SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
INSIGNIA SOLUTIONS PLC
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[LOGO]
June , 2000
To Our Shareholders:
You are cordially invited to attend the 2000 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 July 18, 2000, at 12:30 p.m., local time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual General Meeting and Proxy Statement.
It is important that you use this opportunity to take part in the affairs of
your company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY 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 12:30 p.m. on
Monday, July 17, 2000, being 24 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,
[SIGNATURE]
Stephen M. Ambler
Company Secretary
INSIGNIA SOLUTIONS PLC
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NOTICE OF ANNUAL GENERAL MEETING
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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
Tuesday, July 18, 2000 at 12:30 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, 1999 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 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 David G. Frodsham, who was appointed as a
director of Insignia during the year after the last annual general meeting.
4. To re-elect as a director Nicholas, Viscount Bearsted.
5. 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 4,672,071 ordinary shares" in Rule 4.2 thereof be substituted by
a reference to "will exceed 5,072,071 ordinary shares."
6. 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 four million six hundred seventy-two thousand and seventy-one
(4,672,071) Shares" in Section 2.1 thereof be substituted by a reference to
"shall be five million seventy-two thousand and seventy-one (5,072,071) Shares."
7. To consider the following Ordinary Resolution: "THAT the issuance of
securities representing more than 20 percent of the voting power outstanding for
less than market value of the ADS to certain purchasers pursuant to Stock
Purchase Agreements, dated December 9, 1999, be approved."
8. To transact any other ordinary business of Insignia.
BY ORDER OF THE BOARD
[SIGNATURE]
Stephen M. Ambler
Company Secretary
Dated June , 2000
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 12:30 P.M. ON MONDAY, JULY 17, 2000,
BEING 24 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 shareholder 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.
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
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JUNE , 2000
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 ("Insignia"), 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 Tuesday, July 18, 2000 at
12:30 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 May 24, 2000, 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
June , 2000. 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, 1999 prepared in compliance with the U.K. Companies Act 1985 (the
"Act"). In addition, the 1999 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 7 in the notice are ordinary resolutions. An ordinary
resolution requires the affirmative vote of a majority 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 24 hours before the time of the Meeting, together with the power
of attorney or other authority (if any) under which it is signed. Holders of
ADSs should complete and return the voting instruction form provided to them in
accordance with the instructions contained therein, so that it is received on or
before July 17, 2000. The close of business on May 24, 2000 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, 1999, together with
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, 2000. 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 2000, and the
shareholders are being asked to ratify such selection. 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 David G.
Frodsham, 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
Nicholas, Viscount Bearsted, 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 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, Richard
M. Noling and Albert E. Sisto will be considered for re-election in 2001 and
Vincent S. Pino will be considered for
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re-election in 2002, 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:
DIRECTOR
NAME OF NOMINEE OR DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
- --------------------------- -------- ---------------------------------- --------
NOMINEES
Nicholas, Viscount Bearsted(2).... 50 Chairman of the Board of Insignia 1988
David G. Frodsham(2).............. 44 Chief Executive Officer of Argo 1999
Interactive Group
DIRECTORS
Richard M. Noling................. 51 President and Chief Executive 1997
Officer of Insignia
Vincent S. Pino(1)................ 51 President of Alliance Imaging, 1998
Inc.
Albert E. Sisto(1)................ 50 President of Phoenix Technologies, 1997
Inc.
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
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. He currently serves as Chief Executive Officer of Airpad Ltd., a
company based in the United Kingdom that develops and manufacturers peripheral
products for the games console and personal computer market. 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.
David G. Frodsham was appointed a director of the Company in August 1999. He
currently serves as Chief Executive Officer of Argo Interactive Group, a
provider of wireless Internet technology, based in the United Kingdom.
Previously he was Chief Operating Officer with Phoenix Technologies Ltd. Prior
to that he founded and was Chief Executive Officer for Distributed Information
Processing Research Ltd., involving software design for the handheld/palmtop
market. Before that he was International Business Manager with Psion PLC, and
also held technical and marketing positions with SEL and Zeneca. He received a
B. Sc. from Kings College, London and an MBA from INSEAD in France.
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
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paper management software company. From June 1991 to October 1994, Mr. Noling
served as Senior Vice President and Chief Financial Officer for Gupta
Corporation. He received a Bachelor of Arts degree in aerospace and mechanical
engineering science from the University of California (San Diego) in 1970. He
received an M.A. degree in theology from the Fuller Theological Seminary in
1972, and an M.S. degree in business administration in 1979 from the University
of California (Irvine).
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 MBA 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 President of Phoenix Technologies, Ltd., a company that provides
system enabling software designed into PC's as well as other devices. 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.
BOARD MEETINGS AND COMMITTEES
The Board met twelve (12) times, including telephone conference meetings,
during 1999. 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.
Nicholas, Viscount Bearsted and Mr. Frodsham are the current members of the
Audit Committee, which met four (4) times during 1999. Mr. Sisto served on the
Committee until October 1999. Mr. Frodsham was elected to the Committee in
October 1999. 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 once during 1999. Paul L. Borrill served on the Committee
until he resigned as a director in January 1999. 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.
4
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.
With effect from April 1, 1997, Nicholas, Viscount Bearsted, Chairman of
Insignia, entered into a Consulting Agreement with Insignia whereby he acts as
consultant to Insignia providing advice and assistance as the Board may from
time to time request. Under the agreement, Nicholas, Viscount Bearsted shall be
available to perform such services as requested during the year and shall
received a fee of $1,000 for each day services are provided, plus reimbursement
of reasonable expenses. Prior to April 1, 1999, Nicholas, Viscount Bearsted was
required to make himself available to perform such services for at least
thirteen days per quarter and received a fee of $1,000 for each days service,
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 Albert Sisto, dated
December 28, 1998, whereby Mr. Sisto provided sales consulting, sales training,
advice and assistance as Insignia from time to time requested over a term of six
months commencing December 28, 1998. Mr. Sisto received fees of $500 for each
half-day of service provided, totaling $15,000, along with 10,000 share options
that vested montly over a six month period commencing January 4, 1999.
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
5
PROPOSALS 5 AND 6: 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 460,000 shares, from 4,672,071 shares to
5,072,071 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 and an increase in the number of shares reserved for issuance under the
share option plans to 4,672,071 was adopted by the Board in April 1999 and
approved by the shareholders in May 1999. Any shares that would have been
issuable upon exercise of options granted 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,
1999, approximately 99 persons were eligible to receive options under the Option
Plans. At that date, under the Option Plans, 1,411,245 shares had been issued
upon exercise of options, 2,350,973 shares were subject to outstanding options
and 909,853 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 May , 2000 was $ per share.
The Board approved the proposed amendment in April 2000, to be effective
upon share 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, 1999,
options to subscribe for an aggregate of 519,625 shares were granted under the
1996 Scheme. Of these, options were granted to Named Officers as follows:
Jonathan D. Hoskin, Chief Technology Officer, 13,000 shares. During the same
period, Insignia's current executive officers as a group (7 persons) were
granted options to purchase a total of 13,000 shares under the scheme. No
current directors or nominees for election as a director, who are not executive
directors as a group (4 persons) have been granted options to purchase shares.
No options were granted during the period under the 1996 Plan to any associate
or any executive officer or director of Insignia, and no other person received
5% or more of such options.
6
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 options 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, 1999, approximately 76 persons
were eligible to receive options under the 1996 Scheme, 10,900 shares had been
issued upon exercise of options and options to purchase 315,380 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.
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
7
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.
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.
8
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, 1999, options to
purchase an aggregate of 3,513,400 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,
133,750 shares; George Buchan, Senior Vice President of Engineering and UK
General Manager, 115,000 shares; Ronald C. Workman, Senior Vice President of
Marketing, 110,000 shares; Jonathan Hoskin, Chief Technology Officer, 67,250
shares; Mark McMillan, Executive Vice President of Sales and Marketing, 150,000
shares; Marshall Kwait, Former Vice President of Sales, 75,000 shares; and David
B. Winterburn, former Senior Vice President of Business Development and Chief
Technology Officer, 130,000 shares. During the same period, Insignia's current
executive officers as a group (4 persons) had been granted options to purchase a
total of 1,096,000 shares under the scheme and the current directors or nominees
for election as a director who are not executive officers as a group (4 persons)
had been granted options to purchase a total of 142,500 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 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, 1999, approximately 99 persons were eligible to receive options
under the 1995 Plan, 145,147 shares had been issued upon exercise of options and
1,726,510 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
9
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.
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.
10
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 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 5 AND 6
11
PROPOSAL 7: ISSUANCE OF SECURITIES
Insignia closed a private placement under a securities purchase agreement,
dated December 9, 1999, with Castle Creek Technology Partners LLC and a
securities purchase agreement of the same date with four other investors
consisting of two members of the board of directors and two other individuals
(collectively, the "December 9 Transactions"). These five investors purchased,
at a per share price of $4.23, a total of 1,063,515 ADSs, each representing one
ordinary share, 20p par value per share. Insignia also issued warrants to the
purchasers to purchase a total of 319,054 ADSs at a price of $5.29 per share.
The warrants expire on December 9, 2004. As described below, the exercise price
and the number of ADSs issuable under the warrants are subject to various
adjustments. Insignia also issued to the purchasers additional warrants to
purchase additional ADSs, at par value, if the market price of the ADSs on
certain dates within the twelve months following the closing is lower than the
market price of the ADSs on the date of the closing, which was December 9, 1999.
These transactions were as reported by Insignia on Form 8-K, filed with the
Securities and Exchange Commission on December 15, 1999.
The Board determined that Insignia required financing at the time of the
December 9 Transactions and believed that the December 9 Transactions were fair
to Insignia and its shareholders.
NASD rules, governing issuers with securities listed on the NASDAQ National
Market, require that an issuer obtain shareholders' approval of an issuance of
common stock, in a transaction other than a public offering, equal to or greater
than 20 percent or more of the voting power outstanding before the issuance, for
less than the greater of book or market value of the stock.
As a result of the variable adjustment provisions in the warrants, the
number of shares of common stock which may be issuable upon exercise of the
warrants cannot be determined, but under certain market conditions could
represent more than 20 percent of the voting power outstanding.
Under a registration rights agreement reached between the investors and
Insignia in connection with the private placement, Insignia is obligated to
register all the shares issued to the investors in the private placement and the
shares issuable to the investors upon full exercise of the warrant and the
additional warrants. The terms of the additional warrant provide that if the
warrant is not exercisable for additional shares because such exercise would
violate NASDAQ rules, Insignia shall pay a damage amount to the investor based
on the market price of the common stock.
It is now proposed to approve Resolution 7 to authorize the directors to
issue all required shares upon exercise of warrants acquired by the investors in
the December 9 Transactions.
THE WARRANTS
The investors received warrants to purchase three ADSs for every 10 ADSs
they purchased. The exercise price of the warrants was set at 125% of the
original per ADS purchase price. That calculates to an exercise price of $5.29,
based on a $4.23 per ADS purchase price.
The warrants contain standard weighted average anti-dilution provisions
designed to protect the investors if Insignia sells or is deemed to sell any
ADSs or ordinary shares at below market price during the term of the warrants,
which ends on December 9, 2004.
In addition, under the warrants, if at least $4.75 million of the $6.25
million in funds that are currently held in escrow by Citrix Systems, Inc. are
not released to Insignia by July 10, 2000, the exercise price of the warrants
will be adjusted to the market price on that date, if that market price is lower
than $5.29. Insignia received $1 million of this amount in February 2000. As
part of the warrant agreement, the investors may be entitled to cash payments
upon the occurrence of certain Major Transactions, as defined, including change
of control provisions. Cash payments are determined in a methodology described
in the agreement. Such methodology is impacted by market prices.
12
THE ADDITIONAL WARRANTS
The additional warrants entitle the investors to purchase ADSs at par value
if the average of the closing bid price of the ADSs over ten days before an
adjustment date is less than $4.23. The remaining adjustment dates are:
- 4 months after the effective date of the registration statement
- 8 months after the effective date of the registration statement
If Insignia completes an underwritten public offering with net proceeds to
Insignia of at least $25 million and a per ADS price of at least $7.02 before
either 4 months or 8 months after the effective date of the registration
statement, then the right to the related adjustment date terminates.
Up to the date of this Proxy Statement, there have been four adjustment
dates. However, as calculated, the average share price of the Company on those
adjustment dates has exceeded the adjustment price of $4.23 per share and
consequently no adjustment has occurred.
On any adjustment date the investors will be entitled to purchase additional
ADSs at par value. The number of ADSs issuable to the investors following an
adjustment date is determined under a formula. The following table illustrates
the number of ADSs issuable upon exercise of the additional warrants and the
percentage ownership that each represents, assuming: the average bid price is
100%, 75%, 50%, 29.1358% and 25% of the $4.23 price determined when the warrants
were issued; the number of Ordinary shares outstanding is the number outstanding
on April 30, 2000, which is 14,206,576; there was no adjustment of the number of
ADSs issuable upon exercise of the warrants; and the exchange rate remains at
$1.60 per UK pound sterling.
ADSS ISSUED AS A
PERCENTAGE OF TOTAL
ORDINARY SHARES IN
PERCENT OF BID PRICE ADSS ISSUABLE ISSUE AFTER ISSUANCE
- ---------------------- ---------------------- ----------------------
100% ($4.23) 0 0%
75% ($3.1725) 394,274 2.70%
50% ($2.1115) 1,253,111 8.11%
29.1358% ($1.225) 3,529,467 19.90%
25% ($1.0575) 4,574,917 24.36%
Insignia obtained a third-party valuation to allocate fair value to amounts
received from the private placement between the Ordinary Shares and the
warrants. The amount allocated to mandatorily redeemable warrants totaled $1.440
million, of which $0.590 million was allocated to the warrant, and $0.850
million was allocated to the additional warrant. Of the remaining net proceeds
received, $2.619 million was allocated to mandatorily redeemable capital, of
which $0.340 million was reclassified as Ordinary Shares and $2.279 million was
reclassified as additional paid-in capital upon the registration statement
becoming effective on March 28, 2000.
Amounts classified as warrants will remain outside of shareholders' equity
for the life of the warrant or until they are exercised, whichever occurs first.
This classification reflects certain potential cash payments that may occur to
the investors, should Insignia complete a Major Transaction, such as a takeover,
during the life of the warrants.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 7
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 19, 2000, 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.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
RIT Capital Partners plc(2)................................ 2,032,897 14.3%
Technology Venture Investors IV(3)......................... 1,438,808 10.1%
Castle Creek Technology Partners LLC(4).................... 1,075,333 7.4%
Nicholas, Viscount Bearsted(5)............................. 818,717 5.7%
Richard M. Noling(6)....................................... 449,657 3.1%
George Buchan(7)........................................... 190,679 1.3%
Vincent S. Pino(8)......................................... 127,165 *
Stephen M. Ambler(9)....................................... 59,188 *
Jon Hoskin(10)............................................. 40,657 *
Albert E. Sisto(11)........................................ 35,417 *
Ronald C. Workman(12)...................................... 26,044 *
Mark E. McMillan(13)....................................... 12,500 *
David G. Frodsham(14)...................................... 6,250 *
Stephen H. Cobb(15)........................................ -- *
Marshall Kwait(16)......................................... -- *
David B. Winterburn(17).................................... -- *
All directors and executive officers as a group (12
persons)(18)............................................. 1,766,272 11.7%
- ------------------------
* 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 May 19, 2000 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 a warrant entitling Castle Creek Technology Partners LLC to
purchase 248,154 shares within 60 days of May 19, 2000. Castle Creek
Technology Partners LLC are located at 77 West Wacker Drive, Ste. 4040,
Chicago, Illinois 60601.
(5) Includes 181,771 shares subject to options that were exercisable within 60
days of May 19, 2000. Nicholas, Viscount Bearsted is Chairman of the Board
of the Company. His address is 9 Acacia Road, London, NW8 6AB, United
Kingdom.
(6) Includes 415,000 shares subject to options that were exercisable within 60
days of May 19, 2000. Mr. Noling is the President, Chief Executive Officer,
and a director of the Company.
14
(7) Includes 155,417 shares subject to options that were exercisable within 60
days of May 19, 2000. Mr. Buchan is Senior Vice President of Engineering
and UK General Manager of the Company.
(8) Includes 9,376 shares subject to options that were exercisable within 60
days of May 19, 2000 and a warrant entitling Mr. Pino to purchase 17,725
shares within 60 days of May 19, 2000. Mr. Pino is a director of the
Company.
(9) Represents shares subject to options that were exercisable within 60 days
of May 19, 2000. Mr. Ambler is Chief Financial Officer, Company Secretary
and a Senior Vice President of the Company.
(10) Includes 35,292 shares subject to options that were exercisable within 60
days of May 19, 2000. Mr. Hoskin is Chief Technology Officer.
(11) Represents shares subject to options that were exercisable within 60 days
of May 19, 2000. Mr. Sisto is a director of the Company.
(12) Represents shares subject to options that were exercisable within 60 days
of May 19, 2000. Mr. Workman is Senior Vice President of Marketing.
(13) Represents shares subject to options that were exercisable within 60 days
of May 19, 2000. Mr. McMillan is Executive Vice President of Sales and
Marketing.
(14) Represents shares subject to options that were exercisable within 60 days
of May 19, 2000. Mr. Frodsham is a director of the Company.
(15) Mr. Cobb is Senior Vice President of Worldwide Sales.
(16) Mr. Kwait served as Vice President of Sales from February 1999 to January
2000.
(17) Mr. Winterburn served as Senior Vice President of Business Development and
Chief Technology Officer of the Company from August 1998 to March 1999..
(18) Includes the shares indicated as included in footnotes (5) through (15).
15
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 1999, 1998 and 1997 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 Business
Development and Chief Technology Officer who left Insignia during 1999 (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
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------- ------------
SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS(#) ($)(2)
- ---------------------------- -------- --------- ----------- --------------- ------------ ------------
Richard M. Noling(3)............... 1999 240,611 83,042 -- -- 1,080
President and Chief Executive 1998 217,875 75,171 -- 20,000 1,080
Officer 1997 203,947 93,184 -- 415,000 360
Stephen M. Ambler(4)............... 1999 179,382 57,512 -- 25,000
Chief Financial Officer, Company 1998 145,250 40,345 -- 20,000 --
Secretary and Senior Vice 1997 122,556 8,889 19,777(5) 88,750 4,338
President
George Buchan...................... 1999 168,000 48,161 21,120(6) 40,000 16,800
Senior Vice President of 1998 167,000 54,827 22,044(6) 20,000 16,700
Engineering and UK General 1997 158,650 51,671 20,265(6) 55,000 15,865
Manager
Jon Hoskin(7)...................... 1999 110,400 18,575 18,240(6) 45,000 5,520
Chief Technology Officer 1998 79,569 14,712 15,558(6) 22,000 3,978
1997 64,400 14,304(6) 9,250 3,219
Marshall Kwait(8).................. 1999 157,937 40,174 -- 47,500 1,080
Former Vice President of Sales 1998 128,431 81,587 12,000 1,080
1997 115,800 90,306 15,500 1,080
Mark E. McMillan(9)................ 1999 26,481 19,166 150,000 --
Executive Vice President of
Worldwide Sales and Marketing
Ronald C. Workman(10).............. 1999 174,983 47,746 10,000 1,080
Senior Vice President of 1998 82,500 22,442 -- 100,000 405
Marketing
David B. Winterburn(11)............ 1999 37,951 -- 101,415(12) -- 225
Former Senior Vice President of 1998 59,006 25,734 57,000(13) 130,000 135
Business Development and
Chief Technology Officer
- ------------------------
(1) Bonuses paid to the executive officers are based on a target bonus set for
each officer each quarter, adjusted by the Company's operating results over
plan and the executive officer's performance against quarterly qualitative
goals. All executive officer bonuses are at the discretion of the
Compensation Committee of the Board.
(2) Represents Company contributions to defined contribution employee benefit
plans.
16
(3) Mr. Noling joined the Company in April 1996 as Senior Vice President of
Finance and Operations, Chief Financial Officer and Company Secretary. He
was appointed President and Chief Executive Officer of the Company in March
1997.
(4) Mr. Ambler joined the Company 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) $8,111 of this sum represents the incremental cost to the Company of the
use of a Company car and $11,666 represents a bonus for relocation to the
Company's United States facility.
(6) Represents the payment of a Company car allowance.
(7) Mr. Hoskin joined the Company in June 1992 as Engineering Director. He was
appointed Chief Technology Officer in May 1999.
(8) Mr. Kwait joined the Company in December 1996 as Channel Sales Director. He
was appointed Vice President of Sales in February 1999 and served in this
position until January 2000.
(9) Mr. McMillan joined the Company in November 1999 as Senior Vice President
of Worldwide Sales and Marketing. He was appointed Executive Vice President
of Worldwide Sales and Marketing in April 2000.
(10) Mr. Workman joined the Company in July 1998.
(11) Mr. Winterburn joined the Company 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 the Company between
June 1998 and August 1998.
(12) Comprises $17,500 forgiveness of loan in accordance with the terms of a
promissory note dated July 1998, plus $83,915 payment under severance of
employment, including forgiveness of all remaining principal and interest
on a promissory note dated July 1998.
(13) $15,000 of this sum represents a relocation reimbursement, and $42,000
represents amounts paid for consulting services provided immediately prior
to joining the Company.
The following table sets forth further information regarding individual
grants of rights to purchase ordinary shares during 1999 to each of the Named
Officers. In accordance with the rules of the Securities and Exchange Commission
(the "SEC"), the table sets forth the hypothetical gains or "option spreads"
that would exist for the options at the end of their respective ten-year terms.
These gains are based on assumed rates of annual compounded share price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises depend
upon the future performance of the ordinary shares and ADSs. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
17
OPTION GRANTS IN 1999
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF SHARE PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TO EXERCISE TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#) 1999 ($/SH) DATE 5%($) 10%($)
- ---- ------------------ ------------- -------- ---------- -------- ---------
Richard M. Noling.............. -- -- -- -- --
Stephen M. Ambler.............. 25,000(2) 0.4% 2.000 01/03/09 31,444 79,687
George Buchan.................. 40,000(2) 0.7% 2.000 01/03/09 50,311 127,499
Jon Hoskin..................... 45,000(2) 0.8% 6.375 05/04/09 180,414 457,205
Marshall Kwait................. 47,500(2) 0.8% 3.563 02/23/09 106,436 269,729
Mark E. McMillan............... 150,000(3) 25.2% 4.594 11/03/09 433,371 1,098,248
Ronald C. Workman.............. 10,000(2) 0.2% 2.000 01/03/09 12,578 31,875
David B. Winterburn............ -- -- -- -- --
- ------------------------
(1) The 5% and 10% assumed annual compound rates of share price appreciation are
mandated by rules of the SEC and do not represent the Company's estimate or
projection of future ordinary share or ADS prices.
(2) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. employees. These options vest and
become exercisable at the rate of 2.0833% of the shares for each full month
that the optionee renders service to the Company. The option exercise price
is equal to the fair market value of the Company's ordinary shares on the
date of grant and the options expire ten years from the date of grant,
subject to earlier termination upon termination of employment. 25% of
options granted will be subject to accelerated vesting upon termination or
constructive termination following a change of control of the Company.
(3) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. Employees. These options vest and
become exercisable as to 25% of the shares on the first anniversary of the
date of grant and thereafter at the rate of 2.0833% of the shares for each
full month that the optionee renders services to the Company. The option
exercise price is equal to the fair market value of the Company's ordinary
shares on the date of grant and the options expire ten years from the date
of grant, subject to earlier termination upon termination of employment. 25%
of options granted will be subject to accelerated vesting upon termination
or constructive termination following a change of control of the Company.
The following table sets forth certain information concerning the exercise
of options by each of the Named Officers during 1999, 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, 1999. 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 $4.625 per share, which was
the closing price of the ADSs as reported on the Nasdaq National Market on
December 31, 1999.
18
AGGREGATED OPTION EXERCISES IN 1999 AND
YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT YEAR-END(#) AT YEAR-END($)(2)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------- ----------- ------------- ----------- -------------
Richard M. Noling............... 10,000 26,394 379,688 130,312 758,801 298,014
Stephen M. Ambler............... 29,000 92,779 41,552 68,698 100,004 190,348
George Buchan................... -- -- 139,896 50,104 407,891 168,451
Jon Hoskin...................... -- -- 21,125 56,625 44,268 59,606
Marshall Kwait.................. 22,801 60,216 1,564 50,635 2,634 78,890
Mark E. McMillan................ -- -- -- 150,000 -- 4,650
Ronald C. Workman............... 29,998 141,006 7,085 72,917 25,318 258,825
David B. Winterburn............. 833 6,819 -- -- --
- ------------------------
(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 $1.60 per pound sterling, the exchange rate in effect as
of December 31, 1999.
EMPLOYMENT AGREEMENTS
Effective March 25, 1997, Mr. Noling entered into an employment agreement
with the Company, which is terminable by either party upon six month's notice
and by the Company for cause at any time. In connection with such agreement,
Mr. Noling was granted options to purchase (i) 100,000 ordinary shares at an
exercise price of $1.969, such options being 100% vested and immediately
exercisable, (ii) 100,000 ordinary shares at an exercise price of $1.969, such
options to vest and become exercisable at the rate of 2.0833% of the shares on
the first day of each month following the date of grant and (iii) 200,000
ordinary shares on the day of the 1997 Annual General Meeting, such options to
vest and become exercisable at the rate of 2.0833% of the shares on the first
day of each month following the date of grant. The Annual General Meeting was
held on May 29, 1997 and the options were granted at an exercise price of
$2.375. 100,000 of these options are subject to accelerated vesting and
exercisability should the Company meet certain earnings per share ("EPS")
targets as follows: (a) 25,000 options are accelerated should the EPS exceed
$0.07 for 2 consecutive quarters (b) 37,500 options are accelerated should the
EPS exceed $0.14 for 2 consecutive quarters and (c) 37,500 options are
accelerated should the EPS exceed $0.21 for 2 consecutive quarters, with a
maximum of one early vesting event per quarter. These 100,000 options fully vest
upon a takeover or merger of the Company.
The employment agreement continues through May 31, 2001, and is
automatically extended for an additional year at the end of the term unless
either party gives notice six months prior to November 30, 2000 to terminate
effective upon the expiration of the then current term. In the event of any
business combination resulting in a change of control of the Company or in the
event of disposal of a majority of the assets of the Company, and the
termination or constructive termination of Mr. Noling's employment, Mr. Noling
shall receive his then current full salary for a period of twelve months
following such termination. In addition he shall be entitled to continued
vesting and exercisability of his options for a period of twelve months after
termination and shall be entitled to participate in the Company's employee
benefits on the same basis as if he were an employee.
19
With effect from April 1, 1997, Nicholas, Viscount Bearsted, Chairman of the
Company, entered into a Consulting Agreement with the Company whereby he acts as
consultant to the Company providing advice and assistance as the Board may from
time to time request. Under the agreement, Nicholas, Viscount Bearsted shall be
available to perform such services as requested during the year and shall
receive a fee of $1,000 for each day services are provided, plus reimbursement
of reasonable expenses. Prior to April 1, 1999, Nicholas, Viscount Bearsted was
required to make himself available to perform such services for at least
thirteen days per quarter and received a fee of $1,000 for each days service,
subject to a minimum thirteen days per quarter, plus reimbursement of reasonable
expenses. The agreement is terminable by either party upon six month's advance
written notice and by the Company for cause at any time. In the event of any
business combination resulting in a change of control of the Company or in the
event of disposal of a majority of the assets of the Company, and termination or
constructive termination of his consultancy, Nicholas, Viscount Bearsted will be
entitled to receive an additional twenty-six week's consultancy fees.
In January 1993, Mr. Buchan entered into an employment agreement with the
Company, which may be terminated by either party upon six months' notice and by
the Company for cause at any time. In the event of any business combination,
change in control or disposal of a majority of the assets of the Company,
Mr. Buchan's employment may be terminated with three months' notice, and upon
such termination Mr. Buchan will be entitled to a payment equivalent to his
current annual salary plus estimated bonus for the year following termination
and all his outstanding share options will become exercisable.
In July 1998, the Company loaned Mr. Winterburn $70,000 to assist in the
purchase of a house. The loan was represented by a promissory note, and bore
interest at the prime rate. Provided Mr. Winterburn remained 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 was forgiven as a payment upon severance of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board (the "Committee") makes all
decisions involving the compensation of executive officers of the Company. The
Committee consists of the following non-employee directors: Vincent S. Pino and
Albert E. Sisto. Paul L. Borrill served on the Committee until he resigned as a
director in January 1999.
The Company entered into a consulting agreement with Albert Sisto, dated
December 28, 1998, whereby Mr. Sisto provided sales consulting, sales training,
advice and assistance as the Company from time to time requested over a term of
six months commencing December 28, 1998. Mr. Sisto received fees of $500 for
each half-day of service provided, totaling $15,000, along with 10,000 share
options that vested monthly over a six month period commencing January 4, 1999.
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
20
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
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.
1999 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, 1999 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 1999, 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 1999, 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 1999.
21
For 2000, 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 2000, to Insignia's expected
results and to the number of options currently held by the executive officers
that remain unvested.
COMPANY PERFORMANCE AND CEO COMPENSATION. For 1999, the Compensation
Committee recommended an increase of $23,800 in Mr. Noling's base salary. 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
$83,042 be paid to Mr. Noling.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. For
2000, 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 2000 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
22
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 April 30,
2000 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 RETURNS*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INSIGNIA SOLUTIONS S & P 500 NASDAQ US&FGN
Oct 1995 $100.00 $100.00 $100.00
1995 $97.92 $106.40 $101.71
1996 $34.89 $130.83 $124.52
1997 $17.97 $174.48 $152.07
1998 $16.67 $224.34 $210.28
1999 $38.54 $271.55 $385.34
* Total return based on $100 initial investment & reinvestment of
dividends
CERTAIN TRANSACTIONS
Since January 1, 1999, there has not been, nor is there currently proposed,
any transaction or series of transactions to which the Company or any of its
subsidiaries was or is to be a party in which the amount involved exceeds
$60,000 and in which any executive officer, director or holder of more than 5%
of the Company's ordinary shares had or will have a direct or indirect material
interest other than (i) normal compensation arrangements, which are described
under Item 11 above, (ii) the transactions described under "Compensation
Committee Interlocks and Insider Participation" in Item 11 above, and (iii) the
transactions described under "Employment Agreements" in Item 11 above.
23
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at Insignia's 2000 Annual
General Meeting must be received by Insignia at its registered office no later
than February , 2001 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 MONDAY, JULY 17, 2000,
BEING 24 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
24
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
(REGISTERED NUMBER: 1961960)
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
F-1
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1999
The directors of Insignia Solutions PLC ("the Company") present herewith
their report and the audited accounts of the Company and of the group for the
year ended 31 December 1999 in accordance with the format prescribed by the UK
Companies Act.
PRINCIPAL ACTIVITIES
The principal activities of the Company and group are the development,
marketing and support of virtual machine technology which enables software
applications to be run on various computer platforms.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
In January 1998, the Company announced its intention to launch a new product
line called the Jeode platform, based on the Company's Embedded Virtual Machine
("EVM") technology. This followed a strategic review in late 1997 of the
Company's business. The Company also explored new markets that would leverage
the Company's 12 years of emulation software development experience. The Jeode
platform is the Company's implementation of Sun Microsystems, Inc.'s ("Sun")
Java technology tailored for Internet appliances and embedded devices. The Jeode
platform is enabled by the Company's EVM and is designed to enable software
developers to create reliable, efficient and predictable Internet appliances and
embedded devices. The product became available for sale in March 1999. The Jeode
platform is now the principal product line of the Company and will be for the
foreseeable future. The Jeode product line revenue model is based on original
equipment manufacturer's ("OEMs") customer transactions. Revenues from the Jeode
product line are generally derived from four main sources: the sale of a
development license, the sale of annual maintenance and support, a commercial
use royalty based on shipments of products that include Jeode technology, and
customer-funded engineering activities.
The Jeode platform is available for x86, MIPS, ARM, Power PC and Hitachi SH
processors, and Windows CE, Windows NT, Linux and VxWorks operating systems,
with additional processor/operating system platforms planned for introduction in
2000. The Company also offers various services and will license technology for
porting the Jeode platform to other platforms to help developers migrate their
applications to their platforms more easily.
The Company's principal product line in recent years has been SoftWindows.
This product enabled Microsoft Windows ("Windows") applications to be run on
most Apple Computer Inc. ("Apple") Macintosh computers and many UNIX
workstations. Revenues from this product line grew until 1995, but declined
significantly after that date, along with margins. This was due to a declining
demand for Apple Macintosh products and increased competition. The Company also
shipped RealPC, a low cost software product that allowed consumers to play games
and other applications designed for Intel-based PCs on their Power Macintosh
computers. In early 1999 Management took steps to discontinue these product
lines, and on October 18, 1999, the Company signed an exclusive licensing
arrangement with FWB Software, LLC ("FWB"). Under the arrangement FWB will pay
the Company a royalty based on an earn-out of FWB's future revenues from the
product lines and the Company will be paid as those revenues are achieved. Upon
achieving a certain revenue threshold, the Company will transfer the SoftWindows
and RealPC product lines to FWB at no additional consideration. This arrangement
allows the Company to focus exclusively on its Jeode platform business strategy.
Total turnover in 1999 was $6,837,000 (1998: $14,096,000), of which
SoftWindows revenues accounted for 74%. An operating loss was recorded of
$11,747,000 (1998: $13,511,000).
This change in product focus has resulted in a redirection of available
resources from the Company's historical revenue base towards development and
marketing efforts for the Jeode platform. As a result of
F-2
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS (CONTINUED)
this change in product strategy and associated redirection of resources to new
product development, the Company's financial position weakened during 1999.
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.
The principal source of cash funding came from a private placement funding,
a convertible promissory note, receivable collections and the partial release
from escrow of NTRIGUE product line sales proceeds. As a result at 31
December 1999, the group had cash and cash equivalent balances and short term
investments of $11,107,000 (1998: $16,334,000) of which $6,060,000 (1998:
$9,100,000) was held in escrow.
GOING CONCERN
On March 20, 2000, the Company entered into a binding agreement with a
director and three immediate family members whereby they will provide the
Company a $5.0 million line of credit (see note 22). The Company believes that
with existing funds at year-end, this line of credit and expected cash flow from
operations the Company will have sufficient funds to meet the Company's
operating and capital requirements through the end of fiscal year 2000.
Accordingly the financial statements have been prepared on a going concern
basis.
SHARE CAPITAL AND WARRANTS
The Company issued 214,318 Ordinary shares on the exercise of share options,
171,453 Ordinary shares through its employee share purchase plan and 1,063,515
Ordinary shares through a private placement during the year. In addition as part
of the private placement, the Company issued warrants to purchase 319,054
Ordinary shares.
DIVIDENDS AND TRANSFERS TO RESERVES
The directors are unable to recommend payment of a dividend in respect of
the year ended 31 December 1999 (1998: Nil). The loss for the year of $9,959,000
(1998: profit of $422,000) will be transferred to reserves.
DIRECTORS
The directors of the Company during the year and to the date of this report
were:
Viscount Bearsted (Chairman)
P L Borrill (resigned 8 January 1999)
D G Frodsham (appointed 25 August 1999)
R M Noling (USA)
V S Pino (USA)
A E Sisto (USA)
F-3
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
DIRECTORS (CONTINUED)
The interests of the directors at the year-end in the shares of the Company
were as follows:
OPTIONS TO ACQUIRE
ORDINARY SHARES OF ORDINARY SHARES OF
20P EACH 20P EACH
------------------ ------------------
VISCOUNT BEARSTED
At 31 December 1998......................................... 636,946 190,000
At 31 December 1999......................................... 636,946 193,750
P L BORRILL
At 31 December 1998......................................... -- 25,000
At date of resignation...................................... -- 25,000
D G FRODSHAM
At date of appointment...................................... -- --
At 31 December 1999......................................... -- 16,250
R M NOLING
At 31 December 1998......................................... 26,052 520,000
At 31 December 1999......................................... 33,702 510,000
V S PINO
At 31 December 1998......................................... 23,000 15,000
At 31 December 1999......................................... 82,084 18,750
A E SISTO
At 31 December 1998......................................... -- 25,000
At 31 December 1999......................................... -- 38,750
Further details of the share options are given in note 17 to the financial
statements.
Of the options granted to Viscount Bearsted, 125,000 are exercisable until 3
November 2002 at 90p each, 5000 are exercisable until 16 April 2007 at $1.75
each, 50,000 are exercisable until 28 May 2007 at $2.375 each, 10,000 are
exercisable until 28 April 2008 at $1.625 each, 1,250 are exercisable until
19 April 2009 at $7.25 each, 1,250 are exercisable until 19 July 2009 at $7.188
each and 1,250 are exercisable until 18 October 2009 at $5.00 each.
The options granted to P L Borrill were not exercised by 7 April 2000 and
consequently lapsed.
Of the options granted to D G Frodsham, 15,000 are exercisable until 16
August 2009 at $4.688 each and 1,250 are exercisable until 18 October 2009 at
$5.00 each.
Of the options granted to R M Noling, 85,000 are exercisable until 28
March 2006 at $5.75 each, 15,000 are exercisable until 2 March 2007 at $2.438
each, 190,000 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 each and 10,000 are exercisable until 19 October 2008 at
$0.688 each. During the year RM Noling exercised 10,000 options at $1.969 each.
Of the options exercised, 5,800 were exercised on 28 October 1999 and sold on
the same day at prices ranging between $4.72--$4.88 and 4,200 were exercised on
29 October 1999 and sold on the same day at prices ranging between $4.50--$4.63.
Of the options granted to V S Pino 15,000 are exercisable until 19
October 2008 at $0.688 each,1,250 are exercisable until 19 April 2009 at $7.25
each, 1,250 are exercisable until 19 July 2009 at $7.188 each and 1,250 are
exercisable until 18 October 2009 at $5.00 each. As part of the private
placement (see note 17),
F-4
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
DIRECTORS (CONTINUED)
Mr Pino purchased 59,084 Ordinary shares at $4.23 together with warrants to
purchase 17,725 Ordinary shares at $5.29.
Of the options granted to A E Sisto, 15,000 are exercisable until 16
April 2007 at $1.75 each, 10,000 are exercisable until 28 April 2008 at $1.625
each, 10,000 are exercisable until 4 January 2009 at $2.00 each, 1,250 are
exercisable until 19 April 2009 at $7.25 each, 1,250 are exercisable until 19
July 2009 at $7.188 each and 1,250 are exercisable until 18 October 2009 at
$5.00 each.
The vesting arrangements of the above options are set out in note 17 to the
accounts.
POLICY ON PAYMENT OF CREDITORS
It is the group's policy to agree payment terms with its suppliers, along
with other terms and conditions, when it enters into binding purchase contracts
and to abide by the agreed payment terms provided the supplier has provided the
goods or services in accordance with the terms and conditions of the contract.
The Company had 30 days purchases outstanding at 31 December 1999 based on the
average daily amount invoiced by suppliers during the year ended 31
December 1999.
YEAR 2000 AND EURO
Many currently installed computer systems and software products are not
coded to accept four digit entries in the date code field 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.
The Jeode product is Year 2000 compliant but the Company does not guarantee
that the target platforms on which Jeode may be used are compliant since these
are third party products.
The Company 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 made the necessary changes to ensure that they were
all Year 2000 and Euro compliant. The cost of any remedial work necessary was
expensed as incurred.
There were no material costs to the group associated with this work to
ensure Year 2000 and Euro compliance during the year. No material problems have
occurred and the group does not expect to incur any additional material costs in
the coming year.
FINANCIAL RISKS AND TREASURY POLICY
The group finances its operations by a combination of internally generated
cash flows, existing cash deposits and borrowings. The group's borrowings
consist of floating rate and fixed rate liabilities (see notes 14 and 22). In
addition during the year, funds were obtained from a private placement funding
(see note 17) and from the partial release of NTRIGUE product line sales
proceeds from escrow (see note 7).
The group's Finance Department manages the group's cash borrowings, interest
rate and foreign exchange exposures and its main banking relationships. This is
operated as a cost and risk reduction programme. Transactions of a speculative
nature are not permitted.
F-5
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
FINANCIAL RISKS AND TREASURY POLICY (CONTINUED)
The group limits the effects of movements in foreign exchange rates by
partially matching cash holdings with liabilities in the same currency, assisted
by selective forward foreign currency option contracts arranged with our
bankers.
POST BALANCE SHEET EVENTS
Post balance sheet events are dealt with in Note 22 to the financial
statements.
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.
AUDITORS
A resolution to reappoint PricewaterhouseCoopers will be proposed at the
annual general meeting.
By Order of the Board
S M Ambler
SECRETARY 8 May 2000
F-6
[LOGO]
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
Thames Court
1 Victoria Street
Windsor SL4 1HB
AUDITORS' REPORT TO THE MEMBERS OF Telephone +44 (0) 1753 752000
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES - Facsimile +44 (0) 1753 864826
We have audited the financial statements on pages 7 to 32 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 13 to 15.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report. As described on
page 5, this includes responsibility for preparing the financial statements in
accordance with applicable United Kingdom accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
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 United Kingdom
Companies Act. We also report to you if, in our opinion, the directors' report
is 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 or 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 as at 31 December 1999 and of the
loss and cash flows of the group for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.
PRICEWATERHOUSECOOPERS
Chartered Accountants
and Registered Auditors 8 May 2000
F-7
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
NOTE $'000 $'000
-------- -------- --------
TURNOVER.................................................... 2 6,837 14,096
Cost of sales............................................... (3,203) (8,329)
------- -------
GROSS PROFIT................................................ 3,634 5,767
Distribution costs.......................................... (5,159) (7,870)
Administrative expenses..................................... (10,222) (11,408)
------- -------
OPERATING LOSS.............................................. 2,3 (11,747) (13,511)
Profit on disposal of part of the group's operations........ 7 -- 14,731
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST........ (11,747) 1,220
Interest receivable and similar income...................... 498 1,006
Interest payable and similar charges........................ 6 (26) (22)
------- -------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION........ (11,275) 2,204
Tax on (loss)/profit on ordinary activities................. 8 1,316 (1,782)
------- -------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR........................ 18 (9,959) 422
======= =======
Basic earnings per share.................................... 24 $ (0.77) $ 0.03
======= =======
Diluted earnings per share.................................. 24 (0.77) 0.03
======= =======
The only recognised gain or loss is the profit/(loss) for the year.
The notes on pages 13 to 32 form part of these financial statements.
F-8
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 1999
1999 1998
NOTE $'000 $'000
-------- -------- --------
FIXED ASSETS
Tangible assets............................................. 9 625 1,074
Investments................................................. 10 325 325
------- -------
950 1,399
CURRENT ASSETS
Stocks...................................................... 11 4 82
Debtors of which $434,000 (1998: $522,000) falls due in more
than one year............................................. 12 1,313 4,254
Cash and cash equivalents held in escrow.................... 13 6,060 9,100
Cash at bank and in hand.................................... 5,047 7,234
------- -------
12,424 20,670
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (INCLUDING
$1,000,0000 OF CONVERTIBLE PROMISSORY NOTE IN 1999)....... 14 (7,335) (10,651)
------- -------
NET CURRENT ASSETS.......................................... 5,089 10,019
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 6,039 11,418
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR..... 15 -- --
------- -------
NET ASSETS.................................................. 2,25 6,039 11,418
======= =======
CAPITAL AND RESERVES
Called up share capital..................................... 17,18 4,644 4,164
Share premium account....................................... 18 36,136 32,036
Profit and loss account..................................... 18 (34,793) (24,834)
Capital reserve............................................. 18 52 52
------- -------
EQUITY SHAREHOLDERS' FUNDS.................................. 18 6,039 11,418
======= =======
Approved By The Board on 8 May 2000 and signed on its behalf by:
R M Noling
DIRECTOR
The notes on pages 13 to 32 form part of these financial statements.
F-9
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--AT 31 DECEMBER 1999
1999 1998
NOTE $'000 $'000
-------- -------- --------
FIXED ASSETS
Tangible assets............................................. 9 405 587
Investments................................................. 10 325 325
------- -------
730 912
CURRENT ASSETS
Debtors of which $434,000 (1998: $464,000) falls due in more
than one year............................................. 12 1,093 1,460
Cash and cash equivalents held in escrow.................... 13 6,060 9,100
Cash at bank and in hand.................................... 1,512 4,845
------- -------
8,665 15,405
CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR (INCLUDING
$1,000,0000 OF CONVERTIBLE PROMISSORY NOTE IN 1999)....... 14 (2,352) (2,807)
------- -------
NET CURRENT ASSETS.......................................... 6,313 12,598
======= =======
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 7,043 13,510
CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR..... 15 -- --
PROVISIONS FOR LIABILITIES AND CHARGES...................... 16 (1,004) (2,092)
------- -------
NET ASSETS.................................................. 6,039 11,418
======= =======
CAPITAL AND RESERVES
Called up share capital..................................... 17,18 4,644 4,164
Share premium account....................................... 18 36,277 32,177
Profit and loss account..................................... 18 (34,882) (24,923)
------- -------
EQUITY SHAREHOLDERS' FUNDS.................................. 18 6,039 11,418
======= =======
Approved by the Board on 8 May 2000 and signed on its behalf by:
R M Noling
DIRECTOR
The notes on pages 13 to 32 form part of these financial statements.
F-10
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1999 1998 1998
NOTE $'000 $'000 $'000 $'000
-------- -------- -------- -------- --------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES........ A (11,665) (14,561)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received................................. 498 1,006
Interest element of finance lease rental payments
and promissory note............................. (26) (22)
------- -------
472 984
TAXATION.......................................... 510 76
CAPITAL EXPENDITURE
Purchase of tangible fixed assets................. (213) (937)
Proceeds from sale of tangible fixed assets....... 140 140
------- -------
(73) (797)
ACQUISITION AND DISPOSAL
Proceeds from sale of product line................ -- 15,862
Product line proceeds held in escrow.............. 3,040 (9,100)
------- -------
3,040 6,762
MANAGEMENT OF LIQUID RESOURCES
Proceeds from sale of short term investments...... -- 3,820
FINANCING
Proceeds from issue of share capital.............. D 4,580 473
Capital element of finance lease rental
payments........................................ D (51) (164)
Proceeds from issue of promissory note............ D 1,000 --
------- -------
5,529 309
------- -------
Decrease in net cash.............................. B (2,187) (3,407)
======= =======
The notes on pages 13 to 32 form part of these financial statements.
F-11
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999
A RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
1999 1998
$'000 $'000
-------- --------
Operating loss.............................................. (11,747) (13,511)
Depreciation of tangible fixed assets....................... 580 750
Other non-cash charges...................................... (58) --
Decrease in stocks.......................................... 78 103
Decrease in debtors......................................... 2,941 5,667
Decrease in creditors....................................... (3,459) (7,570)
------- -------
Net cash outflow from operating activities.................. (11,665) (14,561)
======= =======
B RECONCILIATION TO NET CASH
1999 1998
$'000 $'000
-------- --------
Decrease in cash in the period.............................. (2,187) (3,407)
Decrease in debt and lease financing........................ 51 164
Decrease in short term investments.......................... -- (3,820)
------ ------
Change in net cash from cash flows.......................... (2,136) (7,063)
New finance leases.......................................... -- --
------ ------
Movements in net cash in period............................. (2,136) (7,063)
Net cash at 1 January....................................... 7,183 14,246
------ ------
Net cash at 31 December..................................... 5,047 7,183
====== ======
C ANALYSIS OF NET FUNDS
1 JANUARY 31 DECEMBER
1999 CASH FLOW 1999
$'000 $'000 $'000
--------- --------- -----------
Cash at bank and in hand.................................... 7,234 (2,187) 5,047
Finance leases.............................................. (51) 51 --
----- ------ -----
Total....................................................... 7,183 (2,136) 5,047
===== ====== =====
F-12
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
D ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
SHARE CAPITAL FINANCE
CONVERTIBLE (INCLUDING LEASE
DEBT PREMIUM) OBLIGATIONS
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
1 January................................................. -- -- 36,200 35,727 51 215
Cash inflow/(outflow) from financing...................... 1,000 -- 4,580 473 (51) (164)
----- --- ------ ------ --- ----
31 December............................................... 1,000 -- 40,780 36,200 -- 51
===== === ====== ====== === ====
F-13
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999
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 Directors believes that with the $5.0 million line of credit, entered
into on March 20, 2000 (see note 22) and expected cash flows from operations,
the Company will have sufficient funds to meet the Company's operating and
capital requirements through the end of fiscal year 2000. Accordingly the
financial statements have been prepared on a going concern basis.
(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, licence royalties and amounts
chargeable to customers for services provided.
(4) REVENUE RECOGNITION
The Company's revenues are derived from the sale of development licenses,
packaged products licensing fees, royalties received from OEM's, customer funded
engineering activities, training and annual maintenance contracts.
Development licenses may be deferred or reduced if there are outstanding
deliverables to the customer or if the contract is outside the standard
contractual terms. 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 had limited control over the extent to which packaged products
sold to distributors and resellers were sold through to end users. Accordingly,
a portion of the Company's sales have from time to time resulted in increased
inventory at its distributors and resellers. The Company provided sales returns
allowances for distributor and reseller inventories and certain rights of return
and price protection on unsold merchandise held by those distributors and
resellers. These allowances were based on the Company's estimates of expected
sell-through by distributors and resellers of its products.
Minimum guaranteed royalty revenues not subject to significant future
obligations are generally recognised upon shipment of the 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.
Revenues from OEMs for customer-funded engineering are recognised on a
percentage of completion basis, which is computed using the input measure of
labor cost. Revenues from training are recognised
F-14
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENT (CONTINUED)
(4) REVENUE RECOGNITION(CONTINUED)
when the training is performed. Revenues from annual maintenance contracts are
recognised ratably over the term of the contract.
Payments from the sale of development licenses, royalties, customer funded
engineering activities, training 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:
Leasehold improvements........ shorter of estimated useful life or remaining lease term
Computers and other 33%
equipment...................
Fixtures and fittings......... 25-33%
(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
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999 (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 payments 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.
(13) DERIVATIVE FINANCIAL INSTRUMENTS
The provisions of FRS 13 "Derivatives and other Financial Instruments
Disclosures" have been adopted during the year. The only derivative financial
instruments used by the group are foreign exchange options, which are used to
manage foreign exchange fluctuations. Costs of these options are amortised
across the life of the option.
2 SEGMENTAL ANALYSIS
TURNOVER BY TURNOVER BY NET ASSETS/
DESTINATION ORIGIN OPERATING LOSSES (LIABILITIES)
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- -------- -------- --------
USA.................................. 5,801 10,670 6,203 11,960 (2,508) (4,168) (21,451) (12,353)
Rest of the World.................... 1,036 3,426 634 2,136 (9,239) (9,343) 27,490 23,771
----- ------ ----- ------ ------- ------- ------- -------
6,837 14,096 6,837 14,096 (11,747) (13,511) 6,039 11,418
===== ====== ===== ====== ======= ======= ======= =======
F-16
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
2 SEGMENTAL ANALYSIS (CONTINUED)
The directors consider that all of the group's activities fall within one
class of business. The results of the operation that was sold in 1998 (see
note 7) were not material to the group losses. Turnover of this business in 1998
included in the above was $987,000 with an estimated gross operating profit of
$400,000.
3 OPERATING LOSS
The operating loss is stated after charging:
1999 1998
NOTE $'000 $'000
-------- -------- --------
Research and development costs.............................. 5,009 4,621
Depreciation of owned assets................................ 574 700
Depreciation of assets held under finance lease and hire
purchase contracts........................................ 6 50
Hire of equipment under operating leases.................... 158 33
Rental of land and buildings................................ 605 758
Directors' emoluments....................................... 4 415 379
Auditors' remuneration--audit services...................... 257 214
===== =====
Fees paid by the company and its UK subsidiaries to the auditors in the
United Kingdom were $135,000 (1998: $148,000), including audit fees paid to the
parent company auditors of $57,000 (1998: $53,000).
4 DIRECTORS' EMOLUMENTS
1999 1998
$'000 $'000
-------- --------
Aggregate emoluments........................................ 414 378
Company contributions paid to money purchase pension
schemes................................................... 1 1
--- ---
415 379
=== ===
Directors' emoluments of the highest paid director:
1999 1998
$'000 $'000
-------- --------
Aggregate emoluments........................................ 324 293
Company contributions paid to money purchase pension
schemes................................................... 1 1
--- ---
325 294
=== ===
In addition the directors have exercised and been granted share options, the
details of which are set out in the directors' report.
F-17
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
5 EMPLOYEE INFORMATION
(1) The average number of persons employed by the group during the year,
including executive directors, was:
1999 1998
NUMBER NUMBER
-------- --------
Sales and marketing......................................... 16 26
Research and development.................................... 54 46
General and administrative.................................. 22 28
-- ---
92 100
== ===
(2) Group employment costs of all employees including executive directors:
1999 1998
NOTE $'000 $'000
-------- -------- --------
Wages and salaries.......................................... 6,832 7,205
Social security costs....................................... 642 704
Other pension costs......................................... 19 202 182
----- -----
7,676 8,091
===== =====
6 INTEREST PAYABLE AND SIMILAR CHARGES
1999 1998
$'000 $'000
-------- --------
On finance leases and hire purchase contracts............... 2 22
On promissory note.......................................... 13 --
On tax assessment........................................... 11 --
-- --
26 22
== ==
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 ("Citrix") 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, with the remainder 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, $0.9m in August 1999 and $1m in February 2000 (see note 22).
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. Citrix' indemnity claim is based on a declaratory relief
action that Citrix filed against GraphOn Corp. ("GraphOn") in November 1998 in
the United States District Court, Southern District of Florida. Citrix' action
against GraphOn seeks a
F-18
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
7 DISPOSAL OF PART OF THE GROUP'S OPERATIONS (CONTINUED)
declaratory judgement that Citrix does not infringe any GraphOn proprietary
rights and that Citrix has not misappropriated any trade secrets or breached an
agreement to which GraphOn is a party. Citrix filed the action in response to
and to resolve 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.
On October 4, 1999, the Company filed a suit against Citrix and GraphOn in
the Superior Court of the State of California, County of Santa Clara, relating
to the misappropriation assertions of GraphOn and Citrix's refusal to release
funds still remaining in escrow and breach of a Cooperation Agreement between
the parties. GraphOn answered the complaint, and claimed it had not made any
claims of misappropriation against Insignia or Citrix. The case is pending.
On March 15, 2000, GraphOn announced it had filed a suit against Citrix and
the Company in the Superior Court of the State of California, County of Santa
Clara, alleging trade secret misappropriation and breach of contract arising out
of the same facts and circumstances set forth in the Company's action against
GraphOn. GraphOn has not yet served its complaint. The Company believes
GraphOn's claims are without merit. The case is pending.
1999 1998
$'000 $'000
-------- --------
Proceeds from sale.......................................... -- 17,687
Costs incurred in sale...................................... -- (2,956)
-- ------
Profit on disposal.......................................... -- 14,731
== ======
Taxation impact of the profit on disposal was a charge of $5,110,000 in
1998.
8 TAXATION
(1) CURRENT TAXATION
Tax on (loss)/profit on ordinary activities comprises:
1999 1998
$'000 $'000
-------- --------
UK corporation tax @ 30% (1998: 31%)........................ 1,380 (1,754)
Overseas taxation........................................... (64) (28)
----- ------
1,316 (1,782)
===== ======
F-19
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
8 TAXATION (CONTINUED)
At 31 December 1999 the accumulated tax losses carried forward and available
for offset against future profits amounted to approximately $26,000,000 (1998:
$18,600,000) in the United States and $3,000,000 (1998: $1,800,000) 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:
1999 1998
$'000 $'000
-------- --------
Net operating loss carryforwards............................ 9,456 6,947
Tax credit carryforwards.................................... 1,120 1,082
Sales return reserve........................................ 13 384
Accrued expenses, provisions and other temporary
differences............................................... 261 657
------ -----
10,850 9,070
Amount recognised in these financial statements............. -- --
====== =====
9 TANGIBLE FIXED ASSETS
GROUP
COMPUTERS FIXTURES
LEASEHOLD AND OTHER AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
------------ --------- --------- --------
COST
1 January 1999..................................... 458 2,700 108 3,266
Additions.......................................... 10 188 16 214
Disposals.......................................... (8) (641) (3) (632)
--- ----- --- -----
31 December 1999................................... 460 2,267 121 2,848
=== ===== === =====
ACCUMULATED DEPRECIATION
1 January 1999..................................... 95 2,065 32 2,192
Charge for the year................................ 132 422 26 580
Disposals.......................................... (8) (539) (2) (549)
--- ----- --- -----
31 December 1999................................... 219 1,948 56 2,223
=== ===== === =====
NET BOOK AMOUNT
31 DECEMBER 1999................................... 241 319 65 625
=== ===== === =====
31 DECEMBER 1998................................... 363 635 76 1,074
=== ===== === =====
The net book amount of tangible fixed assets includes an amount of $Nil
(1998: $47,000) in respect of assets, principally computers and other equipment,
held under finance leases and hire purchase contracts.
F-20
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
9 TANGIBLE FIXED ASSETS (CONTINUED)
Disposals include retirements of fully depreciated assets.
COMPANY
COMPUTERS FIXTURES
LEASEHOLD AND OTHER AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
------------ --------- --------- --------
COST
1 January 1999..................................... 229 1,216 91 1,536
Additions.......................................... 10 174 13 197
Disposals.......................................... (8) (581) (3) (592)
--- ----- --- -----
31 December 1999................................... 231 809 101 1,141
=== ===== === =====
ACCUMULATED DEPRECIATION
1 January 1999..................................... 22 906 21 949
Charge for the year................................ 57 261 22 340
Disposals.......................................... (8) (543) (2) (553)
--- ----- --- -----
31 December 1999................................... 71 624 41 736
=== ===== === =====
NET BOOK AMOUNT
31 DECEMBER 1999................................... 160 185 60 405
=== ===== === =====
31 DECEMBER 1998................................... 207 310 70 587
=== ===== === =====
The net book amount of tangible fixed assets includes an amount of $Nil
(1998: $47,000) 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
GROUP
-------------------------- COMPANY
SHARES IN ----------------------
OTHER SUBSIDIARY OTHER
INVESTMENTS UNDERTAKINGS INVESTMENTS TOTAL
$'000 $'000 $'000 $'000
----------- ------------ ----------- --------
Net book amount at 1 January and 31
December 1999...................... 325 -- 325 325
=== ======== === ===
F-21
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
10 FIXED ASSET INVESTMENTS (CONTINUED)
The Company's subsidiary undertakings are:
PROPORTION OF NOMINAL
DESCRIPTION OF VALUE ISSUED SHARES AND
NAME OF COMPANY AND COUNTRY OF INCORPORATION AND OPERATION SHARES HELD VOTING RIGHTS HELD
- ---------------------------------------------------------- ----------------- -----------------------
Insignia Solutions International Limited................ L1 ordinary 100%
(England & Wales)
Jeode Limited........................................... L1 ordinary 100%
formerly Insignia Solutions Overseas Limited
(England & Wales)
Insignia Solutions Inc (USA)............................ Common stock, no
par value 100%
Insignia Solutions Foreign Sales Inc (Barbados)......... Common stock, $10
par value 100%
Emulation Technologies Inc (USA)........................ Common stock, no
par value 100%
Insignia Solutions France SARL (France)................. FF100 shares 100%
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 Jeode 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.
11 STOCKS
GROUP
1999 1998
$'000 $'000
-------- --------
Finished software products, manuals and related supplies.... 4 82
== ==
F-22
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
12 DEBTORS
1999 1998
------------------- -------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Amounts falling due within one year:
Trade debtors............................................... -- 116 -- 2,615
Prepayments................................................. 577 681 936 1,057
Other debtors............................................... 82 82 60 60
----- ----- ----- -----
659 879 996 3,732
----- ----- ----- -----
Amounts falling due after more than one year:
Lease deposit............................................... 434 434 443 443
Other debtors............................................... -- -- 21 79
----- ----- ----- -----
434 434 464 522
----- ----- ----- -----
Total debtors............................................... 1,093 1,313 1,460 4,254
===== ===== ===== =====
13 CASH AND CASH EQUIVALENTS HELD IN ESCROW
GROUP AND
COMPANY
-------------------
1999 1998
$'000 $'000
-------- --------
Proceeds from sale of technology held in escrow and accrued
interest.................................................. 6,060 9,100
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.
The release of these funds is subject to resolution of the legal actions set
out in Note 7 to those accounts.
F-23
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
1999 1998
------------------- -------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Trade creditors............................................ 241 707 353 1,608
Other creditors............................................ 81 114 67 171
Social security............................................ 160 160 167 167
Accruals................................................... 602 3,771 912 6,407
Taxation................................................... -- 188 1,006 994
Obligations under finance leases and hire purchase
contracts................................................ -- -- 51 51
Sales return provision..................................... -- 33 -- 991
Deferred revenue........................................... -- 1,349 -- 262
Amounts owing to subsidiary undertakings................... 255 -- 251 --
Convertible promissory note and accrued interest........... 1,013 1,013 -- --
----- ----- ----- ------
2,352 7,335 2,807 10,651
===== ===== ===== ======
On October 20, 1999, the Company signed a convertible promissory note in
favour of Quantum Corporation ("Quantum") for $1.0 million. The note is
convertible at Quantum's option to the Company's shares any time during the
lifetime of the note. The initial conversion price is $4.28 per share with
adjustment clauses for stock splits, reverse stock splits and certain offerings.
As a result of the private placement (see note 17) this conversion price was
adjusted to $4.23 per share on December 9, 1999. All unpaid principal with any
unpaid interest, accrued at 8% per annum, compounded quarterly, is due and
payable on December 31, 2000. The Company has the option to prepay the note in
whole or in part upon 30 days written notice to Quantum. Quantum Corporation has
subsequently assigned this note to Quantum Peripherals Europe.
15 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
There are no amounts due after more than one year.
16 PROVISION FOR LIABILITIES AND CHARGES
1999
COMPANY PROVISION FOR LOSSES:
INCURRED BY SUBSIDIARIES
$'000
-----------------------------
At 1 January 1999................................... 2,092
Amount released in year............................. (1,088)
------
At 31 December 1999................................. 1,004
======
F-24
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
17 CALLED UP SHARE CAPITAL
1999 1998
COMPANY GROUP COMPANY GROUP
NUMBER L'000 NUMBER L'000
---------- -------- ---------- --------
AUTHORISED
Equity interests (Ordinary shares of 20p).............. 30,000,000 6,000 30,000,000 6,000
Non-equity interests (Preferred shares of 20p each).... 3,000,000 600 3,000,000 600
---------- ----- ---------- -----
6,600 6,600
===== =====
NUMBER $'000 NUMBER $'000
---------- ----- ---------- -----
ALLOTTED AND FULLY PAID
Equity interests (Ordinary shares of 20p each)......... 14,039,602 4,644 12,590,316 4,164
========== ===== ========== =====
ALLOTMENTS OF SHARES
During the year 214,318 Ordinary shares of 20p each were issued for cash on
the exercise of share options providing total proceeds of $399,000.
The following table summarises the activity:
NUMBER OF SHARES EXERCISE PRICE RANGE
- ---------------- ---------------------
59,959 L0.40--L0.90
57,351 $0.656--$1.000
59,126 $1.001--$2.000
37,882 $2.001--$3.563
-------
214,318
=======
In addition 171,453 Ordinary shares of 20p each were issued for cash through
participation in the Company's Employee Share Purchase Plan. Of these 130,268
were issued at $0.7704 each and 41,185 were issued at $3.0813 each providing
total proceeds of $227,000.
PRIVATE PLACEMENT AND WARRANTS
In December 1999, the Company issued 1,063,515 Ordinary Shares in ADS form
at a price of $4.23 per share through a private placement. The Company received
$4.5 million less offering expenses totaling $0.4 million. Along with ADSs, the
Company also issued to the purchasing shareholders warrants that entitle the
purchasing shareholders to purchase a total of 319,054 ADSs at an exercise price
of $5.29 per ADS. As described below, the exercise price and the number of ADSs
issuable under the warrants are subject to various adjustments. In addition, the
Company may issue additional warrants that entitle the purchasing shareholders
to purchase ADSs at par value on designated adjustment dates in the future.
The purchasing shareholders received warrants to purchase three ADSs for
every 10 ADSs they purchased. The exercise price of the warrants was set at 125%
of the original per ADS purchase price or $5.29.
F-25
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
17 CALLED UP SHARE CAPITAL (CONTINUED)
The warrants contain anti-dilution provisions designed to protect the
purchasing shareholder if the Company sells or is deemed to sell any shares at
below market price during the term of the warrants, which ends on December 9,
2004.
In addition, under the terms of the warrants, if at least $4.75 million of
the $6.1 million in funds held in escrow by Citrix on December 9, 1999 is not
released to the Company by July 10, 2000, the exercise price of the warrants
will be adjusted to the market price on that date, if that market price is lower
than $5.29 per share. In February 2000, $1.0 million was released from escrow to
the Company--see note 22.
The additional warrants entitle the purchasing shareholders to purchase ADSs
at par value if the average of the closing bid price of the ADSs over ten days
before an adjustment date is less than $4.23. The adjustment dates are: the
effective date of a registration statement for the shares issued in this private
placement, 4 months after the effective date of the registration statement, and
8 months after the effective date of the registration statement.
If the Company completes an underwritten public offering with net proceeds
of at least $25 million and a per ADS price of at least $7.02 before 8 months
after the effective date of the registration statement, then the right to the
related adjustment date terminates. If the registration statement is not
effective by May 10, 2000, then the first adjustment date will be May 10, 2000
and there will be an adjustment date each month thereafter until the
registration statement is effective. In addition, if at least $4.75 million of
the funds held in escrow by Citrix is not released to the Company by March 10,
2000, the purchasing shareholders will have an adjustment date on that date and
each month after that, until the earlier of the date the funds are released from
the escrow or December 10, 2000. In February 2000, $1.0 million was released
from escrow to the Company.
On any adjustment date the purchasing shareholders will be entitled to
purchase additional ADSs at par value. The number of ADSs issuable to the
purchasing shareholders following an adjustment date is determined by a formula
specified in the agreement. The following table illustrates the number of ADSs
issuable upon exercise of the additional warrants and the percentage ownership
that each represents, assuming: the average bid price is 100%, 75%, 50%, 29.136%
and 25% of the $4.23 price determined when the warrants were issued; the number
of Ordinary shares outstanding is the number outstanding on February 9, 2000,
which was 14,063,206; there was no adjustment of the number of ADSs issuable
upon exercise of the warrants; and the exchange rate remains at $1.60 per UK
pound sterling.
ADSS ISSUED AS A PERCENTAGE OF
TOTAL ORDINARY SHARES IN ISSUE
PERCENT OF BID PRICE ADSS ISSUABLE AFTER ISSUANCE
- --------------------- ------------- ------------------------------
100% ($4.23) 0 0%
75% ($3.1725) 394,274 2.73%
50% ($2.1115) 1,253,111 8.18%
29.136% ($1.232) 3,493,852 19.90%
25% ($1.0575) 4,574,917 24.55%
OPTION SCHEMES
The Company has four share option schemes, which provide for the issuance of
share options to employees of the Company to purchase Ordinary shares of 20p par
value. A total of 4,672,071 (1998:
F-26
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
17 CALLED UP SHARE CAPITAL (CONTINUED)
3,922,071) Ordinary shares have been reserved for the issuance of options. At 31
December 1999 and 31 December 1998, approximately 909,853 and 453,011,
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 in the year under the share option
schemes:
UK SHARE US SHARE
OPTION OPTION
SCHEMES SCHEMES TOTAL
-------- --------- ---------
Options outstanding at 1 January 1999....................... 567,792 1,704,341 2,272,133
Granted in the year......................................... 171,000 425,000 596,000
Exercised in the year....................................... (69,859) (144,459) (214,318)
Lapsed in the year.......................................... (47,470) (255,372) (302,842)
------- --------- ---------
Options outstanding at 31 December 1999..................... 621,463 1,729,510 2,350,973
======= ========= =========
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 anniversary of the date of grant. Options are exercisable until the
tenth anniversary of the date of grant unless they lapse before that date.
1,000,517 and 755,031 options were exercisable at 31 December 1999 and 31
December 1998, respectively.
F-27
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
17 CALLED UP SHARE CAPITAL (CONTINUED)
Options outstanding at 31 December 1999 were as follows:
UK SHARE OPTION SCHEMES US SHARE OPTION SCHEMES
----------------------- ------------------------
PERIOD OF PERIOD OF
NUMBER EXERCISE NUMBER EXERCISE
--------- ---------- ---------- ----------
70p per share.................................. 21,416 1993-2001 -- --
86p per share.................................. 12,999 1994-2001 -- --
90p per share.................................. 271,418 1995-2004 3,000 1994-2004
430p per share................................. 250 1998-2005 -- --
$0.656 per share............................... 7,500 1999-2008 18,000 1999-2008
$0.688 per share............................... 20,000 1999-2008 244,440 1998-2008
$0.938 per share............................... 26,050 1998-2008 2,334 1999-2008
$1.000 per share............................... 2,000 1998-2008 68,699 1998-2008
$1.250 per share............................... 21,616 1998-2008 16,450 1998-2008
$1.562 per share............................... 1,400 1997-2007 11,200 1997-2007
$1.625 per share............................... 25,500 1999-2008 199,022 1998-2008
$1.750 per share............................... -- -- 20,000 1997-2007
$1.969 per share............................... -- -- 190,000 1997-2007
$2.000 per share............................... 10,500 1999-2009 79,634 1999-2009
$2.063 per share............................... -- -- 907 1998-2007
$2.125 per share............................... 1,000 1998-2007 -- 1998-2007
$2.313 per share............................... 45,314 1997-2007 71,220 1997-2007
$2.375 per share............................... -- 1998-2007 292,453 1997-2007
$2.438 per share............................... 1,500 1997-2007 116,932 1997-2007
$2.563 per share............................... 4,500 2000-2009 38,594 1999-2009
$4.094 per share............................... -- -- 6,000 2000-2009
$4.313 per share............................... -- -- 20,000 2000-2009
$4.375 per share............................... 34,500 2000-2009 3,500 1999-2009
$4.594 per share............................... -- -- 150,000 2000-2009
$4.688 per share............................... 5,500 1999-2009 18,000 2000-2009
$4.750 per share............................... 25,000 1999-2009 -- --
$5.000 per share............................... -- -- 5,000 1999-2009
$5.125 per share............................... -- -- 13,125 1996-2006
$5.750 per share............................... -- -- 90,000 1996-2006
$5.813 per share............................... 24,500 1999-2009 -- --
$6.000 per share............................... 32,500 2000-2009 -- --
$6.250 per share............................... 23,500 2000-2009 6,500 2000-2009
$6.375 per share............................... -- -- 50,500 1999-2009
$6.500 per share............................... 3,000 2000-2009 6,500 2000-2009
$7.188 per share............................... -- -- 3,750 1999-2009
$7.250 per share............................... -- -- 3,750 1999-2009
------- --------- --------- ---------
621,463 1,729,510
======= =========
F-28
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
17 CALLED UP SHARE CAPITAL (CONTINUED)
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. In May 1999, the number was further increased to 900,000.
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
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. 509,838
Ordinary shares have been issued under the Plan at 31 December 1999 (1998:
338,385).
18 RECONCILIATION OF MOVEMENT IN TOTAL SHAREHOLDERS' FUNDS
TOTAL
SHAREHOLDERS'
CALLED UP SHARE PROFIT AND FUNDS
SHARE PREMIUM LOSS CAPITAL -------------------
CAPITAL ACCOUNT ACCOUNT RESERVE 1999 1998
$'000 $'000 $'000 $'000 $'000 $'000
--------- -------- ---------- -------- -------- --------
GROUP
1 January...................................... 4,164 32,036 (24,834) 52 11,418 10,523
Shares issued in year.......................... 480 4,555 -- -- 5,035 523
Share issue expenses........................... -- (455) -- -- (455) (50)
(Loss)/profit for year......................... -- -- (9,959) -- (9,959) 422
31 December.................................... 4,644 36,136 (34,793) 52 6,039 11,418
COMPANY
1 January...................................... 4,164 32,177 (24,923) -- 11,418 10,523
Shares issued in year.......................... 480 4,555 -- -- 5,035 523
Share issue expenses........................... -- (455) -- -- (455) (50)
Loss for year.................................. -- -- (9,959) -- (9,959) (12,749)
----- ------ ------- -- ------ -------
31 December.................................... 4,644 36,277 (34,882) -- 6,039 11,418
===== ====== ======= == ====== =======
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 (1999: loss of
$9,959,000, 1998: loss of $12,749,000).
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 $202,000 in 1999 (1998: $182,000).
F-29
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
20 COMMITMENTS
(1) LEASE COMMITMENTS
The group has committed to the following annual charges under
non-cancellable operating leases:
PROPERTIES EQUIPMENT
------------------- -------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Expiring:
Within one year..................................... 21 -- 49 8
Within two to five years............................ 214 -- 42 151
After five years.................................... 361 585 -- --
--- --- -- ---
596 585 91 159
=== === == ===
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:
1999 1998
$'000 $'000
-------- --------
Within one year............................................. -- 55
Less: amount representing interest.......................... -- (4)
-- --
Obligations under finance leases (notes 14 and 15).......... -- 51
== ==
(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 1999, there were
no currency options outstanding (1998: $Nil outstanding).
22 SIGNIFICANT POST BALANCE SHEET EVENTS
In February 2000, Citrix agreed to release $1m from the funds held in
escrow. In relation to the indemnity claim received by the Company (see
note 7), on March 15, 2000, GraphOn Corp announced it had filed a suit against
Citrix and the Company in the Superior Court of the State of California, County
of Santa Clara, alleging trade secret misappropriation and breach of contract
arising out of the same facts and circumstances set forth in the Company's
action against GraphOn. GraphOn has not yet served its complaint. The Company
believes GraphOn's claims are without merit and the directors do not consider it
necessary to provide for any irrecoverability of amounts held in escrow. The
case is pending.
F-30
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1999
22 SIGNIFICANT POST BALANCE SHEET EVENTS (CONTINUED)
On March 20, 2000, the Company entered into a binding agreement with V S
Pino, a director, and three immediate family members whereby they would provide
the Company with a $5.0 million line of credit. The interest rate on amounts
drawn down is at prime plus 2% until June 30, 2000 and thereafter at prime plus
4% per annum simple interest, payable in cash at the repayment date. Full
repayment of any outstanding loan is due on March 20, 2001. A commitment fee of
$200,000 is payable in Ordinary shares in ADS form at the closing market bid
price on March 19, 2000. In addition a fee of 2% is payable on each advance or
termination, either in cash or ADSs.
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 $13,000
(1998--$52,000) and the balances due to him at the beginning and the end of the
year were $13,000 and Nil respectively.
A E Sisto, a director of the Company, held a consultancy contract with the
Company for six months beginning December 29, 1998, which causes him to be
treated as a related party for the amounts received under this contract. The
amount payable in the year was $15,000, which was paid during the year, along
with 10,000 share options that vested monthly over a six month period commencing
January 4, 1999.
Other transactions involving directors are disclosed in notes 4 and 17 to
the accounts and in the Directors' Report on pages 2 to 5.
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.
1999 1998
--------------------------------------- ---------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER OF PER SHARE NUMBER OF PER SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
$'000 $'000 $ $'000 $'000 $
-------- ---------------- --------- -------- ---------------- ---------
Profit/(loss) attributable to
shareholders.................... (9,959) 422
BASIC EPS
Earnings attributable to
shareholders.................... (9,959) 12,883 (0.77) 422 12,159 0.03
EFFECT OF DILUTIVE SECURITIES
Dilutive securities............... -- -- -- 297
DILUTED EPS
Adjusted earnings................. (9,959) 12,883 (0.77) 422 12,456 0.03
F-31
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
25 FINANCIAL RISKS
The group limits the effects of movements in foreign exchange rates by
partially matching cash holdings with liabilities in the same currency, assisted
by selective forward foreign currency option contracts arranged with the group's
bankers.
(1) CURRENCY ANALYSIS OF GROUP NET ASSETS
The Group's net assets by currency, at 31 December were:
1999 1998
--------------------------------- ---------------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
$'000 $'000 $'000 $'000 $'000 $'000
-------- ----------- -------- -------- ----------- --------
Sterling......................................... 2,221 629 1,592 4,647 1,727 2,920
US Dollars....................................... 11,135 6,692 4,443 17,418 8,922 8,496
Other............................................ 18 14 4 4 2 2
------ ----- ----- ------ ------ ------
13,374 7,335 6,039 22,069 10,651 11,418
====== ===== ===== ====== ====== ======
(2) SHORT TERM DEBTORS AND CREDITORS
Short term debtors and creditors are not discounted, securitised or pledged
in any way, and as permitted by FRS 13, they are excluded from the numerical
analysis in this note.
(3) ANALYSIS OF GROUP FINANCIAL ASSETS
Included in financial assets are short term bank deposits, escrow funds
detailed in note 13 and a lease deposit relating to the UK premises. The lease
deposit is repayable on expiration of the lease in 2013 or after certain profit
targets are met for three consecutive years.
SHORT TERM BANK TOTAL TOTAL
DEPOSITS FUNDS IN ESCROW LEASE DEPOSIT 1999 1998
$'000 $'000 $'000 $'000 $'000
--------------- --------------- ------------- -------- --------
Sterling............................ 826 -- 434 1,260 2,914
US Dollars.......................... 4,209 6,060 -- 10,269 13,861
Other............................... 12 -- -- 12 2
----- ----- --- ------ ------
5,047 6,060 434 11,541 16,777
===== ===== === ====== ======
(4) CURRENCY ANALYSIS OF GROUP FINANCIAL LIABILITIES
TOTAL TOTAL
PROMISSORY NOTE FINANCE LEASES 1999 1998
$'000 $'000 $'000 $'000
--------------- -------------- -------- --------
Sterling............................................ -- -- -- 51
US Dollars.......................................... 1,013 -- 1,013 --
----- --- ----- ---
1,013 -- 1,013 51
===== === ===== ===
F-32
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999 (CONTINUED)
25 FINANCIAL RISKS (CONTINUED)
(5) MATURITY PROFILE OF GROUP FINANCIAL LIABILITIES
TOTAL
PROMISSORY NOTE FINANCE LEASES 1999
$'000 $'000 $'000
--------------- -------------- --------
Falling due in:
Less than one year........................................ 1,013 -- 1,013
===== === =====
1998
Falling due in:
Less than one year........................................ -- 51 51
===== === =====
(5) INTEREST RATE RISK
The only loan outstanding is the promissory note which bears interest at a
fixed rate--see note 14.
F-33
INSIGNIA SOLUTIONS PLC
PROXY FOR ANNUAL GENERAL MEETING
JULY 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints as proxies, or proxy, Richard M. Noling and
Stephen M. Ambler, 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 Tuesday, July18, 2000, at 12:30 p.m., local time, and at
any adjournments or postponements thereof.
1. 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
2. TO ELECT AS A DIRECTOR DAVID G. FRODSHAM.
/ / FOR / / AGAINST / / ABSTAIN
3. TO RE-ELECT AS A DIRECTOR NICHOLAS, VISCOUNT BEARSTED.
/ / FOR / / AGAINST / / ABSTAIN
4. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S UK EMPLOYEE SHARE OPTION
SCHEME 1996.
/ / FOR / / AGAINST / / ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 INCENTIVE STOCK
OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
6. TO APPROVE A RESOLUTION TO AUTHORIZE THE ISSUANCE OF THE COMPANY'S
SECURITIES.
/ / FOR / / AGAINST / / ABSTAIN
7. 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.
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: , 2000
-----------------------------
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 12:30 p.m. on July 17, 2000, being 24 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]
INSIGNIA SOLUTIONS PLC
INSTRUCTIONS TO THE BANK OF NEW YORK, AS DEPOSITARY
(MUST BE RECEIVED PRIOR TO THE CLOSE OF BUSINESS ON JULY __, 2000)
The undersigned registered holder of American Depositary Receipts hereby
requests and instructs The Bank of New York, as Depositary, through its Agent,
to endeavor, in so far 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 May 24 2000, at the
Annual General Meeting of the Members of INSIGNIA SOLUTIONS plc to be held in
High Wycombe, England, on July 17, 2000 in respect of the resolutions specified
on the reverse.
NOTE: PLEASE DIRECT THE DEPOSITARY HOW IT IS TO VOTE BY PLACING AN X IN
THE APPROPRIATE BOX OPPOSITE THE RESOLUTIONS. THE DEPOSITARY SHALL NOT
VOTE THE AMOUNT OF SHARES OR OTHER DEPOSITED SECURITIES UNDERLYING A
RECEIPT EXCEPT IN ACCORDANCE WITH INSTRUCTIONS FROM THE HOLDER OF SUCH
RECEIPT.
INSIGNIA SOLUTIONS PLC
P.O. BOX 11230
NEW YORK, N.Y. 10203-0230
(Continued and to be dated and signed on the reverse side.)
1. 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
2. TO ELECT AS A DIRECTOR DAVID G. FRODSHAM
/ / FOR / / AGAINST / / ABSTAIN
3. TO RE-ELECT AS A DIRECTOR NICHOLAS, VISCOUNT BEARSTED.
/ / FOR / / AGAINST / / ABSTAIN
4. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S UK EMPLOYEE SHARE OPTION
SCHEME 1996.
/ / FOR / / AGAINST / / ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 EMPLOYEE INCENTIVE
STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
6. TO APPROVE A RESOLUTION TO AUTHORIZE THE ISSUANCE OF THE COMPANY'S
SECURITIES.
/ / FOR / / AGAINST / / ABSTAIN
7. 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: , 2000
-----------------------------
---------------------------------------------
(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]