PHOENIX TECHNOLOGIES LTD, DEF 14A, 1999-12-29

PHOENIX TECHNOLOGIES LTD
DEF 14A, 1999-12-29
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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

PHOENIX TECHNOLOGIES LTD.
- --------------------------------------------------------------------------------
(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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(4) Date Filed:
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PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 570-1000

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 1, 2000

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Notice is hereby given that the Annual Meeting of Stockholders of Phoenix
Technologies Ltd., (the "Company" or "Phoenix") will be held at the Beverly
Heritage Hotel located at 1820 Barber Lane, Milpitas, California 95035, on
February 1, 2000, at 10:00 a.m., California Time, to consider and act upon the
following matters:

1. To elect two Class 1 Directors to the Board of Directors of the Company;

2. To approve an amendment to the Company's 1999 Stock Plan to increase the
number of shares reserved for issuance thereunder by 700,000;

3. To approve the Company's 1999 Director Stock Option Plan and authorize
150,000 shares reserved for issuance thereunder;

4. To approve the Amended 1991 Employee Stock Purchase Plan, which includes
an increase to the number of shares reserved for issuance thereunder by
350,000 shares;

5. To ratify the selection by the Board of Directors of Ernst & Young LLP
as the Company's independent public accountants for the current fiscal
year; and

6. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Stockholders of record at the close of business on December 14, 1999 will be
entitled to vote at the meeting or any adjournments thereof.

All stockholders are cordially invited to attend the meeting.

Linda V. Moore
SECRETARY

December 27, 1999
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PROXY STATEMENT
PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134

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PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 1, 2000

------------------------

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Phoenix Technologies Ltd. (the "Company" or "Phoenix") of
proxies for use at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held on February 1, 2000, at the Beverly Heritage Hotel located
at 1820 Barber Lane, Milpitas, California, commencing at 10:00 a.m., California
time, and at any adjournments thereof. All proxies are solicited for the
purposes set forth herein and in the Notice of Annual Meeting of Stockholders
that accompanies this proxy statement. All proxies will be voted in accordance
with the instructions contained therein, and, if no choice is specified, the
proxies will be voted in favor of the nominees and the proposals set forth in
the accompanying Notice of Meeting and this Proxy Statement. The date of this
Proxy Statement is December 27, 1999, the approximate date on which this Proxy
Statement and the accompanying form of proxy were first sent or given to
stockholders.

GENERAL INFORMATION

CERTAIN FINANCIAL INFORMATION. The Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1999 is enclosed with this Proxy Statement.

VOTING SECURITIES. Only stockholders of record as of the close of business
on December 14, 1999 (the "Record Date") will be entitled to vote at the meeting
and any adjournment thereof. As of the Record Date, there were 24,310,716 shares
of the Company's Common Stock issued and outstanding. Stockholders may vote in
person or by proxy. Each holder of shares of Common Stock is entitled to one
(1) vote on the proposals presented in this Proxy Statement for each share of
the stock held and one vote for each director to be elected. There is no
cumulative voting in connection with the election of directors.

QUORUM. The required quorum for transacting business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "WITHHELD" from a matter are treated as being present at the Annual
Meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.

ABSTENTIONS. While there is no definitive statutory or case law authority
in Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.

BROKER NON-VOTES. Broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for transacting business, but
will not be counted for purposes of determining the

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number of Votes Cast with respect to the particular proposal on which the broker
has expressly not voted. Accordingly, broker non-votes will not affect the
outcome of the voting on a proposal that requires a majority of the Votes Cast
(such as the approval of a plan).

SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting stockholders by mail and through its
regular employees, the Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxy and other soliciting
material to persons for whom they hold shares of Common Stock of the Company,
and to request authority for the exercise of proxies; in such cases, the
Company, upon request of the record holders, will reimburse such holders for
their reasonable expenses. The Company may use the services of its officers,
directors and others to solicit proxies personally or by telephone, facsimile or
electronic mail, without additional compensation. The Company has also retained
Morrow & Co., Inc. to assist in obtaining proxies for the Annual Meeting from
brokers, nominees of stockholders and institutional investors. The estimated fee
for such services, which is not contingent upon the outcome of the voting, is
$6,500 plus out-of-pocket expenses.

VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares presented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted FOR all nominees,
FOR all other proposals described herein and as the proxy holders may determine
in their discretion with respect to any other matters that properly come before
the meeting. See "Transaction of Other Business." A stockholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the time it is
voted, by delivering to the Secretary of the Company a written instrument
revoking the proxy or a duly executed proxy with a later date, or by attending
the meeting and voting in person.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The Company's nominees for election at the Annual Meeting of Stockholders to
Class 1 of the Board of Directors are George Huang and Anthony P. Morris (the
"Nominees"). Messrs. Huang and Morris are presently Class 1 Directors of the
Company. The Company expects each of the Nominees to be available to serve as a
Director. If, however, either of the Nominees is unable or declines to serve for
any reason, proxies may be voted for such substitute nominee as the Board of
Directors may designate.

The Company's Bylaws provide for a classified Board of Directors consisting
of two Class 1 Directors (Messrs. Huang and Morris), two Class 2 Directors
(Messrs. Fisher and Sun) and two Class 3 Directors (Messrs. Sisto and Kay). The
Class 1, 2 and 3 Directors serve staggered three-year terms. A stockholder may
not cast votes for more than two nominees. The two Class 1 directors to be
elected at the 2000 Annual Meeting of Stockholders will be elected to hold
office until the Annual Meeting of Stockholders in 2003 and until their
successors have been elected and qualified.

REQUIRED VOTE. If a quorum is present and voting at the Annual Meeting, the
two nominees receiving the highest number of affirmative votes will be elected
as Class 1 directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum, but have no other legal
effect under Delaware law.

NOMINEES AND OTHER DIRECTORS. The following table sets forth the name and
age of each nominee and each director of the Company whose term of office
continues after the Annual Meeting, the principal occupation of each during the
past five years and the period during which each has served as a director of the
Company. Each nominee is currently serving as a director of the Company. The

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Directors whose names are followed by an asterisk (*) are members of the Audit
Committee or the Compensation Committee, or both.

<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR NAME AGE SINCE POSITION AND CURRENT OFFICES WITH THE COMPANY
- ------------------------------------------------ ----------- ----------- ------------------------------------------------
<S> <C> <C> <C>
Ronald D. Fisher*............................... 52 1990 Director; Chairman
George Huang.................................... 57 1998 Director; Vice Chairman
Jack Kay........................................ 53 1995 Director
Anthony P. Morris*.............................. 53 1993 Director
Albert E. Sisto................................. 51 1999 Director; President and Chief Executive Officer
Anthony Sun*.................................... 46 1998 Director
</TABLE>

Mr. Fisher has served as Chairman of the Board for the Company since
June 1994. From January 1990, when he joined the Company, until October 1995,
Mr. Fisher held the additional title of Chief Executive Officer. Mr. Fisher
currently serves as the Vice Chairman of SOFTBANK Holdings, Inc. Mr. Fisher is
also a director of MicroTouch Systems, Inc., Segue Software, Inc., and SOFTBANK
Corporation, Japan.

Dr. Huang was appointed to the Board in November 1998 and was elected to
serve as Vice Chairman. Dr. Huang served as Chairman of the Board of Directors,
President, Chief Executive Officer and Director of Award Software
International, Inc. from July 1993 until Award merged with the Company in
September 1998. Dr. Huang is Chairman of the Board of Directors of GCH
Systems, Inc. ("GCH"), a company that develops and markets embedded controllers,
Application Specific Integrated Circuits and PC Systems, and from January 1984
until November 1994, he also served as Chief Executive Officer of GCH. From
February 1987 to the present, Dr. Huang has served as a Director of
GCH-SunSystems Company Ltd. ("GSS"), a subsidiary of GCH. From January 1990 to
May 1996, Dr. Huang served as a Director of Fidelity Venture Capital Corporation
("FVCC"), a shareholder of GCH and Award.

Mr. Kay has served as President and Chief Executive Officer of the Company
from October 1, 1995 to June, 1999. He joined the Company as Vice President of
Worldwide Sales in May 1990. In January 1992, he was appointed Senior Vice
President and Chief Operating Officer. In June 1994, he was promoted to
President and Chief Operating Officer.

Mr. Morris has served as a Director of the Company since 1993. Mr. Morris is
a principal with Morris & Associates, a management consulting and financial
advisory firm he founded in 1987. He is also an investor in a number of private
technology companies.

Mr. Sisto joined the Company as President and Chief Executive Officer and
was appointed to the Board in June 1999. He was formerly Chief Operating Officer
of RSA Data Security, Inc. from 1997 to 1999. He served as President, Chairman
and CEO of DocuMagix from 1994 to 1997. From 1989 to 1994 Mr. Sisto served as
the President and CEO of PixelCraft, Inc. Mr. Sisto also serves on the Boards of
Directors of Insignia Solutions, Plc. hi/fn Inc., efax.com, and Tekgraf, Inc.

Mr. Sun was appointed to the Board in 1998. From 1979 to the present,
Mr. Sun has been a general partner at Venrock Associates, a venture capital
firm. Previously, Mr. Sun was employed by Hewlett Packard, TRW and Caere
Corporation. Mr. Sun served as director of Award from October 1995 until Award
merged with the Company in September 1998. Mr. Sun is a director of Cognex
Corporation, 3dFx Interactive, Inc., Inference Corporation, Komag, Inc., and
Worldtalk Communications Corporation.

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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the fiscal year ended September 30, 1999 (the "Last Fiscal Year"),
the Board of Directors held a total of four regularly scheduled meetings, three
special meetings and took additional actions by written consent. During fiscal
1998, Messrs. Huang, Kay and Sisto attended at least 75% of the aggregate number
of meetings of the Board of Directors held during the year and the total number
of meetings held by all committees of the Board of Directors on which he served
during the Last Fiscal Year. Mr. Fisher and Mr. Sun attended 43% and Mr. Morris
attended 57% of the meetings.

The Board of Directors has an Audit Committee and a Compensation Committee.
The Company does not have a standing nominating committee of the Board of
Directors or a committee performing similar functions.

During the Last Fiscal Year, the Audit Committee, which consisted of Messrs.
Fisher and Sun, met one time. The Audit Committee makes recommendations to the
Board regarding appointment of the Company's independent public accountants,
confers with the Company's independent public accountants regarding the scope
and the results of the audit of the Company's books and accounts and reports the
same to the Board of Directors, and establishes and monitors policy relative to
non-audit services provided by the independent public accountants, approves
services rendered by such accountants, reviews the activities and
recommendations of the Company's internal audit department, and reviews and
evaluates the Company's accounting systems, financial controls and financial
personnel.

During the Last Fiscal Year, the Compensation Committee, which consisted of
Messrs. Sun, Fisher and Morris, met once and took additional actions by written
consent. The Compensation Committee reviews salaries and other compensation
arrangements for officers and other key employees of the Company, reviews the
administration of the Company's stock option and stock purchase plans, and
advises the Board on general aspects of the Company's compensation and benefit
policies. For additional information concerning the Compensation Committee, see
"EXECUTIVE COMPENSATION--Compensation Committee Interlocks and Insider
Participation" and "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION."

COMPENSATION OF DIRECTORS

Members of the Board who are not employees of the Company are paid an annual
retainer of $10,000, a fee of $1,000 for each meeting of the Board of Directors
they attend in person, a fee of $500 for each telephonic meeting of the Board of
Directors that they attend, a fee of $500 for each Committee meeting they attend
in person and a fee of $375 for each telephonic Committee Meeting that they
attend. In addition, non-employee Directors who reside outside of the local area
receive reimbursement of travel expenses.

Outside Directors receive options to purchase Common Stock pursuant to the
Company's 1994, 1996, 1998 and 1999 Stock Plans and will be eligible to receive
options under the 1999 Director Option Plan if the stockholders approve the
plan. In September, 1999 the Board changed its option grants to non-employee
Directors to include an automatic initial grant of 40,000 shares for new
non-employee Directors and to automatically grant options on 15,000 shares each
subsequent anniversary for that Director's tenure on the Board. Board member
options vest and become exercisable for 100% of the shares on the date of grant
and have a term of ten years. During fiscal 1999, the Company granted stock
options for 7,000 shares to Mr. Morris, having an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR MESSRS. HUANG AND MORRIS

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PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO THE 1999 STOCK PLAN

On December 11, 1998, the Board of Directors adopted the 1999 Stock Plan
(the "Plan") and reserved 1,100,000 shares of Common Stock for issuance
thereunder subject to stockholder approval. In January, 1999 the stockholders
approved the 1999 Stock Plan.

PROPOSAL

In November 1999, the Board of Directors amended the 1999 Stock Plan to
increase the shares reserved by 700,000 shares. At the annual meeting, the
stockholders are being asked to approve the amendment to increase the number of
shares reserved under the 1991 Stock Plan.

SUMMARY OF THE 1999 STOCK PLAN

GENERAL. The purpose of the Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees, directors
and consultants of the Company and to promote the success of the Company's
business. Options and stock purchase rights may be granted under the Plan.
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonstatutory stock options.

ADMINISTRATION. The Plan may generally be administered by the Board or a
Committee appointed by the Board (as applicable, the "Administrator").

ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and stock purchase
rights may be granted under the Plan to employees, directors and consultants of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom options and stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the number of shares subject to each such
grant.

Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and stock purchase rights granted to such
persons, the Plan provides that no employee, director or consultant may be
granted, in any fiscal year of the Company, options and stock purchase rights to
purchase more than 125,000 shares of Common Stock. Notwithstanding this limit,
however, in connection with such individual's initial employment with the
Company, he or she may be granted options or stock purchase rights to purchase
up to an additional 125,000 shares of Common Stock.

TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:

(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of
the Common Stock on the date such option is granted; provided, however, the
exercise price of an incentive stock option granted to a 10% stockholder may
not be less than 100% of the fair market value of the Common Stock on the
date such option is granted. The fair market value of the Common Stock is
generally determined with reference to the closing sale price for the Common
Stock (or the closing bid if no sales were reported) on the last market
trading day prior to the date the option is granted.

(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option.

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Stock options granted under the Plan generally vest and become exercisable
over four years. The means of payment for shares issued upon exercise of an
option is specified in each option agreement. The Plan permits payment to be
made by cash, check, promissory note, other shares of Common Stock of the
Company (with some restrictions), cashless exercises, a reduction in the
amount of any Company liability to the optionee, any other form of
consideration permitted by applicable law, or any combination thereof.

(c) TERM OF OPTION. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided that in the case
of an incentive stock option granted to a 10% stockholder, the term of the
option may be no more than five (5) years from the date of grant. No option
may be exercised after the expiration of its term.

(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or
consulting relationship terminates for any reason other than death or
disability, then all options held by the optionee under the Plan expire on
the earlier of (i) the date set forth in his or her notice of grant
(normally ninety days past termination) or (ii) the expiration date of such
option. To the extent the option is exercisable at the time of such
expiration, the optionee may exercise all or part of his or her option at
any time before expiration.

(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the Plan expire on the earlier of (i) the date
set forth in his or her notice of grant (normally 90 days after death or
disability) or (ii) the expiration date of such option. The optionee (or the
optionee's estate or the person who acquires the right to exercise the
option by bequest or inheritance), may exercise all or part of the option at
any time before such expiration to the extent that the option was
exercisable at the time of such termination.

(g) NONTRANSFERABILITY OF OPTIONS: Options granted under the Plan are
generally not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by
the optionee.

(h) OTHER PROVISIONS: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.

STOCK PURCHASE RIGHTS. In the case of SPRs, unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the Administrator.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.

In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.

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In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to exercise
the option or stock purchase right as to all the optioned stock, including
shares not otherwise exercisable. In such event, the Administrator shall notify
the optionee that the option or stock purchase right is fully exercisable for
fifteen (15) days from the date of such notice and that the option or stock
purchase right terminates upon expiration of such period.

AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary to comply with Section 162(m) and Section 422 of
the Code, or any similar rule or statute. No such action by the Board or
stockholders may alter or impair any option or stock purchase right previously
granted under the Plan without the written consent of the optionee. Unless
terminated earlier, the Plan shall terminate ten years from the date of its
approval by the stockholders or the Board of the Company, whichever is earlier.

REQUIRED VOTE

If a quorum is present, the affirmative vote of the holders of a majority of
the shares of Common Stock present or represented at the Meeting and voting on
the matter is required for approval of Proposal No. 2.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE 1999 STOCK PLAN

PROPOSAL NO. 3
APPROVAL OF THE 1999 DIRECTOR OPTION PLAN

On August 10, 1999, the Board of Directors adopted the 1999 Director Option
Plan (the "Director Plan") and reserved 150,000 shares of Common Stock for
issuance thereunder subject to stockholder approval. No options or rights to
purchase stock have been granted pursuant to the Director Plan. The Director
Plan is summarized below.

The Board proposes the Director Plan principally to provide a continuing
benefit program for attracting and retaining directors important to the future
of the Company. The Board believes that stock incentive programs, such as the
Director Plan, are commonly employed by companies in the software industry and,
in particular, in the Silicon Valley where the Company is headquartered. At the
annual meeting, the stockholders are being asked to approve the Director Plan
and the reservation of shares thereunder.

SUMMARY OF THE 1999 DIRECTOR OPTION PLAN

GENERAL. The purpose of the Director Plan is to attract and retain the best
available personnel, to provide additional incentive to the directors of the
Company and to promote the success of the Company's business. Stock options will
be automatically granted under the Plan.

ELIGIBILITY; LIMITATIONS. Stock options may be granted under the Director
Plan to non-employee directors of the Company and any parent or subsidiary of
the Company.

TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:

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(a) EXERCISE PRICE. The exercise price of an incentive stock option may
not be less than 100% of the fair market value of the Common Stock on the date
such option is granted.. The fair market value of the Common Stock is generally
determined with reference to the closing sale price for the Common Stock (or the
closing bid if no sales were reported) on the last market trading day prior to
the date the option is granted.

(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. Options granted under the
Director Plan vest and become exercisable for 100% of the shares on the day of
grant. The means of payment for shares issued upon exercise of an option is
specified in each option agreement. The Director Plan permits payment to be made
by cash, check, promissory note, other shares of Common Stock of the Company
(with some restrictions), cashless exercises, a reduction in the amount of any
Company liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.

(c) TERM OF OPTION. The term of an incentive stock option may be no more
than ten (10) years from the date of grant.. No option may be exercised after
the expiration of its term.

(d) TERMINATION OF EMPLOYMENT. If an optionee's service as an Outside
Director terminates for any reason other than death or disability, then all
options held by the optionee under the Plan expire on the earlier of (i) the
date set forth in his or her notice of grant (normally ninety days past
termination) or (ii) the expiration date of such option. To the extent the
option is exercisable at the time of such expiration, the optionee may exercise
all or part of his or her option at any time before expiration.

(e) DEATH OR DISABILITY. If an optionee's service as an Outside Director
terminates as a result of death or disability, then all options held by such
optionee under the Plan expire within 12 months following termination of Outside
Directors service. The optionee (or the optionee's estate or the person who
acquires the right to exercise the option by bequest or inheritance), may
exercise all or part of the option at any time before such expiration to the
extent that the option was exercisable at the time of such termination.

(h) OTHER PROVISIONS: The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.

In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate.

In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right may be assumed or an equivalent option substituted by the successor
corporation. If the successor corporation refuses to assume the options or to
substitute substantially equivalent options, the optionee shall have the right
to exercise the option as to all the optioned stock, including shares not
otherwise exercisable. In such event, the option is fully exercisable for thrity
(30) days from the date of such notice and that the option terminates upon
expiration of such period.

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AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary to comply with Section 162(m) of the Code, or any
similar rule or statute. No such action by the Board or stockholders may alter
or impair any option or stock purchase right previously granted under the Plan
without the written consent of the optionee. Unless terminated earlier, the Plan
shall terminate ten years from the date of its approval by the stockholders or
the Board of the Company, whichever is earlier.

FEDERAL INCOME TAX CONSEQUENCES

NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the shares represented
and voting at the Annual Meeting is required to approve the adoption of the 1999
Director Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL OF THE 1999 DIRECTOR OPTION PLAN

PROPOSAL NO. 4
APPROVAL OF AMENDED AND RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN

The Board of Directors adopted the 1991 Employee Stock Purchase Plan (the
"ESPP") in 1991 and stockholders approved the ESPP in February 1992. Under the
ESPP as originally adopted, 500,000 shares of the Company's Common Stock
(subject to adjustment for any dividend, stock split or other relevant changes
in the Company's capitalization) were reserved for issuance. In February 1996,
the stockholders approved an amended and restated ESPP pursuant to which
amendment 150,000 additional shares were authorized. In February 1998, the
stockholders approved an amended and restated ESPP pursuant to which amendment
150,000 additional shares were authorized. As of September 30, 1999, a total of
1,012,303 shares had been issued under the ESPP from its inception.

PROPOSAL

In November 1999, the Board of Directors amended the ESPP to increase the
shares reserved by 350,000 shares. At the annual meeting, the stockholders are
being asked to approve the amendment to increase the number of shares reserved
under the ESPP.

9
<PAGE>
SUMMARY OF EMPLOYEE STOCK PURCHASE PLAN

Certain features of the Purchase Plan are outlined below.

PURPOSE. The purpose of the Purchase Plan is to provide employees of the
Company and its subsidiary with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company to have the Purchase Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code, as amended. The provisions of the Purchase Plan
shall, accordingly, be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.

ADMINISTRATION. The Purchase Plan may be administered by the Board of
Directors or a committee appointed by the Board (the "Administrator") and is
currently administered by the Stock Option Committee of the Board. Every
finding, decision and determination by the Administrator shall, to the full
extent permitted by law, be final and binding upon all parties.

ELIGIBILITY. Employees are eligible to participate if they are regularly
employed by the Company for at least 20 hours per week and more than five months
per calendar year and have been an employee of the Company or a subsidiary since
at least 2 weeks prior to the Offering Period Commencement Date. Participation
in the Purchase Plan ends automatically on termination of employment with the
Company. Eligible employees may become a participant by completing a
subscription agreement authorizing payroll deductions and filing it with the
Company's payroll office at least ten business days prior to the applicable
enrollment date.

OFFERING PERIODS. The Purchase Plan is implemented by consecutive six month
offering periods commencing on the first trading day on or after December 1 and
June 1 of each year.

PURCHASE PRICE. The purchase price per share of the shares offered under
the Purchase Plan in a given offering period shall be the lower of 85% of the
fair market value of the Common Stock on the enrollment date or 85% of the fair
market value of the Common Stock on the exercise date. The fair market value of
the Common Stock on a given date shall be the closing sale price of the Common
Stock for such date as reported by the New York Stock Exchange.

PAYROLL DEDUCTIONS. The purchase price for the shares is accumulated by
payroll deductions during the offering period. The deductions may not exceed 10%
of a participant's eligible compensation, which is defined in the plan to
include all regular straight time earnings and any payments for overtime, shift
premiums, commissions, incentive compensation, incentive payments, regular
bonuses and other compensation for a given offering period. A participant may
discontinue his or her participation in the Purchase Plan at any time during the
offering period. Payroll deductions shall commence on the first payday following
the enrollment date, and shall end on the exercise date of the offering period
unless sooner terminated as provided in the Purchase Plan.

GRANT AND EXERCISE OF OPTION. The maximum number of shares placed under
option to a participant in an offering is that number determined by dividing the
amount of the participant's total payroll deductions to be accumulated prior to
an exercise date by the lower of 85% of the fair market value of the Common
Stock at the beginning of the offering period or on the exercise date. Unless a
participant withdraws from the Purchase Plan, such participant's option for the
purchase of shares will be exercised automatically on each exercise date for the
maximum number of whole shares at the applicable price.

Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the Purchase Plan if, immediately after the grant of the
option, the employee would own 5% or more of the voting power or value of all
classes of stock of the Company or of any of its subsidiaries (including stock
which may be purchased under the Purchase Plan or pursuant to any other
options), nor shall any

10
<PAGE>
employee be granted an option which would permit the employee to buy under all
employee stock purchase plans of the Company more than $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) in any calendar year.

(a) WITHDRAWAL; TERMINATION OF EMPLOYMENT. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
A participant may withdraw all, but not less than all, of the payroll deductions
credited to such participant's account and not yet used by giving written notice
to the Company.

(b) TRANSFERABILITY. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or by designation of a beneficiary as provided in the Purchase
Plan) and any such attempt may be treated by the Company as an election to
withdraw from the Purchase Plan.

(c) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET
SALE OR CHANGE OF CONTROL. Subject to any required action by the stockholders
of the Company, the shares reserved under the Purchase Plan, as well as the
price per share of Common Stock covered by each option under the Purchase Plan
which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. 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. In the event of a proposed sale of all or
substantially all the assets of the Company or a merger of the Company with or
into another corporation, the Purchase Plan provides that each option under the
plan be assumed or an equivalent option be substituted by the successor or
purchaser corporation, unless the Board determines to shorten the offering
period.

(d) AMENDMENT AND TERMINATION. The Board of Directors of the Company may
at any time and for any reason terminate or amend the Purchase Plan. Except as
provided in the Purchase Plan, no such termination can affect options previously
granted, provided that an offering period may be terminated by the Board of
Directors on any exercise date if the Board determines that the termination of
the Purchase Plan is in the best interests of the Company and its stockholders.
Except as provided in the Purchase Plan, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or under Section 423 of the Code
(or any successor rule or provision or any other applicable law or regulation),
the Company shall obtain stockholder approval of any amendment to the Purchase
Plan in such a manner and to such a degree as required.

FEDERAL TAX INFORMATION FOR THE PURCHASE PLAN

The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax, and the amount of the tax will depend upon the holding period.
If the shares are sold or otherwise disposed of more than two years from the
first day of the offering period, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the

11
<PAGE>
time of such sale or disposition over the purchase price, or (b) an amount equal
to 15% of the fair market value of the shares as of the first day of the
offering period. Any additional gain will be treated as long-term capital gain.
If the shares are sold or otherwise disposed of before the expiration of this
holding period, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are purchased over the purchase price. Any additional gain or loss on
such sale or disposition will be long-term or short-term capital gain or loss,
depending on the holding period. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding period(s) described above.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER
THE PURCHASE PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE
CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A
PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY STATE OR FOREIGN COUNTRY IN
WHICH THE PARTICIPANT MAY RESIDE.

REQUIRED VOTE

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN

PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending September 30, 2000 and is asking stockholders to ratify
this appointment. In the event the ratification of the stockholders of the
appointment of Ernst & Young LLP as the Company's independent auditors is not
obtained, the Board will reconsider such appointment.

Representatives of Ernst & Young LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to do
so and are also expected to be available to respond to appropriate questions
from stockholders.

REQUIRED VOTE

If a quorum is present, the affirmative vote of a majority of the Votes Cast
is required for approval of Proposal No. 5.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF
APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING SEPTEMBER 30, 2000

12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of the Record Date
with respect to the Common Stock owned beneficially by (i) any person who is
known to the Company to be the beneficial owner of more than five percent of its
Common Stock, (ii) each director and director-nominee of the Company, (iii) the
Chief Executive Officer and each other executive officer of the Company included
in the Summary Compensation Table (collectively, the "Named Officers"), and
(iv) all current directors and executive officers of the Company as a group.
Except as otherwise indicated in the footnotes to the table, to the Company's
knowledge, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- ------------------------ -------------------- -----------------
<S> <C> <C>
Intel Corporation(1) ..................................... 1,968,936 8.2%
2200 Mission College Boulevard, Santa Clara, CA
95052-8119
Fidelity Management(2) ................................... 1,759,000 7.3%
82 Devonshire Street, Boston, MA 02109
Sanford C. Bernstein(3)................................... 1,758,000 7.3%
George C. Huang(4)(8)..................................... 860,693 3.6%
Jack Kay(8)............................................... 588,934 2.5%
Anthony Sun(5)(8)......................................... 580,367 2.4%
Ronald D. Fisher(6)....................................... 474,489 2.0%
Albert E. Sisto(8)........................................
Wayne Cantwell(8)......................................... 72,865 *
William E. Meyer(8)....................................... 17,439 *
Anthony Morris(6)(8)...................................... 47,125 *
Stuart J. Nichols(8)...................................... 27,118 *
All current directors and executive officers as a group
(11 persons)(8)......................................... 3,015,983 12.6%
</TABLE>

- ------------------------

* Ownership is less than 1%

(1) Based on information provided pursuant to Schedule 13D filed with the
Securities and Exchange Commission by Intel Corporation ("Intel"). Includes
1,073,965 shares with respect to which Intel may acquire beneficial
ownership at or within 60 days after the Record Date.

(2) Based on information provided pursuant to Schedule 13D filed with the
Securities and Exchange Commission by Fidelity Management.

(3) Based on information provided pursuant to Schedule 13D filed with the
Securities and Exchange Commission by Sanford C. Bernstein.

(4) Includes (i) 17,862 shares held by Margaret Huang, and (ii) 18,040 shares
held by Dwight Huang, Mr. Huang's wife and son, respectively. Also includes
168,565 and 30,625 shares issuable pursuant to options exercisable within
60 days of the Record Date by Mr. Huang and his wife, respectively.
Mr. Huang disclaims beneficial ownership of shares held by his wife and son.

(5) Includes (i) 510,413 shares held by Venrock Associates, Mr. Sun, a director
of Phoenix, is a general partner of Venrock Associates. Mr. Sun disclaims
beneficial ownership of shares held by such entities, except to the extent
of his pecuniary interest therein.

(6) Includes 28,000 shares owned by Mr. Fisher, 3,300 shares held in the name of
Mr. Fisher's spouse; 2,000 shares held in the name of Mr. Fisher's son; and
2,000 shares held in the name of Mr. Fisher's daughter. Mr. Fisher has no
voting power or investment power and disclaims beneficial ownership with
respect to the shares owned by his wife, son and daughter.

(7) Includes 5,000 shares owned by Mr. Morris and 5,000 shares held in a
custodial account for his minor daughters

13
<PAGE>
(8) Includes an aggregate of 1,806,516 shares as to which the named persons
could acquire beneficial ownership at or within 60 days after October 31,
1999. As to each named person, such amounts are as follows:
Mr. Fisher--439,187; Mr. Huang--249,982; Mr. Kay--568,124; Mr. Sun--69,954;
Mr. Sisto--0; Mr. Cantwell--60,329; Mr. Meyer--17,439; Mr. Morris--37,125;
Mr. Nichols--24,375.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation of
(i) all Chief Executive Officers of the Company and (ii) the four other most
highly compensated executive officers of the Company (based on salary plus bonus
for the Last Fiscal Year) who were serving as such at the end of the Last Fiscal
Year:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------
-------------------------------------- SECURITIES AWARDS
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- -------- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay .................................... 1999 $215,000 -- -- 50,000 133,306(2)(3)
Former President and Chief Executive 1998 275,000 -- 50,000 --
Officer(1) 1997 251,750 $159,813 0 --

Albert E. Sisto(4) .......................... 1999 107,386 -- -- 530,000 --
President and Chief Executive Officer 1998 -- -- -- -- --
1997 -- -- -- -- --

George C, Huang(5) .......................... 1999 265,173 71,250 -- 45,000 1,000(3)
Sr. Vice President, 1998 -- -- -- -- --
Business Development 1997 -- -- -- -- --

Wayne Cantwell(6) ........................... 1999 199,167 76,762 -- 66,000 1,000(3)
President, inSilicon Division 1998 161,750 31,601 -- -- 16,595(7)
1997 141,417 34,536 -- -- 4,800(8)

Stuart J. Nichols(9) ........................ 1999 165,000 -- -- 10,000 1,000(3)
Vice President, General Counsel 1998 150,000 2,324 -- 35,000 --
And Secretary 1997 53,826 15,275 -- -- --

William E. Meyer(10) ........................ 1999 141,667 30,060 -- 75,000 --
Vice President, Finance and 1998 81,006 9,450 -- -- 20,000(11)
Chief Financial Officer 1997 -- -- -- -- --
</TABLE>

- ------------------------

(1) Mr. Kay resigned as President and Chief Executive Officer on June 21, 1999.

(2) Includes following amounts related to Mr. Kay's resignation:
severance--$77,500; accrued vacation--$29,806; personal expenses--$25,000.

(3) Includes $1000 contributed by the Company to individual's 401(k) account.

(4) Mr. Sisto was appointed as President and Chief Executive Officer on
June 21, 1999.

(5) Mr. Huang joined the Company in September 1998 when Award was acquired by
the Company.

(6) Mr. Cantwell became President of the inSilicon Division in November, 1999.

(7) Includes $9,545 in relocation expenses and $7,050 automobile allowance.

14
<PAGE>
(8) Includes $4,800 automobile allowance.

(9) Mr. Nichols joined the Company on May 13, 1997. His fiscal 1997 bonus was
guaranteed and paid on a prorated basis.

(10) Mr. Meyer joined the Company in April, 1998 as Contoller and was promoted
to Chief Financial Officer in June, 1999.

(11) Includes $20,000 in relocation expenses.

STOCK OPTIONS

The following tables set forth the stock options granted to each of the
Named Officers under the Company's stock option plans and the options exercised
by such Named Executive Officers during the fiscal year ended September 30,
1999:

OPTION GRANTS IN FISCAL 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL EXERCISE EXPIRATION ----------------------------------
NAME OPTIONS GRANTS PRICE DATE @ 0% @ 5% @ 10%
- ---- --------- ---------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack Kay............. 50,000 1.6% $ 8.5625 05/06/09 $ -- $ 269,246 $ 682,321
Albert E. Sisto...... 530,000 16.7% $11.0000 06/10/09 $ -- $3,666,456 $9,291,519
George C. Huang...... 45,000 1.4% $ 7.0000 10/30/08 $ -- $ 198,102 $ 502,029
Wayne Cantwell....... 31,000 1.0% $ 8.5000 03/31/09 $276,080 $ 654,410 $1,234,844
Wayne Cantwell....... 35,000 1.1% $ 9.3000 07/01/09 $ -- $ 165,714 $ 419,951
Stuart J. Nichols.... 10,000 0.3% $ 8.5625 05/06/09 $ -- $ 53,849 $ 136,464
William E. Meyer..... 45,000 1.4% $11.1250 06/17/09 $ -- $ 91,976 $ 233,085
10,000 0.3% $10.8130 05/28/09 $ -- $ 68,002 $ 172,331
20,000 0.6% $ 7.3125 02/26/09 $ -- $ 314,840 $ 797,867
</TABLE>

- ------------------------

(1) All of the above stock options are subject to the terms of the Company's
1999 Stock Plan and are exercisable only as they vest. The options granted
to each executive officer vest and become exercisable over a four-year
period, provided the optionee continues to be employed by the Company.

(2) All options were granted at an exercise price equal to the fair market value
of the Company's Common Stock on the date of grant. The exercise price may
be paid in cash, in shares of the Company's Common Stock valued at fair
market value on the exercise date, or through a cashless exercise involving
a same-day sale of all or part of the purchased shares.

(3) These columns reflect the potential realizable value of each grant assuming
the market value of the Company's stock appreciates at 5% and 10% annually
from the date of grant over the term of the option. There is no assurance
that the actual stock price appreciation over the 10-year option term will
be at the assumed 5% or 10% levels or at any other level. Unless the market
price of the stock does in fact appreciate over the option term, no value
will be realized from the option grants.

15
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT FY END (#)(2) OPTIONS AT FY END ($)(3)
ACQUIRED ON REALIZED -------------------------- ---------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------------- --------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay......................... 0 0 655,125 40,625 $ 4,339,032 106,641
Albert E. Sisto.................. 0 0 0 530,000 0 99,375
George C. Huang.................. 0 0 210,936 134,189 1,251,412 616,422
Wayne Cantwell................... 0 0 34,439 71,561 141,857 213,442
Stuart J. Nichols................ 0 0 1,875 8,125 4,922 21,328
William E. Meyer................. 0 0 6,188 69,812 11,489 78,133
</TABLE>

- ------------------------

(1) These amounts represent the fair market value of the shares underlying the
stock options on the date of exercise less the stock option exercise price.

(2) These options were granted on various dates during fiscal years 1991 through
1998.

(3) These amounts represent the difference between the exercise price of the
stock options and the closing price of Phoenix Common Stock on
September 30, 1999 for all options held by each Named Officer.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS

In January, 1999 Mr. Kay and the Company entered into a Severance Agreement
covering the terms of this employment as President and Chief Executive Officer.
The Agreement provided for a base salary of $310,000 per year, eligibility to
participate in employee benefit plans and severance benefits upon Mr. Kay's
termination or resignation. These severance benefits provide for severance
payments equal to 12 months base pay; continuation of medical benefits under
COBRA; travel expenses of $25,000 per year for each year Mr. Kay was a resident
of California plus $60,000; payment of an executive bonus as determined by the
Compensation Committee, moving expenses, use of office equipment; and continued
vesting of certain previously granted stock options. The Agreement also contains
covenants not to compete with the Company or to solicit employees.

In June, 1999 Mr. Sisto and the Company executed offer letter setting forth
Mr. Sisto's terms of employment. The offer letter provided for a base salary of
$350,000 per year, eligibility for a performance bonus targeted at 50% of base
salary, a grant of 530,000 non-qualified stock options and eligibility for
employee benefit plans. The agreement also provides for accelerated vesting of
stock options in the event of change of control of The Company and severance
payments equal up to 18 months base pay.

Mr. Cantwell and The Company entered into and Incentive and Severance
agreement in July 1999 that sets forth terms of Mr. Cantwell's employment. The
agreement provides for a base salary of $200,000, eligibility for a cash bonus
plan, participation in employee benefit plans, and performance-based stock
option grants. The agreement also provides for guaranteed severance pay equal to
12 months base salary, continuation of medical benefits through COBRA and
covenants not to compete or solicit employees.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board (the "Committee") has responsibility
for setting and administering the policies which govern executive compensation.
The Committee is composed entirely

16
<PAGE>
of outside Directors. Reports of the Committee's actions are presented to the
full Board. The purpose of this report is to summarize the philosophical
principles, specific program objectives and other factors considered by the
Committee in reaching its determinations regarding the compensation of the
Company's executive officers.

GENERAL COMPENSATION PHILOSOPHY

The Committee has approved principles for the management compensation
program which:

- encourage the development and the achievement of strategic objectives that
enhance long-term stockholder value,

- attract, maintain and motivate key personnel who contribute to long-term
success of the Company, and

- provide a compensation package that recognizes individual contributions
and Company performance.

COMPENSATION METHODOLOGY

The Company strives to provide a comprehensive executive compensation
program that is competitive and performance-based in order to attract and retain
superior executive talent. When establishing salaries, bonus levels and stock
option awards the Committee reviews market data, assesses the Company's
competitive position and considers: (1) the Company's financial performance
during the past year, (2) the individual's performance during the past year and
(3) the salaries of executive officers in similar positions of companies of
comparable size and other companies within the computer software industry. With
respect to executive officers other than the CEO, the Committee places
considerable weight upon the recommendation of the CEO. In addition,
consideration is also given to the particular objectives or priorities that the
CEO or the Board wishes the executive to focus on in the coming year.

COMPONENTS OF COMPENSATION

BASE SALARY. Base salaries for all executive officer positions are
targeted to be competitive with the average salaries of comparable
executives at technology companies of similar size and are intended to
reflect consideration of an officer's experience, business judgment and role
in developing and implementing overall business strategy for the Company.

BONUSES. Bonuses for executive officers are intended to reflect the
Company's belief that a significant portion of the annual compensation of
the executive should be contingent upon the performance of the Company, as
well as the individual's contribution. Bonuses are paid on an annual or
quarterly bases and are based on quantitative and subjective factors,
including the pre-tax profitability of the Company, business development,
operational performance, earnings per share and other measures of
performance appropriate to the officer compensated.

LONG TERM INCENTIVES. Long term incentive-based compensation for
executive officers is realized through the granting of stock options. The
stock option program directly links a portion of compensation to the
interests of stockholders by providing an incentive to maximize stockholder
value. Stock options generally have value for the executive only if the
price of the Company's stock increases above the fair market value on the
grant date and the executive remains in the Company's employ for the period
required for the shares to vest.

COMPENSATION OF CHIEF EXECUTIVE OFFICERS DURING FISCAL 1999

Compensation for the CEO is determined through a process similar to that
discussed above for executive officers in general. As indicated above, the
Company's compensation program is designed to

17
<PAGE>
achieve corporate financial goals and other strategic objectives. This
pay-for-performance program is most clearly exemplified in the compensation of
the Company's Chief Executive Officer.

In setting compensation levels for the Chief Executive Officer, the
Compensation Committee reviewed competitive information reflecting the relevant
compensation data for chief executive officers of companies of comparable size
within the software industry. As a result of this review, Mr. Kay's salary was
increased in fiscal year 1999 however Mr. Kay was not paid a bonus. The decision
by the Compensation Committee to increase Mr. Kay's base compensation and not
pay a bonus was primarily based on the Company's overall performance.
Mr. Sisto's compensation level was determined using generally the same
considerations described above.

MEMBERS OF THE COMPENSATION COMMITTEE

RONALD FISHER

ANTHONY P. MORRIS

ANTHONY SUN

CERTAIN TRANSACTIONS

INTEL CORPORATION: In December 1995, the Company and Intel Corporation
entered into two primary agreements: a technology agreement under which Phoenix
licensed certain of its software products for use by Intel on its motherboard
products for the desktop and server markets; and a Common Stock and Warrant
Purchase Agreement under which Intel agreed to purchase 894,971 shares of
Phoenix common stock and a warrant to purchase an additional 1,073,281 shares of
common stock. The aggregate purchase price for the shares and the warrant was
$10.8 million. The warrant vests and becomes exercisable in four installments
over a five year period from the date of the agreement; the exercise price of
the warrant increases annually from $12.88 to $15.22. The sale of the shares and
the warrant was concluded in February 1996 following the completion of certain
closing conditions.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") reports of ownership and changes
of ownership of the Company's Common Stock and other equity securities.
Executive officers, directors and 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during, and with respect to, its most recent
fiscal year and written representations that no other reports were required, the
filing requirements of Section 16(a) applicable to its executive officers,
directors and 10% stockholders were satisfied.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors at the end of fiscal 1999 were Messrs. Fisher, Morris and Sun, all of
whom are non-employee Directors.

18
<PAGE>
COMPANY STOCK PRICE PERFORMANCE

The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from September 30, 1994 to September 30, 1999 with
the cumulative total return on the Standard and Poor's 500 and the Standard and
Poor's Computer Software and Services market indices over the same period,
assuming the investment of $100 in the Company's Common Stock and in each of the
indices on September 30, 1994 and the reinvestment of all dividends.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PHOENIX TECHNOLOGIES LTD., THE STANDARD & POOR'S 500 INDEX
AND THE STANDARD & POOR'S COMPUTER SOFTWARE & SERVICES INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PHOENIX S&P 500 S&P COMPUTERS
<S> <C> <C> <C>
TECHNOLOGIES (SOFTWARE &
LTD. SERVICES)
9/94 100 100 100
9/95 224 130 146
9/96 307 156 211
9/97 264 219 348
9/98 100 239 479
9/99 199 306 777
</TABLE>

*$100 INVESTED ON 9/30/94 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.

<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------
9/94 9/95 9/96 9/97 9/98 9/99
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PHOENIX TECHNOLOGIES LTD. 100 224 307 264 100 199
S&P 500 100 130 156 219 239 306
S&P COMPUTERS (SOFTWARE & SERVICES) 100 146 211 348 479 777
</TABLE>

We do not expect any matters not listed in the Proxy Statement to come
before this meeting. If any other matter is presented, your signed proxy card
gives the individuals named as proxyholders the authority to vote your shares to
the extent authorized by Rule 14a-4(c) under the Securities Exchange Act of 1934
(The "Exchange Act") which would include matters that the proxyholders did not
know were to be presented 45 days before the anniversary of last year's proxy
statement.

19
<PAGE>
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company at its principal office
in San Jose, California, not later than September 1, 2000 for inclusion in the
proxy statement for that meeting.

By Order of the Board of Directors

Linda V. Moore, SECRETARY

San Jose, California
December 27, 1999

20
<PAGE>
APPENDIX A
PHOENIX TECHNOLOGIES LTD.
1999 DIRECTORS OPTION PLAN
<PAGE>
PHOENIX TECHNOLOGIES LTD.
1999 DIRECTOR OPTION PLAN

1. PURPOSES OF THE PLAN. The purposes of this 1999 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.

All options granted hereunder shall be nonstatutory stock options.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "BOARD" means the Board of Directors of the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMPANY" means Phoenix Technologies Ltd., a Delaware corporation.

(e) "DIRECTOR" means a member of the Board.

(f) "DISABILITY" means total and permanent disability as defined in
section 22(e)(3) of the Code.

(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(i) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:

(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or
system on the day of determination as reported in THE WALL STREET JOURNAL
or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the day of determination, as
reported in THE WALL STREET JOURNAL or such other source as the Board
deems reliable; or

(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.

(j) "INSIDE DIRECTOR" means a Director who is an Employee.

(k) "OPTION" means a stock option granted pursuant to the Plan.

(l) "OPTIONED STOCK" means the Common Stock subject to an Option.

(m) "OPTIONEE" means a Director who holds an Option.

(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.

(o) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(p) "PLAN" means this 1999 Director Option Plan.
<PAGE>
(q) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.

(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 150,000 Shares (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.

(a) PROCEDURE FOR GRANTS. All grants to Outside Director under this
Plan shall be automatic in accordance with the following provisions:

(i) Each Outside Director shall be automatically granted an Option to
purchase 40,000 Shares (the "First Option") on the date on (A) the date
on which such person first becomes an Outside Director, whether through
election by the stockholders of the Company or appointment by the Board
to fill a vacancy; provided, however, that an Inside Director who ceases
to be an Inside Director but who remains a Director shall not receive a
First Option.

(ii) Each Outside Director shall be automatically granted an Option
to purchase 15,000 Shares (a "Subsequent Option") promptly after the
anniversary date on which each director became an Outside Director
provided he or she is then an Outside Director and if as of such date, he
or she shall have served on the Board for at least the preceding six
(6) months.

(iii) Notwithstanding the provisions of subsections (i) and
(ii) hereof, any exercise of an Option granted before the Company has
obtained stockholder approval of the Plan in accordance with Section 16
thereof shall be conditioned upon obtaining stockholder approval of the
Plan in accordance with Section 16 hereof.

(iv) The terms of a First Option granted hereunder shall be as
follows:

(A) the term of the First Option shall be ten (10) years.

(B) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option.

(D) the First Option shall vest and become exercisable for 100%
of the shares subject to the First Option on the date of grant.

(v) The terms of a Subsequent Option granted hereunder shall be as
follows:

(A) the term of the Subsequent Option shall be ten (10) years.

(B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the Subsequent Option.

2
<PAGE>
(D) the Subsequent Option shall vest and become exercisable for
100% of the shares subject to the Subsequent Option on the date of
grant.

(vi) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the
stockholders to increase the number of Shares which may be issued under
the Plan or through cancellation or expiration of Options previously
granted hereunder.

5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.

7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.

8. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 16 hereof
has been obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when notice of such exercise
has been given to the Company in accordance with the terms of the Option by
the person entitled to exercise the Option and full payment for the Shares
with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of the Plan.

3
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director
terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within three (3) months
following the date of such termination. To the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option
shall terminate.

(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee's
estate or a person who acquired the right to exercise such Option does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

9. NON-TRANSFERABILITY OF OPTIONS. Except as determined otherwise by the
Board, the Option may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.

10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject
to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

(c) MERGER OR ASSET SALE. In the event of a merger of the Company with
or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may
be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so

4
<PAGE>
long as the Optionee serves as a Director or a director of the Successor
Corporation. In addition, following such assumption or substitution, the
Option shall remain exercisable in accordance with Sections 8(b) through
(d) above.

If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Board shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.

For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

11. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.

13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, 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.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any

5
<PAGE>
Shares hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.

14. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.

6
<PAGE>

PROXY

PHOENIX TECHNOLOGIES LTD.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, revoking all prior proxies, hereby appoints Albert E. Sisto
and Linda V. Moore, and each of them, with power of substitution, as proxies
to represent and vote as designated herein all shares of stock of Phoenix
Technologies Ltd. (the "Company") which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders of the
Company to be held on February 1, 2000 at the Beverly Heritage Hotel located
at 1820 Barber Lane, Milpitas, California, at 10:00 a.m., California time,
and at any and all adjournments of that meeting.

THE PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR ELECTION OF MESSRS. HUANG AND MORRIS AND FOR
PROPOSALS 2, 3, 4 AND 5. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT OF THAT MEETING.

SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE

<PAGE>

DETACH HERE

/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.

1. To elect George Huang and Anthony Morris to the Board of Directors as
Class 1 Directors.

FOR WITHHELD
/ / / /

/ /
--------------------------------------------------
For both nominees except as noted above

FOR AGAINST ABSTAIN
2. To approve the amendment to the 1999 Stock Plan. / / / / / /

3. To approve the 1999 Director Stock Option Plan. / / / / / /

4. To approve the amendment to the 1991 Employee
Stock Purchase Plan. / / / / / /

5. To ratify the selection of Ernst & Young LLP
as independent auditors for the current fiscal
year. / / / / / /

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /

PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN
THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTIVES,
ADMINISTRATORS, TRUSTEES, GUARDIANS, ATTORNEYS AND CORPORATE OFFICERS SHOULD
ADD THEIR TITLES. PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.