SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by the Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / 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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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth
the amount on which the filing fee is calculated and state
how it was determined):
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[INSIGNIA LOGO]
April 17, 2001
To Our Shareholders:
You are cordially invited to attend the 2001 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 Friday, May 11, 2001, 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
Wednesday, May 9, 2001, being 48 hours prior to the time fixed for the Annual
General Meeting. Returning the proxy card does not deprive you of your right to
attend the meeting and to vote your shares in person.
The transfer books of Insignia Solutions plc will not be closed prior to the
meeting but, pursuant to appropriate action by the Board of Directors, the
record date for determination of the shareholders entitled to notice of and vote
at the meeting is March 19, 2001.
The Notice, Proxy Statement and Proxy Card enclosed herewith are sent to you
by order of the Board of Directors.
Sincerely,
/s/ RICHARD M. NOLING
Richard M. Noling
President and Chief Executive Officer
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" or the "Company") will be held at Insignia House, The Mercury
Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH,
United Kingdom, on Friday, May 11, 2001 at 12:30 p.m., local time, to transact
the following business:
1. To receive the U.K. statutory accounts of the Company for the year ended
December 31, 2000, together with the Directors' and Auditors' reports thereon.
The Shareholders of the Company need not vote on this transaction.
2. To reappoint PricewaterhouseCoopers as the U.K. statutory auditors and
independent accountants of the Company, to hold office until the conclusion of
the Company's next annual general meeting at which accounts are laid before the
Company, and to authorize the Board of Directors of the Company to determine
their remuneration.
3. To elect as a director John C. Fogelin, who was appointed as a director
of Insignia during the year since the last annual general meeting.
4. To re-elect as a director Richard M. Noling.
5. To re-elect as a director Vincent S. Pino.
6. To amend the Company's U.K. Employee Share Option Scheme 1996 to
increase the number of ordinary shares available for issuance under the plan by
1,000,000 to a total of 6,072,071 shares. This plan shares the same shares
reserved for issuance in the stock option pool as the Company's 1995 Incentive
Stock Option Plan for U.S. Employees, which is the Company's stock option plan
for employees in America. The two plans will need to be separately amended to
increase the combined option pool by a total of 1,000,000 ordinary shares.
7. To amend the Company's 1995 Incentive Stock Option Plan for U.S.
Employees to increase the number of ordinary shares available for issuance under
the plan by 1,000,000 to a total of 6,072,071 shares. This plan shares the same
shares reserved for issuance in the stock option pool as the Company's U.K.
Employee Share Option Scheme 1996, which is the Company's stock option plan for
employees in England. The two plans will need to be separately amended to
increase the combined option pool by a total of 1,000,000 ordinary shares.
8. To increase the Company's authorized share capital by creating an
additional 20,000,000 ordinary shares of 20p nominal value.
9. To authorize the Board of Directors of the Company to issue up to
26,224,249 ordinary shares (or other securities derived from such ordinary
shares, such as options or warrants) of the Company without first gaining
shareholder approval, with such authority lasting a period of five years. Under
the laws of England and Wales, the Company is prohibited from issuing securities
without first obtaining the authority of the shareholders at a general meeting.
The Board currently is authorized to issue up to 14,654,566 ordinary shares (or
other securities derived from such ordinary shares, such as options or warrants)
of the Company without first gaining shareholder approval, with such authority
expiring on May 26, 2004. The authority sought by this Proposal 9 will supercede
the Board's current authority now in place.
10. In conjunction with the authority proposed to be given in Proposal 9, to
authorize the Board of Directors of the Company to issue up to 26,224,249
ordinary shares (or other securities derived from such ordinary shares, such as
options or warrants) without giving shareholders the first opportunity to
purchase such shares or securities. This authority is to last a period of five
years. Under the laws of England and Wales, the Company is generally prohibited
from issuing new securities without giving shareholders the first opportunity to
purchase such securities. The Board currently is authorized to issue up to
14,654,566 ordinary shares (or other securities derived from such ordinary
shares, such as options or warrants) of the
Company without giving shareholders the first opportunity to purchase, with such
authority expiring on May 26, 2004. The authority sought by this Proposal 10
will supercede the Board's current authority now in place.
The following Special Resolution will be considered at the meeting in
relation to Proposal 10, which will require at least 75% of the shareholder
votes cast at the meeting to be passed: "THAT, conditionally upon the passing of
the Resolution numbered 9 above, in accordance with Section 95(1) of the Act,
the directors be and are hereby given power, for the period commencing on and
with effect from the date of adoption of this Resolution and (unless previously
revoked or renewed) expiring on April 25, 2006, to allot equity securities (as
defined in Section 94(2) of the Act) pursuant to the authority conferred by the
Resolution numbered 9 above as if Section 89(1) of the Act did not apply to such
allotment; and THAT the power conferred on the directors by a special resolution
passed on May 27, 1999 to allot shares up to an aggregate nominal amount of
L2,930,913.20 as if Section 89 of the Act did not apply to such allotment (to
expire on May 26, 2004) shall cease to have effect upon and with effect from the
passing of this resolution."
11. To transact any other ordinary business of Insignia.
BY ORDER OF THE BOARD
/s/ RICHARD M. NOLING
Richard M. Noling
President and Chief Executive Officer
Dated April 17, 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 WEDNESDAY, MAY 9, 2001,
BEING 48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
NOTES
1. A member entitled to attend and vote at the meeting is entitled to appoint
one or more proxies to attend and, on a poll, vote in his stead. A proxy
need not be a shareholder of Insignia. Completion and return of a form of
proxy will not prevent a member from attending and voting at the meeting.
2. 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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APRIL 17, 2001
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 Friday, May 11, 2001 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 "FOR" the proposal.
At March 19, 2001, Insignia had 19,114,901 ordinary shares outstanding and
entitled to vote, of which approximately 95.4% were held in the form of ADSs.
Each ADS represents one ordinary share. A minimum of two persons holding
together not less than one-third of the ordinary shares in issue will constitute
a quorum for the transaction of business at the meeting. This proxy statement
and the accompanying form of Proxy were first mailed to shareholders on or about
April 18, 2001. 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, 2000 prepared in compliance with the U.K. Companies Act 1985 (the
"Act"). In addition, the 2000 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 9 in the notice are ordinary resolutions. An ordinary
resolution requires the affirmative vote of a majority of the votes cast at the
meeting. Proposal 10 in the notice is a special resolution. A special resolution
requires the affirmative vote of at least 75% of the votes cast at the meeting.
Insignia will tabulate all votes and will separately tabulate, for each
proposal, affirmative and negative votes, abstentions and broker non-votes.
Abstentions and broker non-votes will not be counted in determining the votes. A
form of proxy is enclosed which, to be effective, must be signed, dated and
deposited at the Registered Office of Insignia (Insignia House, The Mercury
Centre, Wycombe Lane, Wooburn Green, High Wycombe, Buckinghamshire, HP10 0HH)
not less than 48 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 Friday, May 4, 2001. The close of business on March 19, 2001 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, 2000, 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, 2001. 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
and independent accountants to perform the audit of Insignia's financial
statements for 2001. The shareholders are being asked to reappoint
PricewaterhouseCoopers to hold office until the conclusion of the Company's next
annual general meeting at which accounts are laid before the Company and to
authorize the Board of Directors of the Company to determine their remuneration.
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.
If Proposal 2 is passed, by a majority of the shareholder votes cast at the
meeting, the following ordinary resolution will be approved: "THAT
PricewaterhouseCoopers be reappointed as U.K. 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."
2
AUDIT COMMITTEE REPORT
The audit committee of the Company's Board of Directors (the "Audit
Committee") consists of three (3) non-employee directors, Nicholas, Viscount
Bearsted, Vincent S. Pino and David Frodsham, each of whom has been determined
to be independent as defined by 4200(a)(14) of the National Association of
Securities Dealers' NASDAQ Marketplace Rules.(1)
The Audit Committee operates under a written charter adopted by the Board,
attached to this proxy Statement as Appendix A. Among its other functions, the
Audit Committee recommends to the Board, subject to shareholder ratification,
the selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
over see these processes.
In this context the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61.
The Company's independent accountants also provided to the Audit Committee
the written disclosure required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees." The Committee discussed with
the independent accountants that firm's independence and considered whether the
non-audit services provided by the independent accountants are compatible with
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(1) Rule 4200(a)(14) of the National Association of Securities Dealers' NASDAQ
Marketplace Rules defines an "independent director" as follows:
"Independent director" means a person other than an officer or employee of
the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the company's board of directors, would interfere with
the exercise of independent judgement in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
(A) a director who is employed by the corporation or any of its
affiliates for the current year or any of the past three years;
(B) a director who accepts any compensation from the corporation or any
of its affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
(C) a director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the
corporation or any of its affiliates as an executive officer. Immediate
family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
(D) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for- profit business organization to which the
corporation made, or from which the corporation received, payments (other
than those arising solely from investments in the corporation's securities)
that exceed 5% of the corporation's or business organization's consolidated
gross revenues for that year, or $200,000, whichever is more, in any of the
past three years;
(E) a director who is employed as an executive of another entity where
any of the company's executives serve on that entity's compensation
committee.
3
maintaining its independence. The Audit Committee concluded after due
consideration that the non-audit services provided by the independent
accountants were compatible with maintaining independence.
Based on the Audit Committee's discussion with management and the
independent accountants, and the Audit Committee's review of the representation
of management and the report of the independent accountants to the Audit
committee, the Audit Committee recommends that the Board include the audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
Submitted by the Audit Committee of the Company's Board of Directors,
Nicholas, Viscount Bearsted, Vincent S. Pino and David Frodsham.
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL ACCOUNTANT
For the fiscal year ended December 31, 2000, PricewaterhouseCoopers, our
independent auditor and principal accountant, billed the approximate fees set
forth below.
Audit Fees: $213,050
Financial Information Systems
Design and Implementation Fees: $ 0
All Other Fees: $172,760
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 2
PROPOSALS 3, 4 AND 5: ELECTION AND RE-ELECTION OF DIRECTORS
At the meeting, shareholders will consider the election of John C. Fogelin,
who was appointed as a director of Insignia during the year since the last
annual general meeting. Shareholders will also consider the re-election of
Richard M. Noling and Vincent S. Pino, both of whom retire 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, Nicholas,
Viscount Bearsted and David G. Frodsham will be considered for 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.
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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
John C. Fogelin................... 35 Vice President and Co-General 2001
Manager, Wind River Systems,
Platform Business Unit
Richard M. Noling................. 52 President and Chief Executive 1997
Officer of Insignia
Vincent S. Pino(1)(2)............. 52 President of Alliance Imaging, 1998
Inc.
DIRECTORS
Nicholas, Viscount Bearsted(2).... 51 Chairman of the Board of Insignia 1988
David G. Frodsham(2).............. 44 Chief Executive Officer of Argo 1999
Interactive Group
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
John C. Fogelin was appointed a director of Insignia in January, 2001. He
currently serves as Vice President and General Manager of Wind River Systems
Platforms Business Unit. Mr. Fogelin oversees all aspects of research and
development for the Wind River Tornado tools and VXWorks operating system.
Previously, Mr. Fogelin designed hardware for embedded applications used in
devices ranging from biomedical equipment to arcade games.
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 Operations Officer between February
and March 1997. From August 1995 to February 1996, Mr. Noling was Vice President
and Chief Financial Officer at Fast Multimedia, Inc., a German-based computer
software and hardware developer. From November 1994 to August 1995, he was Chief
Financial Officer for DocuMagix Inc., a personal paper management software
company. From June 1991 to October 1994, Mr. Noling served as Senior Vice
President and Chief Financial Officer for Gupta Corporation. He received a
Bachelor of Arts degree in 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. Alliance
Imaging is a provider of diagnostic imaging and therapeutic services. 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.
5
Nicholas, Viscount Bearsted has served as Chairman of the Board of Directors
of Insignia since March 1997 and as a director of Insignia since January 1988.
He also served as Chairman of the Board from January 1988 to March 1995, and he
was Insignia's Chief Executive Officer from September 1988 until
September 1993. From May 1999 to July 2000 he also served as Chief Executive
Officer of Airpad Ltd., a company based in the United Kingdom that developed and
manufactured 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 Insignia 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.
BOARD MEETINGS AND COMMITTEES
The Board met nine (9) times, including telephone conference meetings,
during 2000. 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, Mr. Frodsham and Mr. Pino are the current
members of the Audit Committee, which met four (4) times during 2000.
Mr. Frodsham was elected to the Committee in October 1999 and Mr. Pino was
elected to the Committee in July 2000. 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 were the members of the Compensation Committee during
2000, which met once. The Compensation Committee recommends compensation for
officers and employees of Insignia, grants options under Insignia's employee
option plans (other than option grants to non-officers pursuant to guidelines
established by the Board, which may be made by Nicholas, Viscount Bearsted,
Insignia's Chairman, and Richard M. Noling, Insignia's President and Chief
Executive Officer) and reviews and recommends adoption of and amendments to
share option and employee benefit plans.
DIRECTOR COMPENSATION
Insignia pays each outside director $1,000 for every regular meeting
attended, $2,500 per quarter of service on the Board, $500 per quarter for
service on each committee, plus $500 for each committee meeting attended, and
reimburses outside directors for reasonable expenses in attending meetings of
the Board. The Chairman of the Board receives an additional $1,500 per quarter.
In addition, each new
6
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. During 2000, he was not requested to provide any advice
or assistance to the Board. 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.
For information concerning the compensation of Mr. Noling, see "Executive
Compensation."
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 3, 4 AND 5
7
PROPOSALS 6 AND 7: AMENDMENT OF THE U.K. EMPLOYEE SHARE OPTION SCHEME 1996
AND 1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
Shareholders are being asked to approve amendments to the 1995 Stock Option
Plan for U.S. Employees (the "1995 Plan") and the U.K. Employee Share Option
Scheme 1996 (the "1996 Scheme") to increase the number of ordinary shares
reserved for issuance thereunder by 1,000,000 shares, from 5,072,071 shares to
6,072,071 shares. The 1995 Plan is the Company's stock option plan for employees
in the United States and the 1996 Scheme is the Company's stock option plan for
employees in England. The 1996 Scheme is a subplan of the 1995 Plan, created as
a result of the differences in law between the two jurisdictions. Shares in the
stock option pool cover both the 1995 Plan and the 1996 Scheme. Thus, although
shareholders of the Company are asked to approve amendments to two separate
plans, if both amendments are passed, there will only be a single increase of
1,000,000 ordinary shares to the collective stock option pool.
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, 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 and an increase in the number of shares
reserved for issuance under the share option plans to 5,072,071 was adopted by
the Board in April, 2000 and approved by the shareholders in July 2000. 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, 2000, approximately 111 persons were
eligible to receive options under the Option Plans. At that date, under the
Option Plans, 1,602,323 shares had been issued upon exercise of options,
2,827,817 shares were subject to outstanding options and 641,931 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
February 28, 2001 was $4.59375 per share.
As of March 15, 2001, 4,962,828 shares have been drawn from the stock option
pool from the 1995 Plan and 1996 Scheme. If Proposal 6 is passed, by a majority
vote of the shareholder votes cast at the meeting, the 1996 Scheme will be
amended so that the reference to "will exceed 5,072,071 Ordinary Shares" in
Rule 4.2 of the 1996 Scheme will be substituted by a reference to "will exceed
6,072,071 Ordinary Shares." If Proposal 7 is passed, by a majority vote of the
shareholder votes cast at the meeting, the 1995 Plan will be amended so that the
reference to "shall be five million seventy-two thousand and seventy-one
(5,072,071) Shares" in Section 2.1 will be substituted by a reference to "shall
be six million seventy-two thousand and seventy-one (6,072,071) Shares."
The Board approved the proposed amendments in February 2001, to be effective
upon shareholder approval. Below is a summary of the principal provisions of the
Option Plans, assuming shareholder approval of the amendment. The summary is not
necessarily complete, and reference is made to the full text of the Option
Plans.
8
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.
The number of shares allocated under both the 1995 Plan and the 1996 Scheme
to the Company's Chief Executive Officer, the Company's next four most highly
compensated officers and other executive officers and employees is summarized
below:
PLAN BENEFITS
1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
(NOVEMBER 1995-MARCH 15, 2001)
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
(APRIL 1996-MARCH 15, 2001)
NAME AND POSITION NO. OF UNITS
----------------- ------------
Richard M. Noling,.......................................... 640,000
President and Chief Executive Officer
Stephen M. Ambler,.......................................... 133,750
Former Chief Financial Officer, Secretary and Senior
Vice President
George Buchan,.............................................. 272,500
Senior Vice President of Engineering and UK General
Manager
Stephen H. Cobb,............................................ 90,000
Former Senior Vice President of Sales
Jonathan D. Hoskin,......................................... 152,750
Chief Technology Officer and Senior Vice President
Mark E. McMillan,........................................... 325,000
Chief Operating Officer
Ronald C. Workman,.......................................... 175,000
Senior Vice President of Marketing
Paul Livesay,............................................... 140,000
Senior Vice President
Executive Group............................................. 1,929,000
Non-Executive Director Group................................ 322,500
Non-Executive Officer Employee Group/All Other Current and
Former Employees.......................................... 2,711,328
9
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, 2000, approximately 81 persons
were eligible to receive options under the 1996 Scheme, 33,298 shares had been
issued upon exercise of options and options to purchase 328,778 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 Vincent S. Pino, who is an "non-employee director" as that term is defined in
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934, as amended
(the "Exchange Act") and an "outside director" as that term is defined pursuant
to Section 162(m) of the Internal Revenue Code (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
10
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.
11
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, 2000, options to
purchase an aggregate of 4,398,800 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, 540,000 shares; Stephen M. Ambler, former
Chief Financial Officer, Company Secretary and Senior Vice President, 133,750
shares; George Buchan, Senior Vice President of Engineering and U.K. General
Manager, 115,000 shares; Ronald C. Workman, Senior Vice President of Marketing,
135,000 shares; Jonathan Hoskin, Chief Technology Officer, 92,250 shares; Mark
McMillan, Chief Operating Officer, 325,000 shares; Stephen Cobb, former Senior
Vice President of Worldwide Sales, 90,000 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 (7
persons) had been granted options to purchase a total of 1,341,000 shares under
the scheme and the current directors or nominees for election as a director who
are not executive officers as a group (5 persons) had been granted options to
purchase a total of 162,500 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.
The number of shares allocated under both the 1995 Plan and the 1996 Scheme
to the Company's Chief Executive Officer, the Company's next four most highly
compensated officers and other executive officers and employees is summarized
below:
PLAN BENEFITS
1995 INCENTIVE STOCK OPTION PLAN FOR U.S. EMPLOYEES
(NOVEMBER 1995-MARCH 15, 2001)
U.K. EMPLOYEE SHARE OPTION SCHEME 1996
(APRIL 1996-MARCH 15, 2001)
NAME AND POSITION NO. OF UNITS
----------------- ------------
Richard M. Noling,.......................................... 640,000
President and Chief Executive Officer
Stephen M. Ambler,.......................................... 133,750
Former Chief Financial Officer, Secretary and Senior
Vice President
George Buchan,.............................................. 272,500
Senior Vice President of Engineering and UK General
Manager
Stephen H. Cobb,............................................ 90,000
Former Senior Vice President of Sales
Jonathan D. Hoskin,......................................... 152,750
Chief Technology Officer and Senior Vice President
Mark E. McMillan,........................................... 325,000
Chief Operating Officer
Ronald C. Workman,.......................................... 175,000
Senior Vice President of Marketing
12
NAME AND POSITION NO. OF UNITS
----------------- ------------
Paul Livesay,............................................... 140,000
Senior Vice President
Executive Group............................................. 1,929,000
Non-Executive Director Group................................ 322,500
Non-Executive Officer Employee Group/All Other Current and
Former Employees.......................................... 2,711,328
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, 2000, approximately 111 persons were eligible to receive options
under the 1995 Plan, 293,535 shares had been issued upon exercise of options and
2,223,539 shares were subject to outstanding options.
ADMINISTRATION
The 1995 Plan is administered by the Compensation Committee. Subject to the
terms of the 1995 Plan, the Compensation Committee determines the persons who
are to receive options, the number of shares subject to each such option and the
terms and conditions of each such option. The Compensation Committee has the
authority to construe and interpret any of the provisions of the 1995 Plan or
any options granted thereunder. Nicholas, Viscount Bearsted, Insignia's Chairman
and Mr. Noling, Insignia's President and Chief Executive Officer, constitute a
committee that is authorized to make grants of options to non-officer employees
pursuant to guidelines established by the Board.
SHARE OPTIONS
Options granted under the 1995 Plan may be incentive stock options ("ISOs")
within the meaning of Section 422 of the Code or nonqualified stock options
("NQSOs"). Only employees of Insignia, or of a parent or subsidiary of Insignia,
may be granted ISOs. Options under the 1995 Plan have a maximum term of
10 years after the date of grant, except that the term of an option granted to a
person holding more than 10% of the total combined voting power of all classes
of stock of Insignia, or any parent or subsidiary of Insignia, is limited to
five years.
The exercise price of an option granted under the 1995 Plan may not be less
than the fair market value (as defined in the 1995 Plan) of an ordinary share on
the date of grant, except that the exercise price of an ISO granted to a person
holding more than 10% of the total combined voting power of all classes of stock
of Insignia, or any parent or subsidiary of Insignia, must be not less than 110%
of such fair market value.
The exercise price of options granted under the 1995 Plan, plus any
applicable income tax withholding, may be paid: (1) in cash (by check); or where
permitted by law and approved by the Committee, in its sole discretion, at the
time of grant (2) by waiver of compensation due to or accrued by the optionee
for
13
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 Compensation 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.
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
14
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 6 AND 7
PROPOSAL 8: INCREASE IN AUTHORIZED SHARE CAPITAL
The Board of Directors of the Company has approved and recommends that the
shareholders also approve Resolution 8, an ordinary resolution to increase the
authorized share capital to L10,600,000 by the creation of an additional
20,000,000 ordinary shares of 20p nominal value. Each new ordinary share will
rank pari passu in all respects with the existing ordinary shares in the capital
of the Company. The Board believes that this increase of the authorized share
capital will provide the Company with the flexibility to act in the future with
respect to financing programs, acquisitions and other corporate needs.
AUTHORIZED SHARE CAPITAL
On April 9, 2001, the Company had an authorized share capital of L6,600,000
divided into 30,000,000 ordinary shares of 20p each and 3,000,000 Preferred
Shares of 20p each. Also on this date, a total of 19,114,901 ordinary shares
were issued and outstanding. The Company must retain sufficient authorized and
unissued share capital for issuances under the Company's 1995 Stock Option Plan
for U.S. Employees, the Company's U.K. Employee Share Option Scheme 1996 and the
Company's Employee Share Purchase Plan 1995, up to a combined total of 5,072,071
(6,072,071 if resolutions numbered 6 and 7 are passed) for the first two Plans
and 900,000 ordinary shares for the last. In addition, the Company must retain
sufficient
15
authorized and unissued share capital for issuances due to the exercise of
warrants issued by the Company in four private placements, discussed below.
Assuming Proposals 6 and 7 are passed (authorizing an increase in the number
of ordinary shares reserved for issuance under the Option Plans by 1,000,000
shares), the MAXIMUM number of authorized but not yet committed share capital
available to the Company for future issuance is 1,039,194 ordinary shares, as of
April 9, 2001. The calculation of this number is set forth below:
Total Authorized Share Capital.............................. 30,000,000
Less Currently Outstanding Ordinary Shares................ (19,114,901)
Less Shares Retained for Option Plans..................... (6,072,071)
Less Shares Retained for Employee Stock Purchase Plan..... (900,000)
Less Shares Retained for Private Placement Warrants....... (2,873,834)
-----------
Total Authorized But Not Yet Committed Share Capital........ 1,039,104
ADDITIONAL COMMITTED SHARES DUE TO ANTI-DILUTION PROTECTION
The above calculation represents the maximum number if authorized but not
yet committed shares of the Company because it does not yet take into account an
additional amount of shares that must be retained by the Company for
anti-dilution protections contained in warrants issued in its four private
placements. The investors in the four private placements have anti-dilution
protections, which means that they are entitled to purchase an additional amount
of ordinary shares (in the form of ADSs) if the Company issues ordinary shares
at a price below market price. Specifically, the Company will trigger the
anti-dilution protections if it issues securities in a transaction in which the
average price per share (including all shares issueable by the exercise of
warrants) is less than the average closing price of the Company's ADSs, as
quoted on the Nasdaq National Market System, for the ten days preceding the day
of the transaction.
The number of ordinary shares the Company must reserve for the anti-dilution
protections is not a fixed amount, but will fluctuate depending the timing of
the exercise of the warrants and the average price of the Company's ADSs over
the ten days prior to the date of exercise. If triggered, the anti-dilution
protections increase the number of shares which the warrants may purchase. The
amount of the adjustment is based on a formula such that the lower the price of
the Company's ADSs, the greater the potential increase in the number of shares
issueable to the warrants due to their anti-dilution protections. The exact
number of authorized but not yet committed shares of the Company is in constant
change because the number of shares the Company must reserve for the
anti-dilution protections fluctuates day to day. However, the following chart
demonstrates the range in the number of the Company's authorized but not yet
committed shares, assuming that all warrants from the four private placements
are exercised at the same time and that the average ten day price of the
Company's ADSs is (a) $2.79 (which is the closing price of the Company's ADSs on
April 9, 2001), (b) $2.09 (which represents a 25% decline in value from
16
$2.79) and (c) $1.40 (which represents a 50% decline in value) and (d) $0.70
(which represents a 75% decline in value):
NO ANTI-
DILUTION $2.79 $2.09 $1.40 $0.70
----------- ----------- ----------- ----------- -----------
Total Authorized Share
Capital...................... 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
Less Currently Outstanding
Ordinary Shares............ (19,114,901) (19,114,901) (19,114,901) (19,114,901) (19,114,901)
Less Shares Retained for
Option Plans............... (6,072,071) (6,072,071) (6,072,071) (6,072,071) (6,072,071)
Less Shares Retained for
Employee Stock Purchase
Plan....................... (900,000) (900,000) (900,000) (900,000) (900,000)
Less Shares Retained for
Warrants................... (2,873,834) (2,891,704) (2,902,310) (2,913,088) (2,924,045)
----------- ----------- ----------- ----------- -----------
Total Authorized But Not Yet
Committed Share Capital...... 1,039,194 1,021,324 1,010,718 999,940 988,983
The following chart summarizes the amounts of anti-dilution adjustments at
each of the prices:
TEN DAY AVERAGE CLOSING PRICE $2.79 $2.09 $1.40 $0.70
----------------------------- --------- --------- -------- --------
Total Anti-Dilution Adjustment............... 17,870 28,476 39,254 50,211
Authorized Shares Available.................. 1,021,324 1,010,718 999,940 988,983
THERE ARE TWO WAYS THE ANTI-DILUTION PROTECTIONS ARE TRIGGERED.
The anti-dilution provisions can be triggered (1) if the Company sells its
securities in a transaction, such as a private placement financing, for a price
that is lower than the ten day average price of the Company's shares prior to
the transaction, or (2) if the warrants issued in the four private placements
are exercised at a price less than the ten day average price of the Company's
shares at the time of exercise.
Between December 1999 and February 2001, the Company engaged in four private
placement transactions, two of which were transactions which triggered
anti-dilution protections. On December 9, 1999, the Company issued 827,179 ADSs,
warrants to purchase 248,154 ADSs and reset warrants (which have expired without
becoming exercisable) to Castle Creek Technology Partners LLC for an aggregate
consideration of $3.5 million (the "Castle Creek Placement"). Also on
December 9, 1999, the Company issued 236,336 ADSs, warrants to purchase 70,900
ADSs and reset warrants (which have expired without becoming exercisable) to
Vincent S. and Rosemary Pino, Richard N. and Barbara Zehner, Robert Waley-Cohen
and Avalon Panama S.A. for an aggregate consideration of $1 million (the "Four
Investor Placement"). The Company engaged in two additional placements with
Jefferies & Company, Inc. acting as placement agent. On November 24, 2000, the
Company issued 3,600,000 ADSs and warrants to purchase 1,800,000 ADSs to various
investors for an aggregate consideration of $18 million (the "First Jefferies
Placement"). On February 12, 2001, the Company issued 940,000 ADSs and warrants
to purchase 470,000 ADSs for an aggregate consideration of $4.7 million (the
"Second Jefferies Placement").
In the First Jefferies Placement and the Second Jefferies Placement, the
Company sold its securities for a price that was below the ten day average price
of the Company's shares prior to the transactions and therefore triggered
anti-dilution protections. The First Jefferies Placement and the Second
Jefferies Placement each triggered the anti-dilution protections in both the
Castle Creek Placement and the Four Investor Placement. Further, the Second
Jefferies Placement triggered the anti-dilution protection in the First
Jefferies Placement. The anti-dilution protection in the Second Jefferies
Placement has not been triggered as of the date of this Proxy Statement.
However, if the Company issues securities in the future at a price below the ten
day average price of the Company's shares prior to the transaction, the
anti-dilution
17
protections in all four private placements can be triggered, as long as the
warrants issued in those private placements are still outstanding and have not
expired or been exercised. The warrants issued in the Castle Creek Placement and
the Four Investor Placement expire five years from the date of their issuance,
and the warrants issued in the First Jefferies Placement and Second Jefferies
Placement expire three years from the dates of their issuance.
Originally, the investors to the Castle Creek Placement and the Four
Investor Placement held warrants to purchase a total of 319,054 shares of the
Company at an exercise price of $5.29 per share. However, because the First
Jefferies Placement triggered their anti-dilution protections, the exercise
price of warrants issued in these two private placements decreased from $5.29
per share to $4.77 per share and the number of shares issueable under these
warrants increased by 34,781 to a total of 353,836. Although the Second
Jefferies Placement triggered the anti-dilution protections of the Castle Creek
Placement, the Four Investor Placement and the First Jefferies Placement, under
the terms of their anti-dilution provisions, the exercise price of the warrants
in these private placements (and, consequently, the number of shares issueable
under these warrants) is not adjusted because the change is less than a 1%
difference. Instead, the difference is carried forward and not counted until
there is another adjustment which, together with the carried forward adjustment,
would result in at least a 1% change to the exercise price of the warrants.
The second way the anti-dilution protections in the four private placements
can be triggered is by the exercise of warrants for a price below the ten day
average price of the Company's shares. Anti-dilution protection for a particular
private placement can only be triggered by securities issued after that private
placement. For example, if Warrant A was issued in January 2001 and is exercised
in June 2001, anti-dilution protection in Warrant B issued in February 2001
would not be triggered, even though Warrant A was exercised after the issuance
of Warrant B. The exercise of Warrant A would only trigger anti-dilution
protections from transactions prior to January 2001. Specifically, with regard
to the Company's four private placement transactions: (1) the exercise of
warrants from each of the First Jefferies Placement and the Second Jefferies
Placement can trigger anti-dilution protections in both the Castle Creek
Placement and the Four Investor Placement and (2) the exercise of warrants from
the Second Jefferies Placement can trigger the anti-dilution protection in the
First Jefferies Placement. The exercise price of the warrants in the First
Jefferies Placement and the Second Jefferies Placement are identical. Their
exercise price is equal to the lesser of $6 or the ten day average price of the
Company's shares, less a 10% discount.
The exact number of ordinary shares which the Company must reserve for the
warrants as a result of anti-dilution triggers cannot be determined until the
warrants are actually exercised. When the warrants from the First Jefferies
Placement are actually exercised, the anti-dilution protections in the Castle
Creek Placement and the Four Investor Placement will likely be triggered. When
the warrants from the Second Jefferies Placement are actually exercised, the
anti-dilution protections in the Castle Creek Placement, the Four Investor
Placement and the First Jefferies Placement will likely be triggered. The
anti-dilution adjustments are calculated using a formula which takes into
account the ten day average price of the Company's ADSs, the number of ordinary
shares then outstanding, the amount of money received by the Company from the
triggering transaction and the maximum number of shares issueable in the
triggering transaction. After the adjusted exercise price is calculated, the
additional amount of shares which the warrants in the four private placements
can purchase is calculated by a formula which takes into account the old
exercise price, the old number of shares the warrants could purchase and the new
exercise price. The two charts above demonstrate the total number of additional
shares issueable due to anti-dilution protections if all warrants are exercised
simultaneously at a ten day average share price of $2.79, $2.09, $1.40 and
$0.70.
The greater the number of shares sold or issued at a price below market and
the greater the discount in the price per share below market, the greater the
anti-dilution adjustment. However, the anti-dilution protections are based on a
weighted average formula, which means that, generally, the amount of
18
adjustment to the exercise price of the warrants is not as great as the amount
of discount in the price per share below market.
A DECLINING SHARE PRICE OF THE COMPANY'S ADSS MAY TRIGGER ANTI-DILUTION
ADJUSTMENTS WHICH COULD ACCELERATE AND INCREASE THE MAGNITUDE OF THE DECLINE.
The lower the price of the Company's ADSs, the greater the potential
additional number of shares issueable due to the anti-dilution protections. For
example, if there are no anti-dilution adjustments, the number of shares the
Company must retain for the exercise of warrants issued in its four private
placements is 2,873,834. However, if the price of the Company's ADSs decreases
such that its ten day average is $0.70 per share and all warrants are exercised
at this price, the number of shares the Company must retain for the exercise of
warrants increases by 50,211 shares to a total of 2,924,045. Warrant holders
have the right to purchase an increasing amount of shares during a decline in
the price of the Company's ADSs. If the warrant holders exercise their warrants
and sell their shares in the open market during this time, downward pressure is
added to the price, which can further increase the anti-dilution adjustments for
the remaining warrant holders. Additionally, short sales of the Company's shares
may increase the downward pressure on the price of the Company's shares. The
anti-dilution adjustments in the four private placements and short sales may
accelerate and compound a decline in the price of the Company's ADSs.
Shareholders will be diluted as the price of the Company's ADSs drops and
warrant holders in the four private placements gain the right to purchase an
increasingly large number of shares due to their anti-dilution protections.
For additional information on the anti-dilution protection and the
determination of the exercise price of the warrants in the four private
placement transactions, please refer to the sections entitled "Private
Placements and Warrants" and "Dilution Adjustments" in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, which was
mailed to shareholders along with this Proxy Statement.
The Board of Directors of the Company believes that the proposed increase in
the authorized share capital will be sufficient to provide the Company
flexibility to act with respect to its future financing, acquisitions and other
corporate needs. A deficient authorized share capital would limit the Company's
ability to pursue opportunities for future financings, acquisitions, mergers and
other transactions. The Company may also be limited in its ability to effectuate
future stock splits or stock dividends. Although at present the Board of
Directors has no plans to issue additional ordinary shares, it desires to have
the authorized share capital available to provide flexibility to use its capital
stock for business and financial purposes in the future. The Board of Directors
believes that the passing this Proposal is necessary to provide the Corporation
with the flexibility to pursue the types of opportunities described above
without added delay and expense.
The Company believes it has sufficient funding to finance its operations
through March 2002. The Company may require additional financing in the future.
The ordinary shares created by Proposal 8, if passed, may be utilized in such
future financing transactions, if necessary.
The increase in the authorized share capital of the Company and the
subsequent issuance of additional ordinary shares could have the effect of
delaying or preventing a change of control of the Company without further action
by the shareholders. Shares of authorized and unissued ordinary shares (or
American depositary shares representing ordinary shares) could (within the
limits imposed by applicable law) be issued in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. The availability of authorized but unissued shares of ordinary shares
might also discourage or frustrate a merger, a tender offer for the Company's
ordinary shares (or American depositary shares representing ordinary shares) or
other transactions at a premium over the market price that a shareholder may
consider favorable.
19
In addition, the Company has a class of preferred shares, which may
potentially be issued with rights and preferences designed by the Board of
Directors to delay or prevent a change of control. The Company believes that the
unissued preferred shares, together with the proposed increase of authorized
share capital, would be sufficient to implement the Company's anti-takeover
measures and to pursue financing or business combination transactions with
equity.
The Board of Directors is not aware of any attempt to take control of the
Company and has not presented this Proposal with the intention that the increase
in the authorized share capital of the Company be used as a type of
anti-takeover device. Although there are no current plans, the Company may
utilize its increased share capital in transactions with strategic businesses or
technologies that are complementary to the Company. The new ordinary shares
created in the increase in the authorized share capital will rank pari passu in
all respects with the existing ordinary shares in the capital of the Company.
The passing of this Proposal will not have an immediate affect the holders of
currently issued ordinary shares (or American depositary shares representing
ordinary shares). However, to the extent additional authorized ordinary shares
are issued in the future, they will decrease existing shareholders' percentage
equity ownership and, depending upon the price at which they are issued as
compared to the price paid by existing shareholders for their shares, could be
dilutive to the existing shareholders.
The following Ordinary Resolution will be considered at the meeting in
relation to Proposal 8, which will require a majority of the shareholder votes
cast at the meeting to be passed: "THAT the Company's authorised share capital
be increased to L10,600,000 by the creation of an additional 20,000,000 Ordinary
Shares of 20p nominal value, each ranking pari passu in all respects with the
existing Ordinary Shares in the capital of the Company".
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 8
PROPOSALS 9 AND 10: ALLOTMENT OF SECURITIES
Section 80 of the U.K. Companies Act 1985 prohibits a company from allotting
securities without the authority of the shareholders of the company in general
meeting. This is supplemented by Section 89 of the Act, which requires (subject
to specified exemptions) that a company may not allot new securities unless it
has first offered them to existing shareholders.
The Board of Directors is presently authorized to allot shares up to an
aggregate nominal value of L2,930,913.20, or 14,654,566 shares, pursuant to an
ordinary resolution passed by Insignia on May 27, 1999 and expiring five years
from that date, and to do so without first offering the shares to existing
shareholders.
If Proposal 8 is passed, it is now proposed to cancel these authorities, to
the extent that they have not already been relied upon and, by the passing of
this Proposal 9 as an ordinary resolution, to authorize the Board, for a period
of five years, to allot relevant securities having an aggregate nominal value of
up to L5,244,849.80, or 26,224,249 shares, which includes the proposed
20,000,000 share increase of authorized shares in Proposal 8.
Proposal 10, if passed as a special resolution, will authorize the Board,
for a period of five years, to allot equity securities under the authority
conferred by Proposal 9 without first offering them to existing shareholders.
Proposal 10 is a special resolution. A special resolution requires the
affirmative vote of at least 75% of the votes cast at the meeting in order to
pass.
The Company believes it has sufficient funding to finance its operations
through March 2002. However, the Company may require additional financing in the
future. The resolutions adopted by the shareholders in 1999 authorize the Board
to allot shares, as well as other types of securities and options or warrants to
purchase securities. Proposals 9 and 10 above authorize the Board to allot
shares, as well as
20
other types of securities and options or warrants to purchase securities. The
Board believes that this authority will provide Insignia with the flexibility
necessary to obtain additional financing, if necessary, because such waiver by
the shareholders permits Insignia to issue equity capital without first offering
such equity capital to the Company's existing shareholders, as required by
Section 89 of the Act. There can be no assurance that Insignia will be able to
obtain additional financing when needed, on acceptable terms, or at all. The
failure to raise additional funds on a timely basis and on sufficiently
favorable terms could have a material adverse effect on the business, operating
results and financial condition of Insignia.
The following Ordinary Resolution will be considered at the meeting in
relation to Proposal 9, which will require a majority of the shareholder votes
cast at the meeting to be passed: "THAT, in accordance with Section 80 of the
Companies Act 1985 (the "Act"), the directors be and are hereby generally and
unconditionally authorized to exercise all the powers of the Company to allot
relevant securities (as defined in Section 80 of the Act) up to an aggregate
nominal amount of L5,244,849.80 provided that this authority (unless previously
revoked or renewed) shall expire on May 10, 2006 and that the Company may before
such expiry make an offer or agreement which would or might require relevant
securities to be allotted after such expiry and the directors may allot relevant
securities in pursuance of such an offer or agreement as if the authority
conferred hereby had not expired; and THAT the authority conferred on the
directors by an ordinary resolution passed on May 27, 1999 to allot shares up to
an aggregate nominal amount of L2,930,913.20 (to expire on May 26, 2004) shall
cease to have effect upon and with effect from the passing of this resolution."
The following Special Resolution will be considered at the meeting in
relation to Proposal 10, which will require at least 75% of the shareholder
votes cast at the meeting to be passed: "THAT, conditionally upon the passing of
the Resolution numbered 9 above, in accordance with Section 95(1) of the Act,
the directors be and are hereby given power, for the period commencing on and
with effect from the date of adoption of this Resolution and (unless previously
revoked or renewed) expiring on May 10, 2006, to allot equity securities (as
defined in Section 94(2) of the Act) pursuant to the authority conferred by the
Resolution numbered 9 above as if Section 89(1) of the Act did not apply to such
allotment; and THAT the power conferred on the directors by a special resolution
passed on May 27, 1999 to allot shares up to an aggregate nominal amount of
L2,930,913.20 as if Section 89 of the Act did not apply to such allotment (to
expire on May 26, 2004) shall cease to have effect upon and with effect from the
passing of this resolution."
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 9 AND 10
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 22, 2001,
with respect to the beneficial ownership of the Company's ordinary shares by
(i) each shareholder known by the Company to be the beneficial owner of more
than 5% of the Company's ordinary shares, (ii) each director, (iii) each Named
Officer, 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)................................ 2,012,897 10.5%
Castle Creek Technology Partners LLC(3).................... 1,957,124 9.9%
Nicholas, Viscount Bearsted(4)............................. 835,904 4.3%
Richard M. Noling(5)....................................... 507,522 2.6%
Vincent S. Pino(6)......................................... 482,360 2.5%
George Buchan(7)........................................... 197,137 1.0%
Mark E. McMillan(8)........................................ 118,750 *
Stephen M. Ambler(9)....................................... 87,354 *
Jonathan D. Hoskin(10)..................................... 60,323 *
David G. Frodsham(11)...................................... 57,500 *
Albert E. Sisto(12)........................................ 46,042 *
Ronald C. Workman(13)...................................... 41,065 *
John C. Fogelin(14)........................................ 15,000 *
Paul O. Livesay(15)........................................ 0 *
Stephen H. Cobb(16)........................................ 0 *
Marshall J. Kwait(17)...................................... 0 *
All directors and executive officers as a group (12
persons)(18)............................................. 2,448,957 11.9%
------------------------
* 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 February 22, 2001 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 9.9% of the ordinary shares outstanding as of February 22, 2001
and includes ordinary shares and warrants held by Castle Creek Technology
Partners LLC. Each of the warrants held by Castle Creek cannot be exercised
at any time to the extent that exercise would result in Castle Creek having
beneficial ownership of more than 9.9% of the total number of ordinary
shares in issue at the time of exercise. The aggregate number of shares
issuable to Castle Creek under all outstanding warrants exceeds the number
set forth herein. If the total number of ordinary shares in issue
increases, including as a result of issuance of ordinary shares upon
exercise of the warrants, then the number of shares beneficially owned by
Castle Creek may also increase. Castle Creek Technology Partners LLC are
located at 77 West Wacker Drive, Ste. 4040, Chicago, Illinois 60601.
(4) Includes 198,958 shares subject to options that were exercisable within
60 days of February 22, 2001. Nicholas, Viscount Bearsted is Chairman of
the Board of the Company.
22
(5) Includes 470,758 shares subject to options that were exercisable within
60 days of February 22, 2001. Mr. Noling is the President, Chief Executive
Officer, and a director of the Company.
(6) Represents shares and warrants held by Mr. Pino and his immediate family.
Includes 17,501 shares subject to options that were exercisable within
60 days of February 22, 2001 and warrants entitling Mr. Pino or members of
his family to purchase 132,157 shares within 60 days of February 22, 2001.
Mr. Pino is a director of the Company.
(7) Includes 176,875 shares subject to options that were exercisable within
60 days of February 22, 2001. Mr. Buchan is Senior Vice President of
Engineering and U.K. General Manager of the Company.
(8) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. McMillan is Chief Operating Officer.
(9) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Ambler was the Chief Financial Officer, Company
Secretary and a Senior Vice President of the Company through March 15,
2001.
(10) Includes 54,958 shares subject to options that were exercisable within
60 days of February 22, 2001. Mr. Hoskin is Chief Technology Officer and a
Senior Vice President of the Company.
(11) Includes 17,500 shares subject to options that were exercisable within
60 days of February 22, 2001. Mr. Frodsham is a director of the Company.
(12) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Sisto served as a director of the Company
through April 3, 2001.
(13) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Workman is Senior Vice President of Marketing.
(14) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Fogelin is a director of the Company.
(15) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Livesay is the Senior Vice President of
Corporate Development and Strategic Relations.
(16) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Cobb served as Senior Vice President of Sales
from May 2000 to January 2001.
(17) Represents shares subject to options that were exercisable within 60 days
of February 22, 2001. Mr. Kwait served as Vice President of Sales from
February 1999 to January 2000.
(18) Includes the shares indicated as included in footnotes (5) through (15).
23
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 2000, 1999 and 1998 by Insignia's Chief Executive Officer and each of
Insignia's other executive officers who were serving as executive officers at
the end of 1999, as well as Insignia's former Senior Vice President of Worldwide
Sales who left Insignia during 2000 (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.................. 2000 241,032 103,403 -- 20,000 1,080
President and Chief Executive 1999 240,611 83,042 -- -- 1,080
Officer 1998 217,875 75,171 -- 20,000 1,080
Stephen M. Ambler(3)............... 2000 178,008 64,480 -- -- --
Chief Financial Officer, Company 1999 179,382 57,512 -- 25,000 --
Secretary and Senior Vice 1998 145,250 40,345 -- 20,000 --
President
George Buchan...................... 2000 160,387 62,845 20,163(4) -- 16,039
Senior Vice President of 1999 168,000 48,161 21,120(4) 40,000 16,800
Engineering and U.K. General 1998 167,000 54,827 22,044(4) 20,000 16,700
Manager
Stephen H. Cobb(5)................. 2000 121,633 51,647 -- 90,000 --
Former Senior Vice President of
Sales
Jonathan D. Hoskin(6).............. 2000 114,562 37,055 18,330(4) 25,000 5,728
Chief Technology Officer 1999 110,400 18,575 18,240(4) 45,000 5,520
and Senior Vice President 1998 79,569 14,712 15,558(4) 22,000 3,978
Marshall J. Kwait(7)............... 2000 17,968 -- -- -- --
Former Vice President of Sales 1999 157,937 40,174 -- 47,500 1,080
1998 128,431 81,587 -- 12,000 1,080
Mark E. McMillan(8)................ 2000 179,032 80,121 -- 175,000 1,080
Chief Operating Officer 1999 26,481 19,166 -- 150,000 --
Ronald C. Workman(9)............... 2000 174,756 61,418 -- 25,000 405
Senior Vice President of 1999 174,983 47,746 -- 10,000 1,080
Marketing
1998 82,500 22,442 -- 100,000 405
------------------------
(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.
24
(3) Mr. Ambler joined the Company in April 1994 as Director of Finance and
Administration, Europe. He served as Chief Financial Officer, Company
Secretary and Vice President from October 1997 through March 15, 2001. In
addition, he served as Senior Vice President from January 1999 through
March 15, 2001.
(4) Represents the payment of a Company car allowance.
(5) Mr. Cobb joined the Company in May 2000 as Senior Vice President of Sales,
and served in this position until January 2001.
(6) Mr. Hoskin joined the Company in June 1992 as Engineering Director. He was
appointed Chief Technology Officer in May 1999, and he became a Senior Vice
President in January 2001.
(7) 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.
(8) 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, and Chief Operating Officer
in October 2000.
(9) Mr. Workman joined the Company in July 1998.
The following table sets forth further information regarding individual
grants of rights to purchase ordinary shares during 2000 to each of the Named
Officers. In accordance with the rules of the Securities and Exchange Commission
(the "SEC"), the table sets forth the hypothetical gains or "option spreads"
that would exist for the options at the end of their respective ten-year terms.
These gains are based on assumed rates of annual compounded share price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises depend
upon the future performance of the ordinary shares and ADSs. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
OPTION GRANTS IN 2000
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 (#) 2000 ($/SH) DATE 5%($) 10%($)
---- ------------------ ------------- -------- ---------- -------- ---------
Richard M. Noling.............. 20,000(2) 2.3% 5.188 01/18/10 65,254 165,366
Stephen M. Ambler.............. -- -- -- -- -- --
George Buchan.................. -- -- -- -- -- --
Stephen H. Cobb................ 90,000(3) 10.2% 6.375 05/25/10 360,828 914,410
Jonathan D. Hoskin............. 25,000(2) 2.8% 5.188 01/18/10 81,568 206,708
Marshall J. Kwait.............. -- -- -- -- -- --
Mark E. McMillan............... 50,000(4) 5.6% 11.125 04/12/10 349,822 886,519
125,000(2) 14.10% 5.75 10/16/10 452,017 1,145,502
Ronald C. Workman.............. 25,000(2) 2.8% 5.188 01/18/10 81,568 206,708
------------------------
(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
25
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. Upon termination or constructive termination following a change
of control of the Company, 25% of options granted will be subject to
accelerated vesting subject to a minimum 50% having vested.
(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.
Upon termination or constructive termination following a change of control
of the Company, 25% of options granted will be subject to accelerated
vesting subject to a minimum 50% having vested.
(4) 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 8.3333% 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. Upon
termination or constructive termination following a change of control of the
Company, 25% of options granted will be subject to accelerated vesting
subject to a minimum 50% having vested.
The following table sets forth certain information concerning the exercise
of options by each of the Named Officers during 2000, 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, 2000. 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 $4.75 per share, which was
the closing price of the ADSs as reported on the Nasdaq National Market on
December 29, 2000.
AGGREGATED OPTION EXERCISES IN 2000 AND
YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT YEAR-END(#) AT YEAR-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Richard M. Noling............... 30,700 187,577 447,946 51,354 926,501 98,062
Stephen M. Ambler............... -- -- 76,115 36,135 201,164 103,221
George Buchan................... -- -- 168,646 33,854 511,111 98,389
Stephen H. Cobb................. -- -- -- 90,000 -- --
Jonathan D. Hoskin.............. -- -- 46,542 56,208 73,419 34,684
Marshall J. Kwait............... -- -- -- -- -- --
Mark E. McMillan................ -- -- 79,167 245,833 6,338 17,063
Ronald C. Workman............... 10,500 57,155 29,815 64,687 87,454 166,534
------------------------
(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.
26
(2) For purposes of the table, all amounts in pounds sterling were converted to
U.S. dollars using $1.50 per pound sterling, the exchange rate in effect as
of December 31, 2000.
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.
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.
27
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.*
* Mr. Sisto resigned from the Board on April 3, 2001. Mr. Sisto's replacement
has not yet been named.
REPORT OF THE COMPENSATION COMMITTEE
Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee.
GENERAL COMPENSATION POLICY
The Compensation Committee acts on behalf of the Board to establish the
general compensation policy of Insignia for all employees of Insignia. The
Compensation Committee typically reviews base salary levels and target bonuses
for the Chief Executive Officer ("CEO") and other executive officers and
employees of Insignia at or about the beginning of each fiscal year. The
Compensation Committee administers Insignia's incentive and equity plans,
including the 1995 Stock Option Plan for U.S. Employees, the U.K. Employee Share
Option Scheme 1996 and the 1995 Employee Share Purchase Plan.
The Compensation Committee's philosophy in compensating executive officers,
including the CEO, is to relate compensation directly to corporate performance.
Thus, Insignia's compensation policy, which applies to executive officers and
other key employees of Insignia, relates a portion of each individual's total
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.
2000 EXECUTIVE COMPENSATION
BASE COMPENSATION. The information described above was presented to the
Compensation Committee in January 2000. The Compensation Committee reviewed the
recommendations and performance and market data outlined above and established a
base salary level to be effective January 1, 2000 for each executive officer,
including the CEO.
28
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 2000, 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 2000, 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 2000.
For 2001, 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 2001, 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 2000, the Compensation
Committee recommended an increase of $0 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
$103,403 be paid to Mr. Noling.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. For
2001, 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 2001 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
29
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
December 31, 2000 with the cumulative total return on the Nasdaq Stock Market
(U.S. and U.S./Foreign) and the S&P Computer Software and Services Index
(assuming the investment of $100 in Insignia's ADSs on the date of Insignia's
initial public offering and in each of the indexes on October 31, 1995, and
reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INSIGNIA S&P COMPUTER NASDAQ
SOLUTIONS SOFTWARE/SERVICES NASDAQ US US&FOREIGN
1995 $100.00 $100.00 $100.00 $100.00
1996 $35.63 $155.46 $123.04 $122.43
1997 $18.35 $216.56 $150.70 $149.45
1998 $17.02 $392.40 $212.52 $207.00
1999 $39.36 $725.67 $394.94 $385.90
2000 $40.43 $342.87 $237.64 $233.00
CERTAIN TRANSACTIONS
On March 20, 2000, the Company entered into a binding agreement with a
director whereby he would provide the Company a $5.0 million line of credit with
a commitment fee of four points based upon the total amount of the line and
drawdown/termination fee of two points for the first drawdown or termination.
The interest rate on amounts drawn down was 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. The Company drew down a total of $3.0 million of the line of
credit during 2000. A total of 19,994 ordinary shares in ADS form were issued to
the director as payment for drawdown fees under the line of credit arrangement.
On November 27, 2000 the Company repaid this sum, along with all accrued
interest and the termination fee due.
On February 13, 2001, the Company entered into a promissory note with
Richard M. Noling, President and Chief Executive Officer of the Company whereby
Mr. Noling borrowed $150,000 from the
30
U.S. based subsidiary of the Company. The promissory note is due in three equal
installments, on each annual anniversary from the date of the note, beginning on
February 13, 2002. Interest accrues on the unpaid principal balance at a rate
per annum equal to the prime lending rate of interest as listed in the Wall
Street Journal plus 1%. Accrued interest is due and payable monthly in arrears
on the last calendar day of each month, beginning March 31, 2001.
Since January 1, 2000, 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 in
the section entitled "Executive Compensation" above, (ii) the transactions
described under "Compensation Committee Interlocks and Insider Participation" in
the section entitled "Executive Compensation" above, and (iii) the transactions
described under "Employment Agreements" in the section entitled "Executive
Compensation" above.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at Insignia's 2002 Annual
General Meeting must be received by Insignia at its registered office no later
than February 2, 2002 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 WEDNESDAY, MAY 9, 2001,
BEING 48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
31
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
REGISTERED NUMBER: 1961960
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2000
F-1
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000
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 2000 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 software technologies that speed the adoption of
Java-based individualized computing in Internet appliances and embedded devices.
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. It
leverages patent-pending intellectual property to provide these
resource-constrained devices with high performance, fully-compatible Java applet
and application support. The product became available for sale in March 1999.
The Jeode platform is 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") and channel partners' 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 Company's Jeode platform allows developers to create applications for
Internet appliances and embedded devices using Java technology. The Java
environment was originally designed by Sun and first unveiled in 1995.
Currently, International Data Corporation estimates there are over 2.5 million
Java software developers, and Sun estimates more than 10,000,000 Java enabled
computer platforms and more than 200 Java licensees. The primary use of the Java
technology, prior to the beta release of the Jeode platform in November 1998,
was for large corporate or enterprise applications.
There is a growing demand in the Internet appliance and embedded device
markets for Java technology because the Java language is simple, robust, object
oriented, and multi-threaded--meaning it supports applications that do more than
one thing at a time. Among the Java platform's biggest advantages are its "write
once, run anywhere" architecture and its ability to deliver virus-free code. In
addition, the Java technology platform is interpreted and dynamically extensible
and is easy to connect to the Internet. Internet appliances and embedded
devices, if programmed in Java technology, could be dynamically downloaded with
new functionality over the Internet instead of requiring consumers to purchase
an entire new device or taking the device to a repair shop.
However, most existing implementations of Java technology are designed for
medium to large computing environments, and do not scale down to meet the
resource constraints of Internet appliances and embedded devices.
Company management believes that there is a significant opportunity for Java
technology that can scale down to work within the constraints of an Internet
appliance or embedded device. With the Company's fourteen years of experience
developing virtual machine technology to function under severe
F-2
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS (CONTINUED)
systems resource restrictions, the Company is uniquely suited with its
technology to transition from the PC compatibility market to the Java market.
The Company has leveraged its virtual machine expertise and algorithms and
developed its EVM, which is the Company's brand of a Java virtual machine. This
EVM fits within the constraints of an Internet appliance or embedded device. The
Company believes its EVM incorporates unique technologies, including adaptive
optimizing dynamic compilation and precise, concurrent garbage collection to
achieve optimal performance and robustness in limited memory Internet appliances
and embedded devices. Consequently, the Company believes it is in a unique
position to take advantage of the opportunity and demand that now exists.
The Company's principal product line in recent years was 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 Company management took steps to discontinue these
product lines, and on 18 October 1999, the Company signed an exclusive licensing
arrangement with FWB Software, LLC ("FWB"). This arrangement allowed the Company
to focus exclusively on its Jeode platform business strategy.
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.
Total turnover of the Group in 2000 was $10,766,000 (1999: $6,837,000), of
which Jeode revenues accounted for 98%. An operating loss was recorded of
$7,470,000 (1999: $11,747,000).
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 line of credit from a director, receivable collections and the partial release
from escrow of NTRIGUE product line sales proceeds. As a result at 31 December
2000, the Group had cash and cash equivalent balances and short term investments
of $17,351,000 (1999: $11,107,000) of which $5,050,000 (1999: $6,060,000) was
held in escrow.
SHARE CAPITAL AND WARRANTS
During 2000 the Company issued 191,078 Ordinary shares on the exercise of
share options, 43,183 Ordinary shares through its employee share purchase plan,
19,994 Ordinary shares to a director of the Company as payment for drawdown fees
under a Line of Credit arrangement, 251,333 Ordinary shares upon conversion of a
convertible promissory note and 3,600,000 Ordinary shares through a private
placement during the year. In addition as part of the private placement, the
Company issued warrants to purchase 2,026,480 Ordinary shares. On 13 February
2001, a further 940,000 Ordinary shares were issued through a private placement
together with warrants to purchase 495,000 Ordinary shares.
F-3
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
DIVIDENDS AND TRANSFERS TO RESERVES
The directors are unable to recommend payment of a dividend in respect of
the year ended 31 December 2000 (1999: Nil). The Group's loss for the year of
$6,814,000 (1999: $9,959,000) 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)
J C Fogelin (USA) (appointed 16 January 2001)
D G Frodsham
R M Noling (USA)
V S Pino (USA)
A E Sisto (USA)
The interests of the directors at the year-end in the shares of the Company
were as follows:
OPTIONS TO WARRANTS TO
ACQUIRE ORDINARY ACQUIRE ORDINARY
ORDINARY SHARES SHARES OF 20P SHARES OF 20P
OF 20P EACH EACH EACH
--------------- ---------------- ----------------
VISCOUNT BEARSTED
At 31 December 1999............................ 636,946 193,750 --
At 31 December 2000............................ 636,946 198,750 --
J C FOGELIN
At date of appointment......................... -- -- --
D G FRODSHAM
At 31 December 1999............................ -- 16,250 --
At 31 December 2000............................ 10,000 21,250 --
R M NOLING
At 31 December 1999............................ 33,702 510,000 --
At 31 December 2000............................ 35,709 499,300 --
V S PINO
At 31 December 1999............................ 82,084 18,750 17,725
At 31 December 2000............................ 332,702 18,126 132,157
A E SISTO
At 31 December 1999............................ -- 38,750 --
At 31 December 2000............................ -- 43,750 --
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, 5,000 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, 1,250 are exercisable until 18 October 2009 at $5.00 each and 5,000 are
exercisable until 19 January 2010 at $5.25 each.
F-4
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
DIRECTORS (CONTINUED)
Of the options granted to D G Frodsham, 15,000 are exercisable until
16 August 2009 at $4.688 each, 1,250 are exercisable until 18 October 2009 at
$5.00 each and 5,000 are exercisable until 19 January 2010 at $5.25 each. As
part of the private placement on 12 February 2001 (see Note 17), D G Frodsham
purchased 20,000 Ordinary shares at $5.00 together with warrants to purchase
10,000 Ordinary shares at $6.00 (or 90% of market value if less) exercisable
until 12 February 2004.
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,
159,300 are exercisable until 24 March 2007 at $1.969 each, 200,000 are
exercisable until 28 Mayx 2007 at $2.375 each, 10,000 are exercisable until
28 April 2008 at $1.625 each, 10,000 are exercisable until 19 October 2008 at
$0.688 each and 20,000 are exercisable until 19 January 2010 at $5.188 each.
During the year R M Noling exercised 30,700 options at $1.969 each. Of the
options exercised, 8,000 were exercised on 24 April 2000 and sold on the same
day at $8.42, 3,000 were exercised on 25 April 2000 and sold on the same day at
$8.00, 9,000 were exercised on 26 April 2000 and sold on the same day at $8.25,
10,000 were exercised on 21 August 2000 and sold on the same day at $7.75 and
700 were exercised on 11 September 2000 and sold on the same day at $7.00. The
aggregate gain on the exercise of these options was $187,000.
Of the options granted to V S Pino 9,376 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, 1,250 are exercisable
until 18 October 2009 at $5.00 each and 5,000 are exercisable until
19 January 2010 at $5.25 each. During the year V S Pino exercised 5,624 options
at $0.688 each. As part of a private placement on 24 November 2000 (see
Note 17), V S Pino and members of his immediate family purchased 225,000
Ordinary shares at $5.00 together with warrants to purchase 112,500 Ordinary
shares at $6.00 (or 90% of market value if less) exercisable until 24 November
2003.
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, 1,250 are exercisable until 18 October 2009 at $5.00 each and 5,000
are exercisable until 19 January 2010 at $5.25 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 25 days purchases outstanding at 31 December 2000 based on the
average daily amount invoiced by suppliers during the year ended 31 December
2000.
YEAR 2000 AND EURO
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.
F-5
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
YEAR 2000 AND EURO (CONTINUED)
The Company did not experience any problems with its computer systems as a
consequence of the date change on 1 January 2000. The cost of any remedial work
necessary was expensed as incurred.
The Company does not currently offer its customers the choice of payment in
Euros, but has reviewed its procedures and is confident that it will be able to
conduct business in the Euro should that become necessary.
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 Note 14). In addition
during the year, funds were obtained from a private placement funding (see
Note 17), from a Line of Credit (see Note 14) 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.
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
Company's bankers.
POST BALANCE SHEET EVENTS
Post balance sheet events are dealt with in Note 21 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.
F-6
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
AUDITORS
A resolution to reappoint PricewaterhouseCoopers will be proposed at the
annual general meeting.
By Order of the Board
R M Noling
DIRECTOR 7 March 2001
F-7
[LOGO]
--------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
Harman House
1 George Street
Uxbridge UB8 1QQ
AUDITORS' REPORT TO THE MEMBERS OF Telephone +44 (0) 1895 273333
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES - Facsimile +44 (0) 1895 274777
We have audited the financial statements on pages F-9 to F-34 which have been
prepared under the historical cost convention and the accounting policies set
out on pages F-14 to F-16.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report. As described on
page F-6, 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 not consistent with the financial statements, if the Company has not kept
proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding directors' remuneration and transactions is not disclosed.
We read the other information contained in the Annual Report and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's and Group'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 2000 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 7 March 2001
F-8
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2000
2000 1999
NOTE $'000 $'000
-------- -------- --------
TURNOVER.................................................... 2 10,766 6,837
Cost of sales............................................... (2,826) (3,203)
------- -------
GROSS PROFIT................................................ 7,940 3,634
Distribution costs.......................................... (4,475) (5,159)
Administrative expenses..................................... (10,935) (10,222)
------- -------
OPERATING LOSS.............................................. 2,3 (7,470) (11,747)
Interest receivable and similar income...................... 6 443 498
Interest payable and similar charges........................ 6 (572) (26)
------- -------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION................. (7,599) (11,275)
Tax on loss on ordinary activities.......................... 8 785 1,316
------- -------
LOSS FOR THE FINANCIAL YEAR................................. 18 (6,814) (9,959)
======= =======
Basic loss per share........................................ 23 $ (0.47) $ (0.77)
======= =======
Diluted loss per share...................................... 23 (0.47) (0.77)
======= =======
The turnover and operating loss all derive from continuing activities.
The only recognised gain or loss is the loss for the year.
The notes on pages F-14 to F-34 form part of these financial statements.
F-9
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2000
2000 1999
NOTE $'000 $'000
-------- -------- --------
FIXED ASSETS
Tangible assets............................................. 9 512 625
Investments................................................. 10 -- 325
------- -------
512 950
CURRENT ASSETS
Stocks...................................................... 11 5 4
Debtors of which $407,000 (1999: $434,000) falls due in more
than one year............................................. 12 4,468 1,313
Cash and cash equivalents held in escrow.................... 13 5,050 6,060
Cash at bank and in hand.................................... 24 12,301 5,047
------- -------
21,824 12,424
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.............. 14 (5,147) (7,335)
------- -------
NET CURRENT ASSETS.......................................... 16,677 5,089
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 17,189 6,039
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR..... 15 -- --
------- -------
NET ASSETS.................................................. 2 17,189 6,039
======= =======
CAPITAL AND RESERVES
Called up share capital..................................... 17,18 5,876 4,644
Share premium account....................................... 18 52,868 36,136
Profit and loss account..................................... 18 (41,607) (34,793)
Capital reserve............................................. 18 52 52
------- -------
EQUITY SHAREHOLDERS' FUNDS.................................. 18 17,189 6,039
======= =======
Approved By The Board on 7 March 2001 and signed on its behalf by:
R M Noling
DIRECTOR
The notes on pages F-14 to F-34 form part of these financial statements.
F-10
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
COMPANY BALANCE SHEET--AT 31 DECEMBER 2000
2000 1999
NOTE $'000 $'000
-------- -------- --------
FIXED ASSETS
Tangible assets............................................. 9 377 405
Investments................................................. 10 -- 325
------- -------
377 730
CURRENT ASSETS
Debtors of which $407,000 (1999: $434,000) falls due in more
than one year............................................. 12 3,596 1,093
Cash and cash equivalents held in escrow.................... 13 5,050 6,060
Cash at bank and in hand.................................... 9,671 1,512
------- -------
18,317 8,665
CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR.............. 14 (1,877) (2,352)
------- -------
NET CURRENT ASSETS.......................................... 16,440 6,313
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 16,817 7,043
CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR..... 15 -- --
PROVISIONS FOR LIABILITIES AND CHARGES...................... 16 -- (1,004)
------- -------
NET ASSETS.................................................. 16,817 6,039
======= =======
CAPITAL AND RESERVES
Called up share capital..................................... 17,18 5,876 4,644
Share premium account....................................... 18 53,009 36,277
Profit and loss account..................................... 18 (42,068) (34,882)
------- -------
EQUITY SHAREHOLDERS' FUNDS.................................. 18 16,817 6,039
======= =======
Approved by the Board on 7 March 2001 and signed on its behalf by:
R M Noling
DIRECTOR
The notes on pages F-14 to F-34 form part of these financial statements.
F-11
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000
2000 2000 1999 1999
NOTE $'000 $'000 $'000 $'000
-------- -------- -------- -------- --------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES............ A (11,756) (11,665)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received..................................... 443 498
Interest paid on loan................................. (488) (26)
------ -----
(45) 472
TAXATION.............................................. 1,147 510
CAPITAL EXPENDITURE
Purchase of tangible fixed assets..................... (310) (213)
Proceeds from sale of investments..................... 325 --
Proceeds from sale of tangible fixed assets........... 3 140
------ -----
18 (73)
ACQUISITION AND DISPOSAL
Release of product line proceeds held in escrow....... 1,010 3,040
FINANCING
Proceeds from issue of share capital.................. C 16,880 4,580
Capital element of finance lease rental payments...... C -- (51)
Proceeds from issue of promissory note................ C -- 1,000
------ -----
16,880 5,529
------- -------
INCREASE/(DECREASE) IN CASH........................... B 7,254 (2,187)
======= =======
The notes on pages F-14 to F-34 form part of these financial statements.
F-12
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2000
A RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
2000 1999
$'000 $'000
-------- --------
Operating loss.............................................. (7,470) (11,747)
Depreciation of tangible fixed assets....................... 420 580
Other non-cash charges...................................... -- (58)
(Increase)/decrease in stocks............................... (1) 78
(Increase)/decrease in debtors.............................. (3,155) 2,941
Decrease in creditors....................................... (1,550) (3,459)
------- -------
Net cash outflow from operating activities.................. (11,756) (11,665)
======= =======
B RECONCILIATION TO NET CASH
2000 1999
$'000 $'000
-------- --------
Increase/(decrease) in cash in the period................... 7,254 (2,187)
Decrease in debt and lease financing........................ -- 51
------ ------
Change in net cash from cash flows.......................... 7,254 (2,136)
------ ------
Movements in net cash in period............................. 7,254 (2,136)
Net cash at 1 January....................................... 5,047 7,183
------ ------
Net cash at 31 December..................................... 12,301 5,047
====== ======
C ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
SHARE CAPITAL
(INCLUDING FINANCE LEASE
CONVERTIBLE DEBT PREMIUM) OBLIGATIONS
------------------- ------------------- --------------------
2000 1999 2000 1999 2000 1999
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- --------- --------
1 January........................................ 1,000 -- 40,780 36,200 -- 51
Non cash movement................................ (1,000) -- 1,084 -- -- --
Cash inflow/(outflow) from financing............. -- 1,000 16,880 4,580 -- (51)
------ ----- ------ ------ --------- ---
31 December...................................... -- 1,000 58,744 40,780 -- --
====== ===== ====== ====== ========= ===
F-13
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2000
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS
The accounts have been prepared on a going-concern basis 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.
(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 OEMs, 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.
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 when the training is
performed. Revenues from annual maintenance contracts are recognised ratably
over the term of the contract.
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.
F-14
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS (CONTINUED)
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.
(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
F-15
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE FINANCIAL
STATEMENTS (CONTINUED)
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 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)
------------------- ------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999 2000 1999
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- -------- -------- --------
USA................................... 8,851 5,801 10,577 6,203 1,877 (2,508) (19,401) (21,451)
Rest of the World..................... 1,915 1,036 189 634 (9,347) (9,239) 36,590 27,490
------ ----- ------ ----- ------ ------- ------- -------
10,766 6,837 10,766 6,837 (7,470) (11,747) 17,189 6,039
====== ===== ====== ===== ====== ======= ======= =======
The directors consider that all of the Group's activities fall within one
class of business.
F-16
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2000 (CONTINUED)
3 OPERATING LOSS
The operating loss is stated after charging:
2000 1999
NOTE $'000 $'000
-------- -------- --------
Research and development costs.............................. 5,501 5,009
Depreciation of owned assets................................ 420 574
Depreciation of assets held under finance lease and hire
purchase contracts........................................ -- 6
Hire of equipment under operating leases.................... 70 158
Rental of land and buildings................................ 639 605
Directors' emoluments....................................... 4 440 415
Auditors' remuneration--audit services...................... 227 257
--non-audit services.................... 101 78
===== =====
Fees paid by the Company and its UK subsidiaries to the auditors in the
United Kingdom were $167,000 (1999: $135,000), including audit fees paid to the
parent Company auditors of $66,000 (1999: $57,000).
4 DIRECTORS' EMOLUMENTS
2000 1999
$'000 $'000
-------- --------
Aggregate emoluments........................................ 439 414
Company contributions paid to money purchase pension
schemes................................................... 1 1
--- ---
440 415
=== ===
Directors' emoluments of the highest paid director:
2000 1999
$'000 $'000
-------- --------
Aggregate emoluments........................................ 345 324
Company contributions paid to money purchase pension
schemes................................................... 1 1
--- ---
346 325
=== ===
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 2000
5 EMPLOYEE INFORMATION
(1) The average number of persons employed by the Group during the year,
including executive directors, was:
2000 1999
NUMBER NUMBER
-------- --------
Sales and marketing......................................... 18 16
Research and development.................................... 63 54
General and administrative.................................. 21 22
--- --
102 92
=== ==
(2) Group employment costs of all employees including executive directors:
2000 1999
NOTE $'000 $'000
-------- -------- --------
Wages and salaries.......................................... 7,726 6,832
Social security costs....................................... 843 642
Other pension costs......................................... 19 215 202
----- -----
8,784 7,676
===== =====
6 INTEREST
INTEREST RECEIVABLE AND SIMILAR INCOME
2000 1999
$'000 $'000
-------- --------
On escrow account........................................... 290 319
On tax refunds.............................................. 59 30
On lease deposits........................................... 30 35
Bank and other.............................................. 64 14
--- ---
443 498
=== ===
INTEREST PAYABLE AND SIMILAR CHARGES
2000 1999
$'000 $'000
-------- --------
On finance leases and hire purchase contracts............... -- 2
On loan from V S Pino (Note 14)............................. 488 --
On promissory note.......................................... 84 13
On tax assessment........................................... -- 11
--- --
572 26
=== ==
F-18
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
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, Inc ("Citrix") for $17.687 million.
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, $1m in February 2000 and $0.3m in
September 2000.
On 29 January 1999, the Company received an indemnity claim from Citrix for
an amount estimated by Citrix to not exceed $6.25 million. The claim was made in
relation to the Asset Purchase Agreement between the Company and Citrix under
which Citrix purchased the Company's NTRIGUE product line in February 1998.
Citrix's indemnity claim is based on assertions made by GraphOn Corporation
("GraphOn") in January of 1998 and a declaratory relief action that Citrix filed
against GraphOn in November 1998 in the United States District Court, Southern
District of Florida. Citrix's action against GraphOn seeks a declaratory
judgment that Citrix does not infringe any GraphOn proprietary rights and that
Citrix has not misappropriated any trade secrets or breached an agreement to
which GraphOn is a party. Citrix filed the action in response to and to resolve
assertions first made by GraphOn, and disclosed to Citrix in January 1998, that
the Company may have used GraphOn's confidential information to develop certain
of the Company's products, possibly including products the Company sold to
Citrix in February 1998. The Court dismissed the complaint, but Citrix has
subsequently filed an appeal. The Company believes that any misappropriation or
similar assertions by GraphOn are without merit or basis. Accordingly, the
Company contests Citrix's indemnity claim.
On 4 October 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 15 March 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. 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-19
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
8 TAXATION
(1) CURRENT TAXATION
Tax on loss on ordinary activities comprises:
2000 1999
$'000 $'000
-------- --------
UK corporation tax -- overprovision in respect of prior
years..................................................... 938 1,380
Overseas taxation........................................... (153) (64)
---- -----
785 1,316
==== =====
At 31 December 2000 the accumulated tax losses carried forward and available
for offset against future profits amounted to approximately $26,000,000 (1999:
$26,000,000) in the United States and $10,000,000 (1999: $3,000,000) in the
United Kingdom. No provision has been made for any taxation that would become
payable if reserves retained in overseas subsidiaries were distributed as no
such distributions are planned.
(2) DEFERRED TAXATION
The full potential deferred tax asset comprises the following components:
2000 1999
$'000 $'000
-------- --------
Net operating loss carryforwards............................ 13,959 9,456
Tax credit carryforwards.................................... 1,120 1,120
Sales return reserve........................................ -- 13
Accrued expenses, provisions and other temporary
differences............................................... 258 261
------ ------
15,337 10,850
====== ======
Amount recognised in these financial statements............. -- --
====== ======
F-20
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
9 TANGIBLE FIXED ASSETS
GROUP
COMPUTERS FIXTURES
LEASEHOLD AND OTHER AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
------------ --------- --------- --------
COST
1 January 2000..................................... 460 2,267 121 2,848
Additions.......................................... 38 261 11 310
Disposals.......................................... -- (391) -- (391)
--- ----- --- -----
31 December 2000................................... 498 2,137 132 2,767
=== ===== === =====
ACCUMULATED DEPRECIATION
1 January 2000..................................... 219 1,948 56 2,223
Charge for the year................................ 140 256 24 420
Disposals.......................................... -- (388) -- (388)
--- ----- --- -----
31 December 2000................................... 359 1,816 80 2,255
=== ===== === =====
NET BOOK AMOUNT
31 DECEMBER 2000................................... 139 321 52 512
=== ===== === =====
31 DECEMBER 1999................................... 241 319 65 625
=== ===== === =====
No fixed assets were held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
F-21
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
9 TANGIBLE FIXED ASSETS (CONTINUED)
COMPANY
COMPUTERS FIXTURES
LEASEHOLD AND OTHER AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
$'000 $'000 $'000 $'000
------------ --------- --------- --------
COST
1 January 2000..................................... 231 809 101 1,141
Additions.......................................... 38 166 5 209
Disposals.......................................... -- (127) -- (127)
--- ----- --- -----
31 December 2000................................... 269 848 106 1,223
=== ===== === =====
ACCUMULATED DEPRECIATION
1 January 2000..................................... 71 624 41 736
Charge for the year................................ 64 151 22 237
Disposals.......................................... -- (127) -- (127)
--- ----- --- -----
31 December 2000................................... 135 648 63 846
=== ===== === =====
NET BOOK AMOUNT
31 DECEMBER 2000................................... 134 200 43 377
=== ===== === =====
31 DECEMBER 1999................................... 160 185 60 405
=== ===== === =====
No fixed assets were held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
10 FIXED ASSET INVESTMENTS
GROUP AND COMPANY
-----------------
TOTAL
$'000
-----------------
Net book amount at 1 January 2000........................... 325
Disposed during year........................................ (325)
----
Net book amount at 31 December 2000......................... --
====
F-22
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
10 FIXED ASSET INVESTMENTS (CONTINUED)
The Company's subsidiary undertakings are:
PROPORTION OF NOMINAL
DESCRIPTION OF VALUE OF 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
During the year the Company sold its investment in Bristol Technology Inc, a
company incorporated in the USA, for $325,000.
11 STOCKS
GROUP
2000 1999
$'000 $'000
-------- --------
Finished software products, manuals and related supplies.... 5 4
== ==
F-23
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
12 DEBTORS
2000 1999
------------------- -------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Amounts falling due within one year:
Trade debtors............................................... -- 3,385 -- 116
Amounts owed by subsidiary undertakings..................... 2,642 -- -- --
Prepayments................................................. 547 676 577 681
Other debtors............................................... -- -- 82 82
----- ----- ----- -----
3,189 4,061 659 879
----- ----- ----- -----
Amounts falling due after more than one year:
Lease deposit............................................... 407 407 434 434
----- ----- ----- -----
407 407 434 434
----- ----- ----- -----
Total debtors............................................... 3,596 4,468 1,093 1,313
===== ===== ===== =====
13 CASH AND CASH EQUIVALENTS HELD IN ESCROW
GROUP AND
COMPANY
-------------------
2000 1999
$'000 $'000
-------- --------
Proceeds from sale of technology held in escrow and accrued
interest.................................................. 5,050 6,060
===== =====
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 these accounts.
F-24
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2000 1999
------------------- -------------------
COMPANY GROUP COMPANY GROUP
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Trade creditors............................................. 167 1,084 241 707
Other creditors............................................. 12 12 81 114
Social security............................................. 279 279 160 160
Accruals.................................................... 903 2,324 602 3,771
Taxation.................................................... 261 550 -- 188
Sales return provision...................................... -- -- -- 33
Deferred revenue............................................ -- 898 -- 1,349
Amounts owing to subsidiary undertakings.................... 255 -- 255 --
Convertible promissory note and accrued interest............ -- -- 1,013 1,013
----- ----- ----- -----
1,877 5,147 2,352 7,335
===== ===== ===== =====
On 20 October 1999, the Company signed a convertible promissory note in
favour of Quantum Corporation ("Quantum") for $1.0 million. Quantum Corporation
subsequently assigned this note to Quantum Peripherals Europe. The note was
convertible at Quantum's option to the Company's shares any time during the
lifetime of the note. The initial conversion price was $4.28 per share with
adjustment clauses for stock splits, reverse stock splits and certain offerings.
As a result of the private placement in December 1999 (see Note 17) this
conversion price was adjusted to $4.23 per share on 9 December 1999. All unpaid
principal and unpaid interest, accrued at 8% per annum, compounded quarterly,
was converted to Ordinary Shares on 31 December 2000.
On 20 March 2000, the Company entered into a binding agreement with a
director of the Company, V S Pino, whereby he would provide the Company a
$5.0 million line of credit. The interest rate on amounts drawn down was at
prime plus 2% until 30 June 2000 and thereafter at prime plus 4% per annum
simple interest, payable in cash at the repayment date. The Company drew down a
total of $3.0 million of the line of credit during 2000. On 27 November 2000 the
Company repaid this sum, along with all accrued interest and the termination fee
due.
15 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
There are no amounts falling due after more than one year.
16 PROVISION FOR LIABILITIES AND CHARGES
2000
COMPANY PROVISION FOR LOSSES:
INCURRED BY SUBSIDIARIES
$'000
-----------------------------
At 1 January 2000................................... 1,004
Amount released in year............................. (1,004)
------
At 31 December 2000................................. --
======
F-25
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
17 CALLED UP SHARE CAPITAL
2000 1999
GROUP AND COMPANY 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)......... 18,145,190 5,876 14,039,602 4,644
========== ===== ========== =====
ALLOTMENTS OF SHARES
During the year 191,078 Ordinary shares of 20p each were issued for cash on
the exercise of share options providing total proceeds of $471,000.
The following table summarises the activity:
NUMBER OF
SHARES ALLOTED EXERCISE PRICE RANGE
-------------- ---------------------
21,792 L0.70--L0.90
44,590 $0.656--$1.000
66,711 $1.001--$2.000
26,635 $2.001--$4.000
31,350 $4.001--$5.250
-------
191,078
=======
In addition 43,183 Ordinary shares of 20p each were issued for cash through
participation in the Company's Employee Share Purchase Plan. Of these 21,407
were issued at $5.0469 each and 21,776 were issued at $5.4985 each providing
total proceeds of $228,000.
During the year, the Company issued a total of 19,994 Ordinary Shares in ADS
form at various prices, ranging from $6.281 to $16.50 to a director of the
Company, V S Pino (see Note 14) as payment for drawdown fees under a Line of
Credit arrangement entered into in March 2000.
On December 31, 2000 the Company issued a total of 251,333 Ordinary Shares
in ADS form to Quantum Peripherals (Europe) SA, at a per share price of $4.23
per share under the terms of a convertible promissory note entered into on
20 October 1999 (see Note 14).
PRIVATE PLACEMENTS AND WARRANTS
In a private placement that closed on November 24, 2000, certain
securityholders purchased from the Company a total of 3,600,000 units at a price
of $5.00 per unit. Each unit comprises one ADS and one half of one warrant to
purchase one ADS. As described below, the Company may cancel the warrants if the
closing sale price of the Company's ADSs exceeds $9.00 for 30 consecutive
trading days following the
F-26
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
17 CALLED UP SHARE CAPITAL (CONTINUED)
effectiveness of a registration statement filed for the issuance. This
registration statement became effective on 24 December 2000. As compensation for
services in connection with the private placement, the Company (i) issued
five-year warrants to purchase 225,000 of the Company's ADSs at an exercise
price of $5.00 per share, and (ii) paid a cash compensation equal to six percent
(6%) of the gross proceeds received by the Company in the private placement, to
Jefferies & Company, Inc., the placement agent.
The securityholders that participated in this private placement received
warrants to purchase one ADS for every two ADSs they purchased. The exercise
price of the warrants was set at an exercise price per ADS equal to the lower of
$6.00 and the average quoted closing sale price of the Company's ADSs for the
ten trading days ending on the day preceding the day the Company is informed of
the securityholder's intent to exercise, less a 10% discount. These warrants
expire on 24 November 2003. However, subject to certain conditions, if the
quoted closing sale price of the Company's ADSs exceeds $9.00 per share for any
thirty consecutive trading days, the Company may cancel the warrants upon sixty
days prior written notice.
These securityholders also have rights under their subscription agreements
to be issued additional ADSs by the Company if the registration statement is
suspended for more than 60 days in any 12 month period by the Company. If the
registration statement is suspended beyond the 60 day limit, the Company must
issue to these securityholders 0.07 ADS for each ADS purchased in the private
placement. In addition, the Company must issue 0.02 ADS for each ADS purchased
in the private placement for each month thereafter until the registration
statement is declared effective by the SEC. In these circumstances, the
securityholders must only pay the nominal value, or L0.20, per additional ADS,
which is the lowest amount these ADSs can be purchased under English law.
In a private placement that closed on 12 February 2001, certain
securityholders purchased from the Company a total of 940,000 units at a price
of $5.00 per unit. Each unit comprises one ADS and one half of one warrant to
purchase one ADS. As described below, the Company may cancel the warrants if the
closing sale price of the Company's ADSs exceeds $9.00 for 30 consecutive
trading days following the effectiveness of a registration statement filed for
the issuance. As compensation for services in connection with the private
placement, the Company (i) issued five-year warrants to purchase 25,000 of the
Company's ADSs at an exercise price of $5.00 per share, and (ii) paid a cash
compensation equal to six percent (6%) of the first $2 million and 3% on the
remainder of the gross proceeds received by the Company in the private
placement, to Jefferies & Company, Inc., the placement agent.
The securityholders that participated in this private placement received
warrants to purchase one ADS for every two ADSs they purchased. The exercise
price of the warrants was set at an exercise price per ADS equal to the lower of
$6.00 and the average quoted closing sale price of the Company's ADSs for the
ten trading days ending on the day preceding the day the Company is informed of
the securityholder's intent to exercise, less a 10% discount. These warrants
expire on 12 February 2004. However, subject to certain conditions, if the
quoted closing sale price of the Company's ADSs exceeds $9.00 per share for any
thirty consecutive trading days, the Company may cancel the warrants upon sixty
days prior written notice.
These securityholders also have rights under their subscription agreements
to be issued additional ADSs by the Company if (a) the Company does not register
with the SEC their ADSs and the ADSs underlying the Company's warrants and the
SEC does not declare the registration statement effective by 14 May 2001 or
(b) the registration statement is suspended for more than 60 days in any
12 month period by the Company. If the registration statement the Company files
with the SEC is not declared effective by
F-27
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
17 CALLED UP SHARE CAPITAL (CONTINUED)
the deadline, or if the registration statement is suspended beyond the 60 day
limit, the Company must issue to these securityholders 0.07 ADS for each ADS
purchased in the private placement. In addition, the Company must issue 0.02 ADS
for each ADS purchased in the private placement for each month thereafter until
the registration statement is declared effective by the SEC. In these
circumstances, the securityholders must only pay the nominal value, or L0.20,
per additional ADS, which is the lowest amount these ADSs can be purchased under
English law.
DILUTION ADJUSTMENTS
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 securityholders 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
security holders to purchase ADSs at the nominal value on designated adjustment
dates in the future.
Under the December 1999 private placement, the purchasing securityholders
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. However, the warrants contain anti-dilution provisions which
decrease this exercise price and increase the number of ADSs purchasable if the
Company sells or is deemed to sell any shares at below market price during the
term of the warrants, which ends on 9 December 2004. The private placement that
closed on 24 November 2000 was a sale which triggered the anti-dilution
provisions in the warrants, and, as a consequence, the exercise price of the
warrants has been decreased from $5.29 to $4.77 per ADS, and the number of ADSs
purchasable has increased to 353,834. The private placement on 12 February 2001
also triggered the anti-dilution provisions of the issuance of 9 December 1999.
However, the effect of such dilution was less than 1% of the exercise price and
consequently such adjustment is deferred until such time as the accumulation of
this adjustment and future adjustments exceed at least 1% of the exercise price.
As part of their warrant agreements, the purchasing securityholders may be
entitled to cash payments upon the occurrence of certain Major Transactions, as
defined in the warrant agreements, including change of control provisions. Cash
payments are determined in a methodology described in the agreement. Such
methodology is impacted by market price.
Under the December 1999 private placement, the purchasing securityholders
may be entitled to additional warrants to purchase ADSs at L0.20 nominal value
per share. These rights terminate upon the earlier of (a) at least
$4.75 million of the funds originally held in escrow on 9 December 1999 being
released to the Company by Citrix, or (b) 28 March 2001. Because Citrix has not
released enough of these funds in escrow, the purchasing securityholders have
had an adjustment date each month since 10 March 2000. The purchasing
securityholders will continue to have an adjustment date each month until enough
released from the escrow or 28 March 2001, whichever comes earlier. In February
2000 and September 2000, $1.0 million and $0.3 million, respectively, was
released from escrow to Insignia.
F-28
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
17 CALLED UP SHARE CAPITAL (CONTINUED)
The additional warrants entitle these securityholders to purchase ADSs at
L0.20 nominal value per share if the average of the closing bid price of the
ADSs over ten days before an adjustment date is less than $4.23. Through the
date of this report, there have been 15 adjustment dates. However, as
calculated, the average share price of the Company's ADSs on those adjustment
dates has exceeded the adjustment price of $4.23 per share and consequently no
adjustment has occurred. The remaining adjustment date is 10 March 2001.
If an adjustment is necessary following an adjustment date, the number of
additional ADSs each such securityholder is entitled to purchase 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: (1) the average bid price is 100%, 75%, 50%, 25% and
24.7696% of the adjustment price of $4.23; (2) the number of ordinary shares
issued and outstanding is 19,113,994 (which is the number of ordinary shares
outstanding on 22 February 2001); (3) there was no adjustment of the number of
ADSs issuable upon exercise of the warrants; and (4) the exchange rate remains
at $1.50 per British 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) 391,529 2.11%
50% ($2.1115) 1,239,303 6.39%
25% ($1.0575) 4,454,127 19.71%
24.8269% ($1.050178) 4,507,982 19.90%
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 5,072,071 (1999: 4,672,071) Ordinary shares have been reserved
for the issuance of options. At 31 December 2000 and 31 December 1999,
approximately 641,931 and 909,853, 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 2000....................... 621,463 1,729,510 2,350,973
Granted in the year......................................... 88,000 797,400 885,400
Exercised in the year....................................... (41,190) (149,888) (191,078)
Lapsed in the year.......................................... (63,995) (153,483) (217,478)
------- --------- ---------
Options outstanding at 31 December 2000..................... 604,278 2,223,539 2,827,817
======= ========= =========
F-29
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
17 CALLED UP SHARE CAPITAL (CONTINUED)
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.
1,406,851 and 1,000,517 options were exercisable at 31 December 2000 and
31 December 1999, respectively.
Options outstanding at 31 December 2000 were as follows:
UK SHARE OPTION SCHEMES US SHARE OPTION SCHEMES
----------------------- ------------------------
PERIOD OF PERIOD OF
NUMBER EXERCISE NUMBER EXERCISE
--------- ---------- ---------- ----------
86p-90p per share.............................. 275,250 1994-2004 -- --
430p per share................................. 250 1998-2005 -- --
$0.656-$1.000 per share........................ 46,426 1998-2008 235,649 1998-2008
$1.001-$2.000 per share........................ 48,632 1997-2009 444,862 1997-2009
$2.001-$4.000 per share........................ 46,470 1997-2009 452,864 1997-2007
$4.001-$6.000 per share........................ 102,750 1999-2010 684,164 1996-2010
$6.001-$8.000 per share........................ 55,000 2000-2010 232,000 1999-2010
$8.001-$10.000 per share....................... 26,000 2001-2010 59,000 2001-2010
$10.001-$11.250 per share...................... 3,500 2001-2010 115,000 2000-2010
------- --------- --------- ---------
604,278.. 2,223,539
======= =========
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. 553,021
Ordinary shares have been issued under the Plan at 31 December 2000 (1999:
509,838).
F-30
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
18 RECONCILIATION OF MOVEMENT IN TOTAL SHAREHOLDERS' FUNDS
TOTAL
SHAREHOLDERS'
CALLED UP SHARE PROFIT AND FUNDS
SHARE PREMIUM ACCOUNT CAPITAL -------------------
CAPITAL ACCOUNT LOSS RESERVE 2000 1999
$'000 $'000 $'000 $'000 $'000 $'000
--------- -------- ---------- -------- -------- --------
GROUP
1 January....................................... 4,644 36,136 (34,793) 52 6,039 11,418
Shares issued in year........................... 1,232 18,784 -- -- 20,016 5,035
Share issue expenses............................ -- (2,052) -- -- (2,052) (455)
Loss for year................................... -- -- (6,814) -- (6,814) (9,959)
----- ------ ------- -- ------ ------
31 December..................................... 5,876 52,868 (41,607) 52 17,189 6,039
===== ====== ======= == ====== ======
COMPANY
1 January....................................... 4,644 36,277 (34,882) -- 6,039 11,418
Shares issued in year........................... 1,232 18,784 -- -- 20,016 5,035
Share issue expenses............................ -- (2,052) -- -- (2,052) (455)
Loss for year................................... -- -- (7,186) -- (7,186) (9,959)
----- ------ ------- -- ------ ------
31 December..................................... 5,876 53,009 (42,068) -- 16,817 6,039
===== ====== ======= == ====== ======
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 in the Company in 2000 of $7,186,000 (1999: loss of $9,959,000) is dealt
with in the consolidated profit and loss account.
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 $215,000 in 2000 (1999: $202,000).
F-31
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
20 COMMITMENTS
(1) LEASE COMMITMENTS
The Group has committed to the following annual charges under
non-cancellable operating leases:
PROPERTIES EQUIPMENT
------------------- -------------------
2000 1999 2000 1999
$'000 $'000 $'000 $'000
-------- -------- -------- --------
Expiring:
Within one year..................................... 15 21 43 49
Within two to five years............................ 230 214 38 42
After five years.................................... 339 361 -- --
--- --- -- ---
584 596 81 91
=== === == ===
Property lease commitments are reported net of sub-lease income.
(2) FINANCE LEASE COMMITMENTS
The Group has no finance leases commitments.
(3) CAPITAL COMMITMENTS
There are no material capital commitments.
21 SIGNIFICANT POST BALANCE SHEET EVENTS
In a private placement that closed on 12 February 2001, certain security
holders purchased from the Company a total of 940,000 units at a price of $5.00
per unit, (see Note 17). Each unit comprises one ADS and one half of one warrant
to purchase one ADS. The Company may cancel the warrants if the closing sale
price of the Company's ADSs exceeds $9.00 for 30 consecutive trading days
following the effectiveness of a registration statement filed for the issuance.
As compensation for services in connection with the private placement, the
Company (i) issued five-year warrants to purchase 25,000 of the Company's ADSs
at an exercise price of $5.00 per share, and (ii) paid a cash compensation equal
to six percent (6%) of the first $2 million and 3% on the remainder of the gross
proceeds received by the Company in the private placement, to Jefferies &
Company, Inc., the placement agent.
22 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 $Nil
(1999-$13,000) and the balances due to him at the beginning and the end of the
year were Nil.
F-32
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
22 RELATED PARTY TRANSACTIONS (CONTINUED)
A E Sisto, a director of the Company, held a consultancy contract with the
Company for six months beginning 29 December 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 $Nil (1999-$15,000). In addition in 1999 he
received 10,000 share options that vested monthly over a six month period
commencing 4 January 1999.
D G Frodsham, a director of the Company, undertook consultancy work with the
Company during January 2000, which causes him to be treated as a related party
for the amounts received under this contract. The amount payable in the year,
which was paid during the year, was $15,000 (1999-$Nil).
Other transactions involving directors are disclosed in Notes 4 and 17 to
the accounts and in the Directors' Report on pages F-2 to F-7.
23 LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to
Ordinary shareholders by the weighted average number of Ordinary shares in issue
during the year.
For diluted loss 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.
2000 1999
--------------------------------------- ---------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER OF PER SHARE NUMBER OF PER SHARE
LOSS SHARES AMOUNT LOSS SHARES AMOUNT
$'000 $'000 $ $'000 $'000 $
-------- ---------------- --------- -------- ---------------- ---------
Loss attributable to shareholders... (6,814) (9,959)
BASIC EPS
Loss attributable to shareholders... (6,814) 14,571 (0.47) (9,959) 12,883 (0.77)
EFFECT OF DILUTIVE SECURITIES
Dilutive securities................. -- -- -- --
DILUTED EPS
Adjusted loss....................... (6,814) 14,571 (0.47) (9,959) 12,883 (0.77)
24 FINANCIAL RISKS
The Group's financial risk and treasury policy is as detailed in the
Directors' Report. 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 analyses in this note, except for the currency analysis of
the Group's financial assets and liabilities.
(1) INTEREST RATE RISK
The Group had no outstanding loans at 31 December 2000 (1999: Promissory
note--see Note 14).
F-33
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2000
24 FINANCIAL RISKS (CONTINUED)
(2) CURRENCY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
Included in financial assets and liabilities 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 SHORT SHORT
BANK FUNDS IN LEASE TERM TERM TOTAL TOTAL
DEPOSITS ESCROW DEPOSIT RECEIVABLES LIABILITIES 2000 1999
$'000 $'000 $'000 $'000 $'000 $'000 $'000
---------- -------- -------- ----------- ----------- -------- --------
Sterling................................ 302 -- 407 -- (1,256) (547) 257
US Dollars.............................. 11,996 5,050 -- 3,385 (3,448) 16,983 (4,833)
Other................................... 3 -- -- -- (4) (1) (11)
------ ----- --- ----- ------ ------ ------
12,301 5,050 407 3,385 (4,708) 16,435 (4,587)
====== ===== === ===== ====== ====== ======
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 2000, there were
no currency options outstanding (1999: $Nil outstanding).
(3) MATURITY PROFILE OF FINANCIAL LIABILITIES
PROMISSORY NOTE TOTAL
$'000 $'000
FALLING DUE WITHIN ONE YEAR 2000 1999
--------------------------- --------------- --------
Promissory note............................................. -- 1,013
======== =====
(4) FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The fair value of all Group financial assets and liabilities is considered
to be the same as book value.
F-34
APPENDIX A
INSIGNIA SOLUTIONS PLC
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including by
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
and the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate
any matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the outside auditor
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management, as
well as the outside auditors, have more time, knowledge and more detailed
information on the Company than do Committee members; consequently, in carrying
out its oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
- The Committee shall review and reassess, at least annually, the adequacy
of this Charter and shall make recommendations to the Board, as conditions
dictate, to update this Charter.
- The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior to
the filing of Form 10-K) and review and consider with the
A-1
outside auditors the matters required to be discussed by Statement of
Auditing Standards ("SAS") No. 61 as amended from time to time.
- As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to be
included in the Company's quarterly reports to be filed with Securities
and Exchange Commission and the matters required to be discussed by SAS
No. 61 as amended from time to time; this review will occur prior to the
Company's filing of the Form 10-Q.
- The Committee shall discuss with management and the outside auditors the
quality and adequacy of the Company's internal controls and financial
reporting processess.
- The Committee shall:
- request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
- discuss with the outside auditors any such disclosed relationships and
their impact on the outside auditor's independence; and
- recommend that the Board take appropriate action in response to the
outside auditor's report to satisfy itself of the auditor's
independence.
- The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate,
replace the outside auditor. In addition, the Committee shall:
- consider and approve, if appropriate, major changes to the Company's
accounting principles and practices proposed by management. Discuss
with the independent accountants any significant changes in auditing
standards or their audit scope. Consider and approve, if applicable and
if appropriate, any significant changes to the auditing practices of
the internal auditing department.
- establish regular systems of reporting to the Committee by each of
management, the independent accountants and the internal auditors, if
applicable, regarding any significant judgments made in management's
preparation of the financial statements and any significant
difficulties encountered during the course of the review or audit,
including any restrictions on the scope of the work or access to
required information.
- review any significant disagreement among management and the
independent accountants or the internal auditing department, if
applicable, in connection with the preparation of the financial
statements.
- review with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
- report through its Chairperson to the Board following meetings of the
Committee.
- maintain minutes or other records of meetings and activities of the
Committee.
A-2
INSIGNIA SOLUTIONS PLC
PROXY FOR ANNUAL GENERAL MEETING MAY 11, 2001
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
Nicholas, Viscount Bearsted, 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 nominal
value 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 Friday, May 11, 2001, at 12:30 p.m., local time, and at
any adjournments or postponements thereof.
1. To receive the U.K. statutory accounts of Insignia for the year ended
December 31, 2000.
2. To reappoint PricewaterhouseCoopers as U.K. Statutory Auditors and
Independent Accountants of the Company until the conclusion of the next annual
general meeting and to authorize the directors to fix their remuneration.
/ / FOR / / AGAINST / / ABSTAIN
3. To elect as a director John C. Fogelin.
/ / FOR / / AGAINST / / ABSTAIN
4. To re-elect as a director Richard M. Noling.
/ / FOR / / AGAINST / / ABSTAIN
5. To re-elect as a director Vincent S. Pino.
/ / FOR / / AGAINST / / ABSTAIN
6. To amend the Company's U.K. Employee Share Option Scheme 1996 to increase
the number of ordinary shares available for issuance under the plan by 1,000,000
to a total of 6,072,071 shares.
/ / FOR / / AGAINST / / ABSTAIN
7. To amend the Company's 1995 Incentive Stock Option Plan for U.S. Employees
to increase the number of ordinary shares available for issuance under the plan
by 1,000,000 to a total of 6,072,071 shares.
/ / FOR / / AGAINST / / ABSTAIN
8. To increase the Company's authorized share capital by creating an additional
20,000,000 ordinary shares of 20p nominal value.
/ / FOR / / AGAINST / / ABSTAIN
9. Conditioned upon the passing of Proposal 8 above, to authorize the Board of
Directors of the Company to issue up to 26,224,249 ordinary shares (or other
relevant securities derived from such ordinary shares, such as options or
warrants) of the Company without first gaining shareholder approval, with such
authority lasting a period of five years.
/ / FOR / / AGAINST / / ABSTAIN
10. Conditioned upon the passing of Proposal 9 above, to authorize the Board of
Directors of the Company to issue up to 26,224,249 ordinary shares (or other
securities derived from such ordinary shares, such as options or warrants)
without giving shareholders the first opportunity to purchase such shares or
securities, with such authority lasting a period of five years.
/ / FOR / / AGAINST / / ABSTAIN
11. 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 "FOR" THE PROPOSAL. 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: ________________________, 2001
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 MAILTHIS 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 May 9, 2001, being 48 hours prior to the time fixed for
the Annual General Meeting.
Note: If you wish to appoint someone other than Mr. Noling or Viscount
Bearsted as proxy, references to Mr. Noling and Viscount Bearsted 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.
INSIGNIA SOLUTIONS PLC
INSTRUCTIONS TO THE BANK OF NEW YORK, AS DEPOSITARY
(MUST BE RECEIVED PRIOR TO THE CLOSE OF BUSINESS ON MAY 4, 2001)
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 March 19, 2001, at the
Annual General Meeting of the Members of INSIGNIA SOLUTIONS plc to be held in
High Wycombe, England, on May 11, 2001 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 receive the U.K. Statutory Accounts for the year ended December 31,
2000.
2. To reappoint PricewaterhouseCoopers as U.K. Statutory Auditors and
Independent Accountants of the company until the conclusion of the next
annual general meeting and to authorize the directors to fix their
remuneration.
/ / FOR / / AGAINST / / ABSTAIN
3. To elect as a director John C. Fogelin.
/ / FOR / / AGAINST / / ABSTAIN
4. To re-elect as a director Richard M. Noling.
/ / FOR / / AGAINST / / ABSTAIN
5. To re-elect as a director Vincent S. Pino.
/ / FOR / / AGAINST / / ABSTAIN
6. To amend the Company's U.K. Employee Share Option Scheme 1996 to increase
the number of ordinary shares available for issuance under the plan by
1,000,000 to a total of 6,072,071 shares.
/ / FOR / / AGAINST / / ABSTAIN
7. To amend the Company's 1995 Incentive Stock Option Plan for U.S. Employees
to increase the number of ordinary shares available for issuance under the
plan by 1,000,000 to a total of 6,072,071 shares.
/ / FOR / / AGAINST / / ABSTAIN
8. To increase the Company's authorized share capital by creating an
additional 20,000,000 ordinary shares of 20p nominal value.
/ / FOR / / AGAINST / / ABSTAIN
9. Conditioned upon the passing of Proposal 8 above, to authorize the Board
of Directors of the Company to issue up to 26,224,249 ordinary shares
(or other relevant securities derived from such ordinary shares, such as
options or warrants) of the Company without first gaining shareholder
approval, with such authority lasting a period of five years.
/ / FOR / / AGAINST / / ABSTAIN
10. Conditioned upon the passing of Proposal 9 above, to authorize the Board
of Directors of the Company to issue up to 26,224,249 ordinary shares
(or other securities derived from such ordinary shares, such as options
or warrants) without giving shareholders the first opportunity to
purchase such shares or securities, with such authority lasting a period
of five years.
/ / FOR / / AGAINST / / ABSTAIN
11. 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:_____________________, 2001
_________________________________
(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]