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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
INSIGNIA SOLUTIONS PLC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[INSIGNIA LOGO]
APRIL , 1999
To Our Shareholders:
You are cordially invited to attend the 1999 Annual General Meeting of
Shareholders of Insignia Solutions plc to be held at Insignia House, The Mercury
Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH,
United Kingdom, on May , 1999, at p.m., local time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual General Meeting and Proxy Statement.
It is important that you use this opportunity to take part in the affairs of
your company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
The proxy card should be returned to the offices of Insignia Solutions plc
at Insignia House, The Mercury Centre, Wycombe Lane, Wooburn Green, High
Wycombe, Buckinghamshire, HP10 0HH, United Kingdom, not later than p.m. on
, May , 1999, being 48 hours prior to the time fixed for the
Annual General Meeting. Returning the proxy card does not deprive you of your
right to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
Stephen M. Ambler
Company Secretary
<PAGE>
INSIGNIA SOLUTIONS PLC
---------------------
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Insignia Solutions
plc ("Insignia") will be held at Insignia House, The Mercury Centre, Wycombe
Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH, United Kingdom, on
, May , 1999 at p.m., local time, to transact the following
business:
1. To receive the U.K. statutory accounts of Insignia for the year ended
December 31, 1998 together with the Directors' and Auditors' reports thereon.
2. To consider the following Ordinary Resolution: "THAT
PricewaterhouseCoopers be reappointed as UK statutory auditors of Insignia
(having previously been appointed by the board of directors to fill the casual
vacancy arising by reason of the resignation of Price Waterhouse) to hold office
until the conclusion of the next general meeting at which accounts are laid
before the company and THAT the directors be authorized to fix their
remuneration."
3. To elect as a director Vincent S. Pino, who was appointed as a director
of Insignia during the year after the last annual general meeting.
4. To re-elect as a director Albert E. Sisto.
5. To consider the following Ordinary Resolution: "THAT Insignia's 1995
Employee Share Purchase Plan be amended so that the reference to "five hundred
twenty-five thousand (525,000) of the Company's Ordinary Shares" in Section 1
thereof be substituted by a reference to "nine hundred thousand (900,000) of the
Company's Ordinary Shares"."
6. To consider the following Ordinary Resolution: "THAT the Rules of the
Company's UK Employee Share Option Scheme 1996 be amended so that the reference
to "will exceed 3,922,071 Ordinary Shares" in Rule 4.2 thereof be substituted by
a reference to "will exceed 4,672,071 Ordinary Shares"."
7. To consider the following Ordinary Resolution: "THAT Insignia's 1995
Incentive Stock Option Plan for U.S. Employees be amended so that the reference
to "shall be three million, nine hundred twenty-two thousand and seventy-one
(3,922,071) Shares" in Section 2.1 thereof be substituted by a reference to
"shall be four million six hundred seventy-two thousand and seventy-one
(4,672,071) Shares"."
8. To consider the following Ordinary Resolution: "THAT, in accordance with
Section 80 of the Companies Act 1985 (the "Act"), the directors be and are
hereby generally and unconditionally authorized to exercise all the powers of
Insignia to allot relevant securities (as defined in Section 80 of the Act) up
to an aggregate nominal amount of L2,930,913.20 provided that this authority
(unless previously revoked or renewed) shall expire on May , 2004 and that
Insignia may before such expiry make an offer or agreement which would or might
require relevant securities to be allotted after such expiry and the directors
may allot relevant securities in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired; and THAT the authority conferred
on the directors by an ordinary resolution passed on April 19, 1996 to allot
shares up to an aggregate nominal amount of L4,362,417 (to expire on April 18,
2001) shall cease to have effect."
9. To consider the following Special Resolution: "THAT, conditionally upon
the passing of the Resolution numbered 8 above, in accordance with Section 95(1)
of the Act, the directors be and are hereby given power, for the period
commencing on and with effect from the date of adoption of this Resolution and
(unless previously revoked or renewed) expiring on May , 2004, to allot equity
securities (as defined in Section 94(2) of the Act) pursuant to the authority
conferred by the Resolution numbered 8 above as if Section 89(1) of the Act did
not apply to such allotment; and THAT, the power conferred on the directors by a
special resolution passed on April 19, 1996 to allot shares up to an aggregate
nominal amount of L4,362,417 as if Section 89 of the Act did not apply to such
allotment (to expire on April 18, 2001) shall cease to have effect."
10. To transact any other ordinary business of Insignia.
BY ORDER OF THE BOARD
Stephen M. Ambler
Company Secretary
<PAGE>
Dated May , 1999
REGISTERED OFFICE:
Insignia House
The Mercury Centre
Wycombe Lane, Wooburn Green
High Wycombe
Buckinghamshire, HP10 0HH
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
THE PROXY SHOULD BE RETURNED TO THE OFFICES OF INSIGNIA AT INSIGNIA HOUSE, THE
MERCURY CENTRE, WYCOMBE LANE, WOOBURN GREEN, HIGH WYCOMBE, BUCKINGHAMSHIRE, HP10
0HH, UNITED KINGDOM, NOT LATER THAN P.M. ON , MAY , 1999,
BEING 48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
NOTES
1. A member entitled to attend and vote at the meeting is entitled to appoint
one or more proxies to attend and, on a poll, vote in his stead. A proxy
need not be a member of Insignia. Completion and return of a form of proxy
will not prevent a member from attending and voting at the meeting.
2. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed must be deposited at the
Registered Office of Insignia (Insignia House, The Mercury Centre, Wycombe
Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH) not less than
48 hours before the time of the meeting.
3. There are available for inspection at the registered office of Insignia
during usual business hours on any weekday (Saturdays and public holidays
excepted), and, at the place of the Annual General Meeting, from at least
fifteen minutes prior to and until the conclusion of the Annual General
Meeting:
(a) copies of the directors' service agreements with Insignia or any of its
subsidiaries other than those agreements expiring or determinable by the
employing company without payment of compensation within one year; and
(b) the Register of Directors' Interests.
<PAGE>
INSIGNIA SOLUTIONS PLC
INSIGNIA HOUSE
THE MERCURY CENTRE
WYCOMBE LANE, WOOBURN GREEN
HIGH WYCOMBE
BUCKINGHAMSHIRE, HP10 0HH
UNITED KINGDOM
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PROXY STATEMENT
MAY , 1999
------------------------
This Proxy Statement is for holders of ordinary shares of 20p each and
holders of American Depositary Shares ("ADSs") evidenced by American Depositary
Receipts of Insignia Solutions plc, a company organized under the laws of
England and Wales. This proxy statement is furnished by the Board of Directors
of Insignia (the "Board") in connection with the solicitation of specific voting
instructions from holders of ADSs and proxies from holders of ordinary shares
for voting at the Annual General Meeting of Insignia to be held at Insignia
House, The Mercury Centre, Wycombe Lane, Wooburn Green, High Wycombe,
Buckinghamshire, HP10 0HH, United Kingdom, on , May , 1999 at
p.m., local time. All proxies will be voted in accordance with the
instructions contained therein and, if no choice is specified, the person or
persons appointed as proxy will vote or abstain from voting, at their
discretion.
At April , 1999, Insignia had ordinary shares outstanding and
entitled to vote, of which approximately % were held in the form of ADSs.
Each ADS represents one Ordinary Share. A minimum of two persons holding
together not less than one-third of the ordinary shares in issue will constitute
a quorum for the transaction of business at the meeting. This proxy statement
and the accompanying form of Proxy were first mailed to shareholders on or about
April , 1999. Attached beginning at page F-1 of this proxy statement is
Insignia's U.K. Statutory Directors' Report and Accounts for the year ended
December 31, 1998 prepared in compliance with the U.K. Companies Act 1985 (the
"Act"). In addition, the 1998 Annual Report and Form 10-K is enclosed with this
proxy statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of ordinary shares entitled to attend and vote at the meeting may
appoint a proxy to attend and, on a poll of such holders, to vote in their
place. A proxy need not be a shareholder of Insignia. Voting will be by a poll
on all the resolutions to be considered. Holders of Insignia's ordinary shares
are entitled to one vote for each ordinary share held. Shares may not be voted
cumulatively.
Proposals 2 through 8 in the notice are ordinary resolutions. Proposal 9 in
the notice is a special resolution. An ordinary resolution requires the
affirmative vote of a majority of the votes cast at the meeting. A special
resolution requires the affirmative vote of at least 75% of the votes cast at
the meeting. Insignia will tabulate all votes and will separately tabulate, for
each proposal, affirmative and negative votes, abstentions and broker non-votes.
Abstentions and broker non-votes will not be counted in determining the votes. A
form of proxy is enclosed which, to be effective, must be signed, dated and
deposited at the Registered Office of Insignia (Insignia House, The Mercury
Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH)
not less than forty-eight hours before the time of the Meeting, together with
the power of attorney or other authority (if any) under which it is signed.
Holders of ADSs should complete and return the voting instruction form provided
to them in accordance with the instructions contained therein, so that it is
received on or before May , 1999. The
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close of business on April , 1998 has been fixed as the record date for the
determination of the holders of ADSs entitled to provide voting instructions to
The Bank of New York, as depositary.
Insignia will pay the expenses of soliciting proxies and voting
instructions. Following the original mailing of the proxies and other soliciting
materials, Insignia and/or its agents may also solicit proxies and voting
instructions by mail, telephone, telegraph or in person. Following the original
mailing of the proxies and other soliciting materials, Insignia will request
that brokers, custodians, nominees, The Bank of New York, as depositary, and
other record holders of Insignia's ordinary shares or ADSs forward copies of the
proxies and other soliciting materials to persons for whom they hold ordinary
shares or ADSs and request authority for the exercise of proxies and/or voting
instructions. In such cases, Insignia, upon the request of the record holders,
will reimburse such holders for their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this proxy statement has
the power to revoke it any time prior to one hour before the commencement of the
meeting by written instrument delivered to Insignia stating that the proxy is
revoked, by attendance at the meeting and voting in person or by duly filing a
replacement proxy. Please note, however, that if a person's shares are held of
record by a broker, bank or other nominee and that person wishes to vote at the
meeting, the person concerned should ensure that the broker, bank or other
nominee duly appoints such person as its proxy in order that he or she may do
so.
PROPOSAL 1: RECEIPT OF U.K. STATUTORY DIRECTORS' REPORT AND ACCOUNTS
At the meeting, shareholders will receive the U.K. statutory accounts of
Insignia in respect of the financial year ended December 31, 1998, together with
the Directors' and Auditors' reports relating to those accounts. It is a U.K.
legal requirement that the accounts and the reports are laid before the
shareholders of Insignia in general meeting, following which they will be
approved by and signed on behalf of the Board of Directors and delivered to
Companies House in the U.K. on or before July 31, 1999. Shareholders are not
being asked to vote on this proposal. The U.K. statutory Directors' Report and
Accounts are attached hereto beginning on page F-1.
PROPOSAL 2: RE-APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Insignia has selected PricewaterhouseCoopers as its U.K. statutory auditors
to perform the audit of Insignia's financial statements for 1999, and the
shareholders are being asked to ratify such selection. Following the merger of
Price Waterhouse and Coopers & Lybrand from July 1, 1998, Price Waterhouse
resigned as auditors in favour of the new firm, PricewaterhouseCoopers, and the
Board appointed PricewaterhouseCoopers to fill the casual vacancy created by the
resignation. Representatives of PricewaterhouseCoopers are expected to be
present at the meeting, will have the opportunity to make a statement at the
meeting if they desire to do so and are expected to be available to respond to
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RE-APPOINTMENT OF PRICEWATERHOUSECOOPERS
PROPOSALS 3 AND 4: ELECTION AND RE-ELECTION OF DIRECTORS
At the meeting, shareholders will consider the election of Vincent S. Pino,
who was appointed as a director of Insignia during the year after the last
annual general meeting. Shareholders will also consider the re-election of
Albert E. Sisto, who retires by rotation.
Insignia's Articles of Association stipulate that the minimum number of
directors is two, but do not set any maximum number. Directors may be elected by
the shareholders, or appointed by the Board, and
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remain in office until they resign or are removed by the shareholders. In
addition, at each Annual General Meeting the third of the directors who have
been in office longest since their last election, as well as any directors
appointed by the Board during the preceding year, are required to resign and are
then considered for re-election, assuming they wish to stand for re-election. Of
the current directors, Nicholas, Viscount Bearsted will be considered for
re-election in 2000 and Richard M. Noling and Albert E. Sisto will be considered
for re-election in 2001, assuming no additional directors are appointed by the
Board during the year. In the election of directors, each shareholder is
entitled on a poll to one vote for each Ordinary Share held. Shares may not be
voted cumulatively.
DIRECTORS/NOMINEES
The names of the nominees and the other directors of Insignia, and other
information about them, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE OR DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------------------ --- ------------------------------------------------ -----------
<S> <C> <C> <C>
NOMINEES
Vincent S. Pino (1) 50 President of Alliance Imaging, Inc. 1998
Albert E. Sisto (1)(2) 49 Consultant 1997
DIRECTORS
Richard M. Noling 50 President and Chief Executive Officer of 1997
Insignia
Nicholas, Viscount Bearsted (2) 49 Chairman of the Board of Insignia 1988
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Vincent S. Pino was appointed a director of Insignia in October 1998. He has
served as President of Alliance Imaging, Inc. since February 1998. Mr. Pino
began his association with Alliance in 1988 as Chief Financial Officer. From
1991 through 1993, Mr. Pino held the position of Executive Vice President and
Chief Financial Officer. From 1986 to 1988, Mr. Pino was President of Pacific
Capital, where he provided financial consulting services to corporations and
publicly registered real estate limited partnerships. Prior to joining Pacific
Capital, Mr. Pino held executive staff positions with Petrolane Incorporated, a
diversified services company. Mr. Pino received an M.B.A. and a B.S. degree in
finance from the University of Southern California in 1972 and 1970,
respectively.
Albert E. Sisto was appointed as a director of Insignia in March 1997. He is
currently an independent consultant. He served as Chief Operating Officer of RSA
Data Security, Inc., a wholly owned subsidiary of Security Dynamics
Technologies, Inc., from December 1997 to February 1999. He served as the
President, Chief Executive Officer and Chairman of the Board of Directors of
DocuMagix Inc. from October 1994 until December 1997. From September 1989 to
September 1994, Mr. Sisto served as President and Chief Executive Officer of
PixelCraft, an imaging software and equipment company. He received a B.E. degree
in engineering from the Stevens Institute of Technologies in 1971.
Richard M. Noling was named President and Chief Executive Officer and a
director of Insignia in March 1997. He also served as Chief Financial Officer,
Senior Vice President of Finance and Operations and Company Secretary between
April 19, 1996 and October 1, 1997 and Chief Operating Officer between February
and March 1997. From August 1995 to February 1996, Mr. Noling was Vice President
and Chief Financial Officer at Fast Multimedia, Inc., a German-based computer
software and hardware developer. From November 1994 to August 1995, he was Chief
Financial Officer for DocuMagix Inc., a personal paper management software
company. From June 1991 to October 1994, Mr. Noling served as Senior Vice
President and Chief Financial Officer for Gupta Corporation. He received a
Bachelor of Arts degree in
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aerospace and mechanical engineering science from the University of California
(San Diego) in 1970. He received an M.A. degree in theology from the Fuller
Theological Seminary in 1972, and an M.S. degree in business administration in
1979 from the University of California (Irvine).
Nicholas, Viscount Bearsted has served as Chairman of the Board of Directors
of Insignia since March 1997 and as a director of Insignia since January 1988.
He also served as Chairman of the Board from January 1988 to March 1995, and he
was Insignia's Chief Executive Officer from September 1988 until September 1993.
From January 1996 to May 1996, he served as Chief Executive Officer and a
director, and from April 1994 to January 1996, as Deputy Chief Executive Officer
and a director, of Hulton Deutsch Collection Ltd., a photographic content
provider. He founded Alliance Imaging Inc. in 1984 and served as a senior
executive until 1987 and as a director until 1988. Since 1980, he has been a
corporate and computer consultant. He received a Bachelors degree in chemistry
from Oxford University in 1972. He also serves as a director of Mayborn Group
plc.
BOARD MEETINGS AND COMMITTEES
The Board met seven times, including telephone conference meetings, during
1998. No director attended fewer than 75% of the aggregate of the total number
of meetings of the Board (held during the period for which he was a director)
and the total number of meetings held by all committees of the Board on which
such director served (during the period that such director served).
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
Mr. Sisto and Nicholas, Viscount Bearsted are the current members of the
Audit Committee, which met four times during 1998. The Audit Committee meets
with Insignia's independent accountants to review the adequacy of Insignia's
internal control systems and financial reporting procedures; reviews the general
scope of Insignia's annual audit and the fees charged by the independent
accountants; reviews and monitors the performance of non-audit services by
Insignia's auditors, reviews the fairness of any proposed transaction between
any officer, director or other affiliate of Insignia and Insignia, and after
such review, makes recommendations to the full Board; and performs such further
functions as may be required by any stock exchange or over-the-counter market
upon which Insignia's shares may be listed.
Mr. Pino and Mr. Sisto are the current members of the Compensation
Committee, which met four times during 1998. John R. Johnston served on the
Compensation Committee until his resignation as a director in July 1998. Mr.
Pino was elected to the Compensation Committee in October 1998. Paul L. Borrill
served on the Compensation Committee until he resigned in January 1999, at which
time Mr. Sisto was elected to serve on the committee. The Compensation Committee
recommends compensation for officers and employees of Insignia, grants options
under Insignia's employee option plans (other than grants to non-officers of
options pursuant to guidelines established by the Board, which may be made by
Nicholas, Viscount Bearsted, Insignia's Chairman, and Richard M. Noling,
Insignia's President and Chief Executive Officer) and reviews and recommends
adoption of and amendments to share option and employee benefit plans.
DIRECTOR COMPENSATION
Insignia pays each outside director $1,000 for every regular meeting
attended, $2,500 per quarter of service on the Board, $500 per quarter for
service on each committee, plus $500 for each committee meeting attended, and
reimburses outside directors for reasonable expenses in attending meetings of
the Board. The Chairman of the Board receives an additional $1,500 per quarter.
In addition, each new outside director is granted an option to purchase 15,000
shares and each outside director is granted an option to purchase 5,000 shares
annually for so long as he serves as an outside director.
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With effect from April 1, 1997, Nicholas, Viscount Bearsted, Chairman of
Insignia, entered into a Consulting Agreement with Insignia under which he
provides advice and assistance as the Board may from time to time request.
Nicholas, Viscount Bearsted shall be available to perform such services for at
least thirteen days per quarter and shall receive a fee of $1,000 for each day
services are provided, subject to a minimum thirteen days per quarter, plus
reimbursement of reasonable expenses. The agreement is terminable by either
party upon six month's advance written notice and by Insignia for cause at any
time. In the event of any business combination resulting in a change of control
of Insignia or in the event of disposal of a majority of the assets of Insignia,
and termination or constructive termination of his consultancy, Nicholas,
Viscount Bearsted will be entitled to receive an additional twenty-six weeks'
consultancy fees.
Insignia entered into a consulting agreement with Mr. Sisto, dated December
28, 1998, whereby Mr. Sisto will provide sales consulting, sales training,
advice and assistance as Insignia may from time to time request over a term of
six months. Mr. Sisto shall receive a fee of $500 for each half-day of service
provided, subject to a maximum of $35,000. Mr. Sisto shall also receive a bonus
fee for each qualifying Jeode customer contract signed in his assigned
geographic region. A qualifying customer contract is defined as a contract with
a value in excess of $500,000 over two years after signing by Insignia and the
customer. The agreement is terminable by either party upon ten days written
notice and by Insignia for any reason with written notice.
For information concerning the compensation of Mr. Noling, see "Executive
Compensation."
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION AND RE-ELECTION OF EACH OF THE
NOMINATED DIRECTORS
PROPOSAL NO. 5: AMENDMENT OF 1995 EMPLOYEE SHARE PURCHASE PLAN
Shareholders are being asked to approve an amendment to Insignia's 1995
Employee Share Purchase Plan (the "Share Purchase Plan") to increase the number
of ordinary shares reserved for issuance thereunder by 375,000 shares, from
525,000 shares to 900,000 shares. The Board believes that the increase in the
number of shares reserved for issuance under the Share Purchase Plan is in the
best interests of Insignia because of the continuing need to provide equity
participation to attract and retain quality employees and remain competitive in
the industry. The Share Purchase Plan plays an important role in Insignia's
efforts to attract and retain employees of outstanding ability.
The Board approved the proposed amendment in April 1999, to be effective
upon shareholder approval. Below is a summary of the principal provisions of the
Share Purchase Plan, assuming shareholder approval of the amendment. The summary
is not necessarily complete, and reference is made to the full text of the Share
Purchase Plan.
SHARE PURCHASE PLAN HISTORY
The Share Purchase Plan, covering 275,000 shares, was adopted by the Board
in February 1995 and approved by the shareholders in March 1995. An amendment
increasing the number of shares reserved for issuance under the Share Purchase
Plan to 525,000 shares was adopted by the Board in April 1998 and approved by
the shareholders in July 1998. The purpose of the Share Purchase Plan is to
provide employees of Insignia designated by the Board as eligible to participate
("Participating Employees") with a convenient means to acquire an equity
interest in Insignia through payroll deductions and to provide an incentive for
continued employment.
As of December 31, 1998, approximately 98 persons were eligible to
participate in the Share Purchase Plan, 338,385 shares had been issued pursuant
to the Share Purchase Plan and 186,615 shares were available for future issuance
under the Share Purchase Plan. Since inception of the Share Purchase Plan, three
executive officers of Insignia, George Buchan, Richard M. Noling, and Stephen M.
Ambler
5
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purchased 18,717, 17,052, and 883 shares, respectively, pursuant to the Share
Purchase Plan. Over the term of the Share Purchase Plan through December 31,
1998, all employees as a group, other than executive officers, have purchased an
aggregate of 301,733 shares under the Share Purchase Plan. The closing price of
Insignia's ADSs on the Nasdaq National Market on April , 1999 was $ per
share.
SHARES SUBJECT TO PURCHASE
The shares subject to purchase under the Share Purchase Plan consist of
900,000 ordinary shares. This number of shares is subject to proportional
adjustment to reflect consolidation or subdivision of ordinary shares and other
similar events.
ADMINISTRATION
The Share Purchase Plan is administered by the Compensation Committee of the
Board. The interpretation or construction by the Compensation Committee of any
provisions of the Share Purchase Plan or of any right granted under it is final
and binding on all Participating Employees.
ELIGIBILITY
All employees of Insignia, or any parent or subsidiary of Insignia, are
eligible to participate in an Offering Period (as defined below) under the Share
Purchase Plan except the following: (a) employees who are not employed by
Insignia, or any parent or subsidiary, on the 15th day of the month before the
beginning of an Offering Period; (b) employees who are customarily employed for
less than 20 hours per week; (c) employees who are customarily employed for less
than five months in a calendar year; or (d) employees who, together with any
other person whose shares would be attributed to such employee pursuant to
Section 424(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
own shares or hold options to subscribe for shares or who, as a result of
participation in the Share Purchase Plan, would own shares or hold options to
subscribe for shares possessing 5% or more of the total combined voting power or
value of all classes of shares of Insignia.
Participating Employees participate in the Share Purchase Plan through
payroll deductions. A Participating Employee sets the rate of such payroll
deductions, which may not be less than 2% nor more than 10% of the Participating
Employee's W-2 compensation (in the case of employees in the United States).
Compensation for this purpose includes, but is not limited to, base salary,
wages, commissions, overtime, shift premiums (or the substantial equivalent
thereof for employees outside of the United States), bonuses and draws,
unreduced by the amount by which the Participating Employee's salary is reduced
pursuant to Sections 125 or 401(k) of the Code, not to exceed $25,000 per year
or such lower limit as set by the Compensation Committee.
Each offering under the Share Purchase Plan is for a period of six months
(the "Offering Period"). The Offering Periods commence on February 1 and August
1 of each year and end on July 31 and January 31, respectively, of each year.
The first day of each Offering Period is the "Offering Date" for such Offering
Period. A Participating Employee cannot participate simultaneously in more than
one Offering Period. The Board has the power to determine the dates of Offering
Periods or change the duration of Offering Periods without shareholder approval.
Participating Employees may elect to participate in any Offering Period by
enrolling as provided under the terms of the Share Purchase Plan. Once enrolled,
a Participating Employee will automatically participate in each succeeding
Offering Period unless the Participating Employee withdraws from the Offering
Period or the Share Purchase Plan is terminated. After the rate of payroll
deductions for an Offering Period has been set by a Participating Employee, that
rate continues to be effective for the remainder of the Offering Period (and for
all subsequent Offering Periods in which the Participating Employee is
automatically enrolled) unless otherwise changed by the Participating Employee.
The Participating Employee may increase or lower the rate of payroll deductions
for any subsequent Offering
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Period, but may only lower the rate of payroll deductions for an ongoing
Offering Period. Not more than one change may be made during a single Offering
Period.
PURCHASE PRICE
The purchase price per share at which an Ordinary Share may be acquired in
any Offering Period under the Share Purchase Plan is 85% of the lesser of (a)
the fair market value of a share on the Offering Date or (b) the fair market
value of a share on the last day of the Offering Period. The fair market value
of a share is the closing price of Insignia's ADSs on the Nasdaq National Market
on the date of determination.
PURCHASE OF SHARES UNDER THE SHARE PURCHASE PLAN
The number of whole shares a Participating Employee will be able to purchase
in any Offering Period is determined by dividing the total amount withheld from
the Participating Employee during the Offering Period pursuant to the Share
Purchase Plan by the purchase price for each share determined as described
above. The purchase takes place automatically on the last day of the Offering
Period. Unless otherwise determined by the Board, no more than 200% of the
number of shares determined by using 85% of the fair market value of a share on
the Offering Date as the denominator may be purchased by an employee
participating in the Share Purchase Plan on the last day of any Offering Period.
At any time prior to 30 days before the commencement of an Offering Period, the
Board may set a lower maximum number of shares which may be purchased by any
Participating Employee on the last day of an Offering Period.
WITHDRAWAL
A Participating Employee may withdraw from any Offering Period, provided
such withdrawal is made at least 15 days before the end of the Offering Period.
No further payroll deductions for the purchase of shares will be made for the
succeeding Offering Period unless the Participating Employee enrolls in the new
Offering Period in the same manner as for initial participation in the Share
Purchase Plan.
AMENDMENT OF THE SHARE PURCHASE PLAN
The Board may at any time amend, terminate or extend the term of the Share
Purchase Plan, except that any such termination cannot affect the terms of
shares previously granted under the Share Purchase Plan, nor may any amendment
make any change in the terms of shares previously granted which would adversely
affect the right of any participant, nor may any amendment be made without
shareholder approval if such amendment would: (a) increase the number of shares
that may be issued under the Share Purchase Plan; (b) change the designation of
the employees (or class of employees) eligible for participation in the Share
Purchase Plan; or (c) constitute an amendment for which shareholder approval is
required to comply with any applicable securities laws.
TERM OF THE SHARE PURCHASE PLAN
The Share Purchase Plan will continue until the earlier to occur of: (a)
termination of the Share Purchase Plan by the Board; (b) the issuance of all the
shares reserved for issuance under the Share Purchase Plan; or (c) February
2005, ten years after the date the Board adopted the Share Purchase Plan.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement of
the United States federal income tax consequences to Insignia and Participating
Employees. The federal tax laws may change and the federal, state and local tax
consequences for any Participating Employee will depend upon his or her
individual circumstances. Each Participating Employee is encouraged to seek the
advice of a qualified tax advisor regarding the tax consequences of
participation in the Share Purchase Plan. The following
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discussion does not purport to describe income tax consequences or tax
consequences for Participating Employees in countries other than the United
States.
The Share Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
Tax TREATMENT OF THE PARTICIPATING EMPLOYEE. Participating Employees will
not recognize income for federal income tax purposes either upon enrollment in
the Share Purchase Plan or upon the purchase of shares. All tax consequences are
deferred until a Participating Employee sells the shares, disposes of the shares
by gift or dies.
If shares are held for more than one year after the date of purchase and
more than two years from the beginning of the applicable Offering Period, or if
the Participating Employee dies while owning the shares, the Participating
Employee realizes ordinary income on a sale (or a disposition by way of gift or
upon death) to the extent of the lesser of (i) 15% of the fair market value of
the shares at the beginning of the Offering Period or (ii) the actual gain (the
amount by which the market value of the shares on the date of sale, gift or
death exceeds the purchase price). All additional gain upon the sale of the
shares is treated as capital gain. If the shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the Participating
Employee has a capital loss for the difference between the sale price and the
purchase price.
If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (in any case a "disqualifying
disposition") within either the one-year or the two-year holding periods
described above, the Participating Employee realizes ordinary income at the time
of sale or other disposition, taxable to the extent that the fair market value
of the shares at the date of purchase is greater than the purchase price. This
excess will constitute ordinary income (currently not subject to withholding) in
the year of the sale or other disposition even if no gain is realized on the
sale or if a gratuitous transfer is made. The difference, if any, between the
proceeds of the sale and the aggregate fair market value of the shares at the
date of purchase is a capital gain or loss. The maximum tax rate applicable to
ordinary income is 39.6%. Long-term capital gain is taxed at a maximum rate of
20%. To receive long-term capital gain treatment, the shares must be held for
more than one year. Capital gains may be offset by capital losses and up to
$3,000 of capital losses may be offset annually against ordinary income.
TAX TREATMENT OF INSIGNIA. Insignia will be entitled to a deduction in
connection with the disposition of shares acquired under the Share Purchase Plan
only to the extent that the Participating Employee recognizes ordinary income on
a disqualifying disposition of the shares. Insignia will treat any transfer of
record ownership of shares as a disposition, unless it is notified to the
contrary. In order to enable Insignia to learn of disqualifying dispositions and
ascertain the amount of the deductions to which it is entitled, Participating
Employees will be required to notify Insignia in writing of the date and terms
of any disposition of shares purchased under the Share Purchase Plan.
UNITED KINGDOM INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement of
the United Kingdom income tax consequences for Participating Employees who are
resident or are ordinarily resident in the United Kingdom and who ordinarily
perform all or part of the duties of their employment in the United Kingdom.
Because the tax laws may change and because income tax consequences may vary
depending upon the particular circumstances of each Participating Employee, each
Participating Employee should consult his or her own tax advisor regarding the
income tax consequences of participation in the Share Purchase Plan. The
following discussion does not purport to describe income tax consequences or tax
consequences for Participating Employees in countries other than the United
Kingdom.
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Participating Employees are liable to be assessed to income tax on the
difference between the fair market value of the shares at the time they acquire
the shares and the actual discounted purchase price paid for the shares. This
income tax due will be collected under the PAYE system. Upon resale of the
shares acquired pursuant to the Share Purchase Plan, Participating Employees may
be liable to pay capital gains tax on the difference between the market value of
the shares on the date they are acquired and the price at which the
Participating Employee disposed of such shares. However, if a Participating
Employee disposes of the shares by way of gift or a sale for less than their
market value to a "connected person" being the Participating Employee's spouse,
a relative of the Participating Employee or the Participating Employee's spouse
or the spouse of any such relative, then for the purposes of assessing capital
gains tax liability, the Participating Employee will be deemed to have disposed
of the shares at the market value on the date of disposal.
For Offering Periods commencing prior to April 5, 1999, a Participating
Employee will also be liable to pay employee national insurance contributions on
all or part of the amount of the discount of the purchase price to market value
of the shares on the Offering Date if the Participating Employee's earnings have
not reached the maximum employee national insurance contributions' threshold.
For Offering Periods commencing after April 5, 1999, a Participating Employee
will be liable to pay employee national insurance contributions on all or part
of the gain such Participating Employee receives at the time the shares are
acquired, if the Participating Employee's earnings have not reached the maximum
employee national insurance contributions' threshold.
ERISA
The Share Purchase Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
NEW PLAN BENEFITS
The amounts of future share purchases under the Share Purchase Plan are not
determinable because, under the terms of the Share Purchase Plan, purchases are
based upon elections made by Participating Employees. Future purchase prices are
not determinable because they are based upon the fair market value of Insignia's
ordinary shares.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF
THE SHARE PURCHASE PLAN
PROPOSALS 6 AND 7: AMENDMENT OF THE U.K. EMPLOYEE SHARE OPTION SCHEME 1996 AND
1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
Shareholders are being asked to approve amendments to the 1995 Stock Option
Plan for U.S. Employees (the "1995 Plan") and the U.K. Employee Share Option
Scheme 1996 (the "1996 Scheme") to increase the number of ordinary shares
reserved for issuance thereunder by 750,000 shares, from 3,922,071 shares to
4,672,071 shares. The Board believes that the increase in the number of shares
reserved for issuance under these option plans is in the best interests of
Insignia because of the continuing need to provide share options to attract and
retain quality employees and remain competitive in the industry. The Board
believes that the granting of share options plays an important role in
Insignia's efforts to attract and retain employees of outstanding ability. The
Board believes that the additional reserve of shares with respect to which
options may be granted will provide Insignia with adequate flexibility to ensure
that Insignia can continue to aim for those goals and facilitate Insignia's
expansion of its employee base.
Insignia initially reserved an aggregate of 3,372,071 Ordinary Shares for
issuance under all of Insignia's employee share option plans. An increase in the
number of shares reserved for issuance under the share option plans to 3,922,071
was adopted by the Board in April 1997 and approved by the shareholders in May
1997. Any shares that would have been issuable upon exercise of options granted
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pursuant to any of Insignia's employee share option plans that expire or become
unexercisable for any reason without having been exercised in full will become
available for grant under the 1995 Plan or the 1996 Scheme (collectively, the
"Option Plans"). As of December 31, 1998, approximately 98 persons were eligible
to receive options under the Option Plans. At that date, under the Option Plans,
1,196,927 shares had been issued upon exercise of options, 2,272,133 shares were
subject to outstanding options and 453,011 shares were available for future
option grants, after taking into account any shares issuable upon exercise of
options under any of Insignia's employee share option plans that have expired or
become unexercisable without having been exercised in full and that have become
available for future option grants under the Option Plans. The closing price of
Insignia's ADSs on the Nasdaq National Market on , 1999 was $ per
share.
The Board approved the proposed amendment in April 1999, to be effective
upon shareholder approval. Below is a summary of the principal provisions of the
Option Plans, assuming shareholder approval of the amendment. The summary is not
necessarily complete, and reference is made to the full text of the Option
Plans.
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
1996 SCHEME HISTORY
The 1996 Scheme was adopted by the Board in March 1996 and approved by the
shareholders in April 1996. The purpose of the 1996 Scheme is to attract, retain
and provide equity incentives to selected persons to promote the financial
success of Insignia through awards of share options.
From inception of the 1996 Scheme in April 1996 to December 31, 1998,
options to subscribe for an aggregate of 348,625 shares were granted under the
1996 Scheme. None of these options were granted to executive officers,
directors, nominees for election as a director or associates of any of such
executive officers, directors or nominees.
SHARES SUBJECT TO THE 1996 SCHEME
If any option granted pursuant to the 1996 Scheme expires or is surrendered
for any reason without being exercised in whole or in part, the shares released
from such option will again become available for grant under the 1996 Scheme or
the 1995 Plan. In addition, any shares issuable upon exercise of options granted
pursuant to previous Insignia employee option plans or the 1995 Plan that expire
or become unexercisable for any reason without having been exercised in full
also will become available for grant under the 1996 Scheme.
ELIGIBILITY
Options may be granted under the 1996 Scheme to employees, including
officers and directors who are also employees, of Insignia, or any parent or
subsidiary of Insignia. Insignia generally grants options under the 1996 Scheme
to employees who are resident or are ordinarily resident outside of the United
States and who ordinarily perform all or part of the duties of their employment
outside of the United States. As of December 31, 1998, approximately 58 persons
were eligible to receive options under the 1996 Scheme, no shares had been
issued upon exercise of options and options to purchase 199,750 shares were
outstanding under the 1996 Scheme.
ADMINISTRATION
The 1996 Scheme is administered by the Compensation Committee the members of
which are appointed by the Board. The Compensation Committee currently consists
of Albert E. Sisto and Vincent S. Pino, both of whom are "non-employee
directors" as that term is defined in Rule 16b-3 promulgated under the Exchange
Act and "outside directors" as that term is defined pursuant to Section 162(m)
of the Code.
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Subject to the terms of the 1996 Scheme, the Compensation Committee
determines the persons who are to receive options, the number of shares subject
to each such option and the terms and conditions of each such option. The
Compensation Committee has the authority to construe and interpret any of the
provisions of the 1996 Scheme or any options granted thereunder. Nicholas,
Viscount Bearsted, Insignia's Chairman, and Richard M. Noling, Insignia's
President and Chief Executive Officer, constitute a committee that is authorized
to make grants of options to non-officer employees pursuant to guidelines
established by the Board.
SHARE OPTIONS
Options granted under the 1996 Scheme have a maximum term of ten years after
the date of grant. The exercise price of an option granted under the 1996 Scheme
may not be less than the higher of the market value (as defined in the 1996
Scheme) of an Ordinary Share on the trading day immediately preceding the date
of grant and its nominal value. The exercise price of options granted under the
1996 Scheme may be paid: (1) in cash (by check); or where permitted by law and
approved by the Committee (2) by waiver of compensation due to or accrued by the
optionee for services rendered; (3) by a "same-day sale" commitment from the
optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer"); (4) by a "margin" commitment from the
optionee and an NASD Dealer; or (5) by any combination of the foregoing.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL
In the event of a change of control of Insignia or the sale of substantially
all the assets of Insignia, the successor corporation may assume or substitute
equivalent options in exchange for those granted under the 1996 Scheme or
provide substantially similar consideration to optionees under the 1996 Scheme
as is offered to shareholders of Insignia. In the event that the successor
corporation, if any, does not assume or substitute the options or offer
substantially similar consideration, the options will expire on such transaction
at the time and upon the conditions as specified in the 1996 Scheme or as the
Compensation Committee determines.
AMENDMENT OF THE 1996 SCHEME
The Board may at any time terminate or amend the 1996 Scheme, including
amendment of any form of option or instrument to be executed pursuant to the
1996 Scheme. However, the Board may not amend the 1996 Scheme in any manner that
requires shareholder approval pursuant to the Exchange Act or Rule 16b-3 (or its
successor) promulgated thereunder without such approval.
TERM OF THE 1996 SCHEME
The 1996 Scheme will terminate in April 2006, ten years from the date the
1996 Scheme was adopted by Insignia in general meeting. Such termination will
not affect the options outstanding at that time.
UNITED KINGDOM INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement of
the United Kingdom income tax consequences for employees participating in the
1996 Scheme who are resident or are ordinarily resident in the United Kingdom
and who ordinarily perform all or part of the duties of their employment in the
United Kingdom. Because the tax laws may change and because income tax
consequences may vary depending upon the particular circumstances of each
participant, each participant should consult his or her own tax advisor
regarding the income tax consequences of participation in the 1996 scheme. The
following discussion does not purport to describe income tax consequences or tax
consequences for participants in countries other than the United Kingdom.
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A participant in the 1996 Scheme will be liable to be assessed to income tax
on the difference between the exercise price of the shares subject to such
participant's option and the market value of the shares at the date of exercise
of the option. If the option is granted on or after November 27, 1996 the income
tax due will be collected under the "pay as you earn system."
If a participant exercises an option granted after April 5, 1999, the
participant will be required to pay employee national insurance contributions on
all or part of the gain received at the time of exercise if the participant's
earnings have not reached the maximum employee national insurance contributions'
threshold.
Capital gains tax may be payable on the eventual disposal of the shares
which the optionee acquires upon exercise of an option. The liability to capital
gains tax will usually be based on the difference between the market value of
the shares at the date of exercise of the option and the price at which the
shares are sold. However, if the shares are given away or sold for less than
their market value to a "connected person" being a spouse or a relative of the
seller or the seller's spouse or the spouse of any such relative then, for the
purposes of assessing the capital gains tax liability, the seller will be deemed
to have disposed of the shares at their market value on the date of disposal.
ERISA
The 1996 Scheme is not subject to any of the provisions of ERISA.
NEW PLAN BENEFITS
The amounts of future option grants under the 1996 Scheme are not
determinable because, under the terms of the 1996 Scheme, such grants are made
in the discretion of the Compensation Committee. Future option exercise prices
are not determinable because they are based upon the fair market value of
Insignia's ADSs on the date of grant.
1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
1995 PLAN HISTORY
The 1995 Plan was adopted by the Board in February 1995 and approved by the
shareholders in March 1995. The purpose of the 1995 Plan is to attract, retain
and provide equity incentives to selected persons to promote the financial
success of Insignia through awards of share options.
From its inception in November 1995 to December 31, 1998, options to
purchase an aggregate of 2,917,400 shares were granted under the 1995 Plan. Of
these, options were granted to the Named Officers, as follows: Richard M.
Noling, President and Chief Executive Officer, 520,000 shares; Stephen M.
Ambler, Chief Financial Officer, Company Secretary and Senior Vice President,
108,750 shares; George Buchan, Senior Vice President of Engineering and UK
General Manager, 75,000 shares; Ronald C. Workman, Senior Vice President of
Marketing, 100,000 shares; David B. Winterburn, former Senior Vice President of
Business Development and Chief Technology Officer, 130,000 shares; and Joseph A.
Taglia, former Senior Vice President of Sales and Marketing, 110,000 shares.
During the same period, Insignia's current executive officers as a group (4
persons) had been granted options to purchase a total of 803,750 shares and the
current directors or nominees for election as a director who are not executive
officers as a group (3 persons) had been granted options to purchase a total of
105,000 shares. No options were granted during the period under the 1995 Plan to
any associate of any executive officer or director of Insignia, and no other
person received 5% or more of such options.
SHARES SUBJECT TO THE 1995 PLAN
If any option granted pursuant to the 1995 Plan expires or terminates for
any reason without being exercised in whole or in part, the shares released from
such option will again become available for grant
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under the 1995 Plan or the 1996 Scheme. In addition, any shares issuable upon
exercise of options granted pursuant to previous Insignia employee option plans
or the 1996 Scheme that expire or become unexercisable for any reason without
having been exercised in full also will become available for grant under the
1995 Plan.
ELIGIBILITY
Options may be granted under the 1995 Plan to employees, officers,
directors, consultants and advisors of Insignia, or any parent, subsidiary or
affiliate of Insignia. The aggregate maximum number of shares that may be issued
to any one optionee under the 1995 Plan in any one year is 500,000 shares. As of
December 31, 1998, approximately 40 persons were eligible to receive options
under the 1995 Plan, 1,688 shares had been issued upon exercise of options and
1,619,777 shares were subject to outstanding options.
ADMINISTRATION
The 1995 Plan is administered by the Compensation Committee. Subject to the
terms of the 1995 Plan, the Compensation Committee determines the persons who
are to receive options, the number of shares subject to each such option and the
terms and conditions of each such option. The Compensation Committee has the
authority to construe and interpret any of the provisions of the 1995 Plan or
any options granted thereunder. Nicholas, Viscount Bearsted, Insignia's Chairman
and Mr. Noling, Insignia's President and Chief Executive Officer, constitute a
committee that is authorized to make grants of options to non-officer employees
pursuant to guidelines established by the Board.
SHARE OPTIONS
Options granted under the 1995 Plan may be incentive stock options ("ISOs")
within the meaning of Section 422 of the Code or nonqualified stock options
("NQSOs"). Only employees of Insignia, or of a parent or subsidiary of Insignia,
may be granted ISOs. Options under the 1995 Plan have a maximum term of 10 years
after the date of grant, except that the term of an option granted to a person
holding more than 10% of the total combined voting power of all classes of stock
of Insignia, or any parent or subsidiary of Insignia, is limited to five years.
The exercise price of an option granted under the 1995 Plan may not be less
than the fair market value (as defined in the 1995 Plan) of an Ordinary Share on
the date of grant, except that the exercise price of an ISO granted to a person
holding more than 10% of the total combined voting power of all classes of stock
of Insignia, or any parent or subsidiary of Insignia, must be not less than 110%
of such fair market value.
The exercise price of options granted under the 1995 Plan, plus any
applicable income tax withholding, may be paid: (1) in cash (by check); or where
permitted by law and approved by the Committee, in its sole discretion, at the
time of grant (2) by waiver of compensation due to or accrued by the optionee
for services rendered; (3) by a "same-day sale" commitment from the optionee and
an NASD Dealer; (4) by a "margin" commitment from the optionee and an NASD
Dealer; or (5) by any combination of the foregoing.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL
In the event of a merger, consolidation, dissolution or liquidation of
Insignia, the sale of substantially all the assets of Insignia or any other
similar corporate transaction, the successor corporation may assume, replace or
substitute equivalent options in exchange for those granted under the 1995 Plan
or provide substantially similar consideration, shares or other property subject
to repurchase restrictions no less favorable to optionees under the 1995 Plan.
In the event that the successor corporation, if any, does not assume or
substitute the options, the options will expire on such transaction at the time
and upon the conditions as the Committee determines.
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AMENDMENT OF THE 1995 PLAN
The Board may at any time terminate or amend the 1995 Plan, including
amendment of any form of option agreement, exercise agreement or instrument to
be executed pursuant to the 1995 Plan. However, the Board may not amend the 1995
Plan in any manner that requires shareholder approval pursuant to the Code or
the regulations promulgated thereunder, the Exchange Act or Rule 16b-3 (or its
successor) promulgated thereunder without such approval.
TERM OF THE 1995 PLAN
The 1995 Plan will terminate in February 2005, ten years from the date the
1995 Plan was adopted by the Board.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement of
the federal income tax consequences to Insignia and optionees associated with
options granted under the 1995 Plan. The federal tax laws may change and the
federal, state and local tax consequences for any optionee will depend upon his
or her individual circumstances. Each optionee is encouraged to seek the advice
of a qualified tax advisor regarding the tax consequences of participation in
the 1995 Plan.
INCENTIVE STOCK OPTIONS. The optionee will not recognize income upon grant
of an ISO and will not incur tax on its exercise (unless the optionee is subject
to the alternative minimum tax described below). If the optionee holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for one year after the date
the option was exercised and for two years after the date the option was
granted, the optionee generally will realize long-term capital gain or loss
(rather than ordinary income or loss) upon disposition of the ISO Shares. This
gain or loss will be equal to the difference between the amount realized upon
such disposition and the amount paid for the ISO Shares.
If the optionee disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), then the gain realized
upon such disposition, up to the difference between the fair market value of the
ISO Shares on the date of exercise (or, if less, the amount realized on a sale
of such shares) and the option exercise price, will be treated as ordinary
income. Any additional gain will be long-term or short-term capital gain,
depending upon the amount of time the ISO Shares were held by the optionee.
ALTERNATIVE MINIMUM TAX. The difference between the fair market value of
the ISO Shares on the date of exercise and the exercise price is an adjustment
to income for purposes of the alternative minimum tax (the "AMT"). The AMT
(imposed to the extent it exceeds the taxpayer's regular tax) is 26% of an
individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items (including the
difference between the fair market value of the ISO Shares on the date of
exercise and the exercise price) and reducing this amount by the applicable
exemption amount ($45,000 in the case of a joint return, subject to reduction
under certain circumstances). If a disqualifying disposition of the ISO Shares
occurs in the same calendar year as exercise of the ISO, there is no AMT
adjustment with respect to those ISO Shares. Also, upon a sale of ISO Shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the ISO
Shares at exercise over the amount paid for the ISO Shares.
NONQUALIFIED STOCK OPTIONS. An optionee will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO the
optionee will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the optionee's exercise price. The included amount will be treated as
ordinary income by the optionee and may
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be subject to income tax and FICA withholding by Insignia (either by payment in
cash or withholding out of the optionee's salary). Upon resale of the shares by
the optionee, any subsequent appreciation or depreciation in the value of the
shares will be treated as capital gain or loss.
TAX TREATMENT OF INSIGNIA. Insignia will be entitled to a deduction in
connection with the exercise of an NQSO by a domestic employee or director to
the extent that the optionee recognizes ordinary income. Insignia will be
entitled to a deduction in connection with the disposition of ISO Shares only to
the extent that the optionee recognizes ordinary income on a disqualifying
disposition of the ISO Shares.
ERISA
The 1995 Plan is not subject to any of the provisions of ERISA.
NEW PLAN BENEFITS
The amounts of future option grants under the 1995 Plan are not determinable
because, under the terms of the 1995 Plan, such grants are made in the
discretion of the Compensation Committee. Future option exercise prices are not
determinable because they are based upon the fair market value of Insignia's
ADSs on the date of grant.
THE BOARD RECOMMENDS A VOTE FOR RESOLUTIONS 6 AND 7
PROPOSALS 8 AND 9: ALLOTMENT OF SECURITIES
Section 80 of the Act prohibits a company from allotting securities without
the authority of the shareholders of the company in general meeting. This is
supplemented by Section 89 of the Act, which requires (subject to specified
exceptions) that a company may not allot new securities unless it has first
offered them to existing shareholders.
The directors are authorized to allot shares up to an aggregate nominal
value of L4,362,417 pursuant to an ordinary resolution passed by Insignia on
April 19, 1996 and expiring five years from that date, and to do so without
first offering the shares to existing shareholders.
It is now proposed to cancel these authorities, to the extent that they have
not already been relied upon and, by the passing of Resolution 8 as an Ordinary
Resolution, to authorize the directors for a period of five years to allot
relevant securities having an aggregate nominal value of up to L2,930,913.20.
Resolution 9, if passed as a Special Resolution, will authorize the
directors, for a period of five years, to allot equity securities under the
authority conferred by Resolution 8 without first offering them to the
shareholders.
Insignia believes that it will require additional financing in 1999. To
date, Insignia has made no commitments nor agreed to any arrangements to obtain
additional financing, but is currently considering various financing
alternatives. The resolutions adopted by the shareholders in 1996 authorize the
Board to allot shares, but do not authorize other securities, such as
convertible promissory notes or warrants to purchase shares. Resolutions 8 and 9
authorize the Board to allot shares, as well as other types of securities and
options or warrants to purchase securities. The Board believes that this
authority will provide Insignia with the flexibility necessary to obtain
additional financing. There can be no assurance that Insignia will be able to
obtain additional financing when needed, on acceptable terms, or at all. The
failure to raise additional funds on a timely basis and on sufficiently
favourable terms could have a material adverse effect on the business, operating
results and financial condition of Insignia.
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 8 AND 9
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 8, 1999,
with respect to the beneficial ownership of Insignia's ordinary shares by (i)
each shareholder known by Insignia to be the beneficial owner of more than 5% of
Insignia's ordinary shares, (ii) each director and nominee, (iii) each Named
Officer (as defined below) and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------------------------------------------------------- ---------------------- ---------------
<S> <C> <C>
RIT Capital Partners plc(2).............................................. 2,032,897 16.0%
Technology Venture Investors IV(3)....................................... 1,438,808 11.3%
Nicholas, Viscount Bearsted(4)........................................... 790,904 6.1%
Robert H. Siteman and Barbara L. Siteman(5).............................. 641,500 5.0%
Richard M. Noling(6)..................................................... 357,333 2.7%
George Buchan(7)......................................................... 153,537 1.2%
Stephen M. Ambler(8)..................................................... 47,354 *
Vincent S. Pino(9)....................................................... 23,000 *
Albert E. Sisto(10)...................................................... 16,666 *
Ronald C. Workman(11).................................................... 2,083 *
David B. Winterburn(12).................................................. 1,250 *
Joseph A. Taglia(13)..................................................... -- *
All current directors and executive officers as a group (8
persons)(14)........................................................... 1,392,128 10.4%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares subject to options that are currently exercisable or exercisable
within 60 days of March 8, 1999 are deemed to be outstanding and to be
beneficially owned by the person holding such option for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) The address of RIT Capital Partners plc is 27 St. James's Place, London SW1A
1NR, United Kingdom.
(3) Represents 1,278,376 shares held by Technology Venture Investors-4, L.P.
("TVI"), 149,416 shares held by TVI Partners-4, L.P. and 11,016 shares held
by TVI Affiliates-4, L.P. The address of TVI is 2480 Sand Hill Road, Suite
101, Menlo Park, California 94025.
(4) Includes 153,958 shares subject to options that were exercisable within 60
days of March 8, 1999. Nicholas, Viscount Bearsted is Chairman of the Board
of Insignia. His address is 9 Acacia Road, London, NW8 6AB, United Kingdom.
(5) Mr. And Mrs. Siteman's principal address is 1657 Wicklow Court, Westlake
Village, California.
(6) Includes 325,313 shares subject to options that were exercisable within 60
days of March 8, 1999. Mr. Noling is the President and Chief Executive
Officer and a director of Insignia.
(7) Includes 121,875 shares subject to options that were exercisable within 60
days of March 8, 1999. Mr. Buchan is Senior Vice President of Engineering
and UK General Manager of Insignia.
(8) Represents shares subject to options that were exercisable within 60 days of
March 8, 1999. Mr. Ambler is Chief Financial Officer, Company Secretary and
a Senior Vice President of Insignia.
16
<PAGE>
(9) Mr. Pino is a director of Insignia.
(10) Represents shares subject to options that were exercisable within 60 days
of March 8, 1999. Mr. Sisto is a director of Insignia.
(11) Represents shares subject to options that were exercisable within 60 days
of March 8, 1999. Mr. Workman is Senior Vice President of Marketing of
Insignia.
(12) Represents shares subject to options that were exercisable within 60 days
of March 8, 1999. Mr. Winterburn served as Senior Vice President of Business
Development and Chief Technology Officer of Insignia from August 1998 to
March 1999.
(13) Mr. Taglia served as Senior Vice President of Sales and Marketing from
October 1997 to June 1998.
(14) Includes the shares indicated as included in footnotes (4) and (6) through
(11).
17
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to or earned or paid
for services rendered in all capacities to Insignia and its subsidiaries during
each of 1996, 1997 and 1998 by Insignia's Chief Executive Officer and each of
Insignia's other executive officers who were serving as executive officers at
the end of 1998, as well as Insignia's former Senior Vice President of Sales and
Marketing who left Insignia during 1998 (the "Named Officers"). This information
includes the dollar values of base salaries and bonus awards, the number of
shares subject to options granted and certain other compensation, whether paid
or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)(2)
- ----------------------------- --------- ----------- ------------- ----------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling(3) ........ 1998 $ 217,875 $ 75,171 $ -- 20,000 $ 1,080
President and Chief 1997 203,947 93,184 -- 415,000 360
Executive Officer 1996 128,792 9,800 -- 85,000 405
Stephen M. Ambler(4) ........ 1998 145,250 40,345 -- 20,000 --
Chief Financial Officer, 1997 122,556 8,889 19,777(5) 88,750 4,338
Company Secretary and 1996 84,072 -- 8,932(6) 3,750 4,203
Senior Vice President
George Buchan ............... 1998 167,000 54,827 22,044(7) 20,000 16,700
Senior Vice President of 1997 158,650 51,671 20,265(7) 55,000 15,865
Engineering and UK General 1996 141,300 13,168 12,740(7) -- 14,130
Manager
Ronald C. Workman(8) ........ 1998 82,500 22,442 -- 100,000 405
Senior Vice President of
Marketing
David B. Winterburn(9) ...... 1998 59,006 25,734 57,000(10) 130,000 135
Former Senior Vice
President of Business
Development and Chief
Technology Officer
Joseph A. Taglia(11) ........ 1998 103,125 28,833 60,072(12) 10,000 495
Former Senior Vice 1997 108,811 26,747 -- 100,000 292
President of Sales and
Marketing
</TABLE>
- ------------------------------
(1) Bonuses paid to the executive officers (other than the Chief Executive
Officer) are based on a target bonus set for each officer each quarter,
adjusted by Insignia's operating results over plan and the executive
officer's performance against quarterly qualitative goals. The Chief
Executive Officer's bonus is at the discretion of the Compensation Committee
of the Board.
(2) Represents Insignia's contribution to defined contribution employee benefit
plans.
(3) Mr. Noling joined Insignia in April 1996 as Senior Vice President of Finance
and Operations, Chief Financial Officer and Company Secretary. He was
appointed President and Chief Executive Officer of Insignia in March 1997.
(4) Mr. Ambler joined Insignia in April 1994 as Director of Finance and
Administration, Europe. He was appointed Chief Financial Officer, Company
Secretary and Vice President in October 1997. He became a Senior Vice
President in January 1999.
(5) Of this sum, $8,411 represents the incremental cost to Insignia of the use
of a company car and $11,666 represents a bonus for relocation to Insignia's
United States facility.
(6) Represents the incremental cost to Insignia of the use of a company car.
(7) Represents the payment of a company car allowance.
(8) Mr. Workman joined Insignia in July 1998.
18
<PAGE>
(9) Mr. Winterburn joined Insignia in August 1998. He served as Senior Vice
President of Business Development and Chief Technology Officer until March
1999. Mr. Winterburn provided consultancy services to Insignia between June
1998 and August 1998.
(10) $15,000 of this sum represents a relocation reimbursement, and $42,000
represents amounts paid for consulting services provided immediately prior
to joining Insignia.
(11) Mr. Taglia joined Insignia in May 1997 as Senior Vice President and General
Manager of the SoftWindows Business Group. He was appointed Senior Vice
President of Sales and Marketing in October 1997, and left the employment of
Insignia in June 1998.
(12) Represents a payment upon severance of employment.
The following table sets forth further information regarding individual
grants of rights to purchase ordinary shares during 1998 to each of the Named
Officers. In accordance with the rules of the Securities and Exchange Commission
(the "SEC"), the table sets forth the hypothetical gains or "option spreads"
that would exist for the options at the end of their respective ten-year terms.
These gains are based on assumed rates of annual compounded share price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises depend
upon the future performance of the ordinary shares and ADSs. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF SHARE PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(1)
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------
NAME (#) 1998 ($/SH) DATE 5%($) 10%($)
- -------------------------------- ---------------- ----------------- --------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling............... 10,000(2) 0.1% $ 1.625 04/28/08 $ 10,219 $ 25,898
10,000(2) 0.1% 0.688 10/19/08 4,327 10,965
Stephen M. Ambler............... 10,000(2) 0.1% 1.625 04/28/08 10,219 25,898
10,000(2) 0.1% 0.688 10/19/08 4,327 10,965
George Buchan................... 10,000(2) 0.1% 1.625 04/28/08 10,219 25,898
10,000(2) 0.1% 0.688 10/19/08 4,327 10,965
Ronald C. Workman............... 90,000(3) 0.9% 1.000 07/06/08 56,600 143,436
10,000(2) 0.1% 0.688 10/19/08 4,327 10,965
David B. Winterburn............. 120,000(3) 1.2% 1.000 07/06/08 75,467 191,249
10,000(2) 0.1% 0.688 10/19/08 4,327 10,965
Joseph A. Taglia................ 10,000(2)(4) 0.1% 1.625 04/28/08 10,219 25,898
</TABLE>
- ------------------------------
(1) The 5% and 10% assumed annual compound rates of share price appreciation are
mandated by rules of the SEC and do not represent Insignia's estimate or
projection of future ordinary share or ADS prices.
(2) These incentive options were granted pursuant to Insignia's 1995 Incentive
Stock Option Plan for U.S. Employees. These options vest and become
exercisable at the rate of 2.0833% of the shares for each full month that
the optionee renders service to Insignia. The option exercise price is equal
to the fair market value of Insignia's ordinary shares on the date of grant
and the options expire ten years from the date of grant, subject to earlier
termination upon termination of employment. 25% of the options granted will
be subject to accelerated vesting upon termination or constructive
termination following a change of control of Insignia.
(3) These incentive options were granted pursuant to Insignia's 1995 Incentive
Stock Option Plan for U.S. Employees. These options vest and become
exercisable as to 25% of the shares on the first anniversary of the date of
grant and thereafter at the rate of 2.0833% of the shares for each full
month that the optionee renders services to Insignia. The option exercise
price is equal to the fair market value of Insignia's ordinary shares on the
date of grant and the options expire ten years from the date of grant,
subject to earlier termination upon termination of employment. 25% of the
options granted will be subject to accelerated vesting upon termination or
constructive termination following a change of control of Insignia.
(4) These options lapsed on September 28, 1998.
19
<PAGE>
The following table sets forth certain information concerning the exercise
of options by each of the Named Officers during 1998, including the aggregate
amount of gains on the date of exercise. In addition, the table includes the
number of shares covered by both exercisable and unexercisable rights to acquire
shares as of December 31, 1998. Also reported are values of "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding rights to acquire shares and $2.00 per share, which was
the closing price of the ADSs as reported on the Nasdaq National Market on
December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
VALUE OPTIONS AT YEAR-END (#) AT YEAR-END($)(2)
SHARES ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling........ -- -- 290,000 230,000 $ 5,628 $ 17,442
Stephen M. Ambler........ -- -- 38,198 78,052 $ 9,097 $ 21,575
George Buchan............ -- -- 111,979 50,521 $ 45,160 $ 15,698
Ronald C. Workman........ -- -- 417 99,583 $ 547 $ 102,573
David B. Winterburn...... -- -- 417 129,583 $ 547 $ 132,573
Joseph A. Taglia......... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) "Value Realized" represents the fair market value of the shares underlying
the options on the date of exercise less the aggregate exercise price of the
options.
(2) For purposes of the table, all amounts in pounds sterling were converted to
U.S. dollars using $1.67 per pound sterling, the exchange rate in effect as
of December 31, 1998.
EMPLOYMENT AGREEMENTS
Effective March 25, 1997, Mr. Noling entered into an employment agreement
with Insignia, which is terminable by either party upon six month's notice and
by Insignia for cause at any time. In connection with such agreement, Mr. Noling
was granted options to purchase (i) 100,000 ordinary shares at an exercise price
of $1.969, such options being 100% vested and immediately exercisable, (ii)
100,000 ordinary shares at an exercise price of $1.969, such options to vest and
become exercisable at the rate of 2.0833% of the shares on the first day of each
month following the date of grant and (iii) 200,000 ordinary shares on the day
of the 1997 Annual General Meeting, such options to vest and become exercisable
at the rate of 2.0833% of the shares on the first day of each month following
the date of grant. The Annual General Meeting was held on May 29, 1997 and the
options were granted at an exercise price of $2.375. 100,000 of these options
are subject to accelerated vesting and exercisability should Insignia meet
certain earnings per share ("EPS") targets as follows: (a) 25,000 options are
accelerated should the EPS exceed $0.07 for 2 consecutive quarters, (b) 37,500
options are accelerated should the EPS exceed $0.14 for 2 consecutive quarters
and (c) 37,500 options are accelerated should the EPS exceed $0.21 for 2
consecutive quarters, with a maximum of one early vesting event per quarter.
These 100,000 options fully vest upon a takeover or merger of Insignia.
The employment agreement continues through May 31, 2001, and is
automatically extended for an additional year at the end of the term unless
either party gives notice six months prior to November 30, 2000 to terminate
effective upon the expiration of the then current term. In the event of any
business combination resulting in a change of control of Insignia or in the
event of disposal of a majority of the assets of Insignia, and the termination
or constructive termination of Mr. Noling's employment, Mr. Noling
20
<PAGE>
shall receive his then current full salary for a period of twelve months
following such termination. In addition he shall be entitled to continued
vesting and exercisability of his options for a period of twelve months after
termination and shall be entitled to participate in Insignia's employee benefits
on the same basis as if he were an employee.
In January 1993, Mr. Buchan entered into an employment agreement with
Insignia, which may be terminated by either party upon six months' notice and by
Insignia for cause at any time. In the event of any business combination, change
in control or disposal of a majority of the assets of Insignia, Mr. Buchan's
employment may be terminated with three months' notice, and upon such
termination Mr. Buchan will be entitled to a payment equivalent to his current
annual salary plus estimated bonus for the year following termination and all
his outstanding share options will become exercisable.
In July 1998, the Company loaned Mr. Winterburn $70,000 to assist in the
purchase of a house. The loan is represented by a promissory note, and bears
interest at the prime rate. Provided Mr. Winterburn remains an employee of the
Company, the Company agreed to forgive 25% of unpaid principal on January 10,
1999 and 25% each January 10 thereafter up to and including January 10, 2002.
Mr. Winterburn's employment terminated in March 1999, and the remaining unpaid
principal and interest is repayable to the Company within 30 days.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board makes all decisions involving the
compensation of executive officers of Insignia. The Compensation Committee
consists of Albert E. Sisto and Vincent S. Pino, both of whom are non-employee
directors. John R. Johnston served on the Compensation Committee until his
resignation as a director in July 1998. Mr. Pino was elected to the Compensation
Committee in October 1998. Paul L. Borrill served on the Compensation Committee
until he resigned in January 1999, at which time Mr. Sisto was elected to serve
on the committee.
Insignia entered into a consulting agreement with Mr. Sisto, dated December
28, 1998, whereby Mr. Sisto will provide sales consulting, sales training,
advice and assistance as Insignia may from time to time request over a term of
six months. Mr. Sisto shall receive a fee of $500 for each half-day of service
provided, subject to a maximum of $35,000. Mr. Sisto shall also receive a bonus
fee for each qualifying Jeode customer contract signed in his assigned
geographic region. A qualifying customer contract is defined as a contract with
a value in excess of $500,000 over two years after signing by Insignia and the
customer. The agreement is terminable by either party upon ten days written
notice and by Insignia for any reason with written notice.
REPORT OF THE COMPENSATION COMMITTEE
Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee.
GENERAL COMPENSATION POLICY
The Compensation Committee acts on behalf of the Board to establish the
general compensation policy of Insignia for all employees of Insignia. The
Compensation Committee typically reviews base salary levels and target bonuses
for the Chief Executive Officer ("CEO") and other executive officers and
employees of Insignia at or about the beginning of each fiscal year. The
Compensation Committee administers Insignia's incentive and equity plans,
including the 1995 Stock Option Plan for U.S. Employees, the U.K. Employee Share
Option Scheme 1996 and the 1995 Employee Share Purchase Plan.
The Compensation Committee's philosophy in compensating executive officers,
including the CEO, is to relate compensation directly to corporate performance.
Thus, Insignia's compensation policy, which applies to executive officers and
other key employees of Insignia, relates a portion of each individual's total
21
<PAGE>
compensation to the company objectives and individual objectives set forth at
the beginning of the year. Consistent with this policy, a designated portion of
the compensation of the executive officers of Insignia is contingent on
corporate performance and, in the case of executive officers, is also based on
the individual officer's performance as measured against personal objectives.
Long-term equity incentives for executive officers are effected through the
granting of share options. Options generally have value for the executive only
if the price of Insignia's shares increases above the fair market value on the
grant date and the executive remains in Insignia's employ for the period
required for the shares to vest.
The base salaries, incentive compensation and option grants of the executive
officers are determined in part by the Compensation Committee's informal review
of data on prevailing compensation practices in technology companies with whom
Insignia competes for executive talent and by its evaluation of such information
in connection with Insignia's corporate goals. To this end, the Compensation
Committee attempted to compare the compensation of Insignia's executive officers
with the compensation practices of comparable companies to determine base
salary, target bonuses and target total cash compensation. In addition to their
base salaries, Insignia's executive officers, including the CEO, are each
eligible to receive a quarterly cash bonus and option grants.
In preparing the performance graph for this proxy statement, Insignia used
the S&P Computer Software and Services Index as its published line of business
index. The compensation practices of most of the companies in such Index were
not reviewed by Insignia when the Compensation Committee reviewed the
compensation information described above because such companies were determined
not to be competitive with Insignia for executive talent.
1998 EXECUTIVE COMPENSATION
BASE COMPENSATION. The information described above was presented to the
Compensation Committee in January 1998. The Compensation Committee reviewed the
recommendations and performance and market data outlined above and established a
base salary level to be effective January 1, 1998 for each executive officer,
including the CEO.
INCENTIVE COMPENSATION. Cash bonuses are awarded to the extent that an
executive officer achieved predetermined individual objectives and Insignia met
predetermined objectives set by the Board at the beginning of the year. The
CEO's subjective judgment of executives' performance (other than his own) is
taken into account in determining whether those objectives have been satisfied.
SHARE OPTIONS. Share options typically have been granted to executive
officers when the executive first joins Insignia, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group. the Compensation Committee may, however, grant additional
options to executives for other reasons. The number of shares subject to each
option granted is within the discretion of the Compensation Committee and is
based on anticipated future contribution and ability to impact corporate and/or
business unit results, past performance or consistency within the executive's
peer group. In addition, in 1998, long-term incentives in the form of option
grants were considered appropriate because options generally have value only if
the price of Insignia's shares increases above the exercise price and the
optionee remains in the employ of Insignia for the time required for the options
to vest. The options generally become exercisable over a four-year period and
are granted at a price that is equal to the fair market value of the ADSs on the
date of grant. In 1998, the Compensation Committee considered these factors, as
well as the number of options held by such executive officers as of the date of
grant that remained unvested, and determined that additional grants should be
made in 1998.
For 1999, the Compensation Committee will be considering whether to grant
future options to executive officers based on the factors described above, with
particular attention to Insignia-wide management objectives and the executive
officers' success in obtaining specific individual financial and operational
objectives established or to be established for 1999, to Insignia's expected
results and to the number of options currently held by the executive officers
that remain unvested.
22
<PAGE>
COMPANY PERFORMANCE AND CEO COMPENSATION. For 1998, the Compensation
Committee recommended an increase of $15,000 in Mr. Noling's base salary. In
addition, the Compensation Committee granted options to purchase 20,000 shares
to Mr. Noling. Mr. Noling was responsible for Insignia meeting certain of its
objectives in 1998. After careful review of Insignia's performance as measured
against its objectives and the criteria set forth above under the discussion of
incentive compensation, the Compensation Committee recommended that bonuses in
the aggregate amount of $75,171 be paid to Mr. Noling.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. For
1999, Insignia intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended. The 1995 Plan is already in
compliance with Section 162(m) by limiting stock awards to named executive
officers. Insignia does not expect cash compensation for 1999 to be in excess of
$1,000,000 nor, therefore, affected by the requirements of Section 162(m).
COMPENSATION COMMITTEE
Albert E. Sisto
Vincent S. Pino
Paul L. Borrill
23
<PAGE>
COMPANY SHARE PRICE PERFORMANCE
The share price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933, as amended, or under the Exchange Act, except to the extent that Insignia
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such Acts.
The graph below compares the cumulative total shareholder return on the ADSs
of Insignia from the effective date of Insignia's Registration Statement with
respect to Insignia's initial public offering (November 13, 1995) to March 31,
1999 with the cumulative total return on the Nasdaq Stock Market (U.S. and
Foreign) and the S&P Computer Software and Services Index (assuming the
investment of $100 in Insignia's ADSs on the date of Insignia's initial public
offering and in each of the indexes on October 31, 1995, and reinvestment of all
dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
24
<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1998, there has not been, nor is there currently proposed,
any transaction or series of transactions to which Insignia or any of its
subsidiaries was or is to be a party in which the amount involved exceeds
$60,000 and in which any executive officer, director or holder of more than 5%
of Insignia's ordinary shares had or will have a direct or indirect material
interest other than (i) normal compensation arrangements, which are described
under "Proposals 3 and 4--Election and Re-election of Directors-- Director
Compensation" and "Executive Compensation" above and (ii) the transactions
described under "Employment Agreements" above.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at Insignia's 1999 Annual
General Meeting must be received by Insignia at its registered office no later
than , 2000 to be included in Insignia's Proxy Statement and form of
proxy relating to the meeting. This is without prejudice to shareholders' rights
under the Act to propose resolutions that may properly be considered at that
meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Insignia's directors and officers, and persons who own more than 10% of
Insignia's ordinary shares to file initial reports of ownership and reports of
changes in ownership with the SEC. Such persons are required by SEC regulation
to furnish Insignia with copies of all Section 16(a) forms that they file. Based
solely on its review of the copies of such forms furnished to Insignia and
written representations from the executive officers and directors, Insignia
believes that all Section 16(a) filing requirements were met.
OTHER BUSINESS
The Board does not intend to bring any other business before the Meeting,
and, so far as is known to the Board, no matters are to be brought before the
Meeting except as specified in the Notice of the Meeting. As to any business
that may properly come before the Meeting, however, it is intended that proxies,
in the form enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such proxies.
------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
------------------------
THE PROXY SHOULD BE RETURNED TO THE OFFICES OF INSIGNIA AT INSIGNIA HOUSE, THE
MERCURY CENTRE, WYCOMBE LANE, WOOBURN GREEN, HIGH WYCOMBE, BUCKINGHAMSHIRE, HP10
0HH UNITED KINGDOM, NOT LATER THAN 12:30 P.M. ON MAY , 1999, BEING
48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
25
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
(REGISTERED NUMBER 1961960)
DIRECTORS' REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 1998
F-1
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1998
The directors of Insignia Solutions PLC present herewith their report and
the audited accounts of the company and of the Group for the year ended 31
December 1998 in accordance with the format prescribed by the UK Companies Act.
PRINCIPAL ACTIVITIES
The principal activities of the company and group are the design,
engineering, development, licensing and maintenance of computer software
products which provide cross platform compatibility solutions.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
During the year the group generated revenues from sales of its packaged
software products to end users and from software development and licensing
agreements with a number of international US-based concerns. In 1998 the group
shipped two principal product lines, Softwindows and NTRIGUE.
Total turnover was down 64% on 1997 at $14,096,000 (1997: $38,869,000). As a
result of the disposal of the NTRIGUE product line during the year, sales of
Softwindows accounted for 92% of turnover. There was a declining demand for
Softwindows, primarily as a result of the declining market for Apple Macintosh
compatible computers and increased competition reducing both prices and margins.
A resultant operating loss was recorded of $13,511,000 (1997: loss $12,045,000).
On 5 February 1998 the company completed the disposal of its NTRIGUE
technology to Citrix Systems Inc for $17,687,000,of which $8,750,000 was subject
to a holdback in escrow (see note 7). As part of the disposal, the company
transferred 45 employees to Citrix, of whom 43 were development engineers. Sales
of NTRIGUE were discontinued in May 1998.
The income from the sale of the NTRIGUE technology was offset by cash
outflows from operations, and at 31 December 1998, the group had cash and cash
equivalent balances and short term investments of $16,334,000 (1997:
$14,461,000) of which $9,100,000 (1997: Nil) was held in escrow.
In the light of adverse trading in its subsidiary Insignia Solutions Inc,
the Directors have considered it prudent to write down the carrying value of the
investments by $2,000,000 in the balance sheet of the company (see note 10).
In January 1998 the company announced its intention to launch a new product
line. This product line, called Jeode, is based on the company's Embedded
Virtual Machine (EVM) technology. Jeode is the company's implementation of Sun
Microsystem Inc's Java technology developed specifically for embedded systems.
The Jeode platform is enabled by the company's EVM and is designed to enable
software developers to create reliable, efficient and predictable embedded
products. In November 1998, the company delivered Beta versions of the Jeode
platform. The product has been available for sale since 16 March 1999 and is
expected to be the principal product line in 1999 and for the foreseeable
future.
The company 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 and retention of key personnel.
Due to the generally longer sales cycles expected to be associated with the
Jeode platform, the company does not currently have accurate visibility of
future order rates and demand for its products generally.
F-2
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1998 (CONTINUED)
GOING CONCERN
The company requires additional funding to meet its current plans. The
directors are currently in negotiations with certain parties which, when
completed, are anticipated to provide sufficient funds for the group to meet its
operating and capital requirement for at least the next twelve months. The
directors believe there are alternative sources of finance available should
these negotiations not be completed. Accordingly the financial statements have
been prepared on a going concern basis and the directors consider it would not
be appropriate to reflect the consequences of a failure to raise additional
funds on a timely basis and with sufficiently favourable terms in these
financial statements.
SHARE CAPITAL
The company issued 491,000 Ordinary shares on the exercise of share options
and 128,103 Ordinary shares through its employee share purchase plan during the
year.
DIVIDENDS AND TRANSFERS TO RESERVES
The directors are unable to recommend payment of a dividend in respect of
the year ended 31 December 1998 (1997: Nil). The profit for the year $
422,000 (1997: loss of $10,658,000) will be transferred to reserves.
DIRECTORS
The directors of the company during the year and to the date of this report
were:
<TABLE>
<CAPTION>
<S> <C>
Viscount Bearsted (Chairman)
P L Borrill (Resigned 8 January 1999)
J R Johnston (USA) (Resigned 21 July 1998)
R M Noling (USA)
VS Pino (USA) (Appointed 20 October 1998)
A E Sisto (USA)
</TABLE>
F-3
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1998 (CONTINUED)
DIRECTORS (CONTINUED)
The interest of the directors at the year end in the shares of the company
were as follows:
<TABLE>
<CAPTION>
OPTION TO
ACQUIRE
ORDINARY ORDINARY
SHARES SHARES
OF 20P EACH OF 20P EACH
------------- -------------
<S> <C> <C>
Viscount Bearsted
At 31 December 1997............................ 386,946 430,000
At 31 December 1998............................ 636,946 190,000
P L Borrill
At 31 December 1997............................ -- 15,000
At 31 December 1998............................ -- 25,000
J R Johnston
At 31 December 1997............................ -- 20,000
At date of resignation......................... -- 30,000
R M Noling
At 31 December 1997............................ 9,946 500,000
At 31 December 1998............................ 26,052 520,000
V S Pino
At date of appointment......................... 23,000 --
At 31 December 1998............................ 23,000 15,000
A E Sisto
At 31 December 1997............................ -- 15,000
At 31 December 1998............................ -- 25,000
</TABLE>
Further details of the share options are given in note 16 to the accounts.
Of the options granted to Viscount Bearsted, 125,000 are exercisable until 3
November 2002 at 90p each, 5,000 are exercisable until 16 April 2007 at $1.75
each, 50,000 are exercisable until 28 May 2007 at $2.375 each and 10,000 are
exercisable until 28 April 2008 at $1.625. During the year Viscount Bearsted
exercised 250,000 options at 40p each.
Of the options granted to P L Borrill, 15,000 are exercisable until 15 July
2007 at $2.125 each and 10,000 are exercisable until 28 April 2008 at $1.625.
The options granted to J R Johnston were not exercised by 20 October 1998
and consequently lapsed.
Of the options granted to R N Noling, 85,000 are exercisable until 28 March
2006 at $5.75 each, 15,000 are exercisable until 2 March 2007 at $2.438 each,
200,000 are exercisable until 24 March 2007 at $1.969 each, 200,000 are
exercisable until 28 May 2007 at $2.375 each, 10,000 are exercisable until 28
April 2008 at $1.625 and 10,000 are exercisable until 19 October 2008 at $0.688
each.
The options granted to V S Pino are exercisable until 19 October 2008 at
$0.688 each.
Of the options granted to A E Sisto, 15,000 are exercisable until 16 April
2007 at $1.75 each and 10,000 are exercisable until 28 April 2008 at $1.625.
The vesting arrangements of the above options are set out in note 16 to the
accounts.
F-4
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1998 (CONTINUED)
POLICY ON PAYMENT OF CREDITORS
It is the group's policy to agree payment terms with its suppliers, along
with other terms and conditions, when it enters into binding purchase contracts
and to abide by the agreed payment terms provided the supplier has provided the
goods or services in accordance with the terms and conditions of the contract.
The company had 41 days purchases outstanding at 31 December 1998 based on the
average daily amount invoiced by suppliers during the year ended 31 December
1998.
YEAR 2000
Many currently installed computer systems and software products are coded to
accept two digit entries in the date code field. These date code fields will
need to accept four digit entries to distinguish 21(st) century dates from
20(th) century dates. As a result computer systems and software used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.
SoftWindows 98, SoftWindows 95 versions 4.0 and 5.0 and Real PC are Year
2000 compliant. Earlier versions of SoftWindows and all versions of Soft PC, a
product the company no longer ships, are not Year 2000 compliant, but all such
versions are upgradable to Year 2000 compliant products. Furthermore the new
Jeode product under development is Year 2000 compliant. The company does not
however guarantee that the target platforms on which both the SoftWindows and
Jeode products may be used are compliant since these are third party products.
The company has also carried out an assessment of its own internal systems
to assess their ability to deal with the date change from 1999 to 2000 and the
introduction of the Euro and believes they are all Year 2000 compliant. The
costs of any remedial work necessary are expensed as incurred. The group does
not expect the costs associated with ensuring year 2000 and Euro compliance to
have a material effect on its financial position.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare accounts for each financial
year which give a true and fair view of the state of affairs of the group and
the company and of the profit or loss of the group for that period. In preparing
those accounts, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the accounts;
- prepare the accounts on the going concern basis unless it is inappropriate
to presume that the group and company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and company and enable them to ensure that the financial statements comply
with the Companies Act 1985. They are also responsible for safeguarding the
assets of the group and company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
F-5
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1998 (CONTINUED)
AUDITORS
Following the merger on 1 July 1998 with Coopers and Lybrand, Price
Waterhouse resigned as auditors and the directors appointed
PricewaterhouseCoopers to fill the vacancy thereby arising. A resolution to
reappoint PricewaterhouseCoopers will be proposed at the annual general meeting.
By Order of the Board
S M Ambler
SECRETARY 19 April 1999
F-6
<PAGE>
AUDITORS' REPORT TO THE MEMBERS OF
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
We have audited the accounts on pages F-8 to F-29 which have been prepared
under the historical cost convention and the accounting policies set out on
pages F-14 to F-16.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report, including as
described on page F-6 the financial statements. Our responsibilities, as
independent auditors, are established by statute, the Auditing Practices Board
and our profession's ethical guidance.
We report to you our opinion as to whether the financial statements give a
true and fair view and are properly prepared in accordance with the Companies
Act. We also report to you if, in our opinion, the director's report is not
consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and transactions is not disclosed.
We read the other information contained in the Annual Report and consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud of other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of the affairs of the company and the group at 31 December 1998 and of the
profit and cash flows of the group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
PRICEWATERHOUSECOOPERS
Chartered Accountants
and Registered Auditors
Thames Court
1 Victoria Street
Windsor
Berkshire
SL4 1HB 19 April 1999
F-7
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1998
<TABLE>
<CAPTION>
1998 1997
NOTE $'000 $'000
----- --------- ---------
<S> <C> <C> <C>
TURNOVER.............................................................................. 2 14,096 38,869
Cost of sales......................................................................... (8,329) (15,068)
--------- ---------
GROSS PROFIT.......................................................................... 5,767 23,801
Distribution costs.................................................................... (7,870) (17,456)
Administrative expenses............................................................... (11,408) (18,390)
--------- ---------
OPERATING LOSS........................................................................ 2,3 (13,511) (12,045)
Profit on disposal of part of the group's operations.................................. 7 14,731 --
--------- ---------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST.................................. 1,220 (12,045)
Interest receivable and similar income................................................ 1,006 722
Interest payable and similar income................................................... 6 (22) (55)
--------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION.................................. 2,204 (11,378)
Tax on profit/(loss) on ordinary activities........................................... 8 (1,782) 720
--------- ---------
PROFIT FOR THE FINANCIAL YEAR......................................................... 17 422 (10,658)
--------- ---------
--------- ---------
$ $
Basic Earnings per share.............................................................. 24 0.03 (0.91)
--------- ---------
Diluted Earnings per share............................................................ 24 0.03 (0.91)
--------- ---------
</TABLE>
The only recognised gain or loss is the profit/(loss) for the year.
The notes on pages F-12 to F-29 form part of these accounts
F-8
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--31 DECEMBER 1998
<TABLE>
<CAPTION>
1998 1997
NOTE $'000 $'000
--------- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets..................................................................... 9 1,074 2,175
Investments......................................................................... 10 325 325
--------- ---------
1,399 2,500
--------- ---------
CURRENT ASSETS
Stocks.............................................................................. 11 82 185
Debtors of which $522,000 (1997:$85,000) falls due in more than one year............ 12 4,254 10,785
Short term investments.............................................................. -- 3,820
Cash and cash equivalents held in escrow............................................ 13 9,100 --
Cash at bank and in hand............................................................ 7,234 10,641
--------- ---------
20,670 25,431
Creditors--amounts falling due within one year...................................... 14 (10,651) (17,280)
--------- ---------
Net current assets.................................................................. 10,019 8,151
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES............................................... 11,418 10,651
CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR............................. 15 -- (128)
--------- ---------
NET ASSETS.......................................................................... 2 11,418 10,523
--------- ---------
--------- ---------
CAPITAL AND RESERVES
Called up share capital............................................................. 17,18 4,164 3,954
Share premium account............................................................... 18 32,036 31,773
Profit and loss account............................................................. 18 (24,834) (25,256)
Capital reserve..................................................................... 18 52 52
--------- ---------
EQUITY SHAREHOLDERS' FUNDS.......................................................... 18 11,418 10,523
--------- ---------
--------- ---------
</TABLE>
Approved By The Board on 19 April 1999 and signed on its behalf by:
R M Noling
Director
The notes on pages F-12 to F-29 form part of these accounts.
F-9
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
COMPANY BALANCE SHEET--31 DECEMBER 1998
<TABLE>
<CAPTION>
1998 1997
NOTE $'000 $'000
--------- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets.................................................................... 9 587 930
Investments........................................................................ 10 325 2,325
--------- ---------
912 3,255
--------- ---------
CURRENT ASSETS
Debtors............................................................................ 12 1,460 20,564
Short term investments............................................................. -- 1,000
Cash and cash equivalents held in escrow........................................... 13 9,100 --
Cash at bank and in hand........................................................... 4,845 830
--------- ---------
15,405 22,394
Creditors--amounts falling due within one year..................................... 14 (2,807) (1,845)
--------- ---------
NET CURRENT ASSETS................................................................. 12,598 20,549
--------- ---------
Total assets less current liabilities.............................................. 13,510 23,804
Creditors--amounts falling due after more than one year............................ 15 -- (110)
Provision for liabilities and charges.............................................. 16 (2,092) --
--------- ---------
NET ASSETS......................................................................... 11,418 23,694
--------- ---------
CAPITAL AND RESERVES
Called up share capital............................................................ 17,18 4,164 3,954
Share premium account.............................................................. 18 32,177 31,914
Profit and loss account............................................................ 18 (24,923) (12,174)
--------- ---------
EQUITY SHAREHOLDERS' FUNDS......................................................... 18 11,418 23,694
--------- ---------
--------- ---------
</TABLE>
Approved By The Board on 19 April 1999 and signed on its behalf by:
R M Noling
Director
The notes on pages F-12 to F-29 form part of these accounts.
F-10
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 1998
<TABLE>
<CAPTION>
1998 1998 1997 1997
NOTE $'000 $'000 $'000 $'000
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES....................... A (14,561) (7,835)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received.................................................. 1,006 722
Interest element of finance lease rental payments.................. (22) (55)
--------- ---
984 667
TAXATION........................................................... 76 47
CAPITAL EXPENDITURE
Purchase of tangible fixed assets.................................. (937) (753)
Proceeds from sale of tangible fixed assets........................ 140 188
--------- ---
(797) (565)
ACQUISITION AND DISPOSAL
Proceeds from sale of product line................................. 15,862 --
Product line proceeds held in escrow............................... (9,100) --
--------- ---
6,762 --
MANAGEMENT OF LIQUID RESOURCES
Proceeds from sale of short term investments....................... 3,820 2,411
FINANCING
Proceeds from issue of share capital............................... D 473 760
Capital element of finance lease rental payments................... D (164) (385)
--------- ---
309 375
--------- ---------
(DECREASE) IN CASH................................................. B (3,407) (4,900)
--------- ---------
--------- ---------
</TABLE>
The notes on pages F-12 to F-29 form part of these accounts.
F-11
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
1998
A RECONCILIATION OF OPERATING LOSS TO NET CASH (OUTFLOW) FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- ---------
<S> <C> <C>
Operating loss........................................................... (13,511) (12,045)
Depreciation of tangible fixed assets.................................... 750 2,239
Non cash restructuring charge............................................ -- 206
Decrease/(increase) in stocks............................................ 103 230
Decrease/(increase) in debtors........................................... 5,667 3,442
(Decrease)/increase in creditors......................................... (7,570) (1,907)
--------- ---------
Net cash (outflow) from operating activities............................. (14,561) (7,835)
--------- ---------
--------- ---------
</TABLE>
B RECONCILIATION TO NET FUNDS
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- ---------
<S> <C> <C>
(Decrease) in cash in the period........................................... (3,407) (4,900)
Decrease in debt and lease financing....................................... 164 385
(Decrease) in short term investment........................................ (3,820) (2,411)
--------- ---------
Change in net funds from cash flows........................................ (7,063) (6,926)
New finance leases......................................................... -- (46)
--------- ---------
Movements in net funds in period........................................... (7,063) (6,972)
Net funds at 1 January..................................................... 14,246 21,218
--------- ---------
Net funds at 31 December................................................... 7,183 14,246
--------- ---------
--------- ---------
</TABLE>
C ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
1 JANUARY OTHER NON 31 DECEMBER
1998 CASH FLOW CASH 1998
$'000 $'000 $'000 $'000
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Cash at bank and in hand..................... 10,641 (3,407) -- 7,234
Finance leases............................... (215) 164 -- (51)
Short term investment........................ 3,820 (3,820) -- --
----------- ----------- --- -----
Total........................................ 14,246 (7,063) -- 7,183
----------- ----------- --- -----
----------- ----------- --- -----
</TABLE>
F-12
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
1998 (CONTINUED)
D ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL
(INCLUDING PREMIUM) FINANCE LEASE
OBLIGATIONS
-------------------- --------------------
1998 1997 1998 1997
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1 January.................................................. 35,727 34,761 215 554
Cash inflow/(outflow) from financing....................... 473 760 (164) (385)
Non cash restructuring..................................... -- 206 -- --
Inception of finance lease and hire purchase contracts..... -- -- -- 46
--------- --------- --- ---
31 December................................................ 36,200 35,727 51 215
--------- --------- --- ---
--------- --------- --- ---
</TABLE>
F-13
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENT
The accounts have been prepared in US dollars and in accordance with
applicable accounting standards in the United Kingdom. A summary of the
principal group accounting policies, which have been applied consistently, is
set out below.
The company requires additional funding to meet its current plans. The
directors are currently in negotiations with certain parties which, when
completed, are anticipated to provide sufficient funds for the group to meet its
operating and capital requirement for at least the next twelve months. The
directors believe there are alternative sources of finance available should
these negotiations not be completed. Accordingly the financial statements have
been prepared on a going concern basis and the directors consider it would not
be appropriate to reflect the consequences of a failure to raise additional
funds on a timely basis and with sufficiently favourable terms in these
financial statements.
(1) BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention.
(2) BASIS OF CONSOLIDATION
The consolidated accounts include the company and all its subsidiaries.
Intragroup sales and profits are eliminated on consolidation and all sales and
profit figures relate to external transactions only.
(3) TURNOVER
Turnover, which excludes value added tax and sales tax, represents sales of
packaged software, software development fees and licence royalties.
(4) REVENUE RECOGNITION
The company's licence revenues are derived from product licensing fees
relating to the sale of packaged software products and royalties from
distributors, original equipment manufacturers ("OEM's") and site licences. The
company's service revenues are derived from OEM's for customers funded
engineering and from annual maintenance contracts.
Product licensing fees are recognised upon shipment if no significant vendor
obligations remain and if collection of the resulting receivable is deemed
probable. The company grants distributors and resellers certain rights of return
and price protection on unsold merchandise held by those distributors and
resellers. Accordingly, provisions for estimated future returns, exchanges and
credits for price protection are accrued upon product shipment.
The company has limited control over the extent to which products sold to
distributors and resellers are sold through to end users. Accordingly, a portion
of the company's sales may from time to time result in increased inventory at
its distributors and resellers. The company provides sale returns provisions for
distributor and reseller inventories. These provisions are based on the
company's estimates of expected sell-through by distributors and resellers of
its products.
The company provides a limited amount of free telephone technical support to
customers. These activities are generally considered to be insignificant
postcontract customer obligations. Estimated costs of these activities are
accrued at the time of product shipment. Revenues from annual maintenance
contracts are recognised rateably over the term of the contract.
F-14
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENT (CONTINUED)
Revenues from OEM's for funded engineering are recognised on a percentage of
completion basis, which is computed using the input measure of labour cost.
Minimum guaranteed royalty revenues not subject to significant future
obligations are generally recognised on shipment of software. Royalty revenues
that are subject to significant future obligations are recognised when earned.
Royalty revenues that exceed the minimum guarantees are recognised when
reported.
Payments from OEM's and maintenance contracts received in advance of revenue
recognition are recorded as deferred revenue.
(5) RESEARCH AND DEVELOPMENT EXPENDITURE
The company capitalises internal software development costs incurred after
technological feasibility has been demonstrated and commercial viability
expected. The company defines establishment of technological feasibility as the
completion of a working model. Such capitalised amounts are amortised commencing
with the introduction of that product at the greater of the straight-line basis
utilising estimated economic life, generally six months to one year, or the
ratio of actual revenues achieved to the total anticipated revenues over the
life of the product.
(6) FOREIGN CURRENCIES
The directors have determined that the group's and company's functional
currency is the US dollar.
Accordingly non-monetary assets and liabilities whose original values are in
currencies other than dollars are stated at their historic dollar value.
Monetary assets and liabilities expressed in other currencies are translated
into dollars at the rate of exchange ruling at the year end. Transactions in
other currencies are translated into dollars at the average rate for the month
in which the transaction occurred or at the forward contract or option rate
where such a hedging transaction has been undertaken. All foreign exchange
differences are taken to the profit and loss account in the year in which they
arise.
(7) TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at their purchase price, together with any
incidental expenses of acquisition.
Provision for depreciation is made so as to write off the cost of tangible
fixed assets on a straight line basis over the expected useful economic lives of
the assets concerned. The principal annual rates used for this purpose are:
<TABLE>
<S> <C>
Leasehold improvements shorter of estimated useful life or remaining lease term
Computers and other equipment 33%
Fixtures and fittings 25-33%
</TABLE>
(8) STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost is
determined on a first in first out basis and includes transport and handling
costs. Provision is made where necessary for stocks which are slow moving,
obsolete or defective.
F-15
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENT (CONTINUED)
(9) DEFERRED TAXATION
Deferred taxation is provided on the liability method in respect of timing
differences between profit as computed for taxation purposes and profit as
stated in the accounts to the extent that it is probable in the opinion of the
directors that a liability will become payable in the foreseeable future.
Deferred tax assets are only recognised to the extent that they are expected to
be recoverable.
(10) OPERATING LEASES
Rentals payable under operating leases are charged on a straight line basis
over the lease term in arriving at operating profit.
(11) FINANCE LEASE AND HIRE PURCHASE AGREEMENTS
Where fixed assets are financed by leasing agreements or hire purchase
contracts which transfer to the group substantially all the benefits and risks
of ownership, the assets are treated as if they had been purchased outright and
are included in tangible fixed assets. The capital element of these commitments
is shown as obligations under finance lease and hire purchase contracts.
Finance lease rentals are treated as consisting of capital and interest
elements; the capital element is applied to reduce the outstanding obligations
and the interest element is charged against profit in proportion to the reducing
capital element outstanding. Assets held under finance leases are depreciated
over the shorter of the lease term or the useful economic life of equivalent
owned assets.
(12) PENSION COSTS
Pension costs in respect of the group's defined contribution scheme and
401(k) plans are accounted for in the period to which they relate.
2 SEGMENTAL ANALYSIS
<TABLE>
<CAPTION>
NET
TURNOVER BY TURNOVER BY ORIGIN ASSETS/
DESTINATION OPERATING LOSSES (LIABILITIES)
-------------------- -------------------- -------------------- ---------
1998 1997 1998 1997 1998 1997 1998
$'000 $'000 $'000 $'000 $'000 $'000 $'000
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
USA........................................... 10,670 29,371 11,960 32,458 4,168 2,005 (12,353)
Rest of the World............................. 3,426 9,498 2,136 6,411 9,343 10,040 23,771
--------- --------- --------- --------- --------- --------- ---------
14,096 38,869 14,096 38,869 13,511 12,045 11,418
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1997
$'000
---------
<S> <C>
USA........................................... (8,308)
Rest of the World............................. 18,831
---------
10,523
---------
---------
</TABLE>
The directors consider that all of the group's activities fall within one
class of business. The results of the operation that has been sold (see note 7)
are not material to the group losses. Turnover of this business in 1998 included
in the above was $987,000 with an estimated gross profit of $400,000.
F-16
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
3 OPERATING LOSS
The operating loss is stated after charging:
<TABLE>
<CAPTION>
1998 1997
NOTE $'000 $'000
--------- --------- ---------
<S> <C> <C> <C>
Research and development costs........................................................ 4,621 11,123
Depreciation of owned assets.......................................................... 700 1,987
Depreciation of assets held under finance lease and hire purchase contracts........... 50 252
Hire of equipment under operating leases.............................................. 33 92
Rental of land and buildings.......................................................... 758 829
Directors' emoluments................................................................. 4 379 725
Auditors' remuneration--audit services................................................ 214 200
</TABLE>
Fees paid by the company and its UK subsidiaries to the auditors in the
United Kingdom were $148,000 (1997: $185,000), including audit fees paid to the
parent company auditors of $53,000 (1997: $50,000).
In 1997 the group incurred restructuring costs of which $1,652,000 is
classified with distribution costs and $343,000 within administrative expenses.
4 DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
----- -----
<S> <C> <C>
Aggregate emoluments........................................................... 378 427
Company contributions paid to money purchase pension schemes................... 1 --
Aggregate compensation for loss of office...................................... -- 298
--- ---
379 725
--- ---
--- ---
</TABLE>
Included above are amounts totalling $Nil (1997: $22,000) payable to third
parties for making available the services of non-executive directors to the
company.
Directors' emoluments of the highest paid director:
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
----- -----
<S> <C> <C>
Aggregate emoluments........................................................... 293 164
Company contributions paid to money purchase pension schemes................... 1 --
--- ---
294 164
--- ---
--- ---
</TABLE>
In addition the directors have been granted share options, the details of
which are set out in the directors' report.
A loan of $137,500 to R P Lee, a former director of the company, remained
outstanding at 31 December 1997. On 1 January 1998 the company forgave and
cancelled the remaining principal and interest on the loan. This expense has
been included in compensation for loss of office in 1997.
F-17
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
5 EMPLOYEE INFORMATION
(1) The average number of persons employed by the group during the year,
including executive directors, was:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Sales and marketing............................................................. 26 81
Research and development........................................................ 46 97
General and administrative...................................................... 28 37
--- ---
100 215
--- ---
--- ---
</TABLE>
(2) Group employment costs of all employees including executive directors:
<TABLE>
<CAPTION>
1998 1997
NOTE $'000 $'000
--------- --------- ---------
<S> <C> <C> <C>
Wages and salaries................................................ 7,205 13,305
Social security costs............................................. 704 990
Other pension costs............................................... 18 182 315
--------- ---------
8,091 14,610
--------- ---------
--------- ---------
</TABLE>
6 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
----- -----
<S> <C> <C>
On finance leases and hire purchase contracts.................................. 22 55
-- --
-- --
</TABLE>
7 DISPOSAL OF PART OF THE GROUP'S OPERATIONS
On 5 February 1998 the company completed the disposal of its NTRIGUE
technology to Citrix Systems for $17.687 million. As part of the disposal, the
company transferred 45 employees to Citrix, of whom 43 were development
engineers.
Under the terms of the disposal agreement $8.937 million was paid to the
company in cash on 5 February 1998, and the remainder is being held in an escrow
account for the sole purpose of satisfying any obligations to Citrix arising
from or in connection with an event against which the company would be required
to indemnify Citrix. Of this amount, Citrix released $2.5 million to the company
in February 1999. In January 1999 the company received an indemnity claim from
Citrix--see note 22.
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- -----
<S> <C> <C>
Proceeds from sale........................................................... 17,687
Costs incurred in sale....................................................... (2,956) --
--
---------
Exceptional income........................................................... 14,731 --
--
--
---------
---------
</TABLE>
Taxation impact of the exceptional income is a charge of $5,110,000.
F-18
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
8 TAXATION
(1) CURRENT TAXATION
Tax on profit/(loss) on ordinary activities comprises:
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- ---------
<S> <C> <C>
UK corporation taxation @31% (1997: 31.5%)................................... (1,754) 895
Overseas taxation............................................................ (28) (175)
--------- ---
(1,782) 720
--------- ---
--------- ---
</TABLE>
At 31 December 1998 the accumulated tax losses carried forward and available
for offset against future profits amounted to approximately $18,600,000 (1997:
$8,000,000) in the United States and $1,800,000 (1997: $3,000,000) in the United
Kingdom.
No provision has been made for any taxation that would become payable if
reserves retained in overseas subsidiaries were distributed as no such
distributions are planned.
(2) DEFERRED TAXATION
The full potential deferred tax asset comprises the following components:
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- ---------
<S> <C> <C>
Net operating loss carryforwards............................................. 6,947 4,342
Tax credit carryforwards..................................................... 1,082 789
Sales return reserve......................................................... 384 684
Accrued expenses, provisions and other temporary differences................. 657 1,584
--------- ---------
9,070 7,399
--------- ---------
Amount recognised in these financial statements.............................. -- --
--------- ---------
--------- ---------
</TABLE>
F-19
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
9 TANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
LEASEHOLD COMPUTERS AND FIXTURES AND
IMPROVEMENTS OTHER EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
------------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
COST
1 January 1998........................................... 1,435 8,615 810 10,160
Additions................................................ 447 416 72 935
Disposals................................................ (1,424) (6,331) (774) (8,529)
------ ------ ----- ---------
31 December 1998......................................... 458 2,700 108 3,266
------ ------ ----- ---------
ACCUMULATED DEPRECIATION
1 January 1998........................................... 1,124 6,776 785 8,685
Charge for the year...................................... 101 634 15 750
Disposals................................................ (1,130) (5,345) (768) (7,243)
------ ------ ----- ---------
31 December 1998......................................... 95 2,065 32 2,192
------ ------ ----- ---------
NET BOOK AMOUNT
31 DECEMBER 1998......................................... 363 635 76 1,074
------ ------ ----- ---------
31 DECEMBER 1997......................................... 311 1,839 25 2,175
------ ------ ----- ---------
------ ------ ----- ---------
</TABLE>
The net book amount of tangible fixed assets includes an amount of $47,000
(1997: $208,000) in respect of assets, principally computers and other
equipment, held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
COMPANY
<TABLE>
<CAPTION>
LEASEHOLD COMPUTERS AND FIXTURES AND
IMPROVEMENTS OTHER EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
--------------- --------------- --------------- ---------
<S> <C> <C> <C> <C>
COST
1 January 1998............................................ 636 4,279 268 5,183
Additions................................................. 220 264 71 555
Disposals................................................. (627) (3,327) (248) (4,202)
--- ------ --- ---------
31 December 1998.......................................... 229 1,216 91 1,536
--- ------ --- ---------
Accumulated depreciation
1 January 1998............................................ 582 3,424 247 4,253
Charge for the year....................................... 29 286 11 326
Disposals................................................. (589) (2,804) (237) (3,630)
--- ------ --- ---------
31 December 1998.......................................... 22 906 21 949
--- ------ --- ---------
NET BOOK AMOUNT
31 DECEMBER 1998.......................................... 207 310 70 587
--- ------ --- ---------
31 DECEMBER 1997.......................................... 54 855 21 930
--- ------ --- ---------
--- ------ --- ---------
</TABLE>
F-20
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
The net book amount of tangible fixed assets includes an amount of $47,000
(1997: $188,000) in respect of assets, principally computers and other
equipment, held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
10 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
COMPANY
GROUP -----------------------------------------
--------------- SHARES IN
OTHER SUBSIDIARY OTHER
INVESTMENTS UNDERTAKINGS INVESTMENTS TOTAL
$'000 $'000 $'000 $'000
--------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
Net book amount at 1 January 1998............................ 325 2,000 325 2,325
Provision made in 1998....................................... -- (2,000) -- (2,000)
--- ------ --- ---------
Net book amount at 31 December 1998.......................... 325 -- 325 325
--- ------ --- ---------
--- ------ --- ---------
</TABLE>
The company's subsidiary undertakings are:
<TABLE>
<CAPTION>
PROPORTION OF NOMINAL
NAME OF COMPANY AND COUNTRY OF INCORPORATION DESCRIPTION OF VALUE OF ISSUED SHARES AND
AND OPERATION SHARES HELD VOTING RIGHTS HELD
- -------------------------------------------------------------------- ----------------- ---------------------------
<S> <C> <C>
Insignia Solutions International Limited ........................... L1 ordinary 100%
(England & Wales)
Insignia Solutions Overseas Limited ................................ L1 ordinary 100%
(England & Wales)
Insignia Solutions Inc (USA)........................................ Common stock, 100%
no par value
Insignia Solutions Foreign Sales Inc (Barbados)..................... Common stock, 100%
$10 par value
Emulation Technologies Inc (USA).................................... Common stock, 100%
no par value
Insignia Solutions France SARL (France)............................. FF100 shares 100%
</TABLE>
The principal activities of Insignia Solutions Inc, Insignia Solutions
International Limited and Insignia Solutions France SARL are the marketing,
licensing and support of computer software products.
The principal activity of Insignia Solutions Overseas Limited is that of a
holding company.
Emulation Technologies Inc has been dormant since 1990.
Insignia Solutions Foreign Sales Inc has been dormant from incorporation.
OTHER INVESTMENTS
The company owns 65,400 shares of no par value in Bristol Technology Inc, a
company incorporated in the USA, being approximately 10% of the issued common
stock.
F-21
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
11 STOCKS
GROUP
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
----- -----
<S> <C> <C>
Finished software products, manuals and related supplies....................... 82 185
--
--
---
---
</TABLE>
12 DEBTORS
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Amounts falling due within one year:
Trade debtors............................................................. -- 2,615 27 9,228
Amounts owed by subsidiary undertakings................................... -- -- 14,414 --
Prepayments............................................................... 936 1,057 769 608
Taxation recoverable...................................................... -- -- 747 864
Other debtors............................................................. 60 60 -- --
----- --------- ----------- ---------
996 3,732 15,957 10,700
----- --------- ----------- ---------
----- --------- ----------- ---------
Amounts falling due after more than one year:
Loan to subsidiary undertaking............................................ -- -- 4,607 --
Lease deposit............................................................. 443 443 -- 31
Other debtors............................................................. 21 79 -- 54
----- --------- ----------- ---------
464 522 4,607 85
----- --------- ----------- ---------
1,460 4,254 20,564 10,785
----- --------- ----------- ---------
----- --------- ----------- ---------
</TABLE>
13 CASH AND CASH EQUIVALENTS HELD IN ESCROW
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
--------- -----
<S> <C> <C>
Proceeds from sale of technology held in escrow and accrued interest.......... 9,100 --
--------- ---
--------- ---
</TABLE>
The above represents funds received as a result of the disposal of the
company's NTRIGUE technology (see note 7) together with interest earned on such
funds.
F-22
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Trade creditors......................................................... 353 1,608 477 1,683
Other creditors......................................................... 67 171 -- 617
Social security......................................................... 167 167 211 211
Accruals................................................................ 912 6,407 1,081 11,348
Taxation................................................................ 1,006 994 -- --
Obligations under finance leases and hire purchase contracts............ 51 51 76 104
Sales return provision.................................................. -- 991 -- 2,474
Deferred revenue........................................................ -- 262 -- 843
Amounts owing to subsidiary undertakings................................ 251 -- -- --
----- --------- ----- ---------
2,807 10,651 1,845 17,280
----- --------- ----- ---------
----- --------- ----- ---------
</TABLE>
15 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Obligations under finance leases and hire purchase contracts............... -- -- 110 111
Other creditors............................................................ -- -- -- 17
--- --- --- ---
-- -- 110 128
--- --- --- ---
--- --- --- ---
</TABLE>
All finance lease and hire purchase obligations are payable within five
years.
16 PROVISION FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
COMPANY
1998
PROVISION FOR LOSSES
INCURRED BY
SUBSIDIARIES
$'000
-----------------------
<S> <C>
At 1 January 1998..................................................... --
Amount provided for in year........................................... 2,092
-----
At 31 December 1998................................................... 2,092
-----
-----
</TABLE>
F-23
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
17 SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
COMPANY AND GROUP COMPANY AND GROUP
----------------------- -----------------------
NUMBER L'000 NUMBER L'000
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
AUTHORISED
Equity interests (Ordinary shares of 20p)............................ 30,000,000 6,000 30,000,000 6,000
Non-equity interests (preferred share of 20p each)................... 3,000,000 600 3,000,000 600
--------- ---------
6,600 6,600
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
NUMBER $'000 NUMBER $'000
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
ALLOTTED AND FULLY PAID
Equity interests (ordinary shares of 20p each)....................... 12,590,316 4,164 11,971,213 3,954
------------ --------- ------------ ---------
------------ --------- ------------ ---------
</TABLE>
ALLOTMENTS OF SHARES
During the year 491,000 ordinary shares of 20p each were issued for cash on
the exercise of share options, of which 405,250 were issued at 40p, 750 were
issued at 70p and 85,000 were issued at 90p providing total proceeds of
$399,000.
In addition 128,103 Ordinary shares of 20p each were issued for cash through
participation in the company's Employee Share Purchase plan. Of these 54,757
were issued at $1.275 each and 73,346 were issued at $0.7438 each providing
total proceeds of $124,000.
OPTIONS OF SHARES OF INSIGNIA SOLUTIONS PLC
The company has four share option schemes which provide for issuance of
share options to employees of the company to purchase Ordinary shares of 20p par
value. A total of 3,922,071 (1997: 3,922,071) Ordinary shares have been reserved
for issuance of options. At 31 December 1998 and 31 December 1997, approximately
453,011 and 245,290, respectively, Ordinary shares were available for future
grants of share options. Share options are granted at prices of not less than
100% of the fair market value of the Ordinary shares on the date of the grant,
as determined by the Board of Directors.
The following table summarises activity on share options:
<TABLE>
<CAPTION>
UK SHARE US SHARE
OPTION OPTION
SCHEMES SCHEMES TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
1 January 1998............................................................ 1,026,519 1,944,335 2,970,854
Granted in the year....................................................... 143,250 888,750 1,032,000
Exercised in the year..................................................... (396,000) (95,000) (491,000)
Lapsed in the year........................................................ (205,977) (1,033,744) (1,239,721)
---------- ----------- -----------
31 December 1998.......................................................... 567,792 1,704,341 2,272,133
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Options granted to new employees generally vest 25% on the first anniversary
of the date of grant and 1/48 per month thereafter through the fourth
anniversary of the date of grant. Options granted to existing employees will
generally vest at the rate of 1/48 per month from the date of grant through to
the fourth
F-24
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
17 SHARE CAPITAL (CONTINUED)
anniversary of the date of grant. Options are exercisable until the tenth
anniversary of the date of grant unless they lapse before that date. 755,031 and
1,677,062 options were exercisable at 31 December 1998 and 31 December 1997,
respectively.
Options outstanding at 31 December 1998 were as follows:
<TABLE>
<CAPTION>
UK SHARE OPTION SCHEME US SHARE OPTION SCHEMES
----------------------- -----------------------
PERIOD OF PERIOD OF
NUMBER EXERCISE NUMBER EXERCISE
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
40p per share............................ 20,750 1990-1999 -- --
70p per share............................ 28,000 1993-2001 -- --
86p per share............................ 16,832 1994-2001 -- --
90p per share............................ 302,210 1995-2004 4,000 1994-2004
430p per share........................... 250 1998-2005 -- --
650p per share........................... -- -- 937 1996-2005
$0.656 per share......................... 26,500 1999-2008 23,500 1999-2008
$0.688 per share......................... 30,000 1999-2008 288,083 1998-2008
$0.938 per share......................... 28,000 1998-2008 3,500 1999-2008
$1.000 per share......................... 2,000 1998-2008 219,500 1998-2008
$1.250 per share......................... 24,250 1998-2008 20,750 1998-2008
$1.562 per share......................... 2,500 1997-2007 26,000 1997-2007
$1.625 per share......................... 32,000 1999-2008 260,583 1998-2008
$1.750 per share......................... -- -- 20,000 1997-2007
$1.969 per share......................... -- -- 200,000 1997-2007
$2.063 per share......................... -- -- 1,500 1998-2007
$2.125 per share......................... 1,000 1998-2007 15,000 1998-2007
$2.313 per share......................... 49,000 1997-2007 80,416 1997-2007
$2.375 per share......................... 1,500 1998-2007 293,000 1997-2007
$2.438 per share......................... 1,500 1997-2007 143,947 1997-2007
$2.500 per share......................... 1,500 1998-2007 -- --
$5.125 per share......................... -- -- 13,625 1996-2006
$5.750 per share......................... -- -- 90,000 1996-2006
---------- ----------
567,792 1,704,341
---------- ----------
---------- ----------
</TABLE>
SUBSCRIPTION WARRANTS
During 1994, a warrant for 226,666 Ordinary shares of 20p par value at a
price of $3.30 per share was granted to R P Lee, the then Chairman of the
company. Effective 1 January 1998, R P Lee surrendered the Warrant to the
company for cancellation.
EMPLOYEE SHARE PURCHASE PLAN
In March 1995, the company's shareholders adopted the 1995 Employee Share
Purchase Plan (the Plan) with 275,000 Ordinary shares reserved for issuance
thereunder. In July 1998, the number of shares reserved for issuance was
increased to 525,000. The Plan became effective 17 November 1995 and enables
employees to purchase Ordinary shares at approximately 85% of fair market value
of Ordinary shares at
F-25
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
17 SHARE CAPITAL (CONTINUED)
the beginning or end of each six month offering period. The Plan qualifies as an
"employee stock purchase plan" under the US Internal Revenue Code. 338,385
Ordinary shares have been issued under the Plan at 31 December 1998 (1997:
210,282).
18 RECONCILIATION OF MOVEMENT IN TOTAL SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
TOTAL
SHAREHOLDERS'
SHARE PROFIT AND FUNDS
SHARE PREMIUM LOSS CAPITAL ---------
CAPITAL ACCOUNT ACCOUNT RESERVE 1998
$'000 $'000 $'000 $'000 $'000
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROUP
1 January.................................................... 3,954 31,773 (25,256) 52 10,523
Shares issued in year........................................ 210 313 -- -- 523
Share issue expenses......................................... -- (50) -- -- (50)
Profit/(Loss) for year....................................... -- -- 422 -- 422
--
----- ----------- ----------- ---------
31 December 1998 4,164 32,036 (24,834) 52 11,418
--
--
----- ----------- ----------- ---------
----- ----------- ----------- ---------
COMPANY
1 January.................................................... 3,954 31,914 (12,174) -- 23,694
Shares issued in year........................................ 210 313 -- -- 523
Share issue expenses......................................... -- (50) -- -- (50)
Profit/(Loss) for year....................................... -- -- (12,749) -- (12,749)
--
----- ----------- ----------- ---------
31 December 1998............................................. 4,164 32,177 (24,923) -- 11,418
--
--
----- ----------- ----------- ---------
----- ----------- ----------- ---------
<CAPTION>
1997
$'000
---------
<S> <C>
GROUP
1 January.................................................... 20,215
Shares issued in year........................................ 1,002
Share issue expenses......................................... (36)
Profit/(Loss) for year....................................... (10,658)
---------
31 December 1998 10,523
---------
---------
COMPANY
1 January.................................................... 37,945
Shares issued in year........................................ 1,002
Share issue expenses......................................... (36)
Profit/(Loss) for year....................................... (15,217)
---------
31 December 1998............................................. 23,694
---------
---------
</TABLE>
As permitted by Section 230(1)(b) of the Companies Act 1985, Insignia
Solutions plc has not published its separate profit and loss account. The loss
arising is dealt with in the consolidated profit and loss account (1998: loss of
$12,749,000, 1997: loss of $15,217,000).
19 PENSION COSTS
The group has a 401(k) plan covering all of its US employees and a defined
contribution pension plan covering all its UK employees. Under both these plans,
employees may contribute a percentage of their compensation and the group makes
certain matching contributions. Both the employees' and the groups'
contributions are fully vested and nonforfeitable at all times. The assets of
both these plans are held separately from those of the group in independently
managed and administered funds. The group's contributions to these plans
aggregated $182,000 in 1998 (1997: $315,000).
F-26
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
20 COMMITMENTS
(1) LEASE COMMITMENTS
The group was committed to the following annual charges under
non-cancellable operating leases:
<TABLE>
<CAPTION>
PROPERTIES EQUIPMENT
---------------------- ------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
$'000 $'000 $'000 $'000
----- --------- ----- -----
Expiring:
Within one year................................................ -- 169 8 12
In second to fifth inclusive................................... -- 752 151 18
After five years............................................... 585 168 -- --
--
--- --------- ---
585 1,089 159 30
--
--
--- --------- ---
--- --------- ---
</TABLE>
Property lease commitments are reported net of sub-lease income.
(2) FINANCE LEASE COMMITMENTS
Commitments for future minimum payments under finance leases are as follows:
<TABLE>
<CAPTION>
1998 1997
$'000 $'000
----- -----
<S> <C> <C>
Within one year................................................................ 55 125
Between one and five years..................................................... -- 119
--
---
55 244
Less: amount representing interest............................................. (4) (29)
--
---
Obligations under finance leases (notes 14 and 15)............................. 51 215
--
--
---
---
</TABLE>
(3) CAPITAL COMMITMENTS
There are no material capital commitments.
21 CURRENCY OPTIONS
The group enters into currency option contracts to hedge the short-term
impact of sterling fluctuations against the US dollar. The gains and losses on
these contracts are included in the profit and loss account when the related
operating revenues and expenses are recognised. At 31 December 1998, there were
no currency options outstanding (1997: $2.0 million outstanding).
22 SIGNIFICANT POST BALANCE SHEET EVENTS
On 29 January 1999, the company received an indemnity claim on the escrow
account of an uncertain amount, but estimated by the claimant, Citrix, not to
exceed $6.25 million. Subsequently $2.5 million was released in February 1999 as
due.
Citrix' indemnity claim is based on a declaratory relief action that Citrix
filed against GraphOn Corp. 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
F-27
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1998 (CONTINUED)
22 SIGNIFICANT POST BALANCE SHEET EVENTS (CONTINUED)
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 unsubstantiated assertions first made by GraphOn, and disclosed to
Citrix in January 1998, that Insignia used GraphOn confidential information to
develop Insignia products, possibly including products Insignia sold to Citrix
in February 1998. GraphOn has never filed any action against either Insignia or
Citrix relating to its assertions and Insignia believes such assertions by
GraphOn are without merit or basis. Accordingly, Insignia intends to contest
Citrix' indemnity claim and the directors do not consider it necessary to
provide for any irrecoverability for amounts held in escrow.
23 RELATED PARTY TRANSACTIONS
The company has taken advantage of the exemption in Financial Reporting
Standard No. 8 not to disclose transactions and balances between group entities
that have been eliminated on consolidation.
Viscount Bearsted, a director of the company, holds a consultancy contract
with the company which causes him to be treated as a related party for the
amounts received under this contract. The amount payable in the year was $52,000
(1997--$39,000) and the balances due to him at the beginning and the end of the
year were $13,000.
Other transactions involving directors are disclosed in notes 4 and 16 to
the accounts and in the Directors' Report on pages F-2 to F-6.
24 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year.
For diluted earnings per share, the weighted average number of ordinary
shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares: those share options granted to employees where the exercise
price is less than the average market price of the company's ordinary shares
during the year.
<TABLE>
<CAPTION>
1998 1997
WEIGHTED AVERAGE PER SHARE WEIGHTED AVERAGE
EARNINGS NUMBER OF SHARES AMOUNT EARNINGS NUMBER OF SHARES
$'000 '000 $ $'000 '000
------------- ---------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Profit/(loss) attributable to
shareholders............................. 422 (10,658)
Basic EPS
Earnings attributable to shareholders...... 422 12,159 0.03 (10,658) 11,690
Effect of dilutive securities
Options.................................... -- 297 -- --
Diluted EPS
Adjusted earnings.......................... 422 12,456 0.03 (10,658) 11,690
<CAPTION>
PER SHARE
AMOUNT
$
-----------
<S> <C>
Profit/(loss) attributable to
shareholders.............................
Basic EPS
Earnings attributable to shareholders...... (0.91)
Effect of dilutive securities
Options....................................
Diluted EPS
Adjusted earnings.......................... (0.91)
</TABLE>
F-28
<PAGE>
INSIGNIA SOLUTIONS PLC
PROXY FOR ANNUAL GENERAL MEETING
MAY ___, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints as proxies, or proxy, Nicholas, Viscount
Bearsted and Richard M. Noling, or either of them, or __________________________
(see Note below), each with full power of substitution, and hereby authorizes
them or him to represent and to vote, as designated below, all Ordinary Shares,
20p each, of Insignia Solutions plc (the "Company"), held by the undersigned, at
the Annual General Meeting of the Company to be held at Insignia House, The
Mercury Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10
0HH, United Kingdom, on __________, May ___, 1999, at _____ p.m., local time,
and at any adjournments or postponements thereof.
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 / / ABSTAIN
3. TO ELECT AS A DIRECTOR VINCENT S. PINO.
/ / FOR / / AGAINST / / ABSTAIN
4. TO RE-ELECT AS A DIRECTOR ALBERT E. SISTO.
/ / FOR / / AGAINST / / ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 EMPLOYEE SHARE PURCHASE
PLAN.
/ / FOR / / AGAINST / / ABSTAIN
6. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S UK EMPLOYEE SHARE OPTION
SCHEME 1996.
/ / FOR / / AGAINST / / ABSTAIN
7. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 INCENTIVE STOCK OPTION
PLAN FOR U.S. EMPLOYEES.
/ / FOR / / AGAINST / / ABSTAIN
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 / / ABSTAIN
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 / / ABSTAIN
10. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
The Board of Directors recommends that you vote FOR all Proposals.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED, THE
PROXY OR PROXIES WILL VOTE OR ABSTAIN FROM VOTING AT THEIR DISCRETION. In their
discretion, the proxy holders are authorized to vote upon such other business as
may properly come before the meeting or any adjournments or postponements
thereof to the extent authorized by Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934, as amended.
--------------------------------
(Print Shareholder(s) name)
--------------------------------
(Signature(s) of Shareholder or
Authorized Signatory)
--------------------------------
Dated:
------------------------------------------------------------------ ,
1999
Please sign exactly as your name(s) appear(s) on your share certificate. If
shares stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, any such person may
give a proxy; however, if more than one of such joint holders is present at the
meeting, either personally or by proxy, the person whose name stands first in
the Register as one of such holders shall be entitled to vote in respect of the
shares. If shares are held of record by a corporation, the proxy should be
executed by one or more duly authorized officers. Please date the proxy. A proxy
should be filed together with the power of attorney or other authority, if any,
under which it was signed.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
The proxy should be returned to the offices of the Company at The Mercury
Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire HP10 0HH not
later than _____ p.m. on May ___, 1999, being 48 hours prior to the time fixed
for the Annual General Meeting.
- ------------------------------
Note: If you wish to appoint someone other than Viscount Bearsted or Mr. Noling
as proxy, references to Viscount Bearsted and Mr. Noling should be deleted, and
the name of the intended proxy inserted in the space provided. A proxy need not
be a member of the Company but must attend the meeting in person to represent
you.
[REVERSE SIDE]
<PAGE>
INSIGNIA SOLUTIONS PLC
INSTRUCTIONS TO THE BANK OF NEW YORK, AS
DEPOSITARY
(MUST BE RECEIVED PRIOR TO THE CLOSE OF
BUSINESS ON MAY ___, 1999)
The undersigned registered holder of American Depositary Receipts
hereby requests and instructs The Bank of New York, as Depositary, through
its Agent, to endeavor, insofar as practicable, to vote or cause to be voted
the number of shares or other Deposited Securities underlying the American
Depositary Shares evidenced by Receipts registered in the name of the
undersigned on the books of the Depositary as of the close of business on
April ___, 1999, at the Annual General Meeting of the Members of INSIGNIA
SOLUTIONS plc to be held in High Wycombe, England, on May ___, 1999 in
respect of the resolutions specified on the reverse.
NOTE:
PLEASE DIRECT THE DEPOSITARY HOW IT IS TO VOTE BY PLACING AN X IN THE
APPROPRIATE BOX OPPOSITE THE RESOLUTIONS. THE DEPOSITARY SHALL NOT VOTE
THE NUMBER OF SHARES OR OTHER DEPOSITED SECURITIES UNDERLYING A RECEIPT
EXCEPT IN ACCORDANCE WITH INSTRUCTIONS FROM THE HOLDER OF SUCH RECEIPT.
INSIGNIA SOLUTIONS plc
P.O. BOX 11230
NEW YOK, N.Y. 10203-0290
(Continued and to be dated and signed on the reverse side.)
3
<PAGE>
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 [ ] ABSTAIN
3. TO ELECT AS A DIRECTOR VINCENT S. PINO.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO RE-ELECT AS A DIRECTOR ALBERT E. SISTO.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 EMPLOYEE SHARE
PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S UK EMPLOYEE SHARE
OPTION SCHEME 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 INCENTIVE STOCK
OPTION PLAN FOR U.S. EMPLOYEES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 [ ] ABSTAIN
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 [ ] ABSTAIN
10. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
Change of Address Mark Here [ ]
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: __________________________, 1999
4
<PAGE>
-----------------------------------------
(Signature)
-----------------------------------------
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
Votes MUST be indicated (X) in Black or Blue ink.
[REVERSE SIDE]
5
<PAGE>
INSIGNIA SOLUTIONS PLC
1995 EMPLOYEE SHARE PURCHASE PLAN
Adopted by the Board of Directors on February 9, 1995
and Amended on December 15, 1995 and April 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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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.
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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,
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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.
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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
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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
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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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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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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
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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
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<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
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<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
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<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").
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<PAGE>
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
<PAGE>
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;
6
<PAGE>
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
8
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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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
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<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.
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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
