being of the Company;
BOARD: the Board of Directors of the Company;
COMMITTEE: the Compensation Committee of the Board or such duly
constituted committee of the Board comprising of at least two
Disinterested Persons and which complies with the provisions of Section
16 of the Exchange Act whilst the Company is subject to the provisions
of such Section;
COMPANY: Insignia Solutions plc;
CONTROL: has the same meaning as in Section 840 of the Act;
CONVERSION RATE: the average currency conversion rate quoted by the
Bank of
<PAGE>
America in London as the price for Pounds Sterling purchased with
US Dollars;
DATE OF GRANT: the date on which an Option is granted as specified in
the relevant Option Certificate;
DISINTERESTED PERSON: a director who has not, during the period that
person is a member of the Committee and for one year prior to service
as a member of the Committee, been granted or awarded equity securities
pursuant to the Scheme or any other employee share scheme of the
Company or any Parent, Subsidiary or Affiliate of the Company, except
in accordance with the requirements set forth in rules as promulgated
by the SEC under Section 16(b) of the Exchange Act, as such rules are
amended from time to time and as interpreted by the SEC;
EXCHANGE ACT: the statute in the United States of America known as the
Securities Exchange Act 1934, as amended;
EXERCISE PRICE: the amount payable for an Option Share on the exercise
of an Option to be determined in accordance with Rule 3;
GROUP: the Company, its holding company and subsidiaries (as defined in
Section 736 of the Companies Act 1985);
INSIDER: an officer or director of the Company or any other person
whose transactions in the Ordinary Shares are subject to Section 16 of
the Exchange Act;
LAST EXERCISE DATE: in respect of any Option or part of any Option, the
date specified in the relevant Option Certificate as determined by the
Committee being a date not later than ten years after the Date of Grant
of the Option;
MARKET VALUE:
(a) if Ordinary Shares, or instruments evidencing Ordinary Shares,
are then quoted on the Nasdaq National Market the closing price
on the Nasdaq National Market System on the trading day
immediately preceding the Date of Grant of an Option, or, if no
such reported sale takes place on
2
<PAGE>
such date, the closing price on the next preceding trading date
on which a reported sale occurred;
(b) if Ordinary Shares, or instruments evidencing Ordinary Shares,
are publicly traded and are then listed on a national securities
exchange, the closing price on the trading day immediately
preceding the Date of Grant of an Option, or, if no reported
sale takes place on such date, the closing price on the next
preceding trading day on which a reported sale occurred;
(c) if Ordinary Shares, or instruments evidencing Ordinary Shares,
are publicly traded but are not quoted on the Nasdaq National
Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked
prices on the day immediately preceding the Date of Grant of an
Option, as reported by The Wall Street Journal, for the
over-the-counter market;
(d) if none of the foregoing is applicable, by the Board in good
faith.
1986 SCHEME: the Company's 1986 Executive Share Option Scheme;
OPTION SCHEME: a right to acquire Option Shares granted pursuant to the
Scheme;
OPTION CERTIFICATE: the Option Certificate substantially in the form
set out in the Appendix as such certificate may be amended by the
Committee from time to time;
OPTION HOLDER: a Qualified Person who holds an Option in accordance
with the terms of the Scheme or where the context permits a person
becoming entitled to any such Option in consequence of the death of the
original Option Holder;
OPTION SHARES: issued or unissued Ordinary Shares in respect of which
an Option is granted;
ORDINARY SHARES: the ordinary shares in the capital of the Company and
any instruments evidencing such Ordinary Shares;
3
<PAGE>
PARENT: any company (other than the Company) in an unbroken chain of
companies ending with the Company, if at the time of the granting of an
Option under the Scheme, each of such companies other than the Company
owns shares possessing 50 per cent or more of the total combined voting
power of all classes of shares in one of the other companies in such
chain;
QUALIFIED PERSON: any employee (including officers and directors who
are also employees) of a company in the Group;
THE SCHEME: this Insignia Solutions U.K. Employee Share Option Scheme
1996 in its present form with and subject to any amendments hereto
properly effected;
SEC: the United States of America Securities and Exchange Commission;
SUBSIDIARY: any company (other than the Company) in an unbroken chain
of companies beginning with the Company if, at the time of granting of
an Option, each of the companies other than the last company in the
unbroken chain owns shares possessing 50 per cent or more of the total
combined voting power of all classes of shares in one of the other
companies in such chain.
1.2 In this Scheme (unless the context requires otherwise):-
1.2.1 any reference to any statute or statutory provision shall be construed
as including a reference to any modification, re-enactment or extension
of such statute or statutory provision for the time being in force, to
any subordinate legislation made under the same and to any former
statutes or statutory provisions which it consolidated or re-enacted;
1.2.2 any reference to a Rule is to a Rule of this Scheme, as amended from
time to time;
1.2.3 the singular includes a reference to the plural and vice versa;
1.2.4 the masculine gender shall include the feminine gender;
4
<PAGE>
1.2.5 references to the exercise of an Option shall where the context so
allows include the exercise of an Option in part.
2 GRANT OF OPTIONS
2.1 Subject to the limitations and conditions of the Scheme and unless
prohibited by law, the Committee may grant Options following the
Adoption Date at any time to any Qualified Person as it may in its sole
discretion determine.
2.2 On the grant of an Option, the Committee shall determine the Exercise
Price (calculated in accordance with Rule 3) and the Last Exercise Date
of the Option and shall specify such details in the Option Certificate.
2.3 There shall be no consideration payable for the grant of an Option.
2.4 As soon as practicable after the grant of an Option the Committee shall
arrange for the despatch of an Option Certificate duly sealed or
executed as a deed by the Company to each Option Holder to whom an
Option has been granted. An Option Holder may disclaim an Option by
notice in writing to the Company within fourteen days after the date of
the Option Certificate.
3 EXERCISE PRICE
3.1 Subject to adjustment pursuant to Rule 8, the Exercise Price at the
relevant Date of Grant shall be determined by the Committee but it may
not be less than the higher of:-
3.1.1 where the Option is an option to subscribe for Ordinary Shares, the US
Dollar equivalent of the nominal value of an Ordinary Share calculated
by reference to the prevailing Conversion Rate; and
3.1.2 the Market Value of an Ordinary Share.
5
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3.2 The Exercise Price shall be expressed in US Dollars.
4 LIMITATIONS
4.1 No Options shall be granted under the Scheme later than ten years after
the Adoption Date.
4.2 Subject to adjustment pursuant to Rule 8, no Option shall be granted if
the number of Ordinary Shares over which it is proposed to grant the
Option when aggregated with all Ordinary Shares which have been issued
or which might be issued in the future pursuant to options and rights
(excluding those which have lapsed or have been surrendered) granted
under the 1988 US Stock Option Plan, the 1995 Incentive Stock Option
Plan for US Employees and the 1986 Scheme will exceed 4,672,071
Ordinary Shares.
4.3 If an Option is granted in excess of the limitation in Rule 4.2, such
Option shall be limited and take effect over such number of Ordinary
Shares as would be within the said limitation and the Committee shall,
if appropriate, as soon as practicable arrange for any original Option
Certificate to be cancelled and a replacement Option Certificate to be
issued in its place.
5 EXERCISE AND LAPSE OF OPTIONS
5.1 Notwithstanding any other provision of this Rule 5, an Option shall not
in any event be exercisable more than ten years after the Date of Grant
of that Option.
5.2 Options may be exercised by an Option Holder who is a Qualified Person
as follows:-
5.2.1 where such an Option Holder does not hold a subsisting option granted
under the 1986 Scheme at the Date of Grant of the first Option granted
to him then such first Option may be exercised on or after the first
anniversary of the Date of Grant as to 1/48th of the number of Ordinary
Shares comprised in such Option (rounded to the nearest whole number)
for each complete month he has been employed by the Group since the
Date of Grant and shall lapse on the Last Exercise Date;
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5.2.1.1 where such an Option Holder holds a subsisting option granted
under the 1986 Scheme at the Date of Grant of the first
Option granted to him; or
5.2.1.2 in the case of each Option granted to such Option Holder after
his first Option
then such Options may be exercised as to 1/48th of the number of
Ordinary Shares comprised in such Option (rounded to the nearest whole
number) for each complete month he has been employed by the Group since
the Date of Grant and shall lapse on the Last Exercise Date.
5.3 An Option may be exercised otherwise than as set out in Rule 5.2 in the
circumstances and during the periods set out below:-
5.3.1 if an Option Holder ceases to be employed by the Group by reason of his
death his Option may be exercised to the extent that his Option would
have been exercisable at the time of his death within eighteen months
of his death (or such longer period not exceeding five years as may be
determined by the Committee) by his legal personal representatives
provided that such exercise is not later than the Last Exercise Date
and thereafter the Option shall lapse;
5.3.2 if an Option Holder ceases to be employed by the Group by reason of his
disability (as determined by the Committee) his Option may be exercised
to the extent that his Option would have been exercisable at the time
of his cessation of employment within twelve months of the date of such
cessation (or such longer period not exceeding five years as may be
determined by the Committee) provided that such exercise is not later
than the Last Exercise Date and thereafter the Option shall lapse;
5.3.3 if an Option Holder ceases to be employed by the Group (otherwise than
by reason of his death or disability) his Option may be exercised to
the extent that his Option would have been exercisable at the time of
cessation of his employment within three months of the date of such
cessation (or such longer period not exceeding five
7
<PAGE>
years as may be determined by the Committee) provided that such
exercise is not later than the Last Exercise Date and thereafter his
Option shall lapse.
5.4 Each Option is to be exercisable by an Option Holder to the extent that
the Option has become exercisable in whole or in part.
5.5 Exercise of an Option is to be by application in writing addressed to
the Company and specifying the number of Option Shares in respect of
which the Option is being exercised on that occasion and the method of
payment of the Exercise Price for such Option Shares, such application
to be delivered or sent by prepaid post to the registered office for
the time being of the Company or to such office as may from time to
time be specified by the Company in writing to the Option Holder.
5.6 Subject to the regulations and enactments for the time being in force
under any applicable national or foreign securities law and any rules,
regulations and other requirements of any stock exchange or automated
quotation system upon which the Ordinary Shares may be listed or quoted
and subject to compliance by the Option Holder with the terms of the
Option the Company will after receipt of the application make an
allotment to the Option Holder of the number of Ordinary Shares
specified in the application at the Exercise Price (as adjusted in
accordance with the provisions of the Scheme) and will (subject to the
provisions of Rule 5.7) deliver to the Option Holder evidence of title
to such Ordinary Shares provided that instead of allotting and issuing
the appropriate number of Ordinary Shares the Company shall have the
right to satisfy its obligations of allotment by (in whole or in part)
procuring that some or all of the Ordinary Shares are transferred by a
third party to the relevant Option Holder. For these purposes delivery
or transfer to an Option Holder includes delivery or transfer to a
nominee for the Option Holder provided that the Option Holder acquires
the beneficial ownership of the Ordinary Shares delivered or
transferred.
5.7 The Company shall have no obligation to issue or deliver certificates
for Ordinary Shares under the Scheme prior to:-
5.7.1 obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and
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5.7.2 completion of any registration or other qualification of the Ordinary
Shares under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or
advisable.
6 PAYMENT OF EXERCISE PRICE
6.1 Payment of the Exercise Price for the Ordinary Shares may be made in
cash (by cheque) or where expressly approved for the Option Holder by
the Committee and where permitted by law:-
6.1.1 by waiver of remuneration due or accrued to the Option Holder by any
company in the Group for services rendered;
6.1.2 provided that a public market for the Ordinary Shares exists:-
6.1.2.1 through a "same day sale" commitment from the Option
Holder and a broker-dealer that is a member of the
National Association of Securities Dealers ("a NASD
Dealer") whereby the Option Holder irrevocably elects to
exercise his Option and to sell a portion of the Ordinary
Shares so subscribed for in order to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Ordinary Shares to forward the
Exercise Price directly to the Company; or
6.1.2.2 through a "margin" commitment from an Option Holder and a
NASD Dealer whereby the Option Holder irrevocably elects
to exercise his Option and to pledge the Ordinary Shares
so subscribed for to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Ordinary Shares
to forward the Exercise Price directly to the Company; or
9
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6.1.3 by any combination of cash and the methods described in this Rule 6.1.
6.2 Where the payment is to be made in Pounds Sterling then the amount
payable shall be calculated by reference to the Conversion Rate
prevailing at the date of payment.
7 TAKEOVER AND LIQUIDATION
7.1 In the event of:-
7.1.1 any person obtaining Control of the Company as a result of making:-
7.1.1.1 a general offer to acquire the whole of the issued
ordinary share capital of the Company (not already owned
by such person) which is made on a condition such that if
it is satisfied the person making the offer will have
Control of the Company; or
7.1.1.2 a general offer to acquire all the shares in the Company
which are of the same class as the Option Shares (not
already owned by such person);
7.1.2 any company obtaining Control of the Company in pursuance of a
compromise or arrangement sanctioned by the Court under Section 425 of
the Companies Act 1985; or
7.1.3 the sale of substantially all of the assets of the Company;
the purchaser or acquiring company ("the Acquiring Company") may:-
7.1.4 in consideration for the release by an Option Holder of his subsisting
Option grant to such Option Holder a new option over shares in the
Acquiring Company which is otherwise equivalent (as defined in Rule
7.8) to his subsisting Option;
7.1.5 in consideration for the release by an Option Holder of his subsisting
Option grant to such Option Holder an equivalent new option over shares
in the Acquiring
10
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Company governed by the rules of an employee share option scheme of
the Acquiring Company; or
7.1.6 offer substantially similar consideration to Option Holders as is
offered to shareholders of the Company (after taking into account the
existing provisions of the Option).
7.2 In the event that the Acquiring Company, pursuant to a transaction
described in Rule 7.1.1 above, refuses to make a proposal as described
in Rules 7.1.4 to 7.1.6 above to an Option Holder prior to the
commencement of the earliest of the periods described in Rules 7.2.1.1
and 7.2.1.2 below, then:-
7.2.1 if his Option has already become capable of exercise under these Rules
then the Option Holder may exercise it to the extent that the Option
has become exercisable until the end of whichever of the following
periods finishes earliest:-
7.2.1.1 a period of one month beginning with the time when the
Acquiring Company has obtained Control of the Company and
(if applicable) any condition subject to which the offer
is made is satisfied; and
7.2.1.2 if the Acquiring Company becomes bound or entitled to
acquire the shares in the Company under Sections 428 to
430F of the Companies Act 1985, the period when that
person remains so bound or entitled
and then any such Options as remain unexercised shall lapse;
7.2.2 if his Option has not already become capable of exercise under these
Rules then such Option shall lapse at such time and on such conditions
as the Board shall determine.
7.3 For the purposes of Rules 7.1 and 7.2 above a person shall be deemed
to have obtained Control of the Company if he and others acting in
concert with him have together obtained Control of it.
11
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7.4 In the event that the Acquiring Company, pursuant to a transaction
described in Rule 7.1.2 above, refuses to make a proposal as described
in Rules 7.1.4 to 7.1.6 above to an Option Holder prior to the expiry
of one month after the Court sanctions the compromise or arrangement
then his Option shall be subject to the provisions of Rule 7.7.
7.5 In the event that the Acquiring Company, pursuant to a transaction
described in Rule 7.1.3 above, refuses to make a proposal as described
in Rules 7.1.4 to 7.1.6 above to an Option Holder then his Option shall
lapse at such time and on such conditions as the Board shall determine.
7.6 In the event of a members' voluntary winding up of the Company any
Option Holder may, by notice in writing to the Company within 60 days
of the commencement of the winding up (such notice being accompanied by
payment of the Exercise Price), elect in relation to any Option which
has already become capable of exercise under these Rules to be treated
as if that Option had been exercised either to the full extent that it
is then capable of being exercised or to the extent specified in the
notice, immediately before the commencement of the winding up, and such
Option Holder shall then be entitled to be paid a sum equal to the
amount he would have received as a holder of the Ordinary Shares to
which he would have been entitled upon such exercise. Subject as
aforesaid, all Options shall lapse on the winding up of the Company.
7.7 If under Section 425 of the Companies Act 1985 it is proposed that the
court sanctions a compromise or arrangement proposed for the purposes
of or in connection with a scheme for the reconstruction of the Company
or its amalgamation with any other company or companies the Company
shall give notice thereof to all Option Holders at the same time as it
sends notices to members of the Company summoning the meeting to
consider such a compromise or arrangement. Then at the time that such
notice is given:-
7.7.1 if the Option has already become capable of exercise under these Rules,
the Option Holder may exercise the Option, to the extent that the
Option has become exercisable, before the expiry of the later of one
month from the date of such notice
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and one month from the date on which the Court sanctions the
compromise or arrangement and thereafter the Option shall lapse. The
exercise of an Option under this Rule 7.7.1 shall be conditional on
such compromise or arrangement becoming effective;
7.7.2 if the Option has not already become capable of exercise under these
Rules the Option shall lapse at such time and on such conditions as the
Board shall determine.
It shall be a condition of exercising the Option under this Rule 7.7
that, after exercising the Option, the Option Holder shall transfer or
otherwise deal with the Ordinary Shares issued to him so as to place
him in the same position (or as near as possible) as would have been
the case if such Ordinary Shares had been subject to such compromise or
arrangement.
7.8 For the purposes of Rule 7.1.4 above a new option over shares in the
Acquiring Company (hereinafter called the "New Option") shall be
equivalent to a subsisting option (hereinafter called the "Old Option")
if the date of grant is deemed to be the same date as the Date of Grant
of the Old Option; if the aggregate exercise price of the Ordinary
Shares subject to the New Option is as nearly as practicable the same
as the aggregate Exercise Price of the Ordinary Shares subject to the
Old Option; and (save as provided in the Rules and save for the number,
description and Exercise Price of the Ordinary Shares subject to the
New Option) the other rights and terms attaching to the New Option are
as nearly as practicable the same as those attaching to the Old Option.
The New Option shall, for all other purposes of the Scheme, be treated
as having been acquired at the same time as the Old Option.
7.9 With effect from the date on which an Option Holder releases the Old
Option in consideration of the grant to him of the New Option, Rule 1
and Rules 5 to 16 inclusive shall, in relation to the New Option, be
construed for the purposes of that New Option as if references directly
or indirectly to "the Company" and to "Ordinary Shares" were references
to the Acquiring Company and to shares in the Acquiring Company.
13
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7.10 Subject to the provisions of Rule 7.1 to 7.9 above, if any of the
corporate transactions described in such Rules should occur, any
outstanding Options shall be treated in the manner provided for in the
applicable agreement or plan of such corporate transaction.
8 VARIATION IN THE SHARE CAPITAL OF THE COMPANY
8.1 On any variation of the share capital of the Company (whether by way of
capitalisation or rights issue, sub-division or consolidation of the
Ordinary Shares or a share capital reduction) the Exercise Price and/or
the number and nominal value of Ordinary Shares comprised in an Option
and/or the aggregate maximum number of Ordinary Shares available under
the Scheme may be varied in such manner as the Committee shall
determine and such decision of the Committee shall be final and binding
on the Option Holders and the Company subject to written notification
being given to the Option Holders.
8.2 An adjustment to the Exercise Price shall not be made pursuant to the
provisions of this Rule 8 which would result in any Option Shares being
issued unlawfully at a discount.
8.3 A variation shall not be made pursuant to this Rule 8 until the
Auditors shall (acting as experts and not as arbitrators) have notified
the Committee in writing that the proposed variation is, in their
opinion, fair and reasonable.
9 RIGHTS OF ORDINARY SHARES ALLOTTED
9.1 Ordinary Shares to be allotted pursuant to the exercise of any Option
shall rank pari passu in all respects and as one class with the
Ordinary Shares in issue at the date of allotment and Ordinary Shares
allotted or transferred shall rank in full for all dividends and
distributions the record date of which falls on or after the date of
exercise of the Option but shall not rank for any dividend or
distribution the record date of which precedes the date of exercise of
the Option.
9.2 The Company shall not be under an obligation to register the
Ordinary Shares allotted pursuant to the exercise of an Option with the
SEC or to effect compliance
14
<PAGE>
with the registration, qualification or listing requirements of any
national or foreign securities laws, stock exchange or automated
quotation system, and the Company shall have no liability for any
inability or failure to do so.
10 AVAILABILITY OF SHARES
The Company shall at all times have available sufficient unissued
Ordinary Shares to meet any exercise of any Option, taking into account
any arrangements made by the Company to procure the transfer by a third
party to the relevant Option Holder of Ordinary Shares to satisfy
(whether in full or in part) the exercise of any Option.
11 BUYOUT OF OPTIONS
The Committee may at any time buy from an Option Holder his Option
previously granted with payment in cash, Ordinary Shares or other
consideration, based on such terms and conditions as the Committee and
the Option Holder shall agree.
12 TRANSFERS OF OPTIONS
12.1 No Option granted pursuant to the Scheme nor the benefit of an Option
may be transferred, assigned, charged or otherwise alienated save that
nothing in the Rules of the Scheme shall prohibit the transmission of
the Option by operation of law in the event of the death of an Option
Holder.
12.2 If an Option Holder does or suffers an act or thing whereby he would
or might be deprived of the legal or beneficial ownership of an Option
that Option shall forthwith lapse and the Committee shall not knowingly
permit its exercise.
13 EMPLOYMENT WITH THE COMPANY
13.1 Nothing in the Scheme or any Option granted under the Scheme shall
confer or be deemed to confer on any Option Holder any right to
continue in the employ of any
15
<PAGE>
member of the Group or limit in any way the right of any member of
the Group to terminate the employment of the Holder with or without
cause.
13.2 If any Option Holder shall cease to be employed by or hold office with
a member of the Group for any reason he shall not be entitled by way of
compensation for loss of office or otherwise to any sum or other
benefit whatsoever to compensate him for the loss of any right under
the Scheme notwithstanding any provision to the contrary in his
contract of employment.
14 DOCUMENTS
The Company shall deliver to each Option Holder a copy of the documents
sent to ordinary shareholders of the Company as a class of
shareholders.
15 ADMINISTRATION
15.1 The Scheme shall be administered by the Committee. The Committee shall
have the power to:-
15.1.1 construe and interpret the Scheme, any Option Certificates and any
other agreement or document executed pursuant to the Scheme;
15.1.2 prescribe, amend and rescind rules and regulations relating to the
Scheme;
15.1.3 correct any defect, supply any omission, or reconcile any inconsistency
in the Scheme or any agreement or document executed pursuant to the
Scheme;
15.1.4 make all other determinations necessary or advisable for the
administration of the Scheme.
15.2 Any determination made by the Committee with respect to any Option
shall be made in its sole discretion at the time of grant of the Option
or, unless in contravention of any express term of the Scheme or
Option, at any later time, and such determination shall be final and
binding on the Company and all persons having an interest in any
Option. The Committee may delegate to one or more
16
<PAGE>
officers of the Company the authority to grant Options under the Scheme
to Option Holders who are not Insiders of the Company.
15.3 An Option shall not be effective unless such Option is in compliance
with all relevant national and foreign securities laws, rules and
regulations of any governmental body, and the requirements of any stock
exchange or automated quotation system upon which the Ordinary Shares
may then be listed or quoted, as they are in effect on the Date of
Grant of such Option and also on the date of exercise or other issue.
15.4 If any provision of any Rule or any Option conflicts with the
applicable requirements of Rule 16b-3 (or its successors) of the SEC
promulgated under the Exchange Act in relation to Option Holders who
are or may be Insiders then those provisions to the extent possible
shall be interpreted or deemed amended so as to avoid such conflict.
15.5 The Board may at any time terminate or amend the Scheme in any respect,
including without limitation amendment of any form of Option
Certificate or instrument to be executed pursuant to the Scheme,
provided however that the Board shall not, without the approval of the
shareholders of the Company, amend the Scheme in any manner that
requires such shareholder approval pursuant to the Exchange Act or Rule
16b-3 (or its successor), as amended, thereunder, provided, further
that no amendment may be made to outstanding Options without the
consent of the Option Holders.
16 GOVERNING LAW
The Scheme shall be governed by and construed in accordance with the
Laws of England and Wales.
17
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APPENDIX
OPTION CERTIFICATE
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
Certificate No. JAN. 96/02
INSIGNIA SOLUTIONS PLC
(Registered in England No. 1961960)
1 This is to certify that Name: [ ]
Address: [ ]
[ ]
[ ]
is a holder of an Option to subscribe for the number of Ordinary Shares of
20p each in the Company shown in Box `A' below subject to the Rules of the
Insignia Solutions UK Employee Share Option Scheme 1996.
<TABLE>
<CAPTION>
- -------------------------------------------- ------------------------------ -------------------------
`A' `B' `C'
NUMBER OF ORDINARY SHARES EXERCISE PRICE PER DATE OF GRANT OF OPTION
COMPRISED IN THE OPTION ORDINARY SHARE
- -------------------------------------------- ------------------------------ -------------------------
- -------------------------------------------- ------------------------------ -------------------------
<S> <C> <C>
[ ] US$ [ ] [ ]
- -------------------------------------------- ------------------------------ -------------------------
</TABLE>
2 The Date of Grant of the Option is shown in Box `C' above and
the Option is exercisable in whole or in part [not earlier
than the first anniversary of the Date of Grant] subject to
and in accordance with the Rules of the Scheme.
3 The figures shown in Box `A' and Box `B' above are subject to
adjustment in certain circumstances in accordance with the
Rules of the Scheme.
4 The Option is not transferable, assignable or chargeable.
5 The Option will lapse on the Last Exercise Date being the
[tenth] anniversary of the Date of Grant to the extent that it
has not been exercised.
6 The Option [will be exercisable as to 25% of the shares over
which it has been granted on [ ] and will be exercisable as
to 1/48 of the Ordinary Shares over which it has been granted
on the expiry of each complete month thereafter] [will be
exercisable as to 1/48 of the Ordinary Shares over which it
has been granted on the expiry of each complete month since
the Date of Grant]. The Option is exercisable only by notice
in writing in the form prescribed under the Rules of the
Scheme. This certificate must be sent to the Company or such
office as may be specified from time to time by the Company
whenever the Option is
<PAGE>
exercised in whole or in part. Where the Option is exercised
in respect of part only of the Ordinary Shares comprised in
the certificate, the certificate will be returned to the
holder with the balance of Ordinary Shares endorsed overleaf.
7 The rights under the Option may be renounced in whole or in
part by the holder giving notice in writing to the Company
WITHIN FOURTEEN DAYS AFTER THE DATE OF THIS CERTIFICATE. This
certificate must be returned to the Company if the holder
wishes to renounce in whole or in part his rights hereunder.
If rights are renounced in part only the appropriate
replacement certificate will be issued to the holder.
8 This document shall be presumed to be delivered and is
intended by the parties to be a deed when (and not before) it
is dated.
Given under the Common Seal )
of INSIGNIA SOLUTIONS PLC )
in the presence of:- )
..........................
Director
..........................
Secretary
Date: .........................
2
<PAGE>
EXHIBIT 10.49
INSIGNIA SOLUTIONS PLC
1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
As Adopted February 9, 1995
Amended April 20, 1999
1. PURPOSE. The purpose of the Plan is to provide
incentives to attract, retain and motivate eligible persons whose present and
potential contributions are important to the success of the Company, its
Parent, Subsidiaries and Affiliates, by offering them an opportunity to
participate in the Company's future performance through awards of share
options. Capitalized terms not defined in the text are defined in Section 20.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to
Sections 2.2 and 14 of the Plan, the total number of Shares issued and
reserved and available for grant and issue pursuant to options under the
Plan, the UK Employee Share Option Scheme 1996 (the "UK PLAN"), the 1988 U.S.
Stock Option Plan (the "PRIOR PLAN") and the Company's Inland Revenue
approved share option scheme (the "INLAND REVENUE PLAN") (the "PLAN", the "UK
PLAN", the "PRIOR PLAN" and the "INLAND REVENUE PLAN", collectively, the
"OPTION PLANS"), shall be four million six hundred seventy two thousand and
seventy one (4,672,071) Shares. As of the Effective Date, options will no
longer be granted pursuant to the Prior Plan. As of the date of expiration of
the Inland Revenue Plan in December 1996, options will no longer be granted
pursuant to the Inland Revenue Plan. Shares shall again be available for
grant and issue in connection with future awards of options under the Plan
and the UK Plan if such Shares cease to be subject to an option granted
pursuant to the Option Plans. To the extent Shares are subject to options
granted pursuant to the UK Plan, the Inland Revenue Plan or the Prior Plan,
such Shares shall be unavailable for issue under this Plan until such options
expire or become unexercisable without having been exercised in full. To the
extent Shares are subject to options granted pursuant to this Plan, such
Shares shall be unavailable for issue under the UK Plan until such options
expire or become unexercisable without having been exercised in full.
2.2 ADJUSTMENT OF SHARES. In the event that
the number of Shares in issue is changed by a consolidation or sub-division
of ordinary shares of the Company or any bonus or other capitalization issue
of ordinary shares or any similar change in the capital structure of the
Company without consideration, or by a Corporate Transaction (as defined in
Section 14.1) then, unless such change results in the termination of all
outstanding Awards as a result of the Corporate Transaction, (a) the number
of Shares reserved for issue under the Plan and (b) the Exercise Prices of
and number of Shares subject to outstanding Awards shall be proportionately
adjusted, subject to any required action by the Board or the shareholders of
the Company and compliance with applicable securities laws; PROVIDED,
HOWEVER, that fractions of a Share shall not be issued but shall either be
paid in cash at Fair Market Value or shall be rounded up to the nearest
Share, as determined by the Committee; and PROVIDED, FURTHER, that the
Exercise Price of
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
any Award may not be decreased to below the U.S. Dollar equivalent of the par
value of the Shares calculated by reference to the Conversion Rate prevailing
at the date of exercise of an Award.
3. ELIGIBILITY. ISOs (as defined in Section 5 below)
may be granted only to employees (including officers and directors who are
also employees) of the Company or of a Parent or Subsidiary of the Company.
NQSOs (as defined in Section 5 below) may be granted to employees, officers,
directors, consultants, independent contractors and advisors of the Company
or any Parent, Subsidiary or Affiliate of the Company; PROVIDED such
consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under the Plan. Each
person is eligible to receive up to an aggregate maximum of five hundred
thousand (500,000) Shares per fiscal year.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. The Plan shall be
administered by the Committee. Subject to the general purposes, terms and
conditions of the Plan, the Committee shall have full power to implement and
carry out the Plan. The Committee shall have the authority to:
(a) construe and interpret the Plan, any Stock Option
Agreement and any other agreement or
document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations
relating to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares subject to Awards;
(f) determine whether Awards will be granted in replacement
of, or as alternatives to, other Awards under the Plan
or any other incentive or compensation plan of the
Company or any Parent, Subsidiary or Affiliate of the
Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting and exercisability of Awards;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in the Plan, any Award or any Stock
Option Agreement;
(j) determine the disposition of Awards in the event of a
Participant's divorce or dissolution of marriage; and
-2-
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
(k) make all other determinations necessary or advisable
for the administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination
made by the Committee with respect to any Award shall be made in its sole
discretion at the time of grant of the Award or, unless in contravention of
any express term of the Plan or Award, at any later time, and such
determination shall be final and binding on the Company and all persons
having an interest in any Award under the Plan. The Committee may delegate to
one or more officers of the Company the authority to grant an Award under the
Plan to Participants who are not Insiders of the Company.
4.3 COMMITTEE REQUIREMENT. If two or more
members of the Board are Outside Directors, the Committee shall be comprised
of at least two members of the Board, all of whom are Outside Directors.
5. STOCK OPTIONS. The Committee may grant Awards to eligible
persons and shall determine whether such Awards shall be Incentive Stock
Options within the meaning of the Code ("ISOs") or Nonqualified Stock Options
("NQSOS"), the number of Shares subject to the Award, the Exercise Price of
the Award, the period during which the Award may be exercised, and all other
terms and conditions of the Award, subject to the following:
5.1 FORM OF OPTION GRANT. Each Award granted
under the Plan shall be evidenced by a Stock Option Agreement which shall
expressly identify the Award as an ISO or NQSO, and be in such form and
contain such provisions (which need not be the same for each Participant) as
the Committee shall from time to time approve, and which shall comply with
and be subject to the terms and conditions of the Plan.
5.2 DATE OF GRANT. The date of grant of an
Award shall be the date on which the Committee makes the determination to
grant such Award, unless otherwise specified by the Committee. The Stock
Option Agreement and a copy of the Plan will be delivered to the Participant
within a reasonable time after the granting of the Award.
5.3 EXERCISE PERIOD. Awards shall be
exercisable within the times or upon the events determined by the Committee
as in the Stock Option Agreement; PROVIDED, HOWEVER, that no Award shall be
exercisable after the expiration of ten (10) years from the date the Award is
granted; and PROVIDED FURTHER that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock or shares of the Company or any Parent or
Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") shall be exercisable
after the expiration of five (5) years from the date the Award is granted.
The Committee also may provide for the exercise of Awards to become
exercisable at one time or from time to time, periodically or otherwise, in
such number or percentage as the Committee determines.
5.4 EXERCISE PRICE. The Exercise Price shall
be determined by the Committee when the Award is granted subject to the
following:
(a) The Exercise Price shall not be less than 100% of the
Fair Market Value of the Shares on the date of grant;
PROVIDED, that the Exercise Price of any ISO granted to
a Ten Percent Shareholder shall not be less than 110%
of the Fair
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Insignia Solutions plc
1995 Stock Option Plan
Market Value of the Shares on the date of grant.
Payment for the Shares subscribed for may be made in
accordance with Section 6 of the Plan.
(b) The Exercise Price shall be in U.S. Dollars.
(c) The Exercise Price shall not be less than the U.S.
Dollar equivalent of the par value of the Shares
calculated by reference to the Conversion Rate
prevailing at the date of exercise of an Award.
5.5 METHOD OF EXERCISE. Awards may be
exercised only by delivery to the Company of a written exercise agreement
(the "EXERCISE AGREEMENT") in a form approved by the Committee (which need
not be the same for each Participant), stating the number of Shares being
subscribed for, the restrictions imposed on the Shares, if any, and such
representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or
desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
subscribed for.
5.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Award shall
always be subject to the following:
(a) If the Participant is Terminated for any reason except
death or Disability, then Participant may exercise such
Participant's Awards only to the extent that such
Awards would have been exercisable upon the Termination
Date no later than three (3) months after the
Termination Date (or such longer time period not
exceeding five (5) years as may be determined by the
Committee), but in any event, no later than the
expiration date of the Awards.
(b) If the Participant is terminated because of death or
Disability (or the Participant dies within three (3)
months of such termination), then Participant's Awards
may be exercised only to the extent such Awards would
have been exercisable by Participant on the Termination
Date and must be exercised by Participant (or
Participant's legal representative or authorized
assignee) no later than (i) twelve (12) months after
the Termination Date in the case of disability or (ii)
eighteen (18) months after the Termination Date in the
case of death (or such longer time period not exceeding
five (5) years as may be determined by the Committee),
but in any event no later than the expiration date of
the Awards.
5.7 LIMITATIONS ON EXERCISE. The Committee may
specify a reasonable minimum number of Shares that may be subscribed for on
any exercise of an Award; PROVIDED that such minimum number will not prevent
Participant from exercising the Award for the full number of Shares for which
it is then exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair
Market Value (determined as of the date of grant) of Shares with respect to
which ISOs are exercisable for the first time by a Participant during any
calendar year (under the Plan or under any other incentive stock option plan
of the Company or any Affiliate, Parent or Subsidiary of the Company) shall
not exceed
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Insignia Solutions plc
1995 Stock Option Plan
$100,000. If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, the Awards for the first $100,000
worth of Shares to become exercisable in such calendar year shall be ISOs and
the Awards for the amount in excess of $100,000 that become exercisable in
that calendar year shall be NQSOs. In the event that the Code or the
regulations promulgated thereunder are amended after the Effective Date of
the Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be automatically
incorporated herein and shall apply to any Awards granted after the effective
date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The
Committee may modify, extend or renew outstanding Awards and authorize the
grant of new Awards in substitution therefor; provided that any such action
may not, without the written consent of Participant, impair any of
Participant's rights under any Award previously granted. Any outstanding ISO
that is modified, extended, renewed or otherwise altered shall be treated in
accordance with Section 424(h) of the Code. The Committee may reduce the
Exercise Price of outstanding Awards without the consent of Participants
affected by a written notice to them; PROVIDED, HOWEVER, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 of the Plan for Awards granted on the date the
action is taken to reduce the Exercise Price.
5.10 NO DISQUALIFICATION. Notwithstanding any
other provision in the Plan, no term of the Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under
Section 422 of the Code or, without the consent of the Participant affected,
to disqualify any ISO under Section 422 of the Code.
6. PAYMENT FOR SHARES. Payment for Shares subscribed for
pursuant to the Plan may be made in cash (by check) or, where expressly
approved for the Participant by the Committee and where permitted by law:
(a) by waiver of compensation due or accrued to Participant
for services rendered;
(b) provided that a public market for the Shares exists:
(1) through a "same day sale" commitment from
Participant and a broker-dealer that is a
member of the National Association of
Securities Dealers (a "NASD DEALER") whereby
the Participant irrevocably elects to exercise
the Award and to sell a portion of the Shares
so subscribed for in order to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly
to the Company; or
(2) through a "margin" commitment from Participant
and a NASD Dealer whereby Participant
irrevocably elects to exercise the Award and
to pledge the Shares so subscribed for to the
NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the
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<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price
directly to the Company; or
(c) by any combination of the foregoing.
7. WITHHOLDING TAXES.
7.1 WITHHOLDING GENERALLY. Whenever Shares are
to be issued in satisfaction of Awards granted under the Plan, the Company
may require the Participant to remit to the Company an amount sufficient to
satisfy federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such Shares. Whenever, under
the Plan, payments in satisfaction of Awards are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.
7.2 STOCK WITHHOLDING. When, under applicable
tax laws, a Participant incurs tax liability in connection with the exercise
of any Award that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the
Committee may allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be
issued that number of Shares having a Fair Market Value equal to the minimum
amount required to be withheld, determined on the date that the amount of tax
to be withheld is to be determined (the "TAX DATE"). All elections by a
Participant to have Shares withheld for this purpose shall be made in writing
in a form acceptable to the Committee and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, then except as provided below, the election
shall be irrevocable as to the particular Shares as to
which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Committee.
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 VOTING AND DIVIDENDS. No Participant shall
have any of the rights of a shareholder with respect to any Shares until the
Shares are issued to the Participant. After Shares are issued to the
Participant, the Participant shall be a shareholder and have all the rights
of a shareholder with respect to such Shares, including the right to vote and
receive all dividends or other distributions made or paid with respect to
such Shares.
8.2 FINANCIAL STATEMENTS. The Company shall
provide financial statements to each Participant prior to such Participant's
subscription for Shares under the Plan, and to each Participant annually
during the period such Participant has Awards outstanding; provided, however,
the Company shall not be required to provide such financial statements to
Participants whose services in connection with the Company assure them access
to equivalent information.
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<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
9. TRANSFERABILITY. Subject to Section 4.1(j), Awards
granted under the Plan, and any interest therein, shall not: (a) be
transferable or assignable by the Participant, (b) be made subject to
execution, attachment or similar process, otherwise than by will or by the
laws of descent and distribution or as consistent with the specific Plan and
Stock Option Agreement provisions relating thereto or (c) during the lifetime
of the Participant, be exercisable by anyone other than the Participant, and
any elections with respect to an Award, may be made only by the Participant.
10. CERTIFICATES. All certificates for Shares or other
securities delivered under the Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or
foreign securities law, or any rules, regulations and other requirements of
the SEC or any stock exchange or automated quotation system upon which the
Shares may be listed.
11. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An
Award shall not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed, as they are in
effect on the date of grant of the Award and also on the date of exercise or
other issue. Notwithstanding any other provision in the Plan, the Company
shall have no obligation to issue or deliver certificates for Shares under
the Plan prior to (a) obtaining any approvals from governmental agencies that
the Company determines are necessary or advisable, and/or (b) completion of
any registration or other qualification of such shares under any state or
federal law or ruling of any governmental body that the Company determines to
be necessary or advisable. The Company shall be under no obligation to
register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company shall
have no liability for any inability or failure to do so.
12. EMPLOYMENT WITH COMPANY.
12.1 NO OBLIGATION TO EMPLOY. Nothing in the
Plan or any Award granted under the Plan shall confer or be deemed to confer
on any Participant any right to continue in the employ of, or to continue any
other relationship with, the Company or any Parent, Subsidiary or Affiliate
of the Company or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment
or other relationship at any time, with or without cause.
12.2 NO RIGHT TO COMPENSATION. In the event
that any person holding an Award under the Plan ceases to be employed by, or
otherwise has ceased to provide services to, the Company or a Parent,
Subsidiary or Affiliate for whatever reason, he shall have no right to any
compensation in respect of this loss of right to receive Shares under this
Plan.
13. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any
time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the surrender
and cancellation of any or all outstanding Awards. The Committee may at any
time buy from a Participant an Award previously granted
-7-
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
with payment in cash, Shares or other consideration, based on such terms and
conditions as the Committee and the Participant shall agree.
14. CORPORATE TRANSACTIONS.
14.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY
SUCCESSOR. In the event of (a) a 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), (b) a dissolution or liquidation of the
Company, (c) the sale of substantially all of the assets of the Company, or
(d) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the shareholders of the Company give up
all of their equity interest in the Company ("CORPORATE TRANSACTION"), any or
all outstanding Awards may be assumed or replaced by the purchasing or
successor corporation, which assumption or replacement shall be binding on
all Participants. In the alternative, the purchasing or successor corporation
may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking
into account the existing provisions of the Awards). The purchasing or
successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other
property subject repurchase restrictions no less favorable to the Participant.
14.2 EXPIRATION OF AWARDS. In the event such
purchasing or successor corporation, if any, refuses to assume or substitute
the Awards, as provided above, pursuant to a transaction described in
Subsection 14.1(a) above, such Awards shall expire on such transaction at
such time and on such conditions as the Board shall determine. In the event
such purchasing or successor corporation, if any, refuses to assume or
substitute the Awards as provided above, pursuant to a corporate transaction
described in Subsections 14.1(b), (c) or (d) above, or there is no purchasing
or successor corporation, and if the Company ceases to exist as a separate
corporate entity, then, notwithstanding any contrary terms in the Stock
Option Agreement, the Awards shall expire on a date at least twenty (20) days
after the Board gives written notice to Participants specifying the terms and
conditions of such termination.
14.3 OTHER TREATMENT OF AWARDS. Subject to
any greater rights granted to Participants under the foregoing provisions of
this Section 14, in the event of the occurrence of any Corporate Transaction
described in Section 14.1, any outstanding Awards shall be treated as
provided in the applicable agreement or plan of such Corporate Transaction.
14.4 ASSUMPTION OF AWARDS BY THE COMPANY. The
Company, from time to time, also may substitute or assume outstanding awards
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either (a) granting an Award under the Plan in
substitution of such other company's award, or (b) assuming such award as if
it had been granted under the Plan if the terms of such assumed award could
be applied to an Award granted under the Plan. Such substitution or
assumption shall be permissible if the holder of the substituted or assumed
award would have been eligible to be granted an Award under the Plan if the
other company had applied the rules of the Plan to such grant. In the event
the Company assumes an award granted by
-8-
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
another company, the terms and conditions of such award shall remain
unchanged (EXCEPT that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Award rather than assuming an existing option, such new Award may
be granted with a similarly adjusted Exercise Price.
15. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall
become effective at such date and time as the Registration Statement filed
with the SEC relating to the Company's securities is declared effective (and
then only provided that the initial public offering later closes) (the
"EFFECTIVE DATE"). The Plan shall be approved by the shareholders of the
Company (excluding Shares issued pursuant to this Plan), consistent with
applicable laws, within twelve months before or after the date the Plan is
adopted by the Board. Upon the Effective Date, the Board may grant Awards
pursuant to the Plan; PROVIDED, HOWEVER, that: (a) no Award may be exercised
prior to initial shareholder approval of the Plan and (b) no Award granted
pursuant to an increase in the number of Shares approved by the Board shall
be exercised prior to the time such increase has been approved by the
shareholders of the Company.
16. TERM OF PLAN. The Plan will terminate ten (10) years
from the date the Plan is adopted by the Board or, if earlier, the date of
shareholder approval.
17. AMENDMENT OR TERMINATION OF PLAN. The Board may at
any time terminate or amend the Plan in any respect, including without
limitation amendment of any form of Stock Option Agreement or instrument to
be executed pursuant to the Plan; PROVIDED, HOWEVER, that the Board shall
not, without the approval of the shareholders of the Company, amend the Plan
in any manner that requires such shareholder approval pursuant to the Code or
the regulations promulgated thereunder as such provisions apply to ISO plans;
PROVIDED, FURTHER, that no amendment may be made to outstanding Awards
without the consent of the Participant.
18. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of
the Plan by the Board, the submission of the Plan to the shareholders of the
Company for approval, nor any provision of the Plan shall be construed as
creating any limitations on the power of the Board to adopt such additional
compensation arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either generally applicable or applicable only in
specific cases.
19. 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.
20. DEFINITIONS. As used in the Plan, the following
terms shall have the following meanings:
"AFFILIATE" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with the Company where "control" (including the
terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
-9-
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
policies of the corporation, whether through the ownership of voting
securities, by contract or otherwise.
"AWARD" means an award of an option to subscribe for
Shares.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMITTEE" means the committee appointed by the
Board to administer the Plan, or if no committee is appointed, the Board.
"COMPANY" means Insignia Solutions plc, a
corporation organized under the laws of England, or any successor corporation.
"CONVERSION RATE" means the average currency
conversion rate quoted by the Bank of America in London as the price for
Pounds Sterling purchased with U.S. Dollars.
"DISABILITY" means a disability, whether temporary
or permanent, partial or total, within the meaning of Section 22(e)(3) of the
Code, as determined by the Committee.
"EXERCISE PRICE" means the price per share at which
a holder of an Award may subscribe for the Shares issuable upon exercise of
the Award.
"FAIR MARKET VALUE" means the value of a share of
the Company's Ordinary Shares of 20p each determined as follows:
(a) if such Ordinary Shares, or instruments evidencing such
Ordinary Shares (e.g., American Depository Shares or
American Depository Receipts), are then quoted on the
Nasdaq National Market the closing price on the Nasdaq
National Market System on the trading day immediately
preceding the date on which Fair Market Value is
determined, 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;
(b) if such Ordinary Shares, or instruments evidencing such
Ordinary Shares (e.g., American Depository Shares or
American Depository Receipts), are publicly traded and
are then listed on a national securities exchange, the
closing price or, if no reported sale takes place on
such date, the closing price on the next preceding
trading day on which a reported sale occurred;
(c) if such Ordinary Shares, or instruments evidencing such
Ordinary Shares (e.g., American Depository Shares or
American Depository Receipts), are publicly traded but
are not quoted on the Nasdaq National Market nor listed
or admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on such date, as reported by THE WALL STREET
JOURNAL, for the over-the-counter market; or
-10-
<PAGE>
Insignia Solutions plc
1995 Stock Option Plan
(d) if none of the foregoing is applicable, by the Board
in good faith.
"INSIDER" means an officer or director of the
Company or any other person whose transactions in the Company's ordinary
shares are subject to Section 16 of the Securities Exchange Act of 1934, as
amended.
"OUTSIDE DIRECTOR" means any outside director as
defined in Section 162(m) of the Code and the regulations issued thereunder.
"PARENT" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if at
the time of the granting of an Award under the Plan, each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award
under the Plan.
"PLAN" means this Insignia Solutions plc 1995
Incentive Stock Option Plan for U.S. Employees, as amended from time-to-time.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933,
as amended.
"SHARES" means Ordinary Shares of 20p each in the
Company, reserved for issue under the Option Plans, as adjusted pursuant to
Sections 2 and 14 of the Plan, any instruments evidencing such Ordinary
Shares (e.g., American Depository Shares or American Depository Receipts) and
any successor security.
"STOCK OPTION AGREEMENT" means, with respect to each
Award, the signed written agreement between the Company and the Participant
setting forth the terms and conditions of the Award.
"SUBSIDIARY" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
at the time of granting of the Award, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of
the Plan with respect to a Participant, that the Participant has ceased to
provide services as an employee, director, consultant, independent contractor
or advisor, to the Company or a Parent, Subsidiary or Affiliate of the
Company, except in the case of sick leave, military leave, or any other leave
of absence approved by the Committee; PROVIDED, that such leave is for a
period of not more than ninety (90) days, or reinstatement upon the
expiration of such leave is guaranteed by contract or statute. The Committee
shall have sole discretion to determine whether a Participant has ceased to
provide services and the effective date on which the Participant ceased to
provide services (the "TERMINATION DATE").
-11-
<PAGE>
EXHIBIT 11.1
INSIGNIA SOLUTIONS PLC
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------------- ------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Net income (loss) $ (2,711) $ (3,677) $ (5,827) $ 3,955
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
CALCULATION OF BASIC EARNINGS (LOSS) PER SHARE:
Weighted average number of ordinary shares
outstanding used in computation 12,781 12,111 12,736 12,094
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
Basic earnings (loss) per share $ (0.21) $ (0.30) $ (0.46) $ 0.33
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
CALCULATION OF DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average number of ordinary shares
outstanding used in computation 12,781 12,111 12,736 12,094
Net effect of dilutive stock options outstanding - - - 264
--------------- --------------- --------------- -------------
12,781 12,111 12,736 12,358
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
Diluted earnings (loss) per share $ (0.21) $ (0.30) $ (0.46) $ 0.32
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,316
<SECURITIES> 0
<RECEIVABLES> 973
<ALLOWANCES> (211)
<INVENTORY> 7
<CURRENT-ASSETS> 10,129
<PP&E> 3,268
<DEPRECIATION> (2,443)
<TOTAL-ASSETS> 11,529
<CURRENT-LIABILITIES> 5,754
<BONDS> 0
0
0
<COMMON> 4,241
<OTHER-SE> 1,534
<TOTAL-LIABILITY-AND-EQUITY> 11,529
<SALES> 3,598
<TOTAL-REVENUES> 3,815
<CGS> 1,915
<TOTAL-COSTS> 9,804
<OTHER-EXPENSES> (206)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,783)
<INCOME-TAX> 44
<INCOME-CONTINUING> (5,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,827)
<EPS-BASIC> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
