-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bv1NP1lcXtcT6yb7pAodkWPvjZhH+PGgyaKE5YHW+L/XkLaEvYi91wwnGpXSaLxb qmRzB7tIj+YMph7epoadFA== 0000912057-99-009481.txt : 19991216 0000912057-99-009481.hdr.sgml : 19991216 ACCESSION NUMBER: 0000912057-99-009481 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991210 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGNIA SOLUTIONS PLC CENTRAL INDEX KEY: 0001002390 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27012 FILM NUMBER: 99775047 BUSINESS ADDRESS: STREET 1: 41300 CHRISTY ST CITY: FREMONT STATE: CA ZIP: 94538-3115 BUSINESS PHONE: 5103603700 MAIL ADDRESS: STREET 1: 41300 CHRISTY ST CITY: FREMONT STATE: CA ZIP: 94538-3115 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported: DECEMBER 10, 1999 INSIGNIA SOLUTIONS PLC (Exact name of registrant as specified in this charter) ENGLAND AND WALES (State or Other Jurisdiction of Incorporation) 0-27012 NOT APPLICABLE (Commission File Number) (I.R.S. Employer Identification Number) 41300 CHRISTY STREET, FREMONT, CALIFORNIA 94538 UNITED STATES OF AMERICA THE MERCURY CENTRE, WYCOMBE LANE, HIGH WYCOMBE, BUCKS HP10 0HH UNITED KINGDOM (Address of principal executive offices) (Zip Code) (510) 360-3700 (44) 1628-539500 (Registrant's Telephone Numbers, Including Area Code) ITEM 5. OTHER EVENTS On December 9, 1999, Insignia Solutions closed a private placement under a Securities Purchase Agreement dated December 9, 1999 with Castle Creek Technology Partners LLC and a Securities Purchase Agreement of the same date with four other investors consisting of two members of the board of directors and two other individuals. These five investors purchased, at a per share price of $4.23, a total of 1,063,515 American Depositary Shares (ADSs), each representing one ordinary share, 20 pence par value per share. Insignia also issued warrants to the purchasers to purchase a total of 319,054 ADSs at a price of $5.29 per share. The warrants expire on December 9, 2004. In addition, Insignia will issue to the purchasers warrants to purchase additional ADSs, at par value, if the market price of the ADSs on certain dates within the twelve months following the closing is lower than the market price of the ADSs on the date of the closing, which was December 9, 1999. Insignia has also agreed to register the ADSs, including the ADSs issuable upon exercise of the warrants, under the Securities Act of 1933 for resale by the purchasers. The Registration Rights Agreement entered into under the Securities Purchase Agreements provides that Insignia must file the registration statement with the Securities and Exchange Commission by no later than 30 days after the closing. A copy of each Securities Purchase Agreement, Warrant and Registration Rights Agreement is filed as an Exhibit to this Report. These documents are incorporated herein by this reference. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. Not Applicable. (b) Pro Forma Financial Information. Not Applicable. (c) Exhibits. The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION OF EXHIBIT 4.05 Registration Rights Agreement dated as of December 9, 1999, between Insignia Solutions plc and Castle Creek Technology Partners LLC. 4.06 ADSs Purchase Warrant issued to Castle Creek Technology Partners LLC dated December 9, 1999. 4.07 ADSs Purchase Reset Warrant issued to Castle Creek Technology Partners LLC dated December 9, 1999. 4.08 Registration Rights Agreement dated as of December 9, 1999, between Insignia Solutions plc and the Purchasers named therein. 4.09 ADSs Purchase Warrant issued to the Purchasers dated December 9, 1999. 4.10 ADSs Purchase Reset Warrant issued to the Purchasers dated December 9, 1999. 10.50 Securities Purchase Agreement dated as if December 9, 1999, between Insignia Solutions plc and Castle Creek Technology Partners LLC. 10.51 Securities Purchase Agreement dated as if December 9, 1999, between Insignia Solutions plc and the Purchasers named therein.
3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: December 15, 1999 Insignia Solutions plc By: /s/ STEPHEN M. AMBLER ------------------------------ Stephen M. Ambler, SeniorVice President and Chief Financial Officer 4 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT 4.05 Registration Rights Agreement dated as of December 9, 1999, between Insignia Solutions plc and Castle Creek Technology Partners LLC. 4.06 ADSs Purchase Warrant issued to Castle Creek Technology Partners LLC dated December 9, 1999. 4.07 ADSs Purchase Reset Warrant issued to Castle Creek Technology Partners LLC dated December 9, 1999. 4.08 Registration Rights Agreement dated as of December 9, 1999, between Insignia Solutions plc and the Purchasers named therein. 4.09 ADSs Purchase Warrant issued to the Purchasers dated December 9, 1999. 4.10 ADSs Purchase Reset Warrant issued to the Purchasers dated December 9, 1999. 10.50 Securities Purchase Agreement dated as if December 9, 1999, between Insignia Solutions plc and Castle Creek Technology Partners LLC. 10.51 Securities Purchase Agreement dated as if December 9, 1999, between Insignia Solutions plc and the Purchasers named therein.
5 EX-4.05 2 EXHIBIT 4.05 EXHIBIT B REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is entered into as of December 9, 1999, by and between Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), with headquarters located at 41300 Christy Street, Fremont, California 94538, and Castle Creek Technology Partners LLC, an Illinois limited liability company located at 77 West Wacker Drive, Suite 4040, Chicago, Illinois 60601 (the "INITIAL PURCHASER"). RECITALS A. In connection with the Securities Purchase Agreement dated of even date herewith by and between the Company and Initial Purchaser (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the conditions contained therein, to issue and sell to Initial Purchaser (i) the Company's American Depository Shares (the "ADSs"), each ADS representing one ordinary shares of 20p each nominal value of the Company (the "ORDINARY SHARES"); (ii) a warrant exercisable for ADSs, in the form attached as EXHIBIT A to the Securities Purchase Agreement (the "INITIAL WARRANT"); and (iii) a warrant in the form of EXHIBIT C to the Securities Purchase Agreement ( the "RESET WARRANT", and together with the Initial Warrant, the "WARRANTS"). ADSs issued and purchased pursuant to the Securities Purchase Agreement are herein referred to as "SHARES" and ADSs issued or issuable upon exercise of the Warrants are herein referred to as "WARRANT SHARES". B. To induce Initial Purchaser to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "SECURITIES ACT"), and applicable state securities laws. AGREEMENTS NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, and Initial Purchaser hereby agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "PURCHASERS" means Initial Purchaser and any transferees or assignees who agree to become bound by the provisions of this Agreement in accordance with Article IX hereof (each, a "PURCHASER"). (b) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("RULE 415"), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC"). (c) "REGISTRABLE SECURITIES" means the Shares and the Warrant Shares issued or issuable with respect to the Warrants (without regard to any limitations on exercise) and any shares of capital stock issued or issuable, from time to time (with any adjustments), on or in exchange for or otherwise with respect to the ADRs or any other Registrable Securities. (d) "REGISTRATION STATEMENT" means a registration statement of the Company under the Securities Act pursuant to the provisions of this Agreement. (e) "FUNDED AMOUNT" means Three Million Five Hundred Thousand Dollars ($3,500,000). 1.2 CAPITALIZED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. ARTICLE II REGISTRATION 2.1 MANDATORY REGISTRATION. The Company shall prepare and file as soon as practicable but in any event on or prior to thirty (30) days after the date of the Closing with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on such form of Registration Statement as is then available to effect a registration of all of the Registrable Securities (without regard to any limitations on exercise of the Warrants), including those issuable upon full exercise of the Warrants purchased and sold at the Closing. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to and (subject to the approval of (which approval shall be rendered within 3 business days after receipt thereof and shall not be unreasonably withheld, delayed or denied)) the Initial Purchaser and its counsel at least seven (7) business days (or fewer to the extent provided herein) prior to its filing or other submission. The Company shall also prepare and file such amendments to registration statements and such additional registration statements as may from time to time be required by this Agreement. 2.2 UNDERWRITTEN OFFERING. If any offering pursuant to a Registration Statement filed pursuant to Section 2.1 hereof involves an underwritten offering, the Purchasers who hold a majority in interest of the Registrable Securities subject to such underwritten offering, with the consent of Initial Purchaser, shall have the right to select one legal counsel to represent them and an investment banker or bankers and manager or managers to administer the offering, which investment banker or 2 bankers or manager or managers shall be reasonably satisfactory to the Company, and all fees and expenses of which shall be paid by the Purchasers. 2.3 PAYMENTS BY THE COMPANY. The Company shall use its best efforts to cause the Registration Statement filed pursuant to Section 2.1 hereof to become effective as soon as practicable, but in no event later than the ninetieth (90th) day (or the one hundred twentieth (120th) day if the SEC reviews such Registration Statement) following the Closing Date (the "REGISTRATION DEADLINE"). If any Registration Statement required to be filed by the Company pursuant to Section 2.1 hereof is not declared effective by the SEC on or before the applicable Registration Deadline (a "REGISTRATION FAILURE"), or after such Registration Statement has been declared effective by the SEC, sales of all the Registrable Securities cannot be made pursuant to the Registration Statement (by reason of a stop order or the Company's failure to update the Registration Statement or any other reason outside the control of the Purchasers) (a "REGISTRATION SUSPENSION"), then the Company will make payments to the Purchasers in such amounts and at such times as shall be determined pursuant to this Section 2.3 as partial relief for the damages to the Purchasers by reason of any such delay in or reduction of their ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity). In the event of a Registration Failure, the Company shall pay to the Purchasers an amount equal to (A) the Multiplier (as defined herein) times (B) the sum of the aggregate Funded Amount plus the amount payable to the Company under the Warrants times (C) the number of months (prorated per day for partial months) following the Registration Deadline prior to the date the Registration Statement filed pursuant to Section 2.1 is declared effective by the SEC. In addition, in the event of a Registration Suspension, the Company shall pay to the Purchasers an amount equal to (D) the Multiplier times (E) the Funded Amount times (F) the number of months (prorated per day for partial months) from (x) the date on which sales of all the Registrable Securities first cannot be made to (y) the date on which sales of all the Registrable Securities can again be made. Amounts to be paid pursuant to this Section 2.3 shall be paid to Purchasers based upon the number of Shares and Warrant Shares owned and Warrant Shares issuable upon full conversion of the Warrants by each Purchaser, and shall be paid in cash. Such payments shall be made within five (5) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, payments shall be made for each such thirty (30) day period within five (5) days after the end of such thirty (30) day period. For any given date, the "MULTIPLIER" shall mean, (i) during the first thirty days following the Registration Deadline during which there is a Registration Failure or a Registration Suspension, 0.01, (ii) from the thirty-first day of a Registration Failure or Registration Suspension until the sixtieth such day, 0.015 and (iii) after the sixtieth day of a Registration Failure or Registration Suspension, 0.02. Notwithstanding the foregoing, a Registration Suspension effected by the Company pursuant to a Permitted Blackout shall not give rise to an obligation to make such payments. For purposes hereof, "PERMITTED BLACKOUT" shall mean the suspension of the Registration Statement after the effective date upon the good faith determination by the Company's Board of Directors that a material financing, acquisition or other extraordinary corporate transaction is in the best interest of the Company and its shareholders, and that disclosure thereof to the public would have a material adverse effect on the ability of the Company to consummate such material financing, acquisition or other extraordinary corporate transaction, all after receiving advice to such effect from 3 a nationally recognized investment banking firm or, to the extent appropriate, the Company's counsel which has been engaged by the Company in connection with such financing, acquisition or other extraordinary corporate transaction; PROVIDED, HOWEVER, that (i) no more than two (2) such Permitted Blackouts may be imposed during any period of twelve (12) consecutive months and (ii) the aggregate duration of all Permitted Blackouts during any period of twelve (12) consecutive months shall be no more than fifteen (15) business days. 2.4 PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the Registration Period (as hereinafter defined) the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then the Company shall send to each Purchaser who has a right to have Registrable Securities covered by a Registration Statement pursuant to this Agreement written notice of such determination and, if within fifteen (15) days after the date of such notice, such Purchaser shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Purchaser requests to be registered, except that if, in connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of ADSs which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which such Purchaser has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Purchasers seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such Purchasers; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the riht to include such securities in the Registration Statement. No right to registration of Registrable Securities under this Section 2.4 shall be construed to limit any registration required under Section 2.1 or 3.2 hereof. If an offering in connection with which a Purchaser is entitled to registration under this Section 2.4 is an underwritten offering, then each Purchaser whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other ADSs included in such underwritten offering. So long as a Registration Statement is effective and immediately available for use so that all of the Registrable Securities may be sold in reliance thereon, the provisions of this section shall not apply. 4 2.5 ELIGIBILITY FOR FORM S-3. The Company represents and warrants that it meets the requirements for the use of Form S-3 for registration of the re-sale by Initial Purchaser and any other Purchasers of the Registrable Securities and the Company shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-3. ARTICLE III OBLIGATIONS OF THE COMPANY In connection with the registration of the Registrable Securities, the Company shall have the following obligations, including with respect to each Registration Statement to be filed hereunder: 3.1 The Company shall prepare promptly and file with the SEC each Registration Statement required by Section 2.1, and cause each such Registration Statement relating to Registrable Securities to become effective as soon as practicable after such filing, and keep the Registration Statement effective pursuant to Rule 415 and available for use at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold (and no further Registrable Securities may be issued in the future) and (ii) the date on which all of the Registrable Securities (in the reasonable opinion of counsel to Initial Purchaser) may be immediately sold to the public without registration and without restriction as to the number of Registrable Securities to be sold, whether pursuant to Rule 144 or otherwise (the "REGISTRATION PERIOD"). Each such Registration Statement (including any amendments or supplements thereto and prospectuses contained therein and all documents incorporated by reference therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading. 3.2 The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with each Registration Statement as may be necessary to keep such Registration Statement effective and available for use at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until the termination of the Registration Period or, if earlier, such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the event the number of Shares available under a Registration Statement filed pursuant to this Agreement is at any time insufficient to cover one hundred seventy five percent (175%) of the ADSs issued or issuable pursuant to all of the then-issued Warrants or the Securities Purchase Agreement (without regard to any limitations on exercise contained therein), the Company shall amend, if permissible, the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover two hundred percent (200%) of the Warrant Shares issued or issuable upon exercise of the Warrants (without regard to any limitation on exercise contained therein), in each case, as soon as 5 practicable, but in any event within five (5) days. The Company shall cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. 3.3 The Company shall furnish to each Purchaser whose Registrable Securities are included in the Registration Statement and its legal counsel (a) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in the case of the Registration Statement referred to in Section 2.1, each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion, if any, thereof which contains information for which the Company has sought confidential treatment), and (b) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Purchaser may reasonably request in order to facilitate the disposition of the Registrable Securities owned (or to be owned) by such Purchaser. 3.4 The Company shall (a) register and qualify the Registrable Securities covered by each Registration Statement under securities laws of such jurisdictions in the United States as each Purchaser who holds (or has the right to hold) Registrable Securities being offered reasonably requests, (b) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness and availability for use thereof during the applicable Registration Period, (c) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the applicable Registration Period, and (d) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4, (ii) subject itself to general taxation in any such jurisdiction, (iii) file a general consent to service of process in any such jurisdiction, (iv) provide any undertakings that cause the Company material expense or burden, or (v) make any change in its charter or by-laws, which in each case the board of directors of the Company determines to be contrary to the best interests of the Company and its shareholders. 3.5 In the event the Purchasers who hold a majority in interest of the Registrable Securities being offered in an offering pursuant to a Registration Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof select underwriters for the offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering, but shall not bear any costs or expenses of the underwriting. 3.6 As soon as practicable after becoming aware of such event, the Company shall notify (by telephone and also by facsimile and reputable overnight courier) each Purchaser of the happening of any event, of which the Company has knowledge, as a result of which the prospectus included in 6 the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use its best efforts as soon as possible (but in any event within five (5) days) to prepare a supplement or amendment to the Registration Statement (and make all required filings with the SEC) to correct such untrue statement or omission, and the Company shall simultaneously (and thereafter as requested) deliver such number of copies of such supplement or amendment to each Purchaser (or other applicable document) as such Purchaser may request in writing. Unless such an event is publicly announced, the Company shall not, without the consent of the Purchaser, give such Purchaser any material non-public information, but shall inform the Purchasers that such prospectus includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 3.7 The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest practicable time and the Company shall immediately notify by facsimile each Purchaser (at the facsimile number for such Purchaser set forth on the signature page hereto) who holds Registrable Securities (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof. 3.8 The Company shall permit counsel designated by Initial Purchaser to review the Registration Statement and all amendments and supplements thereto a reasonable period of time prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects, provided such objection shall be communicated to the Company within 3 business days after receipt of such Registration Statement by Purchaser. 3.9 Intentionally deleted. 3.10 At the request of any Purchaser, the Company shall furnish, on the date of effectiveness of the Registration Statement and thereafter from time to time on such dates as a Purchaser may reasonably request (a) an opinion, dated as of such applicable date, from counsel representing the Company addressed to the Purchasers and in form, scope and substance as is customarily given in an underwritten public offering and (b) a letter, dated as of such applicable date, from the Company's independent certified public accountants addressed to the Purchasers and in form, scope and substance as customarily given to underwriters in an underwritten public offering. 3.11 The Company shall make available for inspection by (i) any Purchaser, (ii) any underwriter participating in any disposition pursuant to the Registration Statement, (iii) attorneys and accountants retained by any Purchaser, and (iv) attorneys retained by such underwriters (collectively, the "INSPECTORS") all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the "RECORDS"), as shall be reasonably deemed necessary by each Inspector and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each 7 Inspector shall hold in confidence and shall not make any disclosure (except to a Purchaser) of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified in writing, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement to permit Purchaser to sell under such Registration Statement, (b) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or is otherwise required by applicable law or legal process or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the relevant Purchaser). The Company shall not be required to disclose any confidential information in such Records to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in form and reasonable substance satisfactory to the Company) with the Company with respect thereto, substantially in the form of this Section 3.11. Each Purchaser agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein shall be deemed to limit a Purchaser's ability to sell Registrable Securities in a manner which is consistent with applicable laws and regulations. 3.12 The Company shall hold in confidence and not make any disclosure of information concerning a Purchaser provided to the Company excluding any information provided by Purchaser for use in or in connection with a Registration Statement unless (a) disclosure of such information is necessary to comply with federal or state securities laws, (b) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (c) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or is otherwise required by applicable law or legal process, (d) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the Company), or (e) such Purchaser consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning a Purchaser is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Purchaser prior to making such disclosure, and allow the Purchaser, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 3.13 From and after each Closing, the Company shall cause the listing and the continuation of listing of all the Registrable Securities related to such Closing and required to be covered by a Registration Statement on the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange and cause the Registrable Securities to be quoted or listed on each additional national securities exchange or quotation system upon which the ADRs are then listed or quoted. 8 3.14 The Company shall provide a transfer agent and Depositary, which may be a single entity, for the Registrable Securities not later than the effective date of the applicable Registration Statement. 3.15 The Company shall cooperate with the Purchasers who hold Registrable Securities being offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Purchasers may reasonably request and registered in such names as the managing underwriter or underwriters, if any, or the Purchasers may request, and, within two (2) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall cause legal counsel selected by the Company to deliver, to the Depositary for the Registrable Securities (with copies to the Purchasers whose Registrable Securities are included in such Registration Statement) an opinion of such counsel in the form attached hereto as EXHIBIT 1. 3.16 At the request of any Purchaser, the Company shall promptly prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with a Registration Statement filed pursuant hereto as may be necessary in order to change the plan of distribution set forth in such Registration Statement. 3.17 The Company shall comply with all applicable laws related to a Registration Statement and offering and sale of securities covered by the Registration Statement and all applicable rules and regulations of governmental authorities in connection therewith (including, without limitation, the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission). 3.18 The Company shall take all such other actions as any Purchaser or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, but shall not be required to incur any costs or expenses in connection therewith not otherwise provided herein to be borne by the Company. 3.19 From and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company (other than Purchasers with respect to Registrable Securities) to include any of their securities in any Registration Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof without the consent of Initial Purchaser and the holders of a majority of the Registrable Securities. Without the consent of Initial Purchaser, until the effectiveness of the Registration Statements contemplated by Section 2.1 hereof, the Company shall not file any other Registration Statement for the sale of any securities, whether for the account of the Company or any other person. 9 3.20 The Registration Statement shall state that it covers such indeterminate number of additional shares as may be issuable upon exercise of the Warrants to prevent dilution resulting from stock splits, stock dividends and other similar transactions. ARTICLE IV OBLIGATIONS OF THE PURCHASERS In connection with the registration of the Registrable Securities, the Purchasers shall have the following obligations: 4.1 Each Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities. At least five (5) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Purchaser of the information the Company requires from each such Purchaser. 4.2 Each Purchaser, by such Purchaser's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statements hereunder, unless such Purchaser has notified the Company in writing of such Purchaser's election to exclude all of such Purchaser's Registrable Securities from the Registration Statement. 4.3 Each Purchaser whose Registrable Securities are included in a Registration Statement understands that the Securities Act may require delivery of a prospectus relating thereto in connection with any sale thereof pursuant to such Registration Statement, and each such Purchaser shall use its reasonable efforts to comply with the applicable prospectus delivery requirements of the Securities Act in connection with any such sale. 4.4 Intentionally omitted. 4.5 Each Purchaser agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3.6, such Purchaser will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.6 or advice that a supplement or amendment is not required and, if so directed by the Company, such Purchaser shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Purchaser's possession (other than a limited number of permanent file copies), of the prospectus covering such Registrable Securities current at the time of receipt of such notice. Purchaser's obligations under this paragraph shall in no way limit the Company's obligations under this Agreement or Purchaser's rights or remedies against the Company with respect to any breach or threatened breach by the Company of any such obligations. 10 4.6 Without limiting a Purchaser's rights under Section 2.1 or 3.2 hereof, no Purchaser may participate in any underwritten distribution hereunder unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities on the basis provided in any underwriting agreements in usual and customary form entered into by the Company pursuant to Section 3.5 hereof, (b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (c) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of those payable by the Company pursuant to Article V. Without implication that the contrary would otherwise be true, it is expressly understood and agreed that no Purchaser shall be required to participate in any such underwritten distribution. ARTICLE V EXPENSES OF REGISTRATION All expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Articles II and III, including, without limitation, all registration, listing and qualification fees, printers and accounting fees, the fees and disbursements of counsel for the Company, shall be borne by the Company. ARTICLE VI INDEMNIFICATION In the event any Registrable Securities are included in a Registration Statement under this Agreement: 6.1 To the extent permitted by law, the Company will indemnify, hold harmless and defend (a) each Purchaser who holds such Registrable Securities, (b) each underwriter of Registrable Securities and (c) the directors, officers, partners, members, employees, agents and persons who control any Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries whether or not in any court, before any administrative body or by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, "CLAIMS") to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, 11 not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall reimburse each such Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.1: (x) shall not apply to an Indemnified Person with respect to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (z) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company pursuant to Section 3.3 hereof, and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by a Purchaser pursuant to Article IX. 6.2 In connection with any Registration Statement in which a Purchaser is participating, to the extent permitted by law, each such Purchaser agrees to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 6.1, the Company, each of its directors, each of its officers who signs the Registration Statement, its employees, agents and persons, if any, who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any other shareholder selling securities pursuant to the Registration Statement, together with its directors, officers and members, and any person who controls such shareholder or underwriter within the meaning of the Securities Act or the Exchange Act (such an "INDEMNIFIED PARTY"), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Purchaser expressly for use in connection with such Registration Statement; and such Purchaser will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6.2 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Purchaser, which consent shall not be unreasonably withheld; provided, further, however, that a Purchaser shall be liable under this Agreement (including this Section 6.2 and Article VII) for only that amount as does not exceed the net proceeds actually received by such Purchaser 12 as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Purchasers pursuant to Article IX. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.2 with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, and the Indemnified Party failed to utilize such corrected prospectus. 6.3 Promptly after receipt by an Indemnified Person or Indemnified Party under this Article VI of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Article VI, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right (at its expense) to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and continue control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that such indemnifying party shall diligently pursue such defense and an indemnifying party shall not be entitled to assume (or continue) such defense if the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or Indemnified Party and the indemnifying party, and any other party represented by such counsel in such proceeding or the actual or potential defendants in, or targets of, any such action include both the Indemnified Person or the Indemnified Party and any such Indemnified Person or Indemnified Party reasonably determines that there may be legal defenses available to such Indemnified Person or Indemnified Party which are different from or in addition to those available to such indemnifying party. Notwithstanding any assumption of such defense and without limiting any indemnification obligation provided for in Section 6.1 or 6.2, the Indemnified Party or Indemnified Persons, as the case may be, shall be entitled to be represented by counsel (at its own expense if the indemnifying party is permitted to assume and continue control of the defense and otherwise at he expense of the indemnifying party) and such counsel shall be entitled to participate in such defense. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Article VI, except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. ARTICLE VII CONTRIBUTION 13 To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Article VI to the fullest extent permitted by law; provided, however, that (i) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, and (ii) contribution (together with any indemnification or other obligations under this Agreement) by any Purchaser of Registrable Securities shall be limited in amount to the net amount of proceeds received by such Purchaser from the sale of its Registrable Securities. ARTICLE VIII REPORTS UNDER THE EXCHANGE ACT With a view to making available to each Purchaser the benefits of Rule 144, the Company agrees that so long as a Purchaser holds Warrants, any Registrable Securities, the Company shall: 8.1(a) Not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. 8.1(b) File with the SEC in a timely manner and make and keep available all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the filing and availability of such reports and other documents is required for the applicable provisions of Rule 144; and 8.2 Furnish to each Purchaser promptly upon written request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Purchaser to sell such securities pursuant to Rule 144 without registration. ARTICLE IX ASSIGNMENT OF REGISTRATION RIGHTS The rights of the Purchasers hereunder as to Registrable Securities transferred by a Purchaser (or represented by Warrants transferred by a Purchaser), including the right to have the Company register Registrable Securities pursuant to this Agreement, shall be automatically assigned by each Purchaser to any transferee of all or any portion of the Registrable Securities if: (a) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (i) the 14 name and address of such transferee or assignee, (ii) the securities with respect to which such registration rights are being transferred or assigned and (iii) the information specified in Section 3.12 to such transferee, (c) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act or applicable state securities laws, and (d) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing for the benefit of the Company to be bound by all of the provisions contained herein. The rights of a Purchaser hereunder with respect to any Registrable Securities not transferred (and not represented by Warrants transferred) shall not be assigned by virtue of the transfer of other Registrable Securities or transferred Warrants representing other Registrable Securities. ARTICLE X AMENDMENT OF REGISTRATION RIGHTS Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with written consent of the Company, Initial Purchaser (so long as Initial Purchaser still beneficially owns Registrable Securities) and Purchasers who hold a majority interest of the Registrable Securities. Any amendment or waiver effected in accordance with this Article X shall be binding upon each Purchaser and the Company. Notwithstanding the foregoing, no amendment or waiver shall retroactively affect any Purchaser without its consent or prospectively adversely affect any Purchaser who no longer owns any Warrants, Registrable Securities without its consent. No amendment or waiver may adversely affect one or more Purchasers or group of Purchasers vis-a-vis any other Purchaser or group of Purchasers. Neither Article VI nor Article VII hereof may be amended or waived in a manner adverse to a Purchaser without its consent. Notwithstanding anything to the contrary contained in this Article X, no amendment or waiver shall be applicable to an Initial Purchaser who does not consent in writing thereto. ARTICLE XI MISCELLANEOUS 11.1 A person or entity is deemed to be a holder (or a holder in interest) of Registrable Securities whenever such person or entity owns of record such Registrable Securities (or the Warrants which may be exercised for Registrable Securities). If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities (or Warrants, as the case may be). 11.2 Any notices herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by machine-generated confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: 15 If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, CA 94538 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P. O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. and if to Initial Purchaser: Castle Creek Technology Partners LLC c/o Castle Creek Partners LLC 77 West Wacker Drive, Suite 4040 Chicago, Illinois 60601 Telecopy: (312) 499-6999 Attention: Portfolio Manager with a copy to: Altheimer & Gray 10 South Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telecopy: (312) 715-4800 Attention: Peter H. Lieberman, Esq. and if to any Purchaser, at such address as such Purchaser, shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 11.2. 11.3 Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. 16 11.4 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the federal courts located in the state of New York and the state courts of the State of New York located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The parties hereto further agree that service of process upon the parties hereto mailed by first class mail shall be deemed in every respect effective service of process upon each such party in any such suit or proceeding. Nothing herein shall affect either party's right to serve process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11.5 This Agreement and the Securities Purchase Agreement (including all schedules and exhibits thereto and all certificates and opinions required thereby) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Securities Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. 11.6 Subject to the requirements of Article IX hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. Notwithstanding anything to the contrary contained herein, including, without limitation, Article IX (and without compliance therewith), the rights of a Purchaser hereunder shall be assignable to and exercisable by a bona fide pledgee of the Registrable Securities in connection with a Purchaser's margin or brokerage accounts. 11.7 The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 11.8 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto, by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. 11.9 Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 17 11.10 Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by each Purchaser and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers and that the remedy at law for any such breach may be inadequate. 11.11 The initial number of Registrable Securities included on any Registration Statement and each increase to the number of Registrable Securities included thereon shall be allocated pro rata among the Purchasers based on the number of Registrable Securities held by each Purchaser at the time of such establishment or increase, as the case may be. In the event a Purchaser shall sell or otherwise transfer any of such holder's Registrable Securities, each transferee shall be allocated a pro rata portion of the number of Registrable Securities included on a Registration Statement for such transferor. Any ADSs included on a Registration Statement and which remain allocated to any person or entity which does not hold any Registrable Securities shall be allocated to the remaining Purchasers, pro rata based on the number of shares of Registrable Securities then held by such Purchasers. Without implication that the contrary would otherwise be true, for purposes of this paragraph, all Warrants then outstanding shall be assumed exercised for Registrable Securities (without giving effect to any limitations on exercise contained therein). 11.12 PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to make any cash payment to a Purchaser under this Agreement, such cash payment shall be due on the date (the "CASH DUE DATE") that such Purchaser delivers written notice from the Purchaser to the Company. Such cash payment shall be made to the Purchaser by the method (by certified or cashier's check or wire transfer of immediately available funds) elected by such Holder. If such payment is not delivered within two (2) days of the Cash Due Date, such Purchaser shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the Holder. 11.13 If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement. * * * 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. COMPANY: INSIGNIA SOLUTIONS PLC By: s/ Richard M. Noling Name: Richard M. Noling Title: President and CEO PURCHASER: CASTLE CREEK TECHNOLOGY PARTNERS LLC By: Castle Creek Partners, L.L.C. Its: Investment Manager By: s/John D. Ziegelman Name: John D. Ziegelman Title: Managing Member 19 EXHIBIT 1 TO REGISTRATION RIGHTS AGREEMENT [Date] [Name and address of Depositary] RE: INSIGNIA SOLUTIONS PLC Ladies and Gentlemen: We are counsel to Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), and we understand that Castle Creek Technology Partners LLC (the "HOLDER") has purchased from the Company American Depository Shares (the "ADSS") and certain Warrants to purchase additional ADSs. The ADSs were purchased by the Holder pursuant to a Securities Purchase Agreement, dated as of December __, 1999, by and among the Company and the Holder (the "AGREEMENT"). Pursuant to a Registration Rights Agreement, dated as of December __, 1999, by and among the Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the Holder, among other things, to register the Registrable Securities (as that term is defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the Registration Rights Agreement. In connection with the Company's obligations under the Registration Rights Agreement, on _______ __, 1999, the Company filed a Registration Statement on Form S-3 (File No. 333- __________) (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities, which names the Holder as a selling shareholder thereunder. [Other customary introductory and scope of examination language to be inserted, in each case as reasonably acceptable to Holders.] Based on the foregoing, we are of the opinion that the resale of Registrable Securities have been registered under the Securities Act. [Other appropriate customary language to be included, in each case as reasonably acceptable to Holders.] Very truly yours, cc: Castle Creek Technology Partners LLC EX-4.06 3 EXHIBIT 4.06 EXHIBIT A VOID AFTER 5:00 P.M., CENTRAL TIME ON DECEMBER 9, 2004 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase 248,154 American Depository Shares Date: December 9, 1999 INSIGNIA SOLUTIONS PLC ADSS PURCHASE WARRANT THIS CERTIFIES THAT, for value received, Castle Creek Technology Partners LLC ("CASTLE CREEK"), or its registered assigns, is entitled to purchase from Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), at any time or from time to time during the period specified in Section 2 hereof, 248,154 fully paid American Depository Shares (the "ADSS," or "SHARES"), each ADS representing one ordinary share of 20p each nominal value of the Company (the "ORDINARY SHARES"), at an exercise price of $5.29 per Share (the "EXERCISE PRICE"). This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated December 9, 1999 by and between the Company and Castle Creek (the "SECURITIES PURCHASE AGREEMENT"). The number of ADSs purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "CLOSING BID PRICE" means, for any security as of any date, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holder hereof (the "HOLDER") if Bloomberg Financial Markets is not then reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board of such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder with the costs of such appraisal to be borne by the Company. This Warrant is subject to the following terms, provisions, and conditions: 1. MECHANICS OF EXERCISE. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant may be exercised as follows: (a) MANNER OF EXERCISE. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft, destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the "EXERCISE AGREEMENT"), to the Company at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder's designees, as the record owner of such Shares, as of the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such Shares as set forth above. (b) ISSUANCE OF CERTIFICATES. Subject to Section 1(c), certificates for the Warrant Shares to be so purchased, representing the aggregate number of Shares specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). The certificates to be so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be designated by such Holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant representing the number of Shares with respect to which this Warrant shall not then have been exercised. (c) EXERCISE DISPUTES. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of ADSs as are not disputed in accordance with this Section. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed calculations to a nationally recognized independent accounting firm (selected by the Company and reasonably acceptable to Holder) via facsimile within three (3) business days of receipt of the Exercise Agreement. The accounting firm shall audit the calculations and notify the Company and the Holder of the results no later than two (2) business days from the date it receives 2 the disputed calculations. The accounting firm's calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of ADSs in accordance with this Section. (d) FRACTIONAL SHARES. No fractional ADSs are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional Share which would otherwise be issuable in an amount equal to the same fraction of the Exercise Price of an ADS (as determined for exercise of this Warrant into whole ADSs); provided that in the event that sufficient funds are not legally available for the payment of such cash adjustment any fractional ADSs shall be rounded up to the next whole number. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time and from time to time on or after the date hereof and before 5:00 P.M., Central Standard Time on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD"). 3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and agrees as follows: (a) SHARES TO BE FULLY PAID. All Warrant Shares and Ordinary Shares that are represented by such Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid and free from all taxes, liens, claims and encumbrances and shall be entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRS") and in the Deposit Agreement (the "DEPOSIT AGREEMENT") dated November 17, 1995 between the Company and The Bank of New York (the "DEPOSITARY") relating to such ADSs. (b) RESERVATION OF ORDINARY SHARES AND DEPOSIT OF ADSS. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of Ordinary Shares, which are readily available for deposit with the Depositary for the purpose of issuance in the form of ADSs upon exercise of this Warrant, to provide for the exercise of this Warrant. (c) LISTING. The Company shall promptly secure the listing of the ADSs issuable upon exercise of this Warrant on the Nasdaq National Market System ("NNM"), as required by Section 4.10 of the Securities Purchase Agreement and on each such national securities exchange or automated quotation system, if any, on which ADSs are then listed or become listed and shall maintain, so long as any other ADSs shall be so listed, such listing of all ADSs from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of any other shares of capital stock of the Company issuable upon the exercise of this Warrant so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its Memorandum of Association and Articles of Association or through any reorganization, transfer of 3 assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of the Holder of this Warrant, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Ordinary Shares represented by ADSs receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may at all times validly and legally issue fully paid ADSs upon the exercise of this Warrant. 4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. (a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF ADSS UPON ISSUANCE OF ORDINARY SHARES. Except as otherwise provided in Section 4(c) and 4(e) hereof and other than pursuant to the Company's existing obligations as disclosed in Schedule 3.3 of the Securities Purchase Agreement or pursuant to the Reset Warrant or pursuant to the warrants issued to Vincent Pino, Richard Zehner, Robert Waley-Cohen and Viscount Bearsted ("OTHER INVESTORS") at or prior to the Closing on terms substantially similar to the terms of this Warrant and the Reset Warrant, if and whenever after the initial issuance of this Warrant, the Company issues or sells, or in accordance with Section 4(b) hereof is deemed to have issued or sold, any Ordinary Shares (including in the form of ADSs) for no consideration or for a consideration per share less than the then current Market Price (as herein defined) on the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in accordance with the following formula: E' = (E) (O + P/M) / (OS)
where: E' = the adjusted Exercise Price E = the then current Exercise Price; M = the greater of the then current Market Price and the then current Exercise Price; O = the number of Ordinary Shares in issue immediately prior to the Dilutive Issuance; P = the aggregate consideration, calculated as set forth in Section 4(b) hereof, received by the Company upon such Dilutive Issuance; and 4 OS = the total number of Ordinary Shares Deemed In Issue (as herein defined) immediately after the Dilutive Issuance.
Notwithstanding anything to the contrary in this Section 4, in no event shall the Exercise Price be lower than the nominal value of the Ordinary Shares calculated at the time of exercise. (b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be applicable: (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner issues or grants any warrants, rights or options, other than pursuant to the Reset Warrant or any warrants issued to Other Investors at or prior to the Closing on terms substantially similar to the terms of the Warrants, whether or not immediately exercisable, to subscribe for or to purchase Ordinary Shares (including in the form of ADSs) or other securities exercisable, convertible into or exchangeable for Ordinary Shares (including in the form of ADSs) ("CONVERTIBLE SECURITIES"), but not to include the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose (such warrants, rights and options to purchase Ordinary Shares or Convertible Securities are hereinafter referred to as "OPTIONS"), and the price per share for which Ordinary Shares are issuable upon the exercise of such Options is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"), then the maximum total number of Ordinary Shares issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the price per share for which Ordinary Shares are issuable upon the exercise of such Below Market Options is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Below Market Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of Ordinary Shares issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Ordinary Shares upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. (ii) ISSUANCE OF CONVERTIBLE SECURITIES. 5 (A) If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Ordinary Shares are issuable upon such exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the Market Price on the date of issuance, then the maximum total number of Ordinary Shares issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be in issue and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the price per share for which Ordinary Shares issuable upon such exercise, conversion or exchange is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of Ordinary Shares issuable upon the exercise, conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuances of such Ordinary Shares upon exercise, conversion or exchange of such Convertible Securities. (B) If the Company in any manner issues or sells any Convertible Securities with a fluctuating conversion or exercise price or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per share for which Ordinary Shares are issuable upon such exercise, conversion or exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest price per share which would be applicable assuming that (1) all holding period and other conditions to any discounts contained in such Convertible Security have been satisfied, and (2) the Market Price on the date of issuance of such Convertible Security was 80% of the Market Price on such date (the "ASSUMED VARIABLE MARKET PRICE"). (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. Except for the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, if there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange or any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Ordinary Shares (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. 6 (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE SECURITIES. If, in any case, the total number of Ordinary Shares issuable upon exercise of any Options or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Options or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of Ordinary Shares issued upon exercise or conversion thereof), never been issued. (v) CALCULATION OF CONSIDERATION RECEIVED. If any Ordinary Shares, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Ordinary Shares, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair market value of such consideration except where such consideration consists of freely-tradeable securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Ordinary Shares, Options or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Ordinary Shares, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or securities will be determined in the good faith reasonable business judgment of the Board of Directors. (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities issued and outstanding on the date hereof in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon the issuance of the Warrants in accordance with terms of the Securities Purchase Agreement and upon the exercise of such Warrants; or (v) upon the issuance of warrants to Other Investors at or prior to the Closing on terms substantially similar to this Warrant and upon the exercise of such warrants. (c) SUBDIVISION OR COMBINATION OF ORDINARY SHARES. If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its Ordinary Shares into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in 7 effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Ordinary Shares into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. (d) ADJUSTMENT IN NUMBER OF ADSS. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4 or Section 5, the number of ADSs issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of ADSs issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (e) MAJOR TRANSACTIONS. If the Company shall consolidate or merge with any other corporation or entity (other than a consolidation or merger in which the Company is the surviving or continuing entity and its capital stock is unchanged and unissued in such transaction (except for issuances which do not exceed fifty percent (50%) of the Ordinary Shares)) or there shall occur any share exchange pursuant to which all of the Ordinary Shares in issue, including those represented by ADSs, are converted into other securities or property or any such other reclassification or change of the Ordinary Shares in issue or the Company shall sell all or substantially all of its assets (each of the foregoing being a "MAJOR TRANSACTION"), then the holder of this Warrant may, at its option, either (a) in the event that the Ordinary Shares remain in issue or holders of Ordinary Shares receive any common stock or substantially similar equity interest, in each of the foregoing cases the American Depository Shares representing which is publicly traded, retain this Warrant and this Warrant shall continue to apply to such ADSs or shall apply, as nearly as practicable, to the American depository shares of such other common stock or equity interest, as the case may be, or (b) regardless of whether (a) applies, receive consideration, in exchange for this Warrant (without payment of any exercise price hereunder), equal to the greater of, as determined in the sole discretion of such holder, (i) the number of shares of stock or securities or property of the Company, or of the entity resulting from such Major Transaction (the "MAJOR TRANSACTION CONSIDERATION"), to which a holder of the number of Ordinary Shares represented by the ADSs deliverable upon the exercise of this Warrant would have been entitled upon such Major Transaction had such holder so exercised this Warrant (without regard to any limitations on exercise herein or elsewhere contained) on the trading date immediately preceding the public announcement of the transaction resulting in such Major Transaction and had such ADSs been issued and outstanding and had such Holder been the holder of record of such ADSs at the time of the consummation of such Major Transaction, and (ii) cash paid by the Company in immediately available funds in an amount equal to the Black-Scholes Amount (as defined herein) times the number of ADSs for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder), and the Company shall make lawful provision for the foregoing as a part of such Major Transaction and shall cause the issuer of any security in such transaction which constitutes Registrable Securities under that certain Registration Rights Agreement dated December 9, 1999 by and between the Company and Castle Creek 8 (the "REGISTRATION RIGHTS AGREEMENT") to assume all of the Company's obligations under the Registration Rights Agreement. In the event that the Company shall consolidate or merge with any other corporation in a transaction in which common stock of the surviving corporation or the parent thereof (the "EXCHANGE SECURITIES") is issued to the holders of Ordinary Shares in such transaction in exchange for all such Ordinary Shares, and (a) the Exchange Securities are publicly traded and an American Depository Receipt facility is established, (b) the average daily dollar trading volume of the Exchange Securities during the one hundred eighty (180) day period ending on the date on which such transaction is publicly disclosed is greater than One Million Dollars ($1,000,000.00) per day as reported by Bloomberg, (c) the historical one hundred (100) day volatility of the Exchange Securities during the period ending on the date on which such transaction is publicly disclosed is greater than fifty percent (50%), and (d) the market capitalization of the issuer of the Exchange Securities is not less than One hundred Million Dollars ($100,000,000.00) based on the last sale price of the Exchange Securities on the date immediately before the date on which such transaction is publicly disclosed (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg), then the provisions of clause (b) of the preceding sentence shall not apply. In the event that the Company shall, in a Major Transaction, consolidate or merge with any other corporation in a transaction in which the Company is the survivor (a "COMPANY TRANSACTION"), the provisions of clause (ii) of the second preceding sentence shall not apply to the extent that each of the following conditions remain true for the thirty (30) business days commencing as of the date of the consummation of such transaction (the "MEASUREMENT PERIOD"): (a) the ADS remains publicly traded during the period, (b) the average daily dollar trading volume of the ADS is greater than One Million Dollars ($1,000,000.00), (c) the historical thirty (30) day volatility of the Company's ADS is greater than fifty percent (50%), and (d) the market capitalization of the Company is not less than One Hundred Million Dollars ($1,000,000.00) on the last day of the period (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg). No sooner than ten (10) business days nor later than five (5) business days prior to the consummation of the Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall deliver written notice ("NOTICE OF MAJOR TRANSACTION") to the Holder of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day after the Company's sending such notice by telecopy (provided that the Company sends a confirming copy of such notice on the same day by overnight courier) of such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the Major Transaction consideration which the Holder of this Warrant would receive under this Section. If the Major Transaction Consideration is cash and does not consist entirely of United States currency, the Holder may elect to receive United States currency in an amount equal to the value of the Major Transaction Consideration in lieu of the Major Transaction Consideration by delivering notice of such election to the Company within five (5) business days of such holder's receipt of the Notice of Major Transaction. The "BLACK-SCHOLES AMOUNT" shall be the amount determined by calculating the "Black-Scholes" value of an option to purchase one ADS on the applicable page on the Bloomberg online page, using the following variable values: (i) the current market price of the ADSs equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) 9 volatility of the ADS equal to the volatility of the ADSs during the 100 trading day period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the remaining term of this Warrant on the date of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer available utilizing the Bloomberg online page, the Holder shall calculate such amount in its sole discretion using the closest available alternative mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. (f) DISTRIBUTION OF ASSETS. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of its Ordinary Shares and ADSs as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the ADSs subject hereto, to receive the amount of such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such ADSs on the record date for the determination of holders of Ordinary Shares and ADSs entitled to such Distribution. (g) SPECIAL ADJUSTMENT AND NOTICES OF ADJUSTMENT. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. If the Company takes any actions (including under or by virtue of Section 4 of the Warrant) which would have a dilutive effect on the Holder or which would materially and adversely affect the Holder with respect to its investment in the Warrant, and if the provisions of Section 4 of the Warrant, are not strictly applicable to such actions or, if applicable to such actions, would not operate to equitably protect the Holder against such actions, then the Company shall promptly upon notice from Holder appoint its independent certified public accountants to determine as promptly as practicable an appropriate adjustment to the terms hereof, including without limitation adjustments to the Exercise Price, or another appropriate action to so equitably protect such Holder and prevent any such dilution and any such material adverse effect, as the case may be. Following such determination, the Company shall forthwith make the adjustments or take the other actions described therein. (h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. 10 (i) Intentionally Omitted. (j) OTHER NOTICES. In case at any time: (i) the Company shall declare any dividend upon the Ordinary Shares payable in shares of stock of any class or make any other distribution to the holders of the Ordinary Shares and holders of ADSs; (ii) the Company shall offer for subscription pro rata to the holders of the Ordinary Shares and ADSs any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization of the Company, or reclassification of the Ordinary Shares, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the Holder (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Ordinary Shares and holders of ADSs entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Ordinary Shares entitled to vote and holders of ADSs entitled to give voting instructions to the Depositary in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Ordinary Shares and holders of ADSs shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Ordinary Shares and ADSs for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least thirty (30) days prior to the record date or the date on which the Company's books are closed in respect thereto, but in no event earlier than public announcement of such proposed transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. (k) CERTAIN DEFINITIONS. (i) "ORDINARY SHARES DEEMED IN ISSUE" shall mean the number of Ordinary Shares actually in issue (including Ordinary Shares represented by issued and outstanding ADSs), plus (x) in case of any adjustment required by Section 4(a) resulting from the issuance of any Options, the maximum total number of Ordinary Shares (including in the form of ADSs) issuable upon the exercise of the Options for which the adjustment is required (including any Ordinary Shares 11 (including in the form of ADSs) issuable upon the conversion of Convertible Securities issuable upon the exercise of such Options), and (y) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Convertible Securities, the maximum total number of Ordinary Shares (including in the form of ADSs) issuable upon the exercise, conversion or exchange of the Convertible Securities for which the adjustment is required, as of the date of issuance of such Convertible Securities, if any. (ii) "MARKET PRICE," as of any date, (i) means the average of the Closing Bid Prices for the ADSs as reported to Nasdaq for the ten (10) trading days immediately preceding such date, or (ii) if Nasdaq is not the principal trading market for the ADSs, the average of the last reported bid prices on the principal trading market for the ADSs during the same period, or, if there is no bid price for such period, the last reported sales price for such period, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder of this Warrant, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the ADSs set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (iii) "ORDINARY SHARES," for purposes of this Section 4, includes the Ordinary Shares and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the Ordinary Shares represented by the ADSs purchasable pursuant to this Warrant shall include only Ordinary Shares in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Ordinary Shares, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. RESETS. If the Escrow Cure Date as defined in the Reset Warrant does not occur within seven (7) months of Closing, the Exercise Price of this Warrant will be adjusted to the Market Price on the seven-month anniversary of the Closing Date; provided, however, that no adjustment shall be made which would have the effect of increasing the Exercise Price. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder. 7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a holder of the Company's Ordinary Shares or ADSs. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to 12 any liability of the Holder for the Exercise Price or as a holder of the Company's Ordinary Shares or ADSs, whether such liability is asserted by the Company or by creditors of the Company. 8. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT. a. RESTRICTION ON TRANSFER. This Warrant and the rights granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the Form of Assignment attached hereto as Exhibit 2, at the office or agency of the Company referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. b. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the aggregate the right to purchase the number of ADSs which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of ADSs as shall be designated by the Holder of at the time of such surrender. c. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant, in the form hereof, in such denominations as Holder may request. d. CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 8. e. WARRANT REGISTER. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. 13 f. ADDITIONAL RESTRICTION ON EXERCISE OR TRANSFER. Notwithstanding anything to the contrary contained herein, the Warrant shall not be exercisable by the Holder to the extent (but only to the extent) that, if exercisable by Holder, Holder would beneficially own Ordinary Shares and ADSs in excess of 9.9% (the "APPLICABLE PERCENTAGE") of the total Ordinary Shares in issue. To the extent the above limitation applies, the determination of whether the Warrant shall be exercisable (vis-a-vis other securities owned by Holder which contain similar limitations on conversion) and of which Warrants shall be exercisable (as among Warrants) shall be made on the basis of the earliest submission of the Warrants (vis-a-vis other securities owned by the Holder which contain similar limitations on conversion and vis a vis other Warrants), in each case subject to such aggregate percentage limitation. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D and G thereunder. The provisions of this paragraph may be implemented in a manner otherwise than in strict conformity with the terms of this Section 8(f) with the approval of the Board of Directors of the Company and the Holder: (i) with respect to any matter to cure any ambiguity herein, to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation; and (ii) with respect to any other matter, with the further consent of the holders of a majority of the then Ordinary Shares in issue. For clarification, it is expressly a term of this security that the limitations contained in this Section shall apply to each successor Holder. The holders of Ordinary Shares of the Company shall be third-party beneficiaries of this Section 8(f) and the Company may not waive this Section 8(f) without the consent of holders of a majority of its Ordinary Shares. g. CAP AMOUNT. Prior to Shareholder Approval (as defined in the Securities Purchase Agreement), unless otherwise permitted by The Nasdaq National Market System or of the national securities exchange on which the ADSs are listed, or unless the rules thereof no longer are applicable to the Company, in no event shall the total number of ADSs issued to Purchaser at the Closing and issuable upon exercise of the Warrants and the ADSs issued to Other Investors at or prior to the Closing and issuable upon exercise of the warrants issued to Other Investors at or prior to the Closing on terms substantially similar to those of the Securities Purchase Agreement and the Warrants exceed the maximum number of Ordinary Shares that the Company can without shareholder approval so issue pursuant to Nasdaq Rule 4460(i) (or any successor rule) (the "CAP AMOUNT"), which, as of the date of initial issuance of ADSs and Warrants to the Holders, is ____________ Shares. In the event the Holder shall sell or otherwise transfer any of such Holder's Warrants, each transferee shall be allocated a pro rata portion of such Cap Amount along with Other Investors and their transferees. 14 9. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 10. NOTICES. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, California 94538-3115 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P. O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. and if to the Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 10. 11 GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the United States federal courts located in the State of New York in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company agrees that a final nonappealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 12 MISCELLANEOUS. a AMENDMENTS. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. 15 b DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. c ASSIGNABILITY. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Holder and its successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. * * * 16 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Insignia Solutions plc By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO 17 FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) The undersigned hereby irrevocably exercises the right to purchase ____________ of the American Depositary Shares ("ADSS") of Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such ADSs in full, all in accordance with the conditions and provisions of said Warrant. (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any ADSs obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (ii) The undersigned requests that the American Deposit Receipts for such ADSs be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: Date:_____________________________ ___________________________________ Signature of Holder ___________________________________ Name of Holder (Print) Address: ___________________________________ ___________________________________ 18 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the number of ADSs covered thereby set forth hereinbelow, to: NAME OF ASSIGNEE ADDRESS NO. OF SHARES and hereby irrevocably constitutes and appoints ____________ ___ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Date:____________, _____, In the presence of Name:_______________________________________________ Signature:__________________________________________ Title of Signing Officer or Agent (if any): ____________________________________ Address: ____________________________________ ____________________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. 19 EX-4.07 4 EXHIBIT 4.07 EXHIBIT C VOID AFTER 5:00 P.M., CENTRAL TIME ON DECEMBER 9, 2004 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase American Depository Shares Date: December 9, 1999 INSIGNIA SOLUTIONS PLC ADSS PURCHASE WARRANT THIS CERTIFIES THAT, for value received, Castle Creek Technology Partners LLC ("CASTLE CREEK"), or its registered assigns, is entitled to purchase from Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), at any time or from time to time during the period specified in Section 2 hereof, a number of fully paid American Depository Shares (the "ADSS" or "SHARES"), each ADS representing one ordinary share of 20p each nominal value of the Company ("ORDINARY SHARES"), determined pursuant to Section 1 hereof, at the exercise price (the "EXERCISE PRICE") defined below. This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated December 9, 1999 by and between the Company and Castle Creek (the "SECURITIES PURCHASE AGREEMENT"). The number of ADSs purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject to further adjustment as provided in Section 4 hereof. The term "CLOSING BID PRICE" means, for any security as of any date, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holder hereof (the "HOLDER") if Bloomberg Financial Markets is not then reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board of such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder with the costs of such appraisal to be borne by the Company. The Exercise Price shall equal to 20 pence per share, converted into US dollars at the daily exchange rate as reported in The Wall Street Journal (Midwest Edition) on the business day immediately preceding the date of exercise. This Warrant is subject to the following terms, provisions, and conditions: 1. (a) NUMBER OF SHARES INTO WHICH THIS WARRANT IS EXERCISABLE. On any Reset Date (as defined herein), this Warrant shall become exercisable into additional Shares. For purposes hereof, the number of additional Shares into which this Warrant becomes exercisable on a Reset Date shall be determined according to the following formula, where N represents such number: P - M [---------] * O M N = --------------------- V [1 -- ----] M where: P = the Market Price on the issuing date; M = the Market Price on the applicable Reset Date; O = the number of ADSs purchased on the Closing Date; and V = 20 pence, converted into US dollars at the daily exchange rate as reported in The Wall Street Journal (Midwest Edition) on the business day immediately preceding the applicable Reset Date. Notwithstanding the foregoing, this Warrant shall not become exercisable for additional Shares pursuant to this Section 1(a) if such reset would violate NASDAQ Rule 4460(i) (or any successor rule). To the extent that the immediately preceding sentence is applicable, the Company shall pay to the Purchaser an amount equal to (x) "N" TIMES the Market Price on the Reset Date. For any given date, the "MARKET PRICE" shall be the average of the closing bid prices of the shares of ADSs for the ten (10) consecutive trading days immediately prior to such date. 2 (b) RESET DATES. A "RESET DATE" shall mean: (i) each of (A) the date on which the Registration Statement (as defined in the Registration Rights Agreement) required to be filed by the Company pursuant to Section 2.1 of the Registration Rights Agreement is first declared effective (the "EFFECTIVE DATE"), (B) the date which is four (4) months after the Effective Date and (C) the date which is eight (8) months after the Effective Date, in each case where the Market Price on such date is less than $4.23 (the Market Price on the Closing Date); (ii) if the Registration Statement has not been declared effective by the date which is five (5) months after the Closing Date (the "EFFECTIVENESS TRIGGER DATE"), (A) the Effectiveness Trigger Date and (B) each date which is one calendar month following the Effectiveness Trigger Date on which the Registration Statement has not yet been declared effective (in such circumstances, such date, also an "Effectiveness Trigger Date"); and (iii) if, by the date which is three (3) months after the Closing Date (the "ESCROW TRIGGER DATE"), the Company does not have released to it at least 4.75 million dollars ($4,750,000) (the "CURE AMOUNT") of the 6.25 million dollars ($6,250,000) held in escrow as of the Closing Date by State Street Bank pursuant to that certain escrow agreement dated February 5, 1998 by and between the Company and Citrix Systems Inc. (the "ESCROW AGREEMENT"), (A) the Escrow Trigger Date and (B) each date which is one calendar month following the Escrow Trigger Date, up to but excluding the Escrow Cure Date (as defined herein). The "ESCROW CURE DATE" shall mean the earlier of (a) the date on which the Cure Amount has been released to the Company pursuant to the Escrow Agreement and (b) the date which is twelve (12) months after the Effective Date. (c) PUBLIC OFFERING EXCEPTION. Notwithstanding anything to the contrary contained in Section 1(b), (i) the date described in Section 1(b) (i)(B) hereof shall not be a Reset Date if, prior to the earlier of such date or the date which is eight (8) months after the Closing Date, the Company has completed an underwritten public offering with net proceeds to the Company of at least twenty-five million dollars ($25,000,000) at a price per share of ADSs greater than (x) 1.66 TIMES (y) the Market Price on the Closing Date (an "OFFERING"); and (ii) the date described in Section 1 (b) (i)(C) hereof shall not be a Reset Date if, prior to the date which is twelve (12) months after the Closing Date, the Company completes an Offering. 3 2. MECHANICS AND PERIOD OF EXERCISE. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant may be exercised as follows: (a) MANNER OF EXERCISE. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft, destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the "EXERCISE AGREEMENT"), to the Company at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder's designees, as the record owner of such shares, as of the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above. (b) ISSUANCE OF CERTIFICATES. Subject to Section 2(c), certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). The certificates so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be designated by such Holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. (c) EXERCISE DISPUTES. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of ADSs as are not disputed in accordance with this Section. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed calculations to a nationally recognized independent accounting firm (selected by the Company and reasonably acceptable to Holder) via facsimile within three (3) business days of receipt of the Exercise Agreement. The accounting firm shall audit the calculations and notify the Company and the exercising Holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accounting firm's calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of ADSs in accordance with this Section. (d) FRACTIONAL SHARES. No fractional ADSs are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Exercise Price of an ADS (as determined for exercise of this Warrant into whole ADSs); provided that in the event that 4 sufficient funds are not legally available for the payment of such cash adjustment any fractional ADSs shall be rounded up to the next whole number. (e) PERIOD OF EXERCISE. This Warrant is exercisable at any time and from time to time on or after the date hereof and before 5:00 P.M., Central Standard Time on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD"). 3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and agrees as follows: (a) SHARES TO BE FULLY PAID. All Warrant Shares and Ordinary Shares that are represented by such Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid and free from all taxes, liens, claims and encumbrances. (b) RESERVATION OF ORDINARY SHARES AND DEPOSIT OF ADSS. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of Ordinary Shares, which are readily available for deposit with the Depositary for the purpose of issuance in the form of ADSs upon exercise of this Warrant, to provide for the exercise of this Warrant. (c) LISTING. The Company shall promptly secure the listing of the ADSs issuable upon exercise of this Warrant on the Nasdaq National Market as required by Section 4.10 of the Securities Purchase Agreement and on each such national securities exchange or automated quotation system, if any, on which ADSs are then listed or become listed and shall maintain, so long as any other ADSs shall be so listed, such listing of all ADSs from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of any other shares of capital stock of the Company issuable upon the exercise of this Warrant so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its Memorandum of Association and Articles of Association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of the Holder of this Warrant, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Ordinary Shares represented by ADSs receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may at all times validly and legally issue fully paid ADSs and Ordinary Shares upon the exercise of this Warrant. 5 4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. Notwithstanding anything to the contrary in this Section 4, in no event shall the Exercise Price be lower than the nominal value of the Ordinary Shares calculated at the time of exercise. (a) SUBDIVISION OR COMBINATION OF ORDINARY SHARES. If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its Ordinary Shares into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Ordinary Shares into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. (b) ADJUSTMENT IN NUMBER OF ADSS. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of ADSs issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of ADSs issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (c) MAJOR TRANSACTIONS. If the Company shall consolidate or merge with any other corporation or entity (other than a consolidation or merger in which the Company is the surviving or continuing entity and its capital stock is unchanged and unissued in such transaction (except for issuances which do not exceed fifty percent (50%) of the Common Stock)) or there shall occur any share exchange pursuant to which all of the Ordinary Shares in issue, including those represented by ADSs, are converted into other securities or property or any such other reclassification or change of the Ordinary Shares in issue or the Company shall sell all or substantially all of its assets (each of the foregoing being a "MAJOR TRANSACTION"), then the holder of this Warrant may, at its option, either (a) in the event that the Ordinary Shares remain in issue or holders of Ordinary Shares receive any common stock or substantially similar equity interest, in each of the foregoing cases the American Depository Shares representing which is publicly traded, retain this Warrant and this Warrant shall continue to apply to such ADSs or shall apply, as nearly as practicable, to the American depository shares of such other common stock or equity interest, as the case may be, or (b) regardless of whether (a) applies, receive consideration, in exchange for this Warrant (without payment of any exercise price hereunder), equal to the greater of, as determined in the sole discretion of such holder, (i) the number of shares of stock or securities or property of the Company, or of the entity resulting from such Major Transaction (the "MAJOR TRANSACTION CONSIDERATION"), to which a holder of the number of Ordinary Shares represented by the ADSs delivered upon the exercise of this Warrant (pursuant to the cashless exercise feature hereof) would have been entitled upon such Major Transaction had such holder so exercised this Warrant (without regard to any limitations on exercise herein or elsewhere contained) on the trading date immediately 6 preceding the public announcement of the transaction resulting in such Major Transaction and had such ADSs been issued and outstanding and had such Holder been the holder of record of such ADSs at the time of the consummation of such Major Transaction, and (ii) cash paid by the Company in immediately available funds in an amount equal to the Black-Scholes Amount (as defined herein) times the number of ADSs for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder), and the Company shall make lawful provision for the foregoing as a part of such Major Transaction and shall cause the issuer of any security in such transaction which constitutes Registrable Securities under that certain Registration Rights Agreement dated December______, 1999 by and between the Company and Castle Creek (the "REGISTRATION RIGHTS AGREEMENT") to assume all of the Company's obligations under the Registration Rights Agreement. In the event that the Company shall consolidate or merge with any other corporation in a transaction in which common stock of the surviving corporation or the parent thereof (the "Exchange Securities") is issued to the holders of Ordinary Shares in such transaction in exchange for all such Ordinary Shares, and (a) the Exchange Securities are publicly traded and an American Depository Receipt facility is established, (b) the average daily dollar trading volume of the Exchange Securities during the one hundred eighty (180) day period ending on the date on which such transaction is publicly disclosed is greater than One Million Dollars ($1,000,000.00) per day as reported by Bloomberg, (c) the historical one hundred (100) day volatility of the Exchange Securities during the period ending on the date on which such transaction is publicly disclosed is greater than fifty percent (50%), and (d) the market capitalization of the issuer of the Exchange Securities is not less than One hundred Million Dollars ($100,000,000.00) based on the last sale price of the Exchange Securities on the date immediately before the date on which such transaction is publicly disclosed (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg), then the provisions of clause (b) of the preceding sentence shall not apply. In the event that the Company shall, in a Major Transaction, consolidate or merge with any other corporation in a transaction in which the Company is the survivor (a "COMPANY TRANSACTION"), the provisions of clause (ii) of the second preceding sentence shall not apply to the extent that each of the following conditions remain true for the thirty (30) business days commencing as of the date of the consummation of such transaction (the "MEASUREMENT PERIOD"): (a) the ADSs remains publicly traded during the period, (b) the average daily dollar trading volume of the ADSs is greater than One Million Dollars ($1,000,000.00), (c) the historical thirty (30) day volatility of the Company's ADSs is greater than fifty percent (50%), and (d) the market capitalization of the Company is not less than One Hundred Million Dollars ($1,000,000.00) on the last day of the period (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg). No sooner than ten (10) business days nor later than five (5) business days prior to the consummation of the Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall deliver written notice ("NOTICE OF MAJOR TRANSACTION") to the Holder of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day after the Company's sending such notice by telecopy (provided that the Company sends a confirming copy of such notice on the same day by overnight courier) of such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the Major Transaction consideration which the Holder of this Warrant would receive under this Section. If the Major Transaction Consideration is cash and does 7 not consist entirely of United States currency, the Holder may elect to receive United States currency in an amount equal to the value of the Major Transaction Consideration in lieu of the Major Transaction Consideration by delivering notice of such election to the Company within five (5) business days of such holder's receipt of the Notice of Major Transaction. The "BLACK-SCHOLES AMOUNT" shall be the amount determined by calculating the "Black-Scholes" value of an option to purchase one ADS on the applicable page on the Bloomberg online page, using the following variable values: (i) the current market price of the ADSs equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) volatility of the ADS equal to the volatility of the ADSs during the 100 trading day period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the remaining term of this Warrant on the date of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer available utilizing the Bloomberg online page, the Holder shall calculate such amount in its sole discretion using the closest available alternative mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. (d) DISTRIBUTION OF ASSETS. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of its Ordinary Shares and ADSs as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the ADSs subject hereto, to receive the amount of such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such ADSs on the record date for the determination of holders of Ordinary Shares and ADSs entitled to such Distribution. (e) SPECIAL ADJUSTMENT AND NOTICES OF ADJUSTMENT. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. If the Company takes any actions (including under or by virtue of Section 4 of the Warrant) which would have a dilutive effect on the Holder or which would materially and adversely affect the Holder with respect to its investment in the Warrant, and if the provisions of Section 4 of the Warrant, are not strictly applicable to such actions or, if applicable to such actions, would not operate to equitably protect the Holder against such actions, then the Company shall promptly upon notice from Holder appoint its independent certified public accountants to determine as promptly as practicable an appropriate adjustment to the terms hereof, including without limitation adjustments to the Exercise Price, or another appropriate action to so equitably protect such Holder and prevent any such dilution and any such material adverse effect, as the case may be. Following 8 such determination, the Company shall forthwith make the adjustments or take the other actions described therein. (f) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. (g) OTHER NOTICES. In case at any time: (i) the Company shall declare any dividend upon the Ordinary Shares payable in shares of stock of any class or make any other distribution to the holders of the Ordinary Shares and holders of ADSs; (ii) the Company shall offer for subscription pro rata to the holders of the Ordinary Shares and ADSs any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization of the Company, or reclassification of the Ordinary Shares, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the Holder (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Ordinary Shares and holders of ADSs entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Ordinary Shares entitled to vote and holders of ADSs entitled to give voting instructions to the Depositary in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Ordinary Shares and holders of ADSs shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Ordinary Shares and ADSs for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least thirty (30) days prior to the record date or the date on which the Company's books are closed in respect thereto, but in no event earlier than public announcement of such proposed transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. 9 (h) CERTAIN DEFINITIONS. (i) "MARKET PRICE," as of any date, (i) means the average of the Closing Bid Prices for the ADSs as reported to Nasdaq for the ten (10) trading days immediately preceding such date, or (ii) if Nasdaq is not the principal trading market for the ADSs, the average of the last reported bid prices on the principal trading market for the ADSs during the same period, or, if there is no bid price for such period, the last reported sales price for such period, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder of this Warrant, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the ADSs set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (ii) "ORDINARY SHARES," for purposes of this Section 4, includes the Ordinary Shares and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the Ordinary Shares represented by the ADSs purchasable pursuant to this Warrant shall include only Ordinary Shares in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Ordinary Shares, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. Intentionally Omitted. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder. 7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a holder of the Company's Ordinary Shares or ADSs. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a holder of the Company's Ordinary Shares or ADSs, whether such liability is asserted by the Company or by creditors of the Company. 8. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT. a. RESTRICTION ON TRANSFER. This Warrant and the rights granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly 10 executed assignment in the Form of Assignment attached hereto as Exhibit 2, at the office or agency of the Company referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. b. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the aggregate the right to purchase the number of ADSs which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of ADSs as shall be designated by the Holder of at the time of such surrender. c. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant, in the form hereof, in such denominations as Holder may request. d. CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 8. e. WARRANT REGISTER. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. f. ADDITIONAL RESTRICTION ON EXERCISE OR TRANSFER. Notwithstanding anything to the contrary contained herein, the Warrant shall not be exercisable by the Holder to the extent (but only to the extent) that, if exercisable by Holder, Holder would beneficially own Ordinary Shares and ADSs in excess of 9.9% (the "APPLICABLE PERCENTAGE") of the total Ordinary Shares in issue. To the extent the above limitation applies, the determination of whether the Warrant shall be exercisable (vis-a-vis other securities owned by Holder which contain similar limitations on conversion) and of which Warrants shall be exercisable (as among Warrants) shall be made on the basis of the earliest submission of the Warrants (vis-a-vis other securities owned by the Holder which contain similar 11 limitations on conversion and vis a vis other Warrants), in each case subject to such aggregate percentage limitation. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D and G thereunder. The provisions of this paragraph may be implemented in a manner otherwise than in strict conformity with the terms of this Section 8(f) with the approval of the Board of Directors of the Company and the Holder: (i) with respect to any matter to cure any ambiguity herein, to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation; and (ii) with respect to any other matter, with the further consent of the holders of a majority of the then Ordinary Shares in issue. For clarification, it is expressly a term of this security that the limitations contained in this Section shall apply to each successor Holder. The holders of Ordinary Shares of the Company shall be third-party beneficiaries of this Section 8(f) and the Company may not waive this Section 8(f) without the consent of holders of a majority of its Ordinary Shares. To the extent the Holder is prohibited from exercising this Reset Warrant as a result of the Applicable Percentage limitation, the Holder may, at its option and in addition to its other rights under the Securities Purchase Agreement and this Reset Warrant, retain this Warrant or to demand payment, in cash, from the Company in immediately available funds in an amount equal to the Black-Scholes Amount times the number of Shares for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder). g. CAP AMOUNT Prior to Shareholder Approval (as defined in the Securities Purchase Agreement), unless otherwise permitted by The Nasdaq National Market or of the national securities exchange on which the ADSs are listed, or unless the rules thereof no longer are applicable to the Company, in no event shall the total number of ADSs issued to Purchaser at the Closing and issuable upon exercise of the Warrants and the ADSs issued to Other Investors (as defined below) at or prior to the Closing and issuable upon exercise of warrants issued to Vincent Pino, Richard Zehner, Robert Waley-Cohen and Viscount Bearsted ("OTHER INVESTORS") at or prior to the Closing on terms substantially similar to those of the Securities Purchase Agreement and Warrants exceed the maximum number of Ordinary Shares that the Company can without shareholder approval so issue pursuant to Nasdaq Rule 4460(i) (or any successor rule) (the "CAP AMOUNT"), which, as of the date of initial issuance of ADSs and Warrants to the Holders, which amount is ____________ shares. In the event the Holder shall sell or otherwise transfer any of the Holder's Warrants, each transferee shall be allocated a pro rata portion of such Cap Amount along with Other Investors and their transferees. 12 To the extent the Holder is prohibited from exercising this Warrant as a result of the Cap Amount after the Shareholder Approval Date (as defined in the Securities Purchase Agreement), the Company shall pay to the Holder, in cash, in immediately available funds in an amount equal to the Black-Scholes Amount times the number of Shares for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder). 9. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 10. NOTICES. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, California 94538-3115 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P.O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. and if to the Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 10. 11. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the United States federal courts located in the State of New York in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company agrees that a final nonappealable 13 judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 12. MISCELLANEOUS. a. AMENDMENTS. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. b. DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. c. ASSIGNABILITY. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Holder and its successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. * * * 14 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Insignia Solutions plc By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO 15 FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) The undersigned hereby irrevocably exercises the right to purchase ____________ of the American Depositary Shares ("ADSS") of Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such ADSs in full, all in accordance with the conditions and provisions of said Warrant. (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any ADSs obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (ii) The undersigned requests that the American Deposit Receipts for such ADSs be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: Date:__________________________ ______________________________ Signature of Holder ______________________________ Name of Holder (Print) Address: ______________________________ ______________________________ 16 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the number of ADSs covered thereby set forth hereinbelow, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- -------------
and hereby irrevocably constitutes and appoints _______________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Date:____________, _____, In the presence of Name:____________________________________________ Signature:_______________________________________ Title of Signing Officer or Agent (if any): ______________________________________ Address: _______________________________ _______________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. 17 EX-4.08 5 EXHIBIT 4.08 EXHIBIT B REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of December 9, 1999, by and between Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "Company"), with headquarters located at 41300 Christy Street, Fremont, California 94538, and the persons listed on Schedule A to this Agreement (the "Initial Purchasers"). RECITALS A. In connection with the Securities Purchase Agreement dated of even date herewith by and between the Company and Initial Purchasers (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the conditions contained therein, to issue and sell to Initial Purchasers (i) the Company's American Depository Shares (the "ADSS"), each ADS representing one ordinary shares of 20p each nominal value of the Company (the "ORDINARY SHARES"); (ii) a warrant exercisable for ADSs, in the form attached as EXHIBIT A to the Securities Purchase Agreement (the "INITIAL WARRANT"); and (iii) a warrant in the form of EXHIBIT C to the Securities Purchase Agreement ( the "RESET WARRANT", and together with the Initial Warrant, the "WARRANTS"). ADSs issued and purchased pursuant to the Securities Purchase Agreement are herein referred to as "SHARES" and ADSs issued or issuable upon exercise of the Warrants are herein referred to as "WARRANT SHARES". B. To induce Initial Purchasers to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "SECURITIES ACT"), and applicable state securities laws. AGREEMENTS NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, and Initial Purchasers hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "PURCHASERS" means Initial Purchasers and any transferees or assignees who agree to become bound by the provisions of this Agreement in accordance with Article 9 hereof. (b) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC"). (c) "REGISTRABLE SECURITIES" means the Shares and the Warrant Shares issued or issuable with respect to the Warrants (without regard to any limitations on exercise) and any shares of capital stock issued or issuable, from time to time (with any adjustments), on or in exchange for or otherwise with respect to the ADRs or any other Registrable Securities. (d) "REGISTRATION STATEMENT" means a registration statement of the Company under the Securities Act pursuant to the provisions of this Agreement. (e) "FUNDED AMOUNT" means one million dollars ($1,000,000). 1.2 CAPITALIZED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. ARTICLE 2 REGISTRATION 2.1 MANDATORY REGISTRATION. The Company shall prepare and file as soon as practicable but in any event on or prior to thirty (30) days after the date of the Closing with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on such form of Registration Statement as is then available to effect a registration of all of the Registrable Securities (without regard to any limitations on exercise of the Warrants), including those issuable upon full exercise of the Warrants purchased and sold at the Closing. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to and (subject to the approval of (which approval shall be rendered within 3 business days after receipt thereof and shall not be unreasonably withheld, delayed or denied)) the Initial Purchasers and its counsel at least seven (7) business days (or fewer to the extent provided herein) prior to its filing or other submission. The Company shall also prepare and file such amendments to registration statements and such additional registration statements as may from time to time be required by this Agreement. 2.2 UNDERWRITTEN OFFERING. If any offering pursuant to a Registration Statement filed pursuant to Section 2.1 hereof involves an underwritten offering, the Purchasers who hold a majority in interest of the Registrable Securities subject to such underwritten offering, with the consent of Initial Purchasers, shall have the right to select one legal counsel to represent them and an investment banker or bankers and manager or managers to administer the offering, which investment banker or bankers or manager or managers shall be reasonably satisfactory to the Company, and all fees and expenses of which shall be paid by the Purchasers. 2.3 PAYMENTS BY THE COMPANY. The Company shall use its best efforts to cause the Registration Statement filed pursuant to Section 2.1 hereof to become effective as soon as practicable, but in no event later than the ninetieth (90th) day (or the one hundred twentieth -2- (120th) day if the SEC reviews such Registration Statement) following the Closing Date (the "REGISTRATION DEADLINE"). If any Registration Statement required to be filed by the Company pursuant to Section 2.1 hereof is not declared effective by the SEC on or before the applicable Registration Deadline (a "REGISTRATION FAILURE"), or after such Registration Statement has been declared effective by the SEC, sales of all the Registrable Securities cannot be made pursuant to the Registration Statement (by reason of a stop order or the Company's failure to update the Registration Statement or any other reason outside the control of the Purchasers) (a "REGISTRATION SUSPENSION"), then the Company will make payments to the Purchasers in such amounts and at such times as shall be determined pursuant to this Section 2.3 as partial relief for the damages to the Purchasers by reason of any such delay in or reduction of their ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity). In the event of a Registration Failure, the Company shall pay to the Purchasers an amount equal to (A) the Multiplier (as defined herein) times (B) the sum of the aggregate Funded Amount plus the amount payable to the Company under the Warrants times (C) the number of months (prorated per day for partial months) following the Registration Deadline prior to the date the Registration Statement filed pursuant to Section 2.1 is declared effective by the SEC. In addition, in the event of a Registration Suspension, the Company shall pay to the Purchasers an amount equal to (D) the Multiplier times (E) the Funded Amount times (F) the number of months (prorated per day for partial months) from (x) the date on which sales of all the Registrable Securities first cannot be made to (y) the date on which sales of all the Registrable Securities can again be made. Amounts to be paid pursuant to this Section 2.3 shall be paid to Purchasers based upon the number of Shares and Warrant Shares owned and Warrant Shares issuable upon full conversion of the Warrants by each Purchaser, and shall be paid in cash. Such payments shall be made within five (5) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, payments shall be made for each such thirty (30) day period within five (5) days after the end of such thirty (30) day period. For any given date, the "MULTIPLIER" shall mean, (i) during the first thirty days following the Registration Deadline during which there is a Registration Failure or a Registration Suspension, 0.01, (ii) from the thirty-first day of a Registration Failure or Registration Suspension until the sixtieth such day, 0.015 and (iii) after the sixtieth day of a Registration Failure or Registration Suspension, 0.02. Notwithstanding the foregoing, a Registration Suspension effected by the Company pursuant to a Permitted Blackout shall not give rise to an obligation to make such payments. For purposes hereof, "PERMITTED BLACKOUT" shall mean the suspension of the Registration Statement after the effective date upon the good faith determination by the Company's Board of Directors that a material financing, acquisition or other extraordinary corporate transaction is in the best interest of the Company and its stockholders, and that disclosure thereof to the public would have a material adverse effect on the ability of the Company to consummate such material financing, acquisition or other extraordinary corporate transaction, all after receiving advice to such effect from a nationally recognized investment banking firm or, to the extent appropriate, the Company's counsel which has been engaged by the Company in connection with such financing, acquisition or other extraordinary corporate transaction; PROVIDED, HOWEVER, that (i) no more than two (2) such Permitted Blackouts may be imposed during any period of twelve (12) consecutive months and (ii) the aggregate duration of all Permitted Blackouts during any period of twelve (12) consecutive months shall be no more than fifteen (15) business days. -3- 2.4 PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the Registration Period (as hereinafter defined) the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then the Company shall send to each Purchaser who has a right to have Registrable Securities covered by a Registration Statement pursuant to this Agreement written notice of such determination and, if within fifteen (15) days after the date of such notice, such Purchaser shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Purchaser requests to be registered, except that if, in connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of ADSs which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which such Purchaser has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Purchasers seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such Purchasers; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement. No right to registration of Registrable Securities under this Section 2.4 shall be construed to limit any registration required under Section 2.1 or 3.2 hereof. If an offering in connection with which a Purchaser is entitled to registration under this Section 2.4 is an underwritten offering, then each Purchaser whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other ADSs included in such underwritten offering. So long as a Registration Statement is effective and immediately available for use so that all of the Registrable Securities may be sold in reliance thereon, the provisions of this section shall not apply. 2.5 ELIGIBILITY FOR FORM S-3. The Company represents and warrants that it meets the requirements for the use of Form S-3 for registration of the re-sale by Initial Purchasers and any other Purchasers of the Registrable Securities and the Company shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-3. -4- ARTICLE 3 OBLIGATIONS OF THE COMPANY In connection with the registration of the Registrable Securities, the Company shall have the following obligations, including with respect to each Registration Statement to be filed hereunder: 3.1 The Company shall prepare promptly and file with the SEC each Registration Statement required by Section 2.1, and cause each such Registration Statement relating to Registrable Securities to become effective as soon as practicable after such filing, and keep the Registration Statement effective pursuant to Rule 415 and available for use at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold (and no further Registrable Securities may be issued in the future) and (ii) the date on which all of the Registrable Securities (in the reasonable opinion of counsel to Initial Purchasers) may be immediately sold to the public without registration and without restriction as to the number of Registrable Securities to be sold, whether pursuant to Rule 144 or otherwise (the "REGISTRATION PERIOD"). Each such Registration Statement (including any amendments or supplements thereto and prospectuses contained therein and all documents incorporated by reference therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading. 3.2 The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with each Registration Statement as may be necessary to keep such Registration Statement effective and available for use at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until the termination of the Registration Period or, if earlier, such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the event the number of Shares available under a Registration Statement filed pursuant to this Agreement is at any time insufficient to cover one hundred seventy five percent (175%) of the ADSs issued or issuable pursuant to all of the then-issued Warrants or the Securities Purchase Agreement (without regard to any limitations on exercise contained therein), the Company shall amend, if permissible, the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover two hundred percent (200%) of the Warrant Shares issued or issuable upon exercise of the Warrants (without regard to any limitation on exercise contained therein), in each case, as soon as practicable, but in any event within five (5) days. The Company shall cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. 3.3 The Company shall furnish to each Purchaser whose Registrable Securities are included in the Registration Statement and its legal counsel (a) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in the case of the Registration Statement referred to in Section 2.1, each letter written by or on behalf of the Company to the -5- SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion, if any, thereof which contains information for which the Company has sought confidential treatment), and (b) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Purchaser may reasonably request in order to facilitate the disposition of the Registrable Securities owned (or to be owned) by such Purchaser. 3.4 The Company shall (a) register and qualify the Registrable Securities covered by each Registration Statement under securities laws of such jurisdictions in the United States as each Purchaser who holds (or has the right to hold) Registrable Securities being offered reasonably requests, (b) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness and availability for use thereof during the applicable Registration Period, (c) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the applicable Registration Period, and (d) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4, (ii) subject itself to general taxation in any such jurisdiction, (iii) file a general consent to service of process in any such jurisdiction, (iv) provide any undertakings that cause the Company material expense or burden, or (v) make any change in its charter or by-laws, which in each case the board of directors of the Company determines to be contrary to the best interests of the Company and its stockholders. 3.5 In the event the Purchasers who hold a majority in interest of the Registrable Securities being offered in an offering pursuant to a Registration Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof select underwriters for the offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering, but shall not bear any costs or expenses of the underwriting. 3.6 As soon as practicable after becoming aware of such event, the Company shall notify (by telephone and also by facsimile and reputable overnight courier) each Purchaser of the happening of any event, of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use its best efforts as soon as possible (but in any event within five (5) days) to prepare a supplement or amendment to the Registration Statement (and make all required filings with the SEC) to correct such untrue statement or omission, and the Company shall simultaneously (and thereafter as requested) deliver such number of copies of such supplement or amendment to each Purchaser (or other applicable document) as such Purchaser may request in writing. Unless such an event is publicly announced, the Company shall not, without the consent of the Purchaser, give such Purchaser any material non-public information, but shall inform the Purchasers that such prospectus -6- includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 3.7 The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest practicable time and the Company shall immediately notify by facsimile each Purchaser (at the facsimile number for such Purchaser set forth on the signature page hereto) who holds Registrable Securities (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof. 3.8 The Company shall permit counsel designated by the Initial Purchasers to review the Registration Statement and all amendments and supplements thereto a reasonable period of time prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects, provided such objection shall be communicated to the Company within 3 business days after receipt of such Registration Statement by Purchaser. 3.9 [Intentionally deleted]. 3.10 At the request of any Purchaser, the Company shall furnish, on the date of effectiveness of the Registration Statement and thereafter from time to time on such dates as a Purchaser may reasonably request (a) an opinion, dated as of such applicable date, from counsel representing the Company addressed to the Purchasers and in form, scope and substance as is customarily given in an underwritten public offering and (b) a letter, dated as of such applicable date, from the Company's independent certified public accountants addressed to the Purchasers and in form, scope and substance as customarily given to underwriters in an underwritten public offering. 3.11 The Company shall make available for inspection by (i) any Purchaser, (ii) any underwriter participating in any disposition pursuant to the Registration Statement, (iii) attorneys and accountants retained by any Purchaser, and (iv) attorneys retained by such underwriters (collectively, the "INSPECTORS") all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the "RECORDS"), as shall be reasonably deemed necessary by each Inspector and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall hold in confidence and shall not make any disclosure (except to a Purchaser) of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified in writing, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement to permit Purchaser to sell under such Registration Statement, (b) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or is otherwise required by applicable law or legal process or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the relevant Purchaser). The Company shall not be required to disclose any confidential information in such Records to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in -7- form and reasonable substance satisfactory to the Company) with the Company with respect thereto, substantially in the form of this Section 3.11. Each Purchaser agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein shall be deemed to limit a Purchaser's ability to sell Registrable Securities in a manner which is consistent with applicable laws and regulations. 3.12 The Company shall hold in confidence and not make any disclosure of information concerning a Purchaser provided to the Company excluding any information provided by Purchaser for use in or in connection with a Registration Statement unless (a) disclosure of such information is necessary to comply with federal or state securities laws, (b) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (c) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or is otherwise required by applicable law or legal process, (d) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the Company), or (e) such Purchaser consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning a Purchaser is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Purchaser prior to making such disclosure, and allow the Purchaser, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 3.13 From and after each Closing, the Company shall cause the listing and the continuation of listing of all the Registrable Securities related to such Closing and required to be covered by a Registration Statement on the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange and cause the Registrable Securities to be quoted or listed on each additional national securities exchange or quotation system upon which the ADRs are then listed or quoted. 3.14 The Company shall provide a transfer agent and depositary, which may be a single entity, for the Registrable Securities not later than the effective date of the applicable Registration Statement. 3.15 The Company shall cooperate with the Purchasers who hold Registrable Securities being offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Purchasers may reasonably request and registered in such names as the managing underwriter or underwriters, if any, or the Purchasers may request, and, within two (2) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the -8- Purchasers whose Registrable Securities are included in such Registration Statement) an opinion of such counsel in the form attached hereto as EXHIBIT 1. 3.16 At the request of any Purchaser, the Company shall promptly prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with a Registration Statement filed pursuant hereto as may be necessary in order to change the plan of distribution set forth in such Registration Statement. 3.17 The Company shall comply with all applicable laws related to a Registration Statement and offering and sale of securities covered by the Registration Statement and all applicable rules and regulations of governmental authorities in connection therewith (including, without limitation, the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission). 3.18 The Company shall take all such other actions as any Purchaser or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, but shall not be required to incur any costs or expenses in connection therewith not otherwise provided herein to be borne by the Company. 3.19 From and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company (other than Purchasers with respect to Registrable Securities) to include any of their securities in any Registration Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof without the consent of Initial Purchaser and the holders of a majority of the Registrable Securities. Without the consent of Initial Purchaser, until the effectiveness of the Registration Statements contemplated by Section 2.1 hereof, the Company shall not file any other Registration Statement for the sale of any securities, whether for the account of the Company or any other person. 3.20 The Registration Statement shall state that it covers such indeterminate number of additional shares as may be issuable upon exercise of the Warrants to prevent dilution resulting from stock splits, stock dividends and other similar transactions. ARTICLE 4 OBLIGATIONS OF THE PURCHASERS In connection with the registration of the Registrable Securities, the Purchasers shall have the following obligations: 4.1 Each Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities. At least five (5) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Purchaser of the information the Company requires from each such Purchaser. 4.2 Each Purchaser, by such Purchaser's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection -9- with the preparation and filing of the Registration Statements hereunder, unless such Purchaser has notified the Company in writing of such Purchaser's election to exclude all of such Purchaser's Registrable Securities from the Registration Statement. 4.3 Each Purchaser whose Registrable Securities are included in a Registration Statement understands that the Securities Act may require delivery of a prospectus relating thereto in connection with any sale thereof pursuant to such Registration Statement, and each such Purchaser shall use its reasonable efforts to comply with the applicable prospectus delivery requirements of the Securities Act in connection with any such sale. 4.4 [Intentionally omitted] 4.5 Each Purchaser agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3.6, such Purchaser will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.6 or advice that a supplement or amendment is not required and, if so directed by the Company, such Purchaser shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Purchaser's possession (other than a limited number of permanent file copies), of the prospectus covering such Registrable Securities current at the time of receipt of such notice. Purchaser's obligations under this paragraph shall in no way limit the Company's obligations under this Agreement or Purchaser's rights or remedies against the Company with respect to any breach or threatened breach by the Company of any such obligations. 4.6 Without limiting a Purchaser's rights under Section 2.1 or 3.2 hereof, no Purchaser may participate in any underwritten distribution hereunder unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities on the basis provided in any underwriting agreements in usual and customary form entered into by the Company pursuant to Section 3.5 hereof, (b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (c) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of those payable by the Company pursuant to Article 5. Without implication that the contrary would otherwise be true, it is expressly understood and agreed that no Purchaser shall be required to participate in any such underwritten distribution. ARTICLE 5 EXPENSES OF REGISTRATION All expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Articles 2 and 3, including, without limitation, all registration, listing and qualification fees, printers and accounting fees, the fees and disbursements of counsel for the Company and the fees and disbursements of one firm of attorneys for the Purchasers, shall be borne by the Company. -10- ARTICLE 6 INDEMNIFICATION In the event any Registrable Securities are included in a Registration Statement under this Agreement: 6.1 To the extent permitted by law, the Company will indemnify, hold harmless and defend (a) each Purchaser who holds such Registrable Securities, (b) each underwriter of Registrable Securities and (c) the directors, officers, partners, members, employees, agents and persons who control any Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries whether or not in any court, before any administrative body or by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, "CLAIMS") to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall reimburse each such Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.1: (x) shall not apply to an Indemnified Person with respect to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (z) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company pursuant to Section 3.3 hereof, and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by a Purchaser pursuant to Article 9. -11- 6.2 In connection with any Registration Statement in which a Purchaser is participating, to the extent permitted by law, each such Purchaser agrees to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 6.1, the Company, each of its directors, each of its officers who signs the Registration Statement, its employees, agents and persons, if any, who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any other stockholder selling securities pursuant to the Registration Statement, together with its directors, officers and members, and any person who controls such stockholder or underwriter within the meaning of the Securities Act or the Exchange Act (such an "INDEMNIFIED PARTY"), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Purchaser expressly for use in connection with such Registration Statement; and such Purchaser will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6.2 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Purchaser, which consent shall not be unreasonably withheld; provided, further, however, that a Purchaser shall be liable under this Agreement (including this Section 6.2 and Article 7) for only that amount as does not exceed the net proceeds actually received by such Purchaser as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Purchasers pursuant to Article 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.2 with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, and the Indemnified Party failed to utilize such corrected prospectus. 6.3 Promptly after receipt by an Indemnified Person or Indemnified Party under this Article 6 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Article 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right (at its expense) to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and continue control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that such indemnifying party shall diligently pursue such defense and an indemnifying party shall not be entitled to assume (or continue) such defense if the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or Indemnified Party and the indemnifying party, and any other party represented by such counsel in such proceeding or the actual or potential defendants in, or targets of, any such action include both the Indemnified Person or the Indemnified Party and any such Indemnified Person or Indemnified Party reasonably determines -12- that there may be legal defenses available to such Indemnified Person or Indemnified Party which are different from or in addition to those available to such indemnifying party. Notwithstanding any assumption of such defense and without limiting any indemnification obligation provided for in Section 6.1 or 6.2, the Indemnified Party or Indemnified Persons, as the case may be, shall be entitled to be represented by counsel (at its own expense if the indemnifying party is permitted to assume and continue control of the defense and otherwise at the expense of the indemnifying party) and such counsel shall be entitled to participate in such defense. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Article 6, except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Article 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. ARTICLE 7 CONTRIBUTION To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Article 6 to the fullest extent permitted by law; provided, however, that (i) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, and (ii) contribution (together with any indemnification or other obligations under this Agreement) by any Purchaser of Registrable Securities shall be limited in amount to the net amount of proceeds received by such Purchaser from the sale of its Registrable Securities. ARTICLE 8 REPORTS UNDER THE EXCHANGE ACT With a view to making available to each Purchaser the benefits of Rule 144, the Company agrees that so long as any Purchaser holds Warrants, any Registrable Securities, the Company shall: 8.1 (a) Not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. (b) File with the SEC in a timely manner and make and keep available all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the filing and availability of such reports and other documents is required for the applicable provisions of Rule 144; and 8.2 Furnish to each Purchaser promptly upon written request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the -13- Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Purchaser to sell such securities pursuant to Rule 144 without registration. ARTICLE 9 ASSIGNMENT OF REGISTRATION RIGHTS The rights of the Purchasers hereunder as to Registrable Securities transferred by a Purchaser (or represented by Warrants transferred by a Purchaser), including the right to have the Company register Registrable Securities pursuant to this Agreement, shall be automatically assigned by each Purchaser to any transferee of all or any portion of the Registrable Securities if: (a) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (i) the name and address of such transferee or assignee, (ii) the securities with respect to which such registration rights are being transferred or assigned and (iii) the information specified in Section 3.12 to such transferee, (c) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act or applicable state securities laws, and (d) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing for the benefit of the Company to be bound by all of the provisions contained herein. The rights of a Purchaser hereunder with respect to any Registrable Securities not transferred (and not represented by Warrants transferred) shall not be assigned by virtue of the transfer of other Registrable Securities or transferred Warrants representing other Registrable Securities. ARTICLE 10 AMENDMENT OF REGISTRATION RIGHTS Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with written consent of the Company, Initial Purchasers (so long as Initial Purchasers still beneficially owns Registrable Securities) and Purchasers who hold a majority interest of the Registrable Securities. Any amendment or waiver effected in accordance with this Article 10 shall be binding upon each Purchaser and the Company. Notwithstanding the foregoing, no amendment or waiver shall retroactively affect any Purchaser without its consent or prospectively adversely affect any Purchaser who no longer owns any Warrants, Registrable Securities without its consent. No amendment or waiver may adversely affect one or more Purchasers or group of Purchasers vis-a-vis any other Purchaser or group of Purchasers. Neither Article 6 nor Article 7 hereof may be amended or waived in a manner adverse to a Purchaser without its consent. Notwithstanding anything to the contrary contained in this Article 10, no amendment or waiver shall be applicable to an Initial Purchaser who does not consent in writing thereto. -14- ARTICLE 11 MISCELLANEOUS 11.1 A person or entity is deemed to be a holder (or a holder in interest) of Registrable Securities whenever such person or entity owns of record such Registrable Securities (or the Warrants which may be exercised for Registrable Securities). If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities (or Warrants, as the case may be). 11.2 Any notices herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by machine-generated confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, CA 94538 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P.O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. and if to Initial Purchasers: To the names and addresses set forth on Schedule A hereto. with a copy to: Irell & Manella, LLP 333 South Hope Street Los Angeles, CA 90071 Telecopy: (213) 229-0515 Attention: Anthony T. Iler, Esq. -15- and if to any Purchaser, at such address as such Purchaser, shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 11.2. 11.3 Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. 11.4 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the federal courts located in the state of New York and the state courts of the State of New York located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The parties hereto further agree that service of process upon the parties hereto mailed by first class mail shall be deemed in every respect effective service of process upon each such party in any such suit or proceeding. Nothing herein shall affect either party's right to serve process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11.5 This Agreement and the Securities Purchase Agreement (including all schedules and exhibits thereto and all certificates and opinions required thereby) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Securities Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. 11.6 Subject to the requirements of Article 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. Notwithstanding anything to the contrary contained herein, including, without limitation, Article 9 (and without compliance therewith), the rights of a Purchaser hereunder shall be assignable to and exercisable by a bona fide pledgee of the Registrable Securities in connection with a Purchaser's margin or brokerage accounts. 11.7 The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 11.8 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto, by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. -16- 11.9 Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 11.10 Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by each Purchaser and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers and that the remedy at law for any such breach may be inadequate. 11.11 The initial number of Registrable Securities included on any Registration Statement and each increase to the number of Registrable Securities included thereon shall be allocated pro rata among the Purchasers based on the number of Registrable Securities held by each Purchaser at the time of such establishment or increase, as the case may be. In the event a Purchaser shall sell or otherwise transfer any of such holder's Registrable Securities, each transferee shall be allocated a pro rata portion of the number of Registrable Securities included on a Registration Statement for such transferor. Any ADSs included on a Registration Statement and which remain allocated to any person or entity which does not hold any Registrable Securities shall be allocated to the remaining Purchasers, pro rata based on the number of shares of Registrable Securities then held by such Purchasers. Without implication that the contrary would otherwise be true, for purposes of this paragraph, all Warrants then outstanding shall be assumed exercised for Registrable Securities (without giving effect to any limitations on exercise contained therein). 11.12 Whenever the Company is required to make any cash payment to a Purchaser under this Agreement, such cash payment shall be due on the date (the "CASH DUE DATE") that such Purchaser delivers written notice from the Purchaser to the Company. Such cash payment shall be made to the Purchaser by the method (by certified or cashier's check or wire transfer of immediately available funds) elected by such Holder. If such payment is not delivered within two (2) days of the Cash Due Date, such Purchaser shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the Holder. 11.13 If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement. * * * -17- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. COMPANY: INSIGNIA SOLUTIONS PLC By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO -18- REGISTRATION RIGHTS AGREEMENT (continued) PURCHASERS: VINCENT S. and ROSEMARY PINO By s/Vincent S. Pino VINCENT S. PINO By s/Rosemary Pino ROSEMARY PINO RICHARD N. and BARBARA ZEHNER By s/Richard N. Zehner RICHARD N. ZEHNER By s/Barbara Zehner BARBARA ZEHNER By s/Robert Waley Cohen ROBERT WALEY-COHEN AVALON PANAMA S.A. By s/Avalon Panama S.A. -19- EXHIBIT 1 TO REGISTRATION RIGHTS AGREEMENT [Date] [Name and address of transfer agent] RE: INSIGNIA SOLUTIONS PLC Ladies and Gentlemen: We are counsel to Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), and we understand that ______________________ (the "HOLDER") has purchased from the Company American Depository Shares (the "ADSS") and certain Warrants to purchase additional ADSs. The ADSs were purchased by the Holder pursuant to a Securities Purchase Agreement, dated as of December __, 1999, by and among the Company and the Holder (the "AGREEMENT"). Pursuant to a Registration Rights Agreement, dated as of December __, 1999, by and among the Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the Holder, among other things, to register the Registrable Securities (as that term is defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the Registration Rights Agreement. In connection with the Company's obligations under the Registration Rights Agreement, on December __, 1999, the Company filed a Registration Statement on Form S-3 (File No. 333- __________) (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities, which names the Holder as a selling stockholder thereunder. [Other customary introductory and scope of examination language to be inserted, in each case as reasonably acceptable to Holders.] Based on the foregoing, we are of the opinion that the resale of Registrable Securities have been registered under the Securities Act. [Other appropriate customary language to be included, in each case as reasonably acceptable to Holders.] Very truly yours, -20- SCHEDULE A
Name, Address and Purchase Shares Warrants Telecopy Number of Purchaser Price Purchased Purchased - ----------------------------- -------- --------- --------- Vincent S. and Rosemary Pino $250,000 59,084 17,725 Richard N. and Barbara Zehner $250,000 59,084 17,725 Robert Waley-Cohen $250,000 59,084 17,725 Avalon Panama S.A. $250,000 59,084 17,725
-21- EX-4.09 6 EXHIBIT 4.09 EXHIBIT A VOID AFTER 5:00 P.M., CENTRAL TIME ON DECEMBER 9, 2004 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase 70,900 American Depository Shares Date: December 9, 1999 INSIGNIA SOLUTIONS PLC ADSS PURCHASE WARRANT THIS CERTIFIES THAT, for value received, Initial Purchasers or its registered assigns, is entitled to purchase from Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), at any time or from time to time during the period specified in Section 2 hereof, 70,900 fully paid and nonassessable American Depository Shares (the "ADSS," or "SHARES"), each ADS representing one ordinary share of 20p each nominal value of the Company (the "ORDINARY SHARES"), at an exercise price of $5.29 per share (the "EXERCISE PRICE"). This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated December 9, 1999 by and between the Company and the Purchasers listed on Schedule A to that Agreement (the "PURCHASERS") (the "SECURITIES PURCHASE AGREEMENT"). The number of ADSs purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "CLOSING BID PRICE" means, for any security as of any date, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holder hereof (the "HOLDER") if Bloomberg Financial Markets is not then reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board of such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "PINK SHEETS" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder with the costs of such appraisal to be borne by the Company. This Warrant is subject to the following terms, provisions, and conditions: 1. MECHANICS OF EXERCISE. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant may be exercised as follows: (a) MANNER OF EXERCISE. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft, destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the "EXERCISE AGREEMENT"), to the Company at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder's designees, as the record owner of such shares, as of the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above. (b) ISSUANCE OF CERTIFICATES. Subject to Section 1(c), certificates for the Warrant Shares to be so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). The certificates to be so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be designated by such Holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. (c) EXERCISE DISPUTES. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of ADSs as are not disputed in accordance with this Section. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed calculations to a nationally recognized independent accounting firm (selected by the Company and reasonably acceptable to Holder) via facsimile within three (3) business days of receipt of the Exercise Agreement. The accounting firm shall audit the calculations and notify the Company and the Holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accounting firm's calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of ADSs in accordance with this Section. -2- (d) FRACTIONAL SHARES. No fractional ADSs are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Exercise Price of an ADS (as determined for exercise of this Warrant into whole ADSs); provided that in the event that sufficient funds are not legally available for the payment of such cash adjustment any fractional ADSs shall be rounded up to the next whole number. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time and from time to time on or after the date hereof and before 5:00 P.M., Central Standard Time on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD"). 3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and agrees as follows: (a) SHARES TO BE FULLY PAID. All Warrant Shares and Ordinary Shares that are represented by such Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and encumbrances and shall be entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRS") and in the Deposit Agreement dated November 17, 1995 between the Company and The Bank of New York relating to such ADSs. (b) RESERVATION OF ORDINARY SHARES AND DEPOSIT OF ADSS. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of Ordinary Shares, which are readily available for deposit with the Depositary for the purpose of issuance in the form of ADSs upon exercise of this Warrant, to provide for the exercise of this Warrant. (c) LISTING. The Company shall promptly secure the listing of the ADSs issuable upon exercise of this Warrant on the Nasdaq National Market System ("NNM"), as required by Section 4.9 of the Securities Purchase Agreement and on each such national securities exchange or automated quotation system, if any, on which ADSs are then listed or become listed and shall maintain, so long as any other ADSs shall be so listed, such listing of all ADSs from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of any other shares of capital stock of the Company issuable upon the exercise of this Warrant so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its Memorandum of Association and Articles of Association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of the Holder of this Warrant, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Ordinary Shares -3- represented by ADSs receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may at all times validly and legally issue fully paid and nonassessable ADSs upon the exercise of this Warrant. 4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. (a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF ADSS UPON ISSUANCE OF ORDINARY SHARES. Except as otherwise provided in Section 4(c) and 4(e) hereof and other than pursuant to the Company's existing obligations as disclosed in Schedule 3.3 of the Securities Purchase Agreement or pursuant to the Reset Warrant, or pursuant to the warrants issued to Castle Creek Technology Partners LLC at or prior to the Closing on terms substantially similar to the terms of this Warrant and the Reset Warrant, if and whenever after the initial issuance of this Warrant, the Company issues or sells, or in accordance with Section 4(b) hereof is deemed to have issued or sold, any Ordinary Shares (including in the form of ADSs) for no consideration or for a consideration per share less than the then current Market Price (as herein defined) on the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in accordance with the following formula: E' = (E) (O + P/M) / (OS)
where: E' = the adjusted Exercise Price E = the then current Exercise Price; M = the greater of the then current Market Price and the then current Exercise Price; O = the number of Ordinary Shares in issue immediately prior to the Dilutive Issuance; P = the aggregate consideration, calculated as set forth in Section 4(b) hereof, received by the Company upon such Dilutive Issuance; and OS = the total number of Ordinary Shares Deemed In Issue (as herein defined) immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be applicable: (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner issues or grants any warrants, rights or options, other than pursuant to the Reset Warrant, whether or not immediately exercisable, to subscribe for or to purchase Ordinary Shares (including in the form of ADSs) or other securities exercisable, convertible into or exchangeable for Ordinary Shares (including in the form of ADSs) ("CONVERTIBLE SECURITIES"), but not to include the grant or exercise of any stock or options which may hereafter be granted or exercised -4- under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose (such warrants, rights and options to purchase Ordinary Shares or Convertible Securities are hereinafter referred to as "OPTIONS"), and the price per share for which Ordinary Shares are issuable upon the exercise of such Options is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"), then the maximum total number of Ordinary Shares issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the price per share for which Ordinary Shares are issuable upon the exercise of such Below Market Options is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Below Market Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of Ordinary Shares issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Ordinary Shares upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. (ii) ISSUANCE OF CONVERTIBLE SECURITIES. (A) If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Ordinary Shares are issuable upon such exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the Market Price on the date of issuance, then the maximum total number of Ordinary Shares issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be in issue and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the price per share for which Ordinary Shares issuable upon such exercise, conversion or exchange is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of Ordinary Shares issuable upon the exercise, conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuances of such Ordinary Shares upon exercise, conversion or exchange of such Convertible Securities. -5- (B) If the Company in any manner issues or sells any Convertible Securities with a fluctuating conversion or exercise price or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per share for which Ordinary Shares are issuable upon such exercise, conversion or exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest price per share which would be applicable assuming that (1) all holding period and other conditions to any discounts contained in such Convertible Security have been satisfied, and (2) the Market Price on the date of issuance of such Convertible Security was 80% of the Market Price on such date (the "ASSUMED VARIABLE MARKET PRICE"). (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. Except for the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, if there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange or any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Ordinary Shares (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE SECURITIES. If, in any case, the total number of Ordinary Shares issuable upon exercise of any Options or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Options or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of Ordinary Shares issued upon exercise or conversion thereof), never been issued. (v) CALCULATION OF CONSIDERATION RECEIVED. If any Ordinary Shares, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Ordinary Shares, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair market value of such consideration except where such consideration consists of freely-tradeable securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Ordinary Shares, Options or Convertible Securities are issued in connection with any -6- merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Ordinary Shares, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or securities will be determined in the good faith reasonable business judgment of the Board of Directors. (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities issued and outstanding on the date hereof in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee or Director benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon the issuance of the Warrant in accordance with terms of the Securities Purchase Agreement; or (iv) upon the exercise of this Warrant. (c) SUBDIVISION OR COMBINATION OF ORDINARY SHARES. If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its Ordinary Shares into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Ordinary Shares into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. (d) ADJUSTMENT IN NUMBER OF ADSS. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4 or Section 5, the number of ADSs issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of ADSs issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (e) MAJOR TRANSACTIONS. If the Company shall consolidate or merge with any other corporation or entity (other than a consolidation or merger in which the Company is the surviving or continuing entity and its capital stock is unchanged and unissued in such transaction (except for issuances which do not exceed fifty percent (50%) of the Ordinary Shares)) or there shall occur any share exchange pursuant to which all of the Ordinary Shares in issue, including those represented by ADSs, are converted into other securities or property or any such other reclassification or change of the Ordinary Shares in issue or the Company shall sell all or substantially all of its assets (each of the foregoing being a "MAJOR TRANSACTION"), then the holder of this Warrant may, at its option, either (a) in the event that the Ordinary Shares remain in issue or holders of Ordinary Shares receive any common stock or substantially similar equity interest, in each of the foregoing cases the American Depository Shares representing which is publicly traded, retain this Warrant and this Warrant shall continue to apply to such ADSs or shall apply, -7- as nearly as practicable, to the American depository shares of such other common stock or equity interest, as the case may be, or (b) regardless of whether (a) applies, receive consideration, in exchange for this Warrant (without payment of any exercise price hereunder), equal to the greater of, as determined in the sole discretion of such holder, (i) the number of shares of stock or securities or property of the Company, or of the entity resulting from such Major Transaction (the "MAJOR TRANSACTION CONSIDERATION"), to which a holder of the number of Ordinary Shares represented by the ADSs deliverable upon the exercise of this Warrant would have been entitled upon such Major Transaction had such holder so exercised this Warrant (without regard to any limitations on exercise herein or elsewhere contained) on the trading date immediately preceding the public announcement of the transaction resulting in such Major Transaction and had such ADSs been issued and outstanding and had such Holder been the holder of record of such ADSs at the time of the consummation of such Major Transaction, and (ii) cash paid by the Company in immediately available funds in an amount equal to the Black-Scholes Amount (as defined herein) times the number of ADSs for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder), and the Company shall make lawful provision for the foregoing as a part of such Major Transaction and shall cause the issuer of any security in such transaction which constitutes Registrable Securities under that certain Registration Rights Agreement dated December 9, 1999 by and between the Company and the Purchasers (the "REGISTRATION RIGHTS AGREEMENT") to assume all of the Company's obligations under the Registration Rights Agreement. In the event that the Company shall consolidate or merge with any other corporation in a transaction in which common stock of the surviving corporation or the parent thereof (the "EXCHANGE SECURITIES") is issued to the holders of Ordinary Shares in such transaction in exchange for all such Ordinary Shares, and (a) the Exchange Securities are publicly traded and an American Depository Receipt facility is established, (b) the average daily dollar trading volume of the Exchange Securities during the one hundred eighty (180) day period ending on the date on which such transaction is publicly disclosed is greater than One Million Dollars ($1,000,000.00) per day as reported by Bloomberg, (c) the historical one hundred (100) day volatility of the Exchange Securities during the period ending on the date on which such transaction is publicly disclosed is greater than fifty percent (50%), and (d) the market capitalization of the issuer of the Exchange Securities is not less than One hundred Million Dollars ($100,000,000.00) based on the last sale price of the Exchange Securities on the date immediately before the date on which such transaction is publicly disclosed (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg), then the provisions of clause (b) of the preceding sentence shall not apply. In the event that the Company shall, in a Major Transaction, consolidate or merge with any other corporation in a transaction in which the Company is the survivor (a "COMPANY TRANSACTION"), the provisions of clause (ii) of the second preceding sentence shall not apply to the extent that each of the following conditions remain true for the thirty (30) business days commencing as of the date of the consummation of such transaction (the "MEASUREMENT PERIOD"): (a) the ADS remains publicly traded during the period, (b) the average daily dollar trading volume of the ADS is greater than One Million Dollars ($1,000,000.00), (c) the historical thirty (30) day volatility of the Company's ADS is greater than fifty percent (50%), and (d) the market capitalization of the Company is not less than One Hundred Million Dollars ($1,000,000.00) on the last day of the period (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg). No sooner than ten (10) business days nor later than five (5) business days prior to the consummation of the Major Transaction, but not prior to the public -8- announcement of such Major Transaction, the Company shall deliver written notice ("NOTICE OF MAJOR TRANSACTION") to the Holder of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day after the Company's sending such notice by telecopy (provided that the Company sends a confirming copy of such notice on the same day by overnight courier) of such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the Major Transaction consideration which the Holder of this Warrant would receive under this Section. If the Major Transaction Consideration is cash and does not consist entirely of United States currency, the Holder may elect to receive United States currency in an amount equal to the value of the Major Transaction Consideration in lieu of the Major Transaction Consideration by delivering notice of such election to the Company within five (5) business days of such holder's receipt of the Notice of Major Transaction. The "BLACK-SCHOLES AMOUNT" shall be the amount determined by calculating the "Black-Scholes" value of an option to purchase one ADS on the applicable page on the Bloomberg online page, using the following variable values: (i) the current market price of the ADSs equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) volatility of the ADS equal to the volatility of the ADSs during the 100 trading day period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the remaining term of this Warrant on the date of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer available utilizing the Bloomberg online page, the Holder shall calculate such amount in its sole discretion using the closest available alternative mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. (f) DISTRIBUTION OF ASSETS. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of its Ordinary Shares and ADSs as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the ADSs subject hereto, to receive the amount of such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such ADSs on the record date for the determination of holders of Ordinary Shares and ADSs entitled to such Distribution. (g) SPECIAL ADJUSTMENT AND NOTICES OF ADJUSTMENT. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. If the Company takes any actions (including under or by virtue of Section 4 of the Warrant) which would have a dilutive effect on the Holder or which would materially and adversely affect the Holder with respect to its investment in the Warrant, and if the provisions of Section 4 of the Warrant, are not strictly -9- applicable to such actions or, if applicable to such actions, would not operate to equitably protect the Holder against such actions, then the Company shall promptly upon notice from Holder appoint its independent certified public accountants to determine as promptly as practicable an appropriate adjustment to the terms hereof, including without limitation adjustments to the Exercise Price, or another appropriate action to so equitably protect such Holder and prevent any such dilution and any such material adverse effect, as the case may be. Following such determination, the Company shall forthwith make the adjustments or take the other actions described therein. (h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. (i) [Intentionally Omitted] (j) OTHER NOTICES. In case at any time: (i) the Company shall declare any dividend upon the Ordinary Shares payable in shares of stock of any class or make any other distribution to the holders of the Ordinary Shares and holders of ADSs; (ii) the Company shall offer for subscription pro rata to the holders of the Ordinary Shares and ADSs any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization of the Company, or reclassification of the Ordinary Shares, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the Holder (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Ordinary Shares and holders of ADSs entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Ordinary Shares entitled to vote and holders of ADSs entitled to give voting instructions to the Depositary in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Ordinary Shares and holders of ADSs shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Ordinary Shares and ADSs for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least thirty (30) days prior to the -10- record date or the date on which the Company's books are closed in respect thereto, but in no event earlier than public announcement of such proposed transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. (k) CERTAIN DEFINITIONS. (i) "ORDINARY SHARES DEEMED IN ISSUE" shall mean the number of Ordinary Shares actually in issue (including Ordinary Shares represented by issued and outstanding ADSs but not including Ordinary Shares held in the treasury of the Company), plus (x) in case of any adjustment required by Section 4(a) resulting from the issuance of any Options, the maximum total number of Ordinary Shares (including in the form of ADSs) issuable upon the exercise of the Options for which the adjustment is required (including any Ordinary Shares (including in the form of ADSs) issuable upon the conversion of Convertible Securities issuable upon the exercise of such Options), and (y) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Convertible Securities, the maximum total number of Ordinary Shares (including in the form of ADSs) issuable upon the exercise, conversion or exchange of the Convertible Securities for which the adjustment is required, as of the date of issuance of such Convertible Securities, if any. (ii) "MARKET PRICE," as of any date, (i) means the average of the Closing Bid Prices for the ADSs as reported to Nasdaq for the ten (10) trading days immediately preceding such date, or (ii) if Nasdaq is not the principal trading market for the ADSs, the average of the last reported bid prices on the principal trading market for the ADSs during the same period, or, if there is no bid price for such period, the last reported sales price for such period, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder of this Warrant, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the ADSs set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (iii) "ORDINARY SHARES," for purposes of this Section 4, includes the Ordinary Shares and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the Ordinary Shares represented by the ADSs purchasable pursuant to this Warrant shall include only Ordinary Shares in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Ordinary Shares, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. RESETS. If the Escrow Cure Date as defined in the Securities Purchase Agreement does not occur within seven (7) months of Closing, the Exercise Price of this Warrant will be adjusted to the Market Price on the seven-month anniversary of the Closing Date; provided, however, that no adjustment shall be made which would have the effect of increasing the Exercise Price. -11- 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder. 7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a holder of the Company's Ordinary Shares or ADSs. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a holder of the Company's Ordinary Shares or ADSs, whether such liability is asserted by the Company or by creditors of the Company. 8. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT. (a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the Form of Assignment attached hereto as Exhibit 2, at the office or agency of the Company referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. (b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the aggregate the right to purchase the number of ADSs which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of ADSs as shall be designated by the Holder of at the time of such surrender. (c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant, in the form hereof, in such denominations as Holder may request. (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 8. -12- (e) WARRANT REGISTER. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. (f) ADDITIONAL RESTRICTION ON EXERCISE OR TRANSFER. Notwithstanding anything to the contrary contained herein, the Warrant shall not be exercisable by the Holder to the extent (but only to the extent) that, if exercisable by Holder, Holder would beneficially own Ordinary Shares and ADSs in excess of 9.9% (the "APPLICABLE PERCENTAGE") of the total Ordinary Shares in issue. To the extent the above limitation applies, the determination of whether the Warrant shall be exercisable (vis-a-vis other securities owned by Holder which contain similar limitations on conversion) and of which Warrants shall be exercisable (as among Warrants) shall be made on the basis of the earliest submission of the Warrants (vis-a-vis other securities owned by the Holder which contain similar limitations on conversion and vis a vis other Warrants), in each case subject to such aggregate percentage limitation. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D and G thereunder. The provisions of this paragraph may be implemented in a manner otherwise than in strict conformity with the terms of this Section 8(f) with the approval of the Board of Directors of the Company and the Holder: (i) with respect to any matter to cure any ambiguity herein, to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation; and (ii) with respect to any other matter, with the further consent of the holders of a majority of the then Ordinary Shares in issue. For clarification, it is expressly a term of this security that the limitations contained in this Section shall apply to each successor Holder. The holders of Ordinary Shares of the Company shall be third-party beneficiaries of this Section 8(f) and the Company may not waive this Section 8(f) without the consent of holders of a majority of its Ordinary Shares. (g) CAP AMOUNT. Prior to Shareholder Approval (as defined in the Securities Purchase Agreement), unless otherwise permitted by The Nasdaq National Market System or of the national securities exchange on which the ADSs are listed, or unless the rules thereof no longer are applicable to the Company, in no event shall the total number of ADSs issued at the Closing under the Securities Purchase Agreement and upon exercise of the Warrants, when aggregated with the total number of ADSs issued under that certain Securities Purchase Agreement of even date herewith between the Company and Castle Creek Technology Partners LLC (the "Castle Creek Agreement") and upon exercise of the warrants pursuant to the Castle Creek Agreement, exceed the maximum number of shares of Common Stock that the Company can without stockholder approval so issue pursuant to Nasdaq Rule 4460(i) (or any successor rule) (the "CAP AMOUNT") upon Closing under the Securities Purchase Agreement and the exercise of the Warrants, which, as of the date of initial issuance of ADSs and Warrants to the Holders, is ____________ Shares. In the event the Holder shall sell or otherwise transfer any of -13- such Holder's Warrants, each transferee shall be allocated a pro rata portion of such Cap Amount. 9. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 10. NOTICES. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, California 94538-3115 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P. O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. and if to the Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 10. 11. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the United States federal courts located in the State of New York in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company agrees that a final nonappealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 12. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. -14- (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. (c) ASSIGNABILITY. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Holder and its successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. * * * -15- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Insignia Solutions plc By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO -16- FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) The undersigned hereby irrevocably exercises the right to purchase ____________ of the American Depositary Shares ("ADSS") of Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such ADSs in full, all in accordance with the conditions and provisions of said Warrant. (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any ADSs obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (ii) The undersigned requests that the American Deposit Receipts for such ADSs be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: Date: ________________________ ________________________________________ Signature of Holder ________________________________________ Name of Holder (Print) Address: ________________________________________ ________________________________________ -17- FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the number of ADSs covered thereby set forth hereinbelow, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
and hereby irrevocably constitutes and appoints ____________ ___ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Date: _________, ____ In the presence of Name: ________________________________________ Signature:______________________________ Title of Signing Officer or Agent (if any): __________________________________ Address: ________________________ _______________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. -18- EX-4.10 7 EXHIBIT 4.10 EXHIBIT C VOID AFTER 5:00 P.M., CENTRAL TIME ON DECEMBER 9, 2004 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase American Depository Shares Date: December 9, 1999 INSIGNIA SOLUTIONS PLC ADSs PURCHASE WARRANT THIS CERTIFIES THAT, for value received, Initial Purchaser, or its registered assigns, is entitled to purchase from Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "Company"), at any time or from time to time during the period specified in Section 2 hereof, a number of fully paid and nonassessable American Depository Shares (the "ADSs" or "Shares"), each ADS representing one ordinary share of 20p each nominal value of the Company ("Ordinary Shares"), determined pursuant to Section 1 hereof, at the exercise price (the "Exercise Price") defined below. This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated December 9, 1999 by and between the Company and the Purchasers listed on Schedule A to that Agreement (the "Purchasers") (the "SECURITIES PURCHASE AGREEMENT"). The number of ADSs purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject to further adjustment as provided in Section 4 hereof. The term "Closing Bid Price" means, for any security as of any date, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the holder hereof (the "Holder") if Bloomberg Financial Markets is not then reporting closing bid prices of such security (collectively, "Bloomberg"), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board of such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder with the costs of such appraisal to be borne by the Company. The Exercise Price shall equal to 20 pence per share, converted into US dollars at the daily exchange rate as reported in The Wall Street Journal (Midwest Edition) on the business day immediately preceding the date of exercise. This Warrant is subject to the following terms, provisions, and conditions: 1. (a) NUMBER OF SHARES INTO WHICH THIS WARRANT IS EXERCISABLE. On any Reset Date (as defined herein), this Warrant shall become exercisable into additional Shares. For purposes hereof, the number of additional Shares into which this Warrant becomes exercisable on a Reset Date shall be determined according to the following formula, where N represents such number: P - M [--------] * O M N = --------------------- [1 - V/M] where: P = the Market Price on the issuing date; M = the Market Price on the applicable Reset Date; O = the number of ADSs purchased on the Closing Date; and V = 20 pence, converted into US dollars at the daily exchange rate as reported in The Wall Street Journal (Midwest Edition) on the business day immediately preceding the applicable Reset Date. Notwithstanding the foregoing, this Warrant shall not become exercisable for additional Shares pursuant to this Section 1(a) if such reset would violate NASDAQ Rule 4460(i) (or any successor rule). To the extent that the immediately preceding sentence is applicable, the Company shall pay to the Purchaser an amount equal to (x) "N" times the Market Price on the Reset Date. For any given date, the "Market Price" shall be the average of the closing bid prices of the shares of ADSs for the ten (10) consecutive trading days immediately prior to such date. (b) RESET DATES. A "RESET DATE" shall mean: (i) each of (A) the date on which the Registration Statement (as defined in the Registration Rights Agreement) required to be filed by the Company pursuant to -2- Section 2.1 of the Registration Rights Agreement is first declared effective (the "EFFECTIVE DATE"), (B) the date which is four (4) months after the Effective Date and (C) the date which is eight (8) months after the Effective Date, in each case where the Market Price on such date is less than $4.23 (the Market Price on the Closing Date); (ii) if the Registration Statement has not been declared effective by the date which is five (5) months after the Closing Date (the "EFFECTIVENESS TRIGGER DATE"), (A) the Effectiveness Trigger Date and (B) each date which is one calendar month following the Effectiveness Trigger Date on which the Registration Statement has not yet been declared effective (in such circumstances, such date, also an "Effectiveness Trigger Date"); and (iii) if, by the date which is three (3) months after the Closing Date (the "ESCROW TRIGGER DATE"), the Company does not have released to it at least 4.75 million dollars ($4,750,000) (the "CURE AMOUNT") of the 6.25 million dollars ($6,250,000) held in escrow as of the Closing Date by State Street Bank pursuant to that certain escrow agreement dated February 5, 1998 by and between the Company and Citrix Systems Inc. (the "ESCROW AGREEMENT"), (A) the Escrow Trigger Date and (B) each date which is one calendar month following the Escrow Trigger Date, up to but excluding the Escrow Cure Date (as defined herein). The "ESCROW CURE DATE" shall mean the earlier of (a) the date on which the Cure Amount has been released to the Company pursuant to the Escrow Agreement and (b) the date which is twelve (12) months after the Effective Date. (c) PUBLIC OFFERING EXCEPTION. Notwithstanding anything to the contrary contained in Section 1(b), (i) the date described in Section 1(b) (i)(B) hereof shall not be a Reset Date if, prior to the earlier of such date or the date which is eight (8) months after the Closing Date, the Company has completed an underwritten public offering with net proceeds to the Company of at least twenty-five million dollars ($25,000,000) at a price per share of ADSs greater than (x) 1.66 TIMES (y) the Market Price on the Closing Date (an "OFFERING"); and (ii) the date described in Section 1 (b) (i)(C) hereof shall not be a Reset Date if, prior to the date which is twelve (12) months after the Closing Date, the Company completes an Offering. 2. MECHANICS AND PERIOD OF EXERCISE. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant may be exercised as follows: (a) MANNER OF EXERCISE. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft, destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the "EXERCISE AGREEMENT"), to the Company at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the -3- Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder's designees, as the record owner of such shares, as of the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above. (b) ISSUANCE OF CERTIFICATES. Subject to Section 2(c), certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). The certificates so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be designated by such Holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. (c) EXERCISE DISPUTES. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of ADSs as are not disputed in accordance with this Section. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed calculations to a nationally recognized independent accounting firm (selected by the Company and reasonably acceptable to Holder) via facsimile within three (3) business days of receipt of the Exercise Agreement. The accounting firm shall audit the calculations and notify the Company and the exercising Holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accounting firm's calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of ADSs in accordance with this Section. (d) FRACTIONAL SHARES. No fractional ADSs are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Exercise Price of an ADS (as determined for exercise of this Warrant into whole ADSs); provided that in the event that sufficient funds are not legally available for the payment of such cash adjustment any fractional ADSs shall be rounded up to the next whole number. (e) PERIOD OF EXERCISE. This Warrant is exercisable at any time and from time to time on or after the date hereof and before 5:00 P.M., Central Standard Time on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD"). 3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and agrees as follows: (a) SHARES TO BE FULLY PAID. All Warrant Shares and Ordinary Shares that are represented by such Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and encumbrances. -4- (b) RESERVATION OF ORDINARY SHARES AND DEPOSIT OF ADSs. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of Ordinary Shares, which are readily available for deposit with the Depositary for the purpose of issuance in the form of ADSs upon exercise of this Warrant, to provide for the exercise of this Warrant. (c) LISTING. The Company shall promptly secure the listing of the ADSs issuable upon exercise of this Warrant on the Nasdaq National Market System ("NNM") as required by Section 4.9 of the Securities Purchase Agreement and on each such national securities exchange or automated quotation system, if any, on which ADSs are then listed or become listed and shall maintain, so long as any other ADSs shall be so listed, such listing of all ADSs from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of any other shares of capital stock of the Company issuable upon the exercise of this Warrant so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its Memorandum of Association and Articles of Association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of the Holder of this Warrant, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Ordinary Shares represented by ADSs receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may at all times validly and legally issue fully paid and nonassessable ADSs and Ordinary Shares upon the exercise of this Warrant. 4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. (a) SUBDIVISION OR COMBINATION OF ORDINARY SHARES. If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its Ordinary Shares into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Ordinary Shares into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. -5- (b) ADJUSTMENT IN NUMBER OF ADSs. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of ADSs issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of ADSs issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (c) MAJOR TRANSACTIONS. If the Company shall consolidate or merge with any other corporation or entity (other than a consolidation or merger in which the Company is the surviving or continuing entity and its capital stock is unchanged and unissued in such transaction (except for issuances which do not exceed fifty percent (50%) of the Common Stock)) or there shall occur any share exchange pursuant to which all of the Ordinary Shares in issue, including those represented by ADSs, are converted into other securities or property or any such other reclassification or change of the Ordinary Shares in issue or the Company shall sell all or substantially all of its assets (each of the foregoing being a "MAJOR TRANSACTION"), then the holder of this Warrant may, at its option, either (a) in the event that the Ordinary Shares remain in issue or holders of Ordinary Shares receive any common stock or substantially similar equity interest, in each of the foregoing cases the American Depository Shares representing which is publicly traded, retain this Warrant and this Warrant shall continue to apply to such ADSs or shall apply, as nearly as practicable, to the American depository shares of such other common stock or equity interest, as the case may be, or (b) regardless of whether (a) applies, receive consideration, in exchange for this Warrant (without payment of any exercise price hereunder), equal to the greater of, as determined in the sole discretion of such holder, (i) the number of shares of stock or securities or property of the Company, or of the entity resulting from such Major Transaction (the "MAJOR TRANSACTION CONSIDERATION"), to which a holder of the number of Ordinary Shares represented by the ADSs delivered upon the exercise of this Warrant (pursuant to the cashless exercise feature hereof) would have been entitled upon such Major Transaction had such holder so exercised this Warrant (without regard to any limitations on exercise herein or elsewhere contained) on the trading date immediately preceding the public announcement of the transaction resulting in such Major Transaction and had such ADSs been issued and outstanding and had such Holder been the holder of record of such ADSs at the time of the consummation of such Major Transaction, and (ii) cash paid by the Company in immediately available funds in an amount equal to the Black-Scholes Amount (as defined herein) times the number of ADSs for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder), and the Company shall make lawful provision for the foregoing as a part of such Major Transaction and shall cause the issuer of any security in such transaction which constitutes Registrable Securities under that certain Registration Rights Agreement dated December 9, 1999 by and between the Company and the Purchasers (the "REGISTRATION RIGHTS AGREEMENT") to assume all of the Company's obligations under the Registration Rights Agreement. In the event that the Company shall consolidate or merge with any other corporation in a transaction in which common stock of the surviving corporation or the parent thereof (the "EXCHANGE SECURITIES") is issued to the holders of Ordinary Shares in such transaction in exchange for all such Ordinary Shares, and (a) the Exchange Securities are publicly traded and an American Depository Receipt facility is established, (b) the average daily dollar trading volume of the Exchange Securities during the one hundred eighty (180) day period ending on the date on which such transaction is publicly -6- disclosed is greater than One Million Dollars ($1,000,000.00) per day as reported by Bloomberg, (c) the historical one hundred (100) day volatility of the Exchange Securities during the period ending on the date on which such transaction is publicly disclosed is greater than fifty percent (50%), and (d) the market capitalization of the issuer of the Exchange Securities is not less than One hundred Million Dollars ($100,000,000.00) based on the last sale price of the Exchange Securities on the date immediately before the date on which such transaction is publicly disclosed (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg), then the provisions of clause (b) of the preceding sentence shall not apply. In the event that the Company shall, in a Major Transaction, consolidate or merge with any other corporation in a transaction in which the Company is the survivor (a "COMPANY TRANSACTION"), the provisions of clause (ii) of the second preceding sentence shall not apply to the extent that each of the following conditions remain true for the thirty (30) business days commencing as of the date of the consummation of such transaction (the "MEASUREMENT PERIOD"): (a) the Common Stock remains publicly traded during the period, (b) the average daily dollar trading volume of the Common Stock is greater than One Million Dollars ($1,000,000.00), (c) the historical thirty (30) day volatility of the Company's Common Stock is greater than fifty percent (50%), and (d) the market capitalization of the Company is not less than One Hundred Million Dollars ($1,000,000.00) on the last day of the period (in each case, with respect to the foregoing clauses (a) through (d), as reported by Bloomberg). No sooner than ten (10) business days nor later than five (5) business days prior to the consummation of the Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall deliver written notice ("NOTICE OF MAJOR TRANSACTION") to the Holder of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day after the Company's sending such notice by telecopy (provided that the Company sends a confirming copy of such notice on the same day by overnight courier) of such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the Major Transaction consideration which the Holder of this Warrant would receive under this Section. If the Major Transaction Consideration is cash and does not consist entirely of United States currency, the Holder may elect to receive United States currency in an amount equal to the value of the Major Transaction Consideration in lieu of the Major Transaction Consideration by delivering notice of such election to the Company within five (5) business days of such holder's receipt of the Notice of Major Transaction. The "BLACK-SCHOLES AMOUNT" shall be the amount determined by calculating the "Black-Scholes" value of an option to purchase one ADS on the applicable page on the Bloomberg online page, using the following variable values: (i) the current market price of the ADSs equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) volatility of the ADS equal to the volatility of the ADSs during the 100 trading day period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the remaining term of this Warrant on the date of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer available utilizing the Bloomberg online page, the Holder shall calculate such amount in its sole discretion using the closest available alternative mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. -7- (d) DISTRIBUTION OF ASSETS. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of its Ordinary Shares and ADSs as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the ADSs subject hereto, to receive the amount of such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such ADSs on the record date for the determination of holders of Ordinary Shares and ADSs entitled to such Distribution. (e) SPECIAL ADJUSTMENT AND NOTICES OF ADJUSTMENT. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. If the Company takes any actions (including under or by virtue of Section 4 of the Warrant) which would have a dilutive effect on the Holder or which would materially and adversely affect the Holder with respect to its investment in the Warrant, and if the provisions of Section 4 of the Warrant, are not strictly applicable to such actions or, if applicable to such actions, would not operate to equitably protect the Holder against such actions, then the Company shall promptly upon notice from Holder appoint its independent certified public accountants to determine as promptly as practicable an appropriate adjustment to the terms hereof, including without limitation adjustments to the Exercise Price, or another appropriate action to so equitably protect such Holder and prevent any such dilution and any such material adverse effect, as the case may be. Following such determination, the Company shall forthwith make the adjustments or take the other actions described therein. (f) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. (g) OTHER NOTICES. In case at any time: (i) the Company shall declare any dividend upon the Ordinary Shares payable in shares of stock of any class or make any other distribution to the holders of the Ordinary Shares and holders of ADSs; (ii) the Company shall offer for subscription pro rata to the holders of the Ordinary Shares and ADSs any additional shares of stock of any class or other rights; -8- (iii) there shall be any capital reorganization of the Company, or reclassification of the Ordinary Shares, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the Holder (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Ordinary Shares and holders of ADSs entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Ordinary Shares entitled to vote and holders of ADSs entitled to give voting instructions to the Depositary in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Ordinary Shares and holders of ADSs shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Ordinary Shares and ADSs for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least thirty (30) days prior to the record date or the date on which the Company's books are closed in respect thereto, but in no event earlier than public announcement of such proposed transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. (h) CERTAIN DEFINITIONS. (i) "MARKET PRICE," as of any date, (i) means the average of the Closing Bid Prices for the ADSs as reported to Nasdaq for the ten (10) trading days immediately preceding such date, or (ii) if Nasdaq is not the principal trading market for the ADSs, the average of the last reported bid prices on the principal trading market for the ADSs during the same period, or, if there is no bid price for such period, the last reported sales price for such period, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder of this Warrant, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the ADSs set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. (ii) "ORDINARY SHARES," for purposes of this Section 4, includes the Ordinary Shares and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the Ordinary Shares represented by the ADSs purchasable pursuant to this Warrant shall include only Ordinary Shares in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Ordinary Shares, or in the case of any reorganization, reclassification, consolidation, -9- merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. 5. INTENTIONALLY OMITTED. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder. 7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a holder of the Company's Ordinary Shares or ADSs. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a holder of the Company's Ordinary Shares or ADSs, whether such liability is asserted by the Company or by creditors of the Company. 8. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT. (a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the Form of Assignment attached hereto as Exhibit 2, at the office or agency of the Company referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. (b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the aggregate the right to purchase the number of ADSs which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of ADSs as shall be designated by the Holder of at the time of such surrender. (c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant, in the form hereof, in such denominations as Holder may request. -10- (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 8. (e) WARRANT REGISTER. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. (f) ADDITIONAL RESTRICTION ON EXERCISE OR TRANSFER. Notwithstanding anything to the contrary contained herein, the Warrant shall not be exercisable by the Holder to the extent (but only to the extent) that, if exercisable by Holder, Holder would beneficially own Ordinary Shares and ADSs in excess of 9.9% (the "APPLICABLE PERCENTAGE") of the total Ordinary Shares in issue. To the extent the above limitation applies, the determination of whether the Warrant shall be exercisable (vis-a-vis other securities owned by Holder which contain similar limitations on conversion) and of which Warrants shall be exercisable (as among Warrants) shall be made on the basis of the earliest submission of the Warrants (vis-a-vis other securities owned by the Holder which contain similar limitations on conversion and vis a vis other Warrants), in each case subject to such aggregate percentage limitation. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D and G thereunder. The provisions of this paragraph may be implemented in a manner otherwise than in strict conformity with the terms of this Section 8(f) with the approval of the Board of Directors of the Company and the Holder: (i) with respect to any matter to cure any ambiguity herein, to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation; and (ii) with respect to any other matter, with the further consent of the holders of a majority of the then Ordinary Shares in issue. For clarification, it is expressly a term of this security that the limitations contained in this Section shall apply to each successor Holder. The holders of Ordinary Shares of the Company shall be third-party beneficiaries of this Section 8(f) and the Company may not waive this Section 8(f) without the consent of holders of a majority of its Ordinary Shares. To the extent the Holder is prohibited from exercising this Reset Warrant as a result of the Applicable Percentage limitation, the Holder may, at its option and in addition to its other rights under the Securities Purchase Agreement and this Reset Warrant, retain this Warrant or to demand payment, in cash, from the Company in immediately available funds in an amount equal to the Black-Scholes Amount times the number of Shares for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder). -11- (g) CAP AMOUNT. Prior to Shareholder Approval (as defined in the Securities Purchase Agreement), unless otherwise permitted by The Nasdaq National Market or of the national securities exchange on which the ADSs are listed, or unless the rules thereof no longer are applicable to the Company, in no event shall the total number of ADSs issued at the Closing under the Securities Purchase Agreement and upon exercise of the Warrants, when aggregated with the total number of ADSs issued under that certain Securities Purchase Agreement of even date herewith between the Company and Castle Creek Technology Partners LLC (the "Castle Creek Agreement") and upon exercise of the warrants pursuant to the Castle Creek Agreement, exceed the maximum number of shares of Common Stock that the Company can without stockholder approval so issue pursuant to Nasdaq Rule 4460(i) (or any successor rule) (the "Cap Amount") upon Closing under the Securities Purchase Agreement and the exercise of the Warrants, which, as of the date of initial issuance of ADSs and Warrants to the Holders, which amount is ____________ shares. In the event the Holder shall sell or otherwise transfer any of the Holder's Warrants, each transferee shall be allocated a pro rata portion of such Cap Amount. To the extent the Holder is prohibited from exercising this Warrant as a result of the Cap Amount after the Shareholder Approval Date (as defined in the Securities Purchase Agreement), the Company shall pay to the Holder, in cash, in immediately available funds in an amount equal to the Black-Scholes Amount times the number of Shares for which this Warrant was exercisable (without regard to any limitations on exercise herein contained and assuming payment of the exercise payment in cash hereunder). 9. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 10. NOTICES. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, California 94538-3115 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P.O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. -12- and if to the Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 10. 11. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Company irrevocably consents to the jurisdiction of the United States federal courts located in the State of New York in any suit or proceeding based on or arising under this Warrant and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company agrees that a final nonappealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 12. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. (c) ASSIGNABILITY. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Holder and its successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. * * * IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Insignia Solutions plc By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO -13- FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) The undersigned hereby irrevocably exercises the right to purchase ____________ of the American Depositary Shares ("ADSs") of Insignia Solutions plc, a company organized and existing under the laws of England and Wales (the "COMPANY"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such ADSs in full, all in accordance with the conditions and provisions of said Warrant. (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any ADSs obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (ii) The undersigned requests that the American Deposit Receipts for such ADSs be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: Date: -------------------- ------------------------------------- Signature of Holder ------------------------------------- Name of Holder (Print) Address: ------------------------------------- ------------------------------------- -14- FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the number of ADSs covered thereby set forth hereinbelow, to: Name of Assignee Address No. of Shares and hereby irrevocably constitutes and appoints ____________ ___ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Date: , --------- ---- In the presence of Name: --------------------------------------------- Signature: ---------------------------------------- Title of Signing Officer or Agent (if any): ------------------------------------------- Address: ----------------------------------- ----------------------------------- Note: The above signature should correspond exactly with the name on the face of the within Warrant. -15- EX-10.50 8 EXHIBIT 10.50 EXHIBIT 10.50 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of December 9, 1999, by and between Insignia Solutions plc, a public limited company organized and existing under the laws of England and Wales (the "COMPANY"), with headquarters located at 41300 Christy Street, Fremont, California 94538, and Castle Creek Technology Partners LLC, an Illinois limited liability company located at 77 West Wacker Drive Ste. 4040, Chicago, Illinois 60601 (THE "PURCHASER"). RECITALS A. The Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "SECURITIES ACT"). B. Purchaser desires to purchase, upon the terms and conditions stated in this Agreement, (i) the Company's American Depository Shares (the "ADSs"), each ADS representing one ordinary share of 20p each nominal value of the Company ( the "ORDINARY SHARES"); (ii) a Warrant in the form of EXHIBIT A hereto (the "INITIAL WARRANT") entitling the holder thereof to purchase certain number of the Company's ADSs; and (iii) a Warrant in the form of EXHIBIT C hereto ( the "RESET WARRANT", and together with the Initial Warrant, the "WARRANTS") entitling the holder thereof to purchase additional ADSs from the Company upon the occurrence of certain events as defined therein. The ADSs being purchased hereunder are referred to herein as the "SHARES" and the ADSs issuable upon exercise of any Warrant (including the Reset Warrant) are referred to herein as the "WARRANT SHARES". The Shares, the Warrants and the Warrant Shares are collectively referred to herein as the "SECURITIES." C. Contemporaneous with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide certain registration rights in relation to the Securities under the Securities Act, the rules and regulations promulgated thereunder and applicable state securities laws. AGREEMENTS NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser hereby agree as follows: ARTICLE I PURCHASE AND SALE OF SECURITIES I.1 PURCHASE OF ADSs AND WARRANTS. On the Closing Date (as defined herein), subject to the terms and the satisfaction (or waiver) of the conditions set forth in Articles VI and VII, the Company shall issue and sell to Purchaser, and Purchaser shall purchase from the Company (i) 827,179 (_________) Shares, (ii) a Warrant entitling the holder thereof to purchase 248,154 Warrant Shares, and (iii) the Reset Warrant, for an aggregate consideration of Three Million Five Hundred Thousand Dollars ($3,500,000.00) (the "PURCHASE PRICE"). I.2 FORM OF PAYMENT. At the Closing, the Purchaser shall pay the Purchase Price for the Shares and Warrants by wire transfer to the Company, in accordance with the Company's written wiring instructions, against delivery of the Shares and duly executed Warrants, and the Company shall deliver to the Purchaser such Shares and such executed Warrants against delivery of such Purchase Price from the Purchaser. I.3 CLOSING DATE. Subject to the satisfaction (or waiver) of the conditions set forth in Articles VI and VII below, the date and time of the issuance, sale and purchase of the Securities pursuant to this Agreement shall be December 9, 1999 (the"Closing Date"). The Closing shall occur at 10:00 a.m. Chicago time, at the offices of Altheimer & Gray, 10 S. Wacker Drive, Chicago, IL 60606. I.4 LIMITATION ON SALES. Notwithstanding anything to the contrary contained in this Agreement, the Company may not sell and Purchaser may not purchase any Shares pursuant to this Agreement and the transactions contemplated hereby to the extent that such sale and purchase would result in Purchaser beneficially owning in excess of 9.9% of the Company's total Ordinary Shares in issue at the time of such purchase. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and Regulation 13D and G thereunder. This Section 1.4 may not be waived by Purchaser unless such waiver has been voted upon and approved by an ordinary resolution of the Company's shareholders. ARTICLE II PURCHASER'S REPRESENTATIONS AND WARRANTIES The Purchaser represents and warrants to the Company as set forth in this Article II. The Purchaser makes no other representations or warranties, express or implied, to the Company in connection with the transactions contemplated hereby and any and all prior representations and warranties, if any, which may have been made by the Purchaser to the Company in connection with the transactions contemplated hereby shall be deemed to have been merged in this Agreement and 2 any such prior representations and warranties, if any, shall not survive the execution and delivery of this Agreement. II.1 INVESTMENT PURPOSE. Purchaser is purchasing the Shares and Warrants for Purchaser's own account for investment only and not with a view toward or in connection with the public re-sale or distribution thereof, except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Purchaser will not resell any of the Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Purchaser understands that Purchaser must bear the economic risk of this investment indefinitely, unless the applicable Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is available, and that the Company has no present intention of registering any such Securities other than as contemplated by the Registration Rights Agreement. By making the representations in this Section 2.1, the Purchaser does not agree to hold any Securities for any minimum or other specific term and reserves the right to dispose of any or all of the Securities at any time in accordance with or pursuant to a registration statement or an applicable exemption from registration under the Securities Act. II.2 ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. II.3 RELIANCE ON EXEMPTIONS. Purchaser understands that the Shares and Warrants are being offered and sold to Purchaser in reliance upon specific exemptions from the registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations and warranties of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Securities. II.4 INFORMATION. Purchaser and its counsel have been furnished all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares and Warrants which have been specifically requested by Purchaser. Purchaser has been afforded the opportunity to ask questions of the Company, and its officers, directors, employees and agents,and has received what Purchaser believes to be complete and satisfactory answers to any such inquiries. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its representations and warranties shall modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in Article III. Purchaser understands that Purchaser's investment in the Securities involves a high degree of risk. II.5 GOVERNMENTAL REVIEW. Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an investment therein. 3 II.6 TRANSFER OR RESALE. Purchaser understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless subsequently registered thereunder or an exemption from such registration is available (which exemption the Company expressly agrees may be established as contemplated in clauses (b) and (c) of Section 5.1 hereof); (ii) any sale of such Securities made in reliance on Rule 144 under the Securities Act (or a successor rule) ("RULE 144") may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities without registration under the Securities Act may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to this Agreement or the Registration Rights Agreement). II.7 LEGENDS. Purchaser understands that, subject to Article V hereof, the certificate for the Warrants, and until such time as the Shares and the Warrant Shares, as applicable, have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Purchaser pursuant to Rule 144, the certificates for the Shares and Warrant Shares will bear a restrictive legend (the "LEGEND") in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. II.8 AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of Purchaser and are valid and binding agreements of Purchaser enforceable against Purchaser in accordance with their terms. II.9 RESIDENCY. Purchaser is a resident of the State of Illinois. 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchaser that: III.1 ORGANIZATION AND QUALIFICATION. The Company is a public limited company duly incorporated and validly existing under the laws of England and Wales and registered in England under the Companies Act of 1985. Each of the Company's subsidiaries is a corporation, limited liability company or other entity duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its organization, except where the failure to be so organized, existing or in good standing that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. The Company and each of its subsidiaries have full power and authority to conduct their respective businesses as they are presently being conducted and to own, lease and operate their respective properties and assets, except, in the case of any subsidiary only, where the failure to have such power or authority would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. The Company and each of its subsidiaries are duly qualified to do business as foreign entities and are in good standing in each jurisdiction in which the character or location of the properties and assets owned or operated by them or the nature of the businesses conducted by them makes such qualification necessary, except where the failure to be so qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the business, operations, properties, financial condition, operating results or prospects of the Company and its subsidiaries, taken as a whole on a consolidated basis, (ii) the transactions contemplated hereby, (iii) the ability of the Company to perform its obligations under this Agreement, the Warrants or the Registration Rights Agreement (collectively, the "TRANSACTION DOCUMENTS") or (iv) the Purchaser's interest in the Securities. III.2 AUTHORIZATION; ENFORCEMENT. Except as disclosed in Schedule 3.2, (a) the Company has the requisite corporate power and authority (i) to enter into and perform its obligations under each of the Transaction Documents, (ii) to issue and sell to Purchaser, and to perform its obligations with respect to, the Shares and the Warrants in accordance with the terms hereof and thereof, as applicable, (iii) issue the Warrant Shares in accordance with the terms of the Warrants; (b) the execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation the issuance of the Warrants and the reservation for issuance and the issuance of the Shares and the Warrant Shares) have been duly authorized by all necessary corporate action and no further consent or authorization of the Company, its board of directors, or its shareholders or any other person, body or agency is required with respect to any of the transactions contemplated hereby or thereby (whether under rules of The Nasdaq National Market ("NASDAQ"), the National Association of Securities Dealers or otherwise), other than the Nasdaq Authorizations (as herein defined) and the declaration or ordering of effectiveness by the SEC of the Registration Statement or Statements as contemplated by the Registration Rights Agreement (collectively, the "CONSENTS"); (c) this Agreement, the Registration Rights Agreement and the Warrants have been duly executed 5 and delivered by the Company; and (d) each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. III.3 CAPITALIZATION. The capitalization of the Company as of the date of this Agreement, including the authorized share capital, the number of shares in issue, the number of shares reserved for issuance pursuant to the Company's stock option plans and employee stock purchase plans, the number of shares reserved for issuance pursuant to securities (other than the Warrants) exercisable for, or convertible into or exchangeable for any share, the number of Ordinary Shares represented by ADSs, the number of shares to be initially reserved for issuance in the form of ADSs upon exercise of the Warrants is set forth on Schedule 3.3. All of the issued Ordinary Shares have been duly and validly authorized and validly issued and are fully paid and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any shareholders of the Company or any liens or encumbrance. All of the outstanding ADSs have been duly and validly authorized and validly issued and are entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRs") and in the Deposit Agreement (the "DEPOSIT AGREEMENT") dated November 17, 1995 between the Company and The Bank of New York, as Depositary (the "DEPOSITARY"). Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, and (ii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except the Registration Rights Agreement). The Company has furnished to Purchaser true, correct and complete copies of the Company's Memorandum of Association as currently in effect ("MEMORANDUM OF ASSOCIATION"), and the Company's Articles of Association as currently in effect (the "ARTICLES OF ASSOCIATION"). The Company has set forth on SCHEDULE 3.3 all instruments and agreements (other than the Memorandum and Articles of Association) governing securities convertible into or exercisable or exchangeable for the Ordinary Shares (including in the form of ADSs) of the Company (and the Company shall provide to Purchaser copies thereof upon the request of Purchaser). Except as disclosed in SCHEDULE 3.3, the Company has no indebtedness for borrowed money and no agreement providing for indebtedness for borrowed money. Except as disclosed in Schedule 3.3 and this Agreement, the Company has no share purchase agreements, rights plans or agreements containing similar provisions and no agreements containing anti-dilution provisions. No anti-dilution provisions which have, individually or in the aggregate, any dilutive effect on Purchaser's investment are triggered as a result of any of the transactions contemplated hereby, including exercise of the Warrants. The Company shall provide Purchaser with a written update of this representation signed by the Company's Chief Executive Officer or Chief Financial Officer on behalf of the Company as of the date of the Closing and it shall be a condition to Purchaser's obligations at Closing that there are no material changes in such capitalization since the Company's representation on the date hereof. The Company has no subsidiaries, except as provided on Schedule 6 3.3. All such subsidiaries included on Schedule 3.3. are one hundred percent (100%) owned by the Company. Except as provided on Schedule 3.3, the Company has no investments, either debt or equity, in any other entity. III.4 ISSUANCE OF SECURITIES. The Shares and the Warrant Shares and the Ordinary Shares represented by such Shares and Warrant Shares are duly authorized and reserved for issuance, and, upon issuance in accordance with the terms hereof and exercise of the Warrants in accordance with the terms thereof, as applicable, will be validly issued, fully paid and free from all liens, claims and encumbrances and will not be subject to any preemptive rights or other similar rights of shareholders of the Company. Upon issuance, the Shares are, and the Warrant Shares will be, entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRs) and in the Deposit Agreement. The Warrants are duly and validly authorized and are validly issued, fully paid, and free from all liens, claims and encumbrances and are not and will not be subject to any preemptive rights or other similar rights of shareholders of the Company. The Board of Directors of the Company has unanimously approved the issuance of Shares and the Warrants pursuant to the terms hereof and of Warrant Shares issuable upon full exercise of the Warrants pursuant to the terms thereof (without giving effect to any limitations on exercise contained therein, including for purposes of Nasdaq Rule 4460(i) and Nasdaq Rule 4310(c)(25)(H)(1)(b)) (the "NASDAQ AUTHORIZATIONS"), has unanimously recommended to the shareholders of the Company the approval of the Nasdaq Authorizations and will seek Shareholder Approval (as defined in Section 4.13) at the Company's next annual meeting, which is currently scheduled for July, 2000. No further corporate authorization or approval (other than the Shareholder Approval) is required under the rules of the Nasdaq with respect to the transactions contemplated by this Agreement, including, without limitation, the issuance of the Shares and Warrant Shares and the inclusion thereof for trading on the Nasdaq. III.5 NO CONFLICTS. The execution, delivery and performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Shares, the Warrants and Warrant Shares and the Purchaser's purchase and acquisition of the Shares, the Warrants and the Warrant Shares) do not and will not (a) result in a violation of the Memorandum of Association and Articles of Association, (b) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party (except for such conflicts, defaults, terminations, amendments, accelerations, and cancellations as would not, individually or in the aggregate, have a Material Adverse Effect), or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations and the laws of England and Wales) applicable to the Company or any of its subsidiaries, or by which any property or asset of the Company or any of its subsidiaries, is bound or affected. Neither the Company nor any of its subsidiaries is in violation of its Memorandum of Association, its Articles of Association, or other organizational documents, and neither the Company nor any of its subsidiaries is in default (and no event has occurred which, with notice or lapse of time or both, would put the Company or 7 any of its subsidiaries in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, except fr possible defaults or rights as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted so long as Purchaser owns any of the Securities, in violation of any law, ordinance, rule, regulation, order, judgment or decree of any governmental entity, court or arbitration tribunal except for possible violations the sanctions for which either singly or in the aggregate would not have a Material Adverse Effect. The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under this Agreement, the Warrants or the Registration Rights Agreement or to perform its obligations in accordance with the terms hereof or thereof, other than the Consents. The purchase and acquisition of the Securities by the Purchaser do not violate any law, rule, regulation, order, judgment or decree applicable to the Company, or require further filing by the Company or Purchaser under such law, rule, regulation, order, judgment or decree, by virtue of the Company's business or assets, other than the Consents as described in Section 3.2. The Company is not in violation of the listing requirements of Nasdaq and does not reasonably anticipate that the ADSs will be de-listed by Nasdaq for the foreseeable future, and the Company has made all necessary filings and notifications with, and obtained all necessary approvals from, Nasdaq with respect to the transactions contemplated hereby, including, without limitation, the issuance of the Securities and the listing of the Shares and the Warrant Shares on the Nasdaq. III.6 REGISTRATION AND SEC DOCUMENTS. The Ordinary Shares are registered under Section 12 of the Exchange Act and have been so registered since __________. Except as disclosed in SCHEDULE 3.6, since December 31, 1996, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with Companies House pursuant to the U.K. Companies Act 1985 (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the "COMPANY REPORTS") and has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed after December 31, 1996, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being referred to herein as the "SEC DOCUMENTS" and such documents filed prior to the date hereof, the "FILED SEC DOCUMENTS"), including for purposes of determining the availability of Form S-3. The Company has delivered to Purchaser true and complete copies of the SEC Documents filed since December 31, 1996. As of their respective dates of filing, the Company Reports and the SEC Documents complied in all material respects with the requirements of the applicable law and the rules and regulations promulgated thereunder applicable to such Company Reports and SEC Documents, and none of the Company Reports and SEC Documents, at the time they were filed with the Companies House or SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Document is, or, except 8 pursuant to Filed SEC Documents has been, required to be updated or amended under applicable law. The financial statements of the Company included in the SEC Documents were prepared in accordance with U.S. generally accepted accounting principles, consistently applied, and the rules and regulations of the SEC during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they do not include footnotes or are condensed or summary statements) and present accurately and completely the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial year-end audit adjustments). Except as set forth in the financial statements of the Company included in the Filed SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred subsequent to the date of such financial statements in the ordinary course of business consistent with past practice and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, in each case of clause (i) and (ii) next above which, individually or in the aggregate, are not material to the financial condition, business, operations, properties, operating results or prospects of the Company and its subsidiaries taken on a whole. The Filed SEC Documents, as supplemented by SCHEDULE 3.6 hereto, contain a complete and accurate list of all material undischarged written or oral contracts, agreements, leases or other instruments to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or to which any of the properties or assets of the Company or any subsidiary is subject (each a "CONTRACT"), except to the extent not required to be filed pursuant to the applicable Rules and Regulations of the SEC. None of the Company, its subsidiaries or, to the best knowledge of the Company, any of the other parties thereto, is in breach or violation of any Contract, which breach or violation relates to indebtedness for borrowed money, is with respect to an obligation in excess of one hundred thousand dollars ($100,000) or would have a Material Adverse Effect. No event, occurrence or condition exists which, with the lapse of time, the giving of notice, or both, or the happening of any further event or condition, would become a breach or default by the Company or its subsidiaries under any Contract which breach or default would have a Material Adverse Effect. III.7 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company. III.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, governmental agency or authority, or self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company, any of its subsidiaries, or any of their respective directors or officers in their capacities as such, wherein an unfavorable decision, ruling or finding could reasonably be expected to have a Material Adverse Effect or would adversely affect the transactions contemplated by this Agreement or any of the documents contemplated hereby or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of such other documents. To the Company's 9 knowledge, there are no facts which, if known by a potential claimant or governmental agency or authority, could give rise to a claim or proceeding which, if asserted or conducted with results unfavorable to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect. III.9 DISCLOSURE. No information relating to or concerning the Company set forth in this Agreement or provided to Purchaser in connection with the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. Except for the execution and performance of this Agreement and the transactions contemplated hereby, no material fact (within the meaning of the federal securities laws of the United States) exists with respect to the Company or any of its subsidiaries which has not been publicly disclosed. III.10 ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE SECURITIES. The Company acknowledges and agrees that Purchaser is acting independently and is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement or the transactions contemplated hereby, that this Agreement and the transaction contemplated hereby, and the relationship between Purchaser and the Company, are "arms-length", and that any statement made by Purchaser, or any of its representatives or agents, in connection with this Agreement or the transactions contemplated hereby is not advice or a recommendation, is merely incidental to Purchaser's purchase of the Securities and has not been relied upon in any way by the Company, its officers, directors or other representatives. The Company further represents to Purchaser that the Company's decision to enter into this Agreement and the transactions contemplated hereby has been based solely on an independent evaluation by the Company and its representatives. III.11 CURRENT PUBLIC INFORMATION. The Company is currently eligible to register the resale of the Shares and the Warrant Shares by the Purchaser in a secondary offering under General Instruction B3 and B4 of Form S-3 on a registration statement on Form S-3 under the Securities Act, all as contemplated by Section 2.1 of the Registration Rights Agreement. III.12 NO GENERAL SOLICITATION. Neither the Company nor any person acting on behalf of the Company has conducted any "general solicitation," as described in Rule 502(c) under Regulation D, with respect to any of the Securities being offered hereby. III.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its affiliates, nor any person acting on their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under the Securities Act pursuant to the provisions of Regulation D. The transactions contemplated hereby are exempt from the registration requirements of the Securities Act, assuming the accuracy of the representations and warranties herein contained of Purchaser to the extent relevant for such determination. 10 III.14 NO BROKERS. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by Purchaser relating to this Agreement or the transactions contemplated hereby, except for dealings with Allied Capital International, Inc. (the fees of which shall be paid in full by the Company). The Company will indemnify Purchaser from and against any fees and expenses sought or other claims made by Allied Capital International, Inc. III.15 ACKNOWLEDGMENT OF DILUTION. The number of Warrant Shares issuable upon exercise each of the Warrants may increase substantially in certain circumstances. The Company's executive officers and directors have studied and fully understand the terms of this Agreement and the transactions contemplated hereby and the nature of the securities being sold hereunder and recognize that they have a potentially dilutive effect. The board of directors of the Company has unanimously concluded in its good faith business judgment that the issuance of the Shares, the Warrants and the Warrant Shares as contemplated hereby is in the best interests of the Company. The Company acknowledges that its obligation to issue Warrant Shares upon exercise of the Warrants is binding upon it and enforceable regardless of the dilution that such issuance may have on the ownership interests of other shareholders. III.16 INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns or possesses adequate and enforceable rights to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and proprietary knowledge (collectively, "INTANGIBLES") used or necessary for the conduct of its business as now being conducted and as previously described in the Company's Annual Report on Form 10-K most recently filed and any subsequently filed reports on Form 10-Q and Form 8-K. Neither the Company nor any subsidiary of the Company infringes on or is in conflict with any right of any other person with respect to any Intangibles nor is there any claim of infringement made by a third party against or involving the Company or any of its subsidiaries, which infringement, conflict or claim, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. III.17 FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. Without limiting the generality of the foregoing, the Company and its subsidiaries have not directly or indirectly made or agreed to make (whether or not said payment is lawful) any payment to obtain, 11 or with respect to, sales other than usual and regular compensation to its or their employees and sales representatives with respect to such sales. III.18 KEY EMPLOYEES. Each Key Employee (as defined below) is currently serving the Company in the capacity disclosed in SCHEDULE 3.18. No Key Employee, to the best of the knowledge of the Company and its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each Key Employee does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. No Key Employee has, to the best of the knowledge of the Company and its subsidiaries, any intention to terminate or limit his employment with, or services to, the Company or any of its subsidiaries, nor is any such Key Employee subject to any constraints (e.g., litigation) which would cause such employee to be unable to devote his full time and attention to such employment or services. "Key Employees" means Rick Noling, Stephen Ambler, Mark McMillan, George Buchan, John Hoskin, Ron Workman and Marshall Kwait and any individual who assumes or performs any of the duties of a Key Employee. 3.19 YEAR 2000 COMPLIANCE. The information set forth in the Filed SEC Documents with respect to Year 2000-related compliance by the Company does not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained therein not misleading. The Company's testing compliance program and contingency plan, in each case regarding Year 2000-related matters, are adequate to prevent a Material Adverse Effect and such Year 2000-related matters will not cause a Material Adverse Effect. ARTICLE IV COVENANTS IV.1 BEST EFFORTS. The parties shall use their best efforts timely to satisfy each of the conditions described in Articles VI and VII of this Agreement. IV.2 SECURITIES LAWS. The Company agrees to file a Form D with respect to the Securities with the SEC as required under Regulation D and to provide a copy thereof to Purchaser on or prior to the date of Closing. The Company agrees to file a Form 8-K disclosing this Agreement and the transactions contemplated hereby with the SEC within three (3) days following the Closing Date. Such Form 8-K shall contain as exhibits this Agreement, the Warrants and the Registration Rights Agreement. The Company shall, on or prior to the Closing Date, take such action as is necessary to sell the Securities to Purchaser in accordance with applicable U.S. federal and state securities laws and regulations and the applicable laws of England and Wales, and shall provide evidence of any such action so taken to Purchaser on or prior to the date of the Closing. Without limiting any of the Company's obligations under this Agreement, the Registration Rights Agreement or the Warrants, from and after the Closing Date, neither the Company nor any person acting on its behalf shall take 12 any action which would adversely affect any exemptions from registration under the Securities Act with respect to the transactions contemplated hereby. IV.3 REPORTING STATUS. So long as Purchaser beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. IV.4 USE OF PROCEEDS. The Company shall use the proceeds from the sale of the Securities hereunder for general working capital purposes. IV.5 RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. (i) During the period beginning on the Closing Date and ending on the later of (x) the date which is three (3) months after the Effective Date and (y) the date which is six (6) months following the Closing Date (such period, the "FINANCING PERIOD"), the Company shall not issue or agree to issue (except (A) the issuance of ADSs pursuant to this Agreement and the issuance of ADSs to Vincent Pino, Richard Zehner, Robert Waley-Cohen and Viscount Bearsted ("OTHER INVESTORS") pursuant to an agreement reached at or prior to the Closing for an aggregate amount of One Million Dollars ($1,000,000) on terms substantially similar to this Agreement, (B) pursuant to investments from industry participants, in which there is a significant purpose other than raising equity capital, (C) in connection with the acquisition of another company, (D) in an underwritten public offering or (E) on conversion of the Convertible Promissory Notes issued in favor of Quantum Corporation dated October 20, 1999) any equity securities or any equity-like or equity-linked securities of the Company (or any security convertible into or exercisable or exchangeable, directly or indirectly, for equity, equity-like or equity-linked securities of the Company) if such securities are issued at a price (or in the case of securities convertible into or exercisable or exchangeable, directly or indirectly, for Ordinary Shares or ADSs such securities provide for a conversion, exercise or exchange price) which may be less than the then current market price for Ordinary Shares or ADSs on the date of issuance (in the case of Ordinary Shares or ADSs) or the date of conversion, exercise or exchange (in the case of securities convertible into or exercisable or exchangeable, directly or indirectly, for Ordinary Shares or ADSs), or if such securities are variable-priced or contain provisions for price resetting (any such securities, the "RESTRICTED SECURITIES"). (ii) During the six-month period beginning on the date immediately following the final day of the Financing Period, the Company will not issue or agree to issue any Restricted Securities unless the Company has satisfied all of the following requirements with respect to such issuance: (I) The Company shall have delivered notice to Purchaser (the "TRANSFER NOTICE"), which notice shall include (A) the terms and number of units of the security and the consideration per unit which the Company desires to receive for the securities (which, in the case where the Company shall have received an offer to purchase such securities other 13 than from Purchaser (a "THIRD PARTY OFFER"), shall be the consideration set forth in such offer) and (B) all of the material terms and conditions, including the terms and conditions of payment, upon which the Company proposes to transfer said securities (which, in the case of a Third Party Offer, shall be the terms and conditions set forth in the Third Party Offer). (II) Upon the delivery of the Transfer Notice, the Purchaser shall have an option to purchase any or all of the securities described therein. Such option shall be exercisable by Purchaser by service of written notice upon the Company within five (5) days of receipt of the Transfer Notice. (III) If the options created in clause (II) hereof are not exercised by Purchaser within five (5) days of service of the Transfer Notice, or if such options are exercised only in part, then, within a period of thirty (30) days beginning on the day following the date of expiration of the option period, the Company may issue some or all of the securities sought to be issued as to which such options were not exercised, at a price which is not less than one hundred percent (100%) of the price specified in the Transfer Notice and on terms and conditions not less favorable to the Company than those specified in the Transfer Notice. IV.6 FURTHER RESTRICTION ON ISSUANCE OF SECURITIES. While Purchaser holds any Shares, any Warrants or Warrant Shares, the Company and each of its subsidiaries shall not issue, or authorize for issuance, or otherwise transfer or enter into any commitment to issue or otherwise transfer, any debt or equity security, bond, note or other security of any of the Company's subsidiaries, provided that Purchaser shall keep the Company current on its such Shareholdings. IV.7 EXPENSES. (i) The Company shall pay to Purchaser at the Closing reimbursement for the expenses incurred by it and its affiliates and advisors in connection with the negotiation, preparation, execution, and delivery of this Agreement and the other agreements and documents to be executed in connection herewith, including, without limitation, due diligence and attorneys' fees and expenses (the "EXPENSES"). In addition, from time to time thereafter, upon Purchaser's written request, the Company shall pay to Purchaser such Expenses, if any, not so paid at Closing and/or covered by such payment, in each case to the extent incurred by Purchaser. The Company shall not be required to reimburse Expenses to the extent such Expenses exceed Forty Thousand Dollars ($40,000) in the aggregate. (ii) The Company shall pay all UK documentary, stamp, transfer or similar taxes, plus any fees of the Depositary for the ADSs, attributable to the exercise of the Warrants and the issuance or delivery of Ordinary Shares or ADSs representing the Ordinary Shares. IV.8 INFORMATION. The Company agrees to send the following reports to Purchaser until the earlier of (i) Purchaser transfers, assigns or sells all of its Securities; or (ii) the second (2nd) anniversary of the Closing Date: (a) within three (3) days after the filing with the SEC, a copy of 14 its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy statements and any Current Reports on Form 8-K; and (b) within two (2) days after release, copies of all press releases issued by the Company or any of its subsidiaries. The Company further agrees to promptly provide to Purchaser any information with respect to the Company, its properties, or its business or Purchaser's investment as Purchaser may reasonably request; provided, however, that the Company shall not be required to give Purchaser any material nonpublic information. If any information requested by Purchaser from the Company contains material nonpublic information, the Company shall inform Purchaser in writing that the information requested contains material nonpublic information and shall in no event provide such information to Purchaser without the express prior written consent of Purchaser after being so informed. IV.9 AVAILABILITY OF SHARES. From and after the Closing Date, the Company shall: a. at all times have sufficient authorized share capital available for allotment and issue to permit the exercise of the Warrants into Warrant Shares. b issue and cause its Depositary to issue and deliver such ADSs as required upon exercise of the Warrants and take all actions necessary to ensure that all such Warrant Shares shall, when issued and paid for, be duly and validly issued, fully paid and be entitled to the benefits specified in the corresponding ADRs and in the Deposit Agreement; and c If, and so long as, any ADSs are listed or quoted on any securities exchange or market, the Company shall, if permitted by the rules of such securities exchange or market, list and keep listed or quoted on such securities exchange or market, upon official notice of issuance, all Warrant Shares issuable upon exercise of the Warrants. IV.10 LISTING. For a period of beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, the Company shall continue the listing and trading of its ADSs on The Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange, secure and maintain listing and trading of the Shares and Warrant Shares on such exchange, and comply in all respects with the Company's reporting, filing and other obligations under the by-laws or rules of such exchange. If the Company fails to maintain the listing or trading of the ADSs as required by this Section 4.10, then beginning on the tenth (10th) business day following such failure, if the ADSs are still not listed or traded, then the Company shall pay to Purchaser an amount equal to one percent (1%) of the fair market value of the Shares and Warrant Shares then held by Purchaser per day that such failure continues. For purposes hereof, the number of Warrant Shares held by Purchaser shall be calculated as though the Warrants held by Purchaser were fully exercised, without regard to any limitations on the exercise thereof. IV.11 PROSPECTUS DELIVERY REQUIREMENT. Purchaser understands that the Securities Act may require delivery of a prospectus relating to the ADSs in connection with any sale thereof pursuant to a registration statement under the Securities Act covering the resale by Purchaser of the ADSs being sold hereunder. 15 IV.12 INTENTIONAL ACTS OR OMISSIONS. Neither the Company nor Purchaser shall intentionally perform any act which if performed, or intentionally omit to perform any act which, if omitted to be performed, would prevent or excuse the performance of this Agreement or any of the transactions contemplated hereby. IV.13 SHARE AUTHORIZATION. The Company covenants and agrees that it shall (i) solicit by proxy the Shareholder Approval (as defined below) and (ii) use its best efforts to obtain the Shareholder Approval at its next annual shareholder meeting, which shall be held no later than July 31, 2000 ("SHAREHOLDER APPROVAL DATE"). For purposes hereof, "SHAREHOLDER APPROVAL" means authorization by the shareholders of the Company for the issuance of ADSs to Purchaser at the Closing and upon the exercise of the Warrants pursuant to the terms thereof and the issuance of ADSs at or prior to the Closing to Other Investors and upon the exercise of the warrants issued to the Other Investors at or prior to the Closing on substantially similar terms in the aggregate in excess of twenty percent (20%) of the total Ordinary Shares then in issue and, if necessary, the elimination of any prohibitions under the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities on the Company's ability to issue ADSs in excess of twenty percent (20%). In addition, the Company shall, unless otherwise consented to by Purchaser, have a definitive proxy statement mailed to each shareholder of the Company at least twenty (20) days prior to the Approval Date. The Company shall deliver one copy of any SEC comments it receives with respect to its proxy statement to the Purchaser and will not file such proxy statement (or any amendments thereto), whether such proxy statement is in preliminary or definitive form, without the approval of the Purchaser, which approval shall not be unreasonably withheld or delayed. ARTICLE V LEGEND REMOVAL AND TRANSFER INSTRUCTIONS V.1 REMOVAL OF LEGEND. The Legend shall be removed and the Company shall issue or cause its Depositary to issue a certificate without any legend to the holder of any Security upon which such Legend is stamped, and a certificate for a Security shall be originally issued without any legend, if, unless otherwise required by applicable state securities laws, (a) the sale of such Security is registered under the Securities Act, (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, and reasonably satisfactory to the Company (the cost of which shall be borne by the holder), to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such Security can be sold pursuant to Rule 144. Purchaser agrees to sell all Securities, including those represented by a certificate(s) from which the Legend has been removed, or which were originally issued without the Legend, (i) pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or (ii) in compliance with an exemption from the registration requirements of the Securities Act. In the event the Legend is removed from any Security or any Security is issued without the Legend and thereafter the effectiveness of a registration statement covering the resale of such Security is suspended or a 16 supplement or amendment thereto is required by applicable securities laws, then upon reasonable advance notice to Purchaser holding such Security, the Company may require that the Legend be placed on any such Security that cannot then be sold pursuant to an effective registration statement or Rule 144 or with respect to which the opinion referred to in clause (b) next above has not been rendered, which Legend shall be removed when such Security may be sold pursuant to an effective registration statement or Rule 144 or such holder provides the opinion with respect thereto described in clause (b) next aboe. Except for the Legend required pursuant to this Section 5.1, the Securities shall bear no legend. V.2 DEPOSITARY INSTRUCTIONS. The Company shall instruct its Depositary to issue certificates, registered in the name of Purchaser or its nominee, for the Shares and Warrant Shares in such amounts as specified from time to time by Purchaser to the Company and the Depositary. Such certificates shall bear a legend only in the form of the Legend and only to the extent permitted by Section 5.1 above. The Company warrants that no instruction other than such instructions referred to in this Article V, and no stop transfer instructions other than stop transfer instructions to give effect to Section 2.6 hereof in the case of the Shares and Warrant Shares prior to registration thereof under the Securities Act, will be given by the Company to its Depositary and that the Securities shall otherwise be freely transferable on the books and records of the Company. Nothing in this Section shall affect in any way Purchaser's obligations and agreement set forth in Section 5.1 hereof to resell the Securities pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of applicable securities laws. Without limiting any other rights of Purchaser or obligations of the Company, if (a) Purchaser provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions (the reasonable cost of which shall be borne by the Company), to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from registration or (b) Purchaser transfers Securities pursuant to Rule 144, the Company shall permit the transfer, and promptly instruct its Depositary and take all actions necessary to cause its Depositary to issue one or more certificates in such name and in such denomination as specified by Purchaser in order to effect such a transfer or sale. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Purchaser by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Article V will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Article V, that Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. V.3 FAILURE TO REMOVE LEGEND. If the Company fails to remove any legend as required by this Article V (a "LEGEND REMOVAL FAILURE"), then beginning on the tenth (10th) day following such failure, if the Company continues to fail to remove such legend, the Company shall pay to Purchaser holding shares subject to a Legend Removal Failure an amount equal to one percent (1%) of the fair market value of the Shares and Warrant Shares then held by Purchaser per day that such 17 failure continues. For purposes hereof, the number of Warrant Shares held by Purchaser shall be calculated as though the Warrants held by Purchaser were fully exercised, without regard to any limitations on the exercise thereof. ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL VI.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Shares and Warrants to Purchaser at the Closing is subject to the satisfaction, as of the date of the Closing and with respect to Purchaser, of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion: (i) Purchaser shall have executed the signature page to this Agreement and the Registration Rights Agreement and delivered the same to the Company. (ii) Purchaser shall deliver the applicable Purchase Price for the Shares and the Warrants purchased at the Closing. (iii) The representations and warranties of Purchaser shall be true and correct as of the date when made and as of the Closing as though made at that time, and Purchaser shall have performed, satisfied and complied in all material respects with the covenants and agreements required by this Agreement to be performed or complied with by Purchaser at or prior to the Closing. The Company shall have received an Officer's Certificate from Purchaser dated the Closing Date to the foregoing effect and as to such other matters as may be reasonably requested by the Company. (iv) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which restricts or prohibits the consummation of any of the transactions contemplated by this Agreement. ARTICLE VII CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE VII.1 CONDITIONS TO THE CLOSING. The obligation of Purchaser hereunder to purchase the Shares and Warrants to be purchased by it on the Closing Date is subject to the satisfaction of each of the following conditions, provided that these conditions are for Purchaser's sole benefit and may be waived by Purchaser at any time in Purchaser's sole discretion: 18 (i) The Company shall have executed the signature page to this Agreement and the Registration Rights Agreement and delivered the same to Purchaser. (ii) The Company shall have delivered duly executed certificates for the Shares (in such denominations as Purchaser shall reasonably request) and Warrants being so purchased by Purchaser at the Closing. (iii) At or prior to the Closing, Other Investors shall have purchased from the Company Shares and warrants for an aggregate consideration of One Million Dollars ($1,000,000) on terms substantially similar to terms contained herein. (iv) The ADSs, including all Shares and Warrant Shares, shall be listed on the Nasdaq and trading in the ADSs shall not have been suspended by the Nasdaq, the SEC or other regulatory authority and no de-listing or suspension shall be reasonably likely for the foreseeable future. (v) The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing as though made at that time and the Company shall have performed, satisfied and complied with the covenants and agreements required by this Agreement to be performed or complied with by the Company at or prior to the Closing. Purchaser shall have received a certificate, executed by the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing to the foregoing effect and as to such other matters as may be reasonably requested by Purchaser. (vi) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. (vii) Purchaser shall have received the officer's certificate described in Section 3.3, dated as of the Closing and there shall be no material changes from the date of signing of this Agreement to the date of the Closing other than as a result of issuance of ADSs pursuant to options, warrants and other obligations disclosed on Schedule 3.3 as of the date of this Agreement. (viii) Purchaser shall have received opinions of the Company's counsel, dated as of the Closing, in the form attached hereto as EXHIBIT D. (ix) Intentionally Omitted. (x) The Company has filed a Form D with respect to the Securities with the SEC as required under Regulation D and has provided a copy thereof to Purchaser. 19 (xi) The Company has filed an Additional Listing Application (and no additional time is required for the effectiveness thereof) with respect to all Shares and Warrant Shares with the National Association of Securities Dealers and has provided a copy thereof to Purchaser. ARTICLE VIII GOVERNING LAW; MISCELLANEOUS VIII.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably consent to the jurisdiction of the United States federal courts located in the State of New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement or the transactions contemplated hereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by the first class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding arising hereunder. Nothing herein shall affect Purchaser's right to serve process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. VIII.2 OFFICER AND DIRECTOR TRANSACTIONS. If any executive officer or director of the Company, directly or indirectly, including through family members, trusts or other entities related to such executive officer or director, disposes or provides or files any public notice, including pursuant to Rule 144 of the Securities Act, of a bona fide intent to dispose, of any Ordinary Shares or ADSs beneficially owned by him during the period beginning on the Closing Date and ending on the date which is six (6) months after the Effective Date, the Company shall pay to Purchaser an amount equal to (x) the number of Shares and Warrant Shares (without giving effect to any exercise or limitation on exercise thereof) then held by Purchaser TIMES (y) the difference between (m) the closing bid price of the ADSs on the trading day immediately preceding the day on which such disposal was publicly announced (the "ANNOUNCEMENT DATE") and (n) the lowest closing bid price of the ADSs during the thirty (30) trading day period beginning on the Announcement Date; PROVIDED, HOWEVER, that any individual executive officer or director may transfer up to ten percent (10%) of the Ordinary Shares and/or ADSs beneficially owned by such executive officer or director (which includes ADSs and Ordinary Shares to be received upon exercise of existing options) after the Effective Date without triggering the Company's payment obligations pursuant to this Section 8.2. VIII.3 COUNTERPARTS. This Agreement may be executed in two or more counterparts, including, without limitation, by facsimile transmission, all of which counterparts shall be considered one and the same agreement and shall become effective when counterparts have been 20 signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause additional original executed signature pages to be promptly delivered to the other parties. VIII.4 HEADINGS. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. VIII.5 SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. VIII.6 SCOPE OF AGREEMENT; AMENDMENTS. This Agreement and the documents and instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, no Purchaser makes any representation, warranty, covenant or undertaking with respect the transactions contemplated hereby. No provision of this Agreement may be waived other than by an instrument in writing signed by the party to be charged with enforcement and no provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Purchaser. VIII.7 NOTICE. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by facsimile-machine confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, CA 94538 Telecopy: (510)360-3702 Attention: Stephen M. Ambler with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P. O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. 21 If to the Purchaser: Castle Creek Technology Partners LLC c/o Castle Creek Partners LLC 77 West Wacker Drive, Suite 4040 Chicago, Illinois 60601 Telecopy: (312) 499-6999 Attention: Portfolio Manager with a copy to: Altheimer & Gray 10 South Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telecopy: (312) 715-4800 Attention: Peter H. Lieberman, Esq. VIII.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor Purchaser shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, Purchaser may assign its rights and obligations hereunder and may transfer any or all of its Securities to any of its "affiliates," as that term is defined under the Exchange Act, without the consent of the Company so long as such affiliate is an accredited investor. This provision shall not limit Purchaser's right to transfer the Securities pursuant to the terms of this Agreement. In addition, and notwithstanding anything to the contrary contained in this Agreement, the Warrants or the Registration Rights Agreement, the Securities may be pledged, and all rights of Purchaser under this Agreement or any other agreement or document related to the transaction contemplated hereby may be assigned, without further consent of the Company, to a bona fide pledgee in connection with Purchaser's margin or brokerage accounts. VIII.9 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. VIII.10 SURVIVAL. The representations, warranties, covenants and agreements of the Company in this Agreement shall survive each and every Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Purchaser. The Company agrees to indemnify and hold harmless Purchaser and each of Purchaser's officers, directors, employees, partners, agents and affiliates for loss or damage to the extent arising as a result of or related to (a) any breach by the Company of any of its representations or covenants set forth herein or (b) any cause of action, suit or claim brought or made against such indemnitee (other than by the Company solely for breach of this Agreement, the Warrants or the Registration Rights Agreement by the indemnitee or by governmental or regulatory authorities) and arising out of or resulting from the execution, delivery, 22 performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto or contemplated hereby, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities or the status of Purchaser as an investor in the Company, except to the extent that such actual loss or damage arises out of or results from a breach by such indemnitee of this Agreement, the Warrants or the Registration Rights Agreement or from Purchaser's violation of law. The right to indemnification shall include the right to advancement of expenses as they are incurred. VIII.11 PUBLIC FILINGS; PUBLICITY. Immediately following execution of this Agreement, the Company shall issue a press release with respect to the transactions contemplated hereby. Prior to the issuance, filing or other submission of any press releases (including the foregoing press release), SEC or other filings, or any other public statements, with respect to the transactions contemplated hereby, the Company shall provide such press releases, filings or statements to Purchaser and its counsel for comment and approval, provided, however, that the such approval shall be rendered within 48 hours after receipt thereof by Purchaser and shall not be unreasonably withheld or delayed and the Company shall be entitled, without the prior approval of Purchaser, to make any press release or SEC, Nasdaq, NASD or exchange filings with respect to such transactions as is required by applicable law and regulations (although Purchaser shall (to the extent time permits) be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). VIII.12 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the filing of all appropriate documentation and notifications with Nasdaq with respect to the Warrant Shares immediately following each of any applicable Shareholder Approval, any applicable Nasdaq Approval and any applicable Second Nasdaq Approval. VIII.13 REMEDIES. No provision of this Agreement providing for any remedy to Purchaser shall limit any remedy which would otherwise be available to Purchaser at law or in equity. Nothing in this Agreement shall limit any rights Purchaser may have with any applicable federal or state securities laws with respect to the investment contemplated hereby. VIII.14 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers to action to be taken by any person or entity, or which such person or entity is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such person or entity. VIII.15 REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Agreement shall be cumulative and in addition to all other remedies available under this Agreement, at law or in equity (including a decree of specific performance 23 and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit Purchaser's right to actual damages for any failure by the Company to comply with the terms of this Agreement. The Company covenants to Purchaser that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by Purchaser and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. VIII.16 PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to make any cash payment to Purchaser under this Agreement, such cash payment shall be due on the date (the "CASH DUE DATE") that Purchaser delivers written notice from the Purchaser to the Company. Such cash payment shall be made to the Purchaser by the method (by certified or cashier's check or wire transfer of immediately available funds) elected by such Holder. If such payment is not delivered within two (2) days of the Cash Due Date, Purchaser shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the Holder. VIII.17 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of Purchaser in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. VIII.18 TERMINATION. In the event that the Closing shall not have occurred on or before two (2) business days after the date of this agreement, unless the parties agree otherwise, this Agreement shall terminate at the close of business on such date. * * * 24 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written. PURCHASER: CASTLE CREEK TECHNOLOGY PARTNERS LLC BY: Castle Creek Partners, L.L.C. ITS: Investment Manager BY: s/John D. Ziegelman NAME: John D. Ziegelman TITLE: Managing Member COMPANY INSIGNIA SOLUTIONS PLC By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO 25 EX-10.51 9 EXHIBIT 10.51 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of December 9, 1999, by and between Insignia Solutions plc, a public limited company organized and existing under the laws of England and Wales (the "Company"), with headquarters located at 41300 Christy Street, Fremont, California 94538, and the Investors listed on Schedule A attached hereto (each a "Purchaser" and together, the "Purchasers"). RECITALS A. The Company and Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). B. Purchasers desire to purchase, upon the terms and conditions stated in this Agreement, (i) the Company's American Depository Shares (the "ADSs"), each ADS representing one ordinary share of 20p each nominal value of the Company ( the "Ordinary Shares"); (ii) a Warrant in the form of Exhibit A hereto (the "Initial Warrant") entitling the holder thereof to purchase certain number of the Company's ADSs; and (iii) a Warrant in the form of Exhibit C hereto ( the "Reset Warrant", and together with the Initial Warrant, the "Warrants") entitling the holder thereof to purchase additional ADSs from the Company upon the occurrence of certain events as defined therein. The ADSs being purchased hereunder are referred to herein as the "Shares" and the ADSs issuable upon exercise of any Warrant (including the Reset Warrant) are referred to herein as the "Warrant Shares". The Shares, the Warrants and the Warrant Shares are collectively referred to herein as the "Securities." C. Contemporaneous with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement in the form attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to which the Company has agreed to provide certain registration rights in relation to the Securities under the Securities Act, the rules and regulations promulgated thereunder and applicable state securities laws. AGREEMENTS NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser hereby agree as follows: ARTICLE 1 PURCHASE AND SALE OF SECURITIES 1.1 PURCHASE OF ADSS AND WARRANTS. On the Closing Date (as defined herein), subject to the terms and the satisfaction (or waiver) of the conditions set forth in Articles 6 and 7, the Company shall issue and sell to the Purchasers, and each Purchaser, severally and not jointly, shall purchase from the Company (i) that number of Shares set forth opposite the Purchaser's name on Schedule A, (ii) a Warrant entitling the holder thereof to purchase that number of Warrant Shares set forth opposite the Purchaser's name on Schedule A, and (iii) the Reset Warrant, for an aggregate consideration of One Million Dollars ($1,000,000.00) (the "Purchase Price"). 1.2 FORM OF PAYMENT. At the Closing, the Purchasers, severally and not jointly, shall pay the Purchase Price for the Shares and Warrants by wire transfer to the Company, in accordance with the Company's written wiring instructions, against delivery of the Shares and duly executed Warrants, and the Company shall deliver to the Purchasers such Shares and such executed Warrants against delivery of such Purchase Price from the Purchasers. 1.3 CLOSING DATE. Subject to the satisfaction (or waiver) of the conditions set forth in Articles 6 and 7 below, the date and time of the issuance, sale and purchase of the Securities pursuant to this Agreement shall be December 9, 1999 (the "Closing Date"). The Closing shall occur at 8:00 a.m. PST, at the offices of Ritchey Fisher Whitman & Klein, 1717 Embarcadero Road, Palo Alto, California 94303. 1.4 LIMITATION ON SALES. Notwithstanding anything to the contrary contained in this Agreement, the Company may not sell and Purchaser may not purchase any Shares pursuant to this Agreement and the transactions contemplated hereby to the extent that such sale and purchase would result in any Purchaser beneficially owning in excess of 9.9% of the Company's Ordinary Shares in issue at the time of such purchase. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 13D and G thereunder. This Section 1.4 may not be waived by Purchaser unless such waiver has been voted upon and approved by a majority of the holders of the Company's Ordinary Shares. ARTICLE 2 PURCHASERS' REPRESENTATIONS AND WARRANTIES Each Purchaser, severally and not jointly, represents and warrants to the Company as set forth in this Article 2. Each Purchaser makes no other representations or warranties, express or implied, to the Company in connection with the transactions contemplated hereby and any and all prior representations and warranties, if any, which may have been made by each Purchaser to the Company in connection with the transactions contemplated hereby shall be deemed to have been merged in this Agreement and any such prior representations and warranties, if any, shall not survive the execution and delivery of this Agreement. 2.1 INVESTMENT PURPOSE. Purchaser is purchasing the Shares and Warrants for Purchaser's own account for investment only and not with a view toward or in connection with the public re-sale or distribution thereof, except pursuant to sales that are exempt from the -2- registration requirements of the Securities Act and/or sales registered under the Securities Act. Purchaser will not resell any of the Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Purchaser understands that Purchaser must bear the economic risk of this investment indefinitely, unless the applicable Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is available, and that the Company has no present intention of registering any such Securities other than as contemplated by the Registration Rights Agreement. By making the representations in this Section 2.1, the Purchaser does not agree to hold any Securities for any minimum or other specific term and reserves the right to dispose of any or all of the Securities at any time in accordance with or pursuant to a registration statement or an applicable exemption from registration under the Securities Act. 2.2 ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. 2.3 RELIANCE ON EXEMPTIONS. Purchaser understands that the Shares and Warrants are being offered and sold to Purchaser in reliance upon specific exemptions from the registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations and warranties of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Securities. 2.4 INFORMATION. Purchaser and its counsel have been furnished all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares and Warrants which have been specifically requested by Purchaser. Purchaser has been afforded the opportunity to ask questions of the Company, and its officers, directors, employees and agents, and has received what Purchaser believes to be complete and satisfactory answers to any such inquiries. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its representations and warranties shall modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in Article 3. Purchaser understands that Purchaser's investment in the Securities involves a high degree of risk. 2.5 GOVERNMENTAL REVIEW. Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an investment therein. 2.6 TRANSFER OR RESALE. Purchaser understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless subsequently registered thereunder or an exemption from such registration is available (which exemption the Company expressly agrees may be established as contemplated in clauses (b) and (c) of Section 5.1 hereof); (ii) any sale of such Securities made in reliance on Rule 144 under the Securities Act (or a successor rule) ("Rule 144") may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities without registration under the Securities Act may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the -3- Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to this Agreement or the Registration Rights Agreement). 2.7 LEGENDS. Purchaser understands that, subject to Article 5 hereof, the certificate for the Warrants, and until such time as the Shares and the Warrant Shares, as applicable, have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Purchaser pursuant to Rule 144, the certificates for the Shares and Warrant Shares will bear a restrictive legend (the "Legend") in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. 2.8 AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of Purchaser and are valid and binding agreements of Purchaser enforceable against Purchaser in accordance with their terms. 2.9 RESIDENCY. Purchasers are residents of the State of Colorado (Mr. and Mrs. Pino), State of California (Mr. and Mrs. Zehner), and England (Mr. Waley-Cohen); and Avalon Panama S.A. is a company incorporated in Panama. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to each Purchaser that: 3.1 ORGANIZATION AND QUALIFICATION. The Company is a public limited company duly incorporated and validly existing under the laws of England and Wales. Each of the Company's subsidiaries is a corporation, limited liability company or other entity duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its organization, except where the failure to be so organized, existing or in good standing that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. The Company and each of its subsidiaries have full power and authority to conduct their -4- respective businesses as they are presently being conducted and to own, lease and operate their respective properties and assets, except, in the case of any subsidiary only, where the failure to have such power or authority would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. The Company and each of its subsidiaries are duly qualified to do business as foreign entities and are in good standing in each jurisdiction in which the character or location of the properties and assets owned or operated by them or the nature of the businesses conducted by them makes such qualification necessary, except where the failure to be so qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on (i) the business, operations, properties, financial condition, operating results or prospects of the Company and its subsidiaries, taken as a whole on a consolidated basis, (ii) the transactions contemplated hereby, (iii) the ability of the Company to perform its obligations under this Agreement, the Warrants or the Registration Rights Agreement (collectively, the "Transaction Documents") or (iv) the Purchaser's interest in the Securities. 3.2 AUTHORIZATION; ENFORCEMENT. (a) The Company has the requisite corporate power and authority (i) to enter into and perform its obligations under each of the Transaction Documents, (ii) to issue and sell to Purchaser, and to perform its obligations with respect to, the Shares and the Warrants in accordance with the terms hereof and thereof, as applicable, (iii) issue the Warrant Shares in accordance with the terms of the Warrants; (b) the execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation the issuance of the Warrants and the reservation for issuance and the issuance of the Shares and the Warrant Shares) have been duly authorized by all necessary corporate action and no further consent or authorization of the Company, its board of directors, or its stockholders or any other person, body or agency is required with respect to any of the transactions contemplated hereby or thereby (whether under rules of The Nasdaq National Market ("Nasdaq"), the National Association of Securities Dealers or otherwise), other than the Nasdaq Authorizations (as herein defined) and the declaration or ordering of effectiveness by the SEC of the Registration Statement or Statements as contemplated by the Registration Rights Agreement (collectively, the "Consents"); (c) this Agreement, the Registration Rights Agreement and the Warrants have been duly executed and delivered by the Company; and (d) each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 3.3 CAPITALIZATION. The capitalization of the Company as of the date of this Agreement, including the authorized share capital, the number of shares in issue, the number of shares reserved for issuance pursuant to the Company's stock option plans and employee stock purchase plans, the number of shares reserved for issuance pursuant to securities (other than the Warrants) exercisable for, or convertible into or exchangeable for any share, the number of Ordinary Shares represented by ADSs, the number of shares to be initially reserved for issuance in the form of ADSs upon exercise of the Warrants is set forth on Schedule 3.3. All of the issued Ordinary Shares have been duly and validly authorized and validly issued and are fully paid and nonassessable and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any stockholders of the Company or any liens or encumbrance. All of the outstanding ADSs have been duly and validly authorized and validly issued and are entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRs") and in the -5- Deposit Agreement dated November 17, 1995 between the Company and The Bank of New York, as Depositary. Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, and (ii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except the Registration Rights Agreement). The Company has furnished to Purchaser true, correct and complete copies of the Company's Memorandum of Association as currently in effect ("Memorandum of Association"), and the Company's Articles of Association as currently in effect (the "Articles of Association"). The Company has set forth on Schedule 3.3 all instruments and agreements (other than the Memorandum and Articles of Association) governing securities convertible into or exercisable or exchangeable for the Ordinary Shares (including in the form of ADSs) of the Company (and the Company shall provide to Purchaser copies thereof upon the request of Purchaser). Except as disclosed in Schedule 3.3, the Company has no indebtedness for borrowed money and no agreement providing for indebtedness for borrowed money. Except as disclosed in Schedule 3.3 and this Agreement, the Company has no share purchase agreements, rights plans or agreements containing similar provisions and no agreements containing anti-dilution provisions. No anti-dilution provisions which have, individually or in the aggregate, any dilutive effect on Purchaser's investment are triggered as a result of any of the transactions contemplated hereby, including exercise of the Warrants. The Company shall provide Purchaser with a written update of this representation signed by the Company's Chief Executive Officer or Chief Financial Officer on behalf of the Company as of the date of the Closing and it shall be a condition to Purchaser's obligations at Closing that there are no material changes in such capitalization since the Company's representation on the date hereof. The Company has no subsidiaries, except as provided on Schedule 3.3. All such subsidiaries included on Schedule 3.3. are one hundred percent (100%) owned by the Company. Except as provided on Schedule 3.3, the Company has no investments, either debt or equity, in any other entity. 3.4 ISSUANCE OF SECURITIES. The Shares and the Warrant Shares and the Ordinary Shares represented by such Shares and Warrant Shares are duly authorized and reserved for issuance, and, upon issuance in accordance with the terms hereof and exercise of the Warrants in accordance with the terms thereof, as applicable, will be validly issued, fully paid and non-assessable, and free from all liens, claims and encumbrances and will not be subject to any preemptive rights or other similar rights of stockholders of the Company. Upon issuance, the Shares are, and the Warrant Shares will be, entitled to the benefits specified in the corresponding American Depositary Receipts ("ADRs) and in the Deposit Agreement relating to such ADSs. The Warrants are duly and validly authorized and are validly issued, fully paid and non-assessable, and free from all liens, claims and encumbrances and are not and will not be subject to any preemptive rights or other similar rights of stockholders of the Company. The Board of Directors of the Company has unanimously approved the issuance of Shares and the Warrants pursuant to the terms hereof and of Warrant Shares issuable upon full exercise of the Warrants pursuant to the terms thereof (without giving effect to any limitations on exercise contained -6- therein, including for purposes of Nasdaq Rule 4460(i) and Nasdaq Rule 4310(c)(25)(H)(1)(b)) (the "Nasdaq Authorizations"), has unanimously recommended to the stockholders of the Company the approval of the Nasdaq Authorizations and will seek Shareholder Approval (as defined in Section 4.13) at the Company's next annual meeting, which is currently scheduled for May, 2000. No further corporate authorization or approval (other than the Shareholder Approval) is required under the rules of the Nasdaq with respect to the transactions contemplated by this Agreement, including, without limitation, the issuance of the Shares and Warrant Shares and the inclusion thereof for trading on the Nasdaq. 3.5 NO CONFLICTS. The execution, delivery and performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Shares, the Warrants and Warrant Shares and the Purchaser's purchase and acquisition of the Shares, the Warrants and the Warrant Shares) do not and will not (a) result in a violation of the Memorandum of Association and Articles of Association, (b) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party (except for such conflicts, defaults, terminations, amendments, accelerations, and cancellations as would not, individually or in the aggregate, have a Material Adverse Effect), or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations and the laws of England and Wales) applicable to the Company or any of its subsidiaries, or by which any property or asset of the Company or any of its subsidiaries, is bound or affected. Neither the Company nor any of its subsidiaries is in violation of its Memorandum of Association, its Articles of Association, or other organizational documents, and neither the Company nor any of its subsidiaries is in default (and no event has occurred which, with notice or lapse of time or both, would put the Company or any of its subsidiaries in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, except for possible defaults or rights as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted so long as Purchaser owns any of the Securities, in violation of any law, ordinance, rule, regulation, order, judgment or decree of any governmental entity, court or arbitration tribunal except for possible violations the sanctions for which either singly or in the aggregate would not have a Material Adverse Effect. The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under this Agreement, the Warrants or the Registration Rights Agreement or to perform its obligations in accordance with the terms hereof or thereof, other than the Consents. The purchase and acquisition of the Securities by the Purchaser do not violate any law, rule, regulation, order, judgment or decree applicable to the Company, or require further filing by the Company or Purchaser under such law, rule, regulation, order, judgment or decree, by virtue of the Company's business or assets, other than the Consents as described in Section 3.2. The Company is not in violation of the listing requirements of Nasdaq and does not -7- reasonably anticipate that the ADSs will be de-listed by Nasdaq for the foreseeable future, and the Company has made all necessary filings and notifications with, and obtained all necessary approvals from, Nasdaq with respect to the transactions contemplated hereby, including, without limitation, the issuance of the Securities and the listing of the Shares and the Warrant Shares on the Nasdaq. 3.6 REGISTRATION AND SEC DOCUMENTS. The Ordinary Shares are registered under Section 12 of the Exchange Act and have been so registered since __________. Except as disclosed in Schedule 3.6, since December 31, 1996, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with Companies House pursuant to the U.K. Companies Act 1985 and 1989 (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the "Company Reports") and has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed after December 31, 1996, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being referred to herein as the "SEC Documents" and such documents filed prior to the date hereof, the "Filed SEC Documents"), including for purposes of determining the availability of Form S-3. The Company has delivered to Purchaser true and complete copies of the SEC Documents filed since December 31, 1996. As of their respective dates of filing, the Company Reports and the SEC Documents complied in all material respects with the requirements of the applicable law and the rules and regulations promulgated thereunder applicable to such Company Reports and SEC Documents, and none of the Company Reports and SEC Documents, at the time they were filed with the Companies House or SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Document is, or, except pursuant to Filed SEC Documents has been, required to be updated or amended under applicable law. The financial statements of the Company included in the SEC Documents were prepared in accordance with U.S. generally accepted accounting principles, consistently applied, and the rules and regulations of the SEC during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they do not include footnotes or are condensed or summary statements) and present accurately and completely the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial year-end audit adjustments). Except as set forth in the financial statements of the Company included in the Filed SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred subsequent to the date of such financial statements in the ordinary course of business consistent with past practice and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, in each case of clause (i) and (ii) next above which, individually or in the aggregate, are not material to the financial condition, business, operations, properties, operating results or prospects of the Company and its subsidiaries taken on a whole. The Filed SEC Documents, as supplemented by Schedule 3.6 hereto, contain a complete and accurate list of all material undischarged written or -8- oral contracts, agreements, leases or other instruments to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or to which any of the properties or assets of the Company or any subsidiary is subject (each a "Contract"), except to the extent not required to be filed pursuant to the applicable Rules and Regulations of the SEC. None of the Company, its subsidiaries or, to the best knowledge of the Company, any of the other parties thereto, is in breach or violation of any Contract, which breach or violation relates to indebtedness for borrowed money, is with respect to an obligation in excess of one hundred thousand dollars ($100,000) or would have a Material Adverse Effect. No event, occurrence or condition exists which, with the lapse of time, the giving of notice, or both, or the happening of any further event or condition, would become a breach or default by the Company or its subsidiaries under any Contract which breach or default would have a Material Adverse Effect. 3.7 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company. 3.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, governmental agency or authority, or self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company, any of its subsidiaries, or any of their respective directors or officers in their capacities as such, wherein an unfavorable decision, ruling or finding could reasonably be expected to have a Material Adverse Effect or would adversely affect the transactions contemplated by this Agreement or any of the documents contemplated hereby or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of such other documents. To the Company's knowledge, there are no facts which, if known by a potential claimant or governmental agency or authority, could give rise to a claim or proceeding which, if asserted or conducted with results unfavorable to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect. 3.9 DISCLOSURE. No information relating to or concerning the Company set forth in this Agreement or provided to Purchaser in connection with the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. Except for the execution and performance of this Agreement and the transactions contemplated hereby, no material fact (within the meaning of the federal securities laws of the United States) exists with respect to the Company or any of its subsidiaries which has not been publicly disclosed. 3.10 ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE SECURITIES. The Company acknowledges and agrees the Purchaser is acting independently and is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement or the transactions contemplated hereby, that this Agreement and the transaction contemplated hereby, and the relationship between the Purchaser and the Company, are "arms-length", and that any statement made by the Purchaser, or any of its representatives or agents, in connection with this Agreement or the transactions contemplated hereby is not advice or a recommendation, is merely incidental to Purchaser's purchase of the Securities and has not been -9- relied upon in any way by the Company, its officers, directors or other representatives. The Company further represents to the Purchaser that the Company's decision to enter into this Agreement and the transactions contemplated hereby has been based solely on an independent evaluation by the Company and its representatives. 3.11 CURRENT PUBLIC INFORMATION. The Company is currently eligible to register the resale of the Shares and the Warrant Shares by the Purchaser in a secondary offering under General Instruction B3 and B4 of Form S-3 on a registration statement on Form S-3 under the Securities Act, all as contemplated by Section 2.1 of the Registration Rights Agreement. 3.12 NO GENERAL SOLICITATION. Neither the Company nor any person acting on behalf of the Company has conducted any "general solicitation," as described in Rule 502(c) under Regulation D, with respect to any of the Securities being offered hereby. 3.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its affiliates, nor any person acting on their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under the Securities Act pursuant to the provisions of Regulation D. The transactions contemplated hereby are exempt from the registration requirements of the Securities Act, assuming the accuracy of the representations and warranties herein contained of Purchaser to the extent relevant for such determination. 3.14 NO BROKERS. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by any Purchaser relating to this Agreement or the transactions contemplated hereby, except for dealings with Allied Capital International, Inc. (the fees of which shall be paid in full by the Company). The Company will indemnify each Purchaser from and against any fees and expenses sought or other claims made by Allied Capital International, Inc. 3.15 ACKNOWLEDGMENT OF DILUTION. The number of Warrant Shares issuable upon exercise each of the Warrants may increase substantially in certain circumstances. The Company's executive officers and directors have studied and fully understand the terms of this Agreement and the transactions contemplated hereby and the nature of the securities being sold hereunder and recognize that they have a potentially dilutive effect. The board of directors of the Company has unanimously concluded in its good faith business judgment that the issuance of the Shares, the Warrants and the Warrant Shares as contemplated hereby is in the best interests of the Company. The Company acknowledges that its obligation to issue Warrant Shares upon exercise of the Warrants is binding upon it and enforceable regardless of the dilution that such issuance may have on the ownership interests of other stockholders. 3.16 INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns or possesses adequate and enforceable rights to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and proprietary knowledge (collectively, "Intangibles") used or necessary for the conduct of its business as now -10- being conducted and as previously described in the Company's Annual Report on Form 10-K most recently filed and any subsequently filed reports on Form 10-Q and Form 8-K. Neither the Company nor any subsidiary of the Company infringes on or is in conflict with any right of any other person with respect to any Intangibles nor is there any claim of infringement made by a third party against or involving the Company or any of its subsidiaries, which infringement, conflict or claim, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. 3.17 FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. Without limiting the generality of the foregoing, the Company and its subsidiaries have not directly or indirectly made or agreed to make (whether or not said payment is lawful) any payment to obtain, or with respect to, sales other than usual and regular compensation to its or their employees and sales representatives with respect to such sales. 3.18 KEY EMPLOYEES. Each Key Employee (as defined below) is currently serving the Company in the capacity disclosed in Schedule 3.18. No Key Employee, to the best of the knowledge of the Company and its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each Key Employee does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. No Key Employee has, to the best of the knowledge of the Company and its subsidiaries, any intention to terminate or limit his employment with, or services to, the Company or any of its subsidiaries, nor is any such Key Employee subject to any constraints (e.g., litigation) which would cause such employee to be unable to devote his full time and attention to such employment or services. "Key Employees" means Richard Noling, Stephen Ambler, Mark McMillan, George Buchan, John Hoskin, Ronald Workman and Marshall Kwait. 3.19 YEAR 2000 COMPLIANCE. The information set forth in the Filed SEC Documents with respect to Year 2000-related compliance by the Company does not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained therein not misleading. The Company's testing compliance program and contingency plan, in each case regarding Year 2000-related matters, are adequate to prevent a Material Adverse Effect and such Year 2000-related matters will not cause a Material Adverse Effect. -11- ARTICLE 4 COVENANTS 4.1 BEST EFFORTS. The parties shall use their best efforts timely to satisfy each of the conditions described in Articles 6 and 7 of this Agreement. 4.2 SECURITIES LAWS. The Company agrees to file a Form D with respect to the Securities with the SEC as required under Regulation D and to provide a copy thereof to the Purchaser on or prior to the date of Closing. The Company agrees to file a Form 8-K disclosing this Agreement and the transactions contemplated hereby with the SEC within three (3) days following the Closing Date. Such Form 8-K shall contain as exhibits this Agreement, the Warrants and the Registration Rights Agreement. The Company shall, on or prior to the Closing Date, take such action as is necessary to sell the Securities to Purchaser in accordance with applicable U.S. federal and state securities laws and regulations and the applicable laws of England and Wales, and shall provide evidence of any such action so taken to each Purchaser on or prior to the date of the Closing. Without limiting any of the Company's obligations under this Agreement, the Registration Rights Agreement or the Warrants, from and after the Closing Date, neither the Company nor any person acting on its behalf shall take any action which would adversely affect any exemptions from registration under the Securities Act with respect to the transactions contemplated hereby. 4.3 REPORTING STATUS. So long as any Purchaser beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. 4.4 USE OF PROCEEDS. The Company shall use the proceeds from the sale of the Securities hereunder for general working capital purposes. 4.5 RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. (i) During the period beginning on the Closing Date and ending on the later of (x) the date which is three (3) months after the Effective Date and (y) the date which is six (6) months following the Closing Date (such period, the "Financing Period"), the Company shall not issue or agree to issue (except (A) the ADSs pursuant to this Agreement and the issuance of the ADSs to Castle Creek Technology Partners LLC at or prior to the Closing for an aggregate amount of Three Million Five Hundred Thousand Dollars ($3,500,000) on terms substantially similar to this Agreement, (B) pursuant to investments from industry participants, in which there is a significant purpose other than raising equity capital, (C) in connection with the acquisition of another company, (D) in an underwritten public offering or (E) on conversion of the Convertible Promissory Notes issued in favor of Quantum Corporation dated October 20, 1999) any equity securities or any equity-like or equity-linked securities of the Company (or any security convertible into or exercisable or exchangeable, directly or indirectly, for equity, equity-like or equity-linked securities of the Company) if such securities are issued at a price (or in the case of securities convertible into or exercisable or exchangeable, directly or indirectly, for Ordinary Shares or ADSs such securities provide for a conversion, exercise or exchange price) which may -12- be less than the then current market price for Ordinary Shares or ADSs on the date of issuance (in the case of Ordinary Shares or ADSs) or the date of conversion, exercise or exchange (in the case of securities convertible into or exercisable or exchangeable, directly or indirectly, for Ordinary Shares or ADSs), or if such securities are variable-priced or contain provisions for price resetting (any such securities, the "Restricted Securities"). (ii) During the six-month period beginning on the date immediately following the final day of the Financing Period, the Company will not issue or agree to issue any Restricted Securities unless the Company has satisfied all of the following requirements with respect to such issuance: (I) The Company shall have delivered notice to the Purchasers (the "Transfer Notice"), which notice shall include (A) the terms and number of units of the security and the consideration per unit which the Company desires to receive for the securities (which, in the case where the Company shall have received an offer to purchase such securities other than from the Purchasers (a "Third Party Offer"), shall be the consideration set forth in such offer) and (B) all of the material terms and conditions, including the terms and conditions of payment, upon which the Company proposes to transfer said securities (which, in the case of a Third Party Offer, shall be the terms and conditions set forth in the Third Party Offer). (II) Upon the delivery of the Transfer Notice, the Purchasers shall have an option to purchase any or all of the securities described therein. Such option shall be exercisable by the Purchasers by service of written notice upon the Company within five (5) days of receipt of the Transfer Notice. (III) If the options created in clause (II) hereof are not exercised by the Purchasers within five (5) days of service of the Transfer Notice, or if such options are exercised only in part, then, within a period of thirty (30) days beginning on the day following the date of expiration of the option period, the Company may issue some or all of the securities sought to be issued as to which such options were not exercised, at a price which is not less than one hundred percent (100%) of the price specified in the Transfer Notice and on terms and conditions not less favorable to the Company than those specified in the Transfer Notice. (IV) Each Purchaser shall have the option pursuant to clause (II) hereof to purchase that percentage of the securities specified in the transfer notice equal to the purchase price set forth opposite that Purchaser's name on Schedule A hereto divided by Four Million Five Hundred Thousand Dollars ($4,500,000). In the event that any Purchaser declines to exercise the option created in clause (II) hereof, such option may be exercised by the remaining Purchasers, pro rata to the purchase price set forth opposite the name of each said remaining Purchaser on Schedule A hereto. 4.6 FURTHER RESTRICTION ON ISSUANCE OF SECURITIES. While any Purchaser holds any Shares, any Warrants or Warrant Shares, the Company and each of its subsidiaries shall not issue, or authorize for issuance, or otherwise transfer or enter into any commitment to issue or otherwise transfer, any debt or equity security, bond, note or other security of any of the Company's subsidiaries, provided that Purchaser shall keep the Company current on its such Shareholdings. -13- 4.7 EXPENSES. The Company shall pay to the Purchasers at the Closing reimbursement for the expenses incurred by it and its affiliates and advisors in connection with the negotiation, preparation, execution, and delivery of this Agreement and the other agreements and documents to be executed in connection herewith, including, without limitation, due diligence and attorneys' fees and expenses (the "Expenses"). In addition, from time to time thereafter, upon any Purchaser's written request, the Company shall pay to the Purchaser such Expenses, if any, not so paid at Closing and/or covered by such payment, in each case to the extent incurred by the Purchaser. The Company shall not be required to reimburse Expenses to the extent such Expenses exceed Ten Thousand Dollars ($10,000) in the aggregate. 4.8 INFORMATION. The Company agrees to send the following reports to each Purchaser until the earlier of (i) the Purchaser transfers, assigns or sells all of its Securities; or (ii) the second (2nd) anniversary of the Closing Date: (a) within three (3) days after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy statements and any Current Reports on Form 8-K; and (b) within two (2) days after release, copies of all press releases issued by the Company or any of its subsidiaries. The Company further agrees to promptly provide to each Purchaser any information with respect to the Company, its properties, or its business or such Purchaser's investment as such Purchaser may reasonably request; provided, however, that the Company shall not be required to give the Purchaser any material nonpublic information. If any information requested by any Purchaser from the Company contains material nonpublic information, the Company shall inform such Purchaser in writing that the information requested contains material nonpublic information and shall in no event provide such information to such Purchaser without the express prior written consent of such Purchaser after being so informed. 4.9 AVAILABILITY OF SHARES. From and after the Closing Date, the Company shall: a. at all times have sufficient authorized share capital available for allotment and issue to permit the exercise of the Warrants into Warrant Shares. b. issue and cause the transfer agent and Depositary to deliver such ADSs as required upon exercise of the Warrants and take all actions necessary to ensure that all such Warrant Shares shall, when issued and paid for, be duly and validly issued, fully paid and nonassessable and be entitled to the benefits specified in the corresponding ADRs and in the Deposit Agreement relating to such ADSs; and c. If, and so long as, any ADSs are listed or quoted on any securities exchange or market, the Company shall, if permitted by the rules of such securities exchange or market, list and keep listed or quoted on such securities exchange or market, upon official notice of issuance, all Warrant Shares issuable upon exercise of the Warrants. 4.10 LISTING. For a period of beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, the Company shall continue the listing and trading of its ADSs on The Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange, secure and maintain listing and trading of the Shares and Warrant Shares on such exchange, and comply in all respects with the Company's reporting, filing and other obligations under the by-laws or rules of such exchange. If the Company fails to maintain the listing or -14- trading of the ADSs as required by this Section 4.10, then beginning on the tenth (10th) business day following such failure, if the ADSs are still not listed or traded, then the Company shall pay to the Purchasers an amount equal to one percent (1%) of the fair market value of the Shares and Warrant Shares then held by the Purchasers per day that such failure continues. For purposes hereof, the number of Warrant Shares held by Purchaser shall be calculated as though the Warrants held by the Purchasers were fully exercised, without regard to any limitations on the exercise thereof. 4.11 PROSPECTUS DELIVERY REQUIREMENT. The Purchasers understand that the Securities Act may require delivery of a prospectus relating to the ADSs in connection with any sale thereof pursuant to a registration statement under the Securities Act covering the resale by the Purchasers of the ADSs being sold hereunder. 4.12 INTENTIONAL ACTS OR OMISSIONS. Neither the Company nor the Purchasers shall intentionally perform any act which if performed, or intentionally omit to perform any act which, if omitted to be performed, would prevent or excuse the performance of this Agreement or any of the transactions contemplated hereby. 4.13 SHARE AUTHORIZATION. The Company covenants and agrees that it shall (i) solicit by proxy the Shareholder Approval (as defined below) and (ii) use its best efforts to obtain the Shareholder Approval at its next annual stockholder meeting, which shall not be held later than [July 31, 2000] ("Shareholder Approval Date"). For purposes hereof, "Stockholder Approval" means authorization by the stockholders of the Company for the issuance of ADSs upon the exercise of the Warrants pursuant to the terms thereof in the aggregate in excess of twenty percent (20%) of the issued and outstanding ADSs and, if necessary, the elimination of any prohibitions under the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities on the Company's ability to issue ADSs in excess of twenty percent (20%). In addition, the Company shall, unless otherwise consented to by a majority in interest of the Purchasers, have a definitive proxy statement mailed to each stockholder of the Company at least twenty (20) days prior to the Approval Date. The Company shall deliver one copy of any SEC comments it receives with respect to its proxy statement to the Purchasers and will not file such proxy statement (or any amendments thereto), whether such proxy statement is in preliminary or definitive form, without the approval of a majority in interest of the Purchasers, which approval shall not be unreasonably withheld or delayed. ARTICLE 5 LEGEND REMOVAL AND TRANSFER INSTRUCTIONS 5.1 REMOVAL OF LEGEND. The Legend shall be removed and the Company shall issue a certificate without any legend to the holder of any Security upon which such Legend is stamped, and a certificate for a Security shall be originally issued without any legend, if, unless otherwise required by applicable state securities laws, (a) the sale of such Security is registered under the Securities Act, (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, and -15- reasonably satisfactory to the Company (the cost of which shall be borne by the Holder), to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such Security can be sold pursuant to Rule 144. Each Purchaser agrees to sell all Securities, including those represented by a certificate(s) from which the Legend has been removed, or which were originally issued without the Legend, (i) pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or (ii) in compliance with an exemption from the registration requirements of the Securities Act. In the event the Legend is removed from any Security or any Security is issued without the Legend and thereafter the effectiveness of a registration statement covering the resale of such Security is suspended or a supplement or amendment thereto is required by applicable securities laws, then upon reasonable advance notice to any Purchaser holding such Security, the Company may require that the Legend be placed on any such Security that cannot then be sold pursuant to an effective registration statement or Rule 144 or with respect to which the opinion referred to in clause (b) next above has not been rendered, which Legend shall be removed when such Security may be sold pursuant to an effective registration statement or Rule 144 or such holder provides the opinion with respect thereto described in clause (b) next above. Except for the Legend required pursuant to this Section 5.1, the Securities shall bear no legend. 5.2 TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its transfer agent to issue certificates, registered in the name any Purchaser or its nominee, for the Shares and Warrant Shares in such amounts as specified from time to time by such Purchaser to the Company. Such certificates shall bear a legend only in the form of the Legend and only to the extent permitted by Section 5.1 above. The Company warrants that no instruction other than such instructions referred to in this Article 5, and no stop transfer instructions other than stop transfer instructions to give effect to Section 2.6 hereof in the case of the Shares and Warrant Shares prior to registration thereof under the Securities Act, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company. Nothing in this Section shall affect in any way the Purchasers' obligations and agreements set forth in Section 5.1 hereof to resell the Securities pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of applicable securities laws. Without limiting any other rights of the Purchasers or obligations of the Company, if (a) any Purchaser provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions (the reasonable cost of which shall be borne by the Company), to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from registration or (b) any Purchaser transfers Securities pursuant to Rule 144, the Company shall permit the transfer, and promptly instruct its transfer agent to issue one or more certificates in such name and in such denomination as specified by Purchaser in order to effect such a transfer or sale. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Article 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Article 5, that any Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and -16- requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 5.3 FAILURE TO REMOVE LEGEND. If the Company fails to remove any legend as required by this Article 5 (a "Legend Removal Failure"), then beginning on the tenth (10th) day following such failure, if the Company continues to fail to remove such legend, the Company shall pay to the Purchaser holding shares subject to a Legend Removal Failure an amount equal to one percent (1%) of the fair market value of the Shares and Warrant Shares then held by the Purchaser per day that such failure continues. For purposes hereof, the number of Warrant Shares held by the Purchaser shall be calculated as though the Warrants held by the Purchaser were fully exercised, without regard to any limitations on the exercise thereof. ARTICLE 6 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL 6.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Shares and Warrants to each Purchaser at the Closing is subject to the satisfaction, as of the date of the Closing and with respect to each Purchaser, of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion: (i) Each Purchaser shall have executed the signature page to this Agreement and the Registration Rights Agreement and delivered the same to the Company. (ii) Each Purchaser shall deliver the applicable Purchase Price for the Shares and the Warrants purchased at the Closing. (iii) The representations and warranties of each Purchaser shall be true and correct as of the date when made and as of the Closing as though made at that time, and each Purchaser shall have performed, satisfied and complied in all material respects with the covenants and agreements required by this Agreement to be performed or complied with by such Purchaser at or prior to the Closing. The Company shall have received a certificate executed by each Purchaser dated the Closing Date as to such matters as may be reasonably requested by the Company. (iv) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which restricts or prohibits the consummation of any of the transactions contemplated by this Agreement. -17- ARTICLE 7 CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE 7.1 CONDITIONS TO THE CLOSING. The obligation of the Purchasers hereunder to purchase the Shares and Warrants to be purchased by it on the Closing Date is subject to the satisfaction of each of the following conditions, provided that these conditions are for Purchasers' sole benefit and may be waived by the Purchasers at any time in the Purchasers' sole discretion: (i) the Company shall have executed the signature page to this Agreement and the Registration Rights Agreement and delivered the same to Purchaser. (ii) The Company shall have delivered duly executed certificates for the Shares (in such denominations as the Purchasers shall reasonably request) and Warrants being so purchased by Purchaser at the Closing. (iii) At or prior to the Closing, Castle Creek Technology Partners LLC shall have purchased from the Company Shares and Warrants for an aggregate consideration of Three Million Five Hundred Thousand Dollars ($3,500,000) on terms substantially similar to terms contained herein. (iv) The ADSs, including all Shares and Warrant Shares, shall be listed on the Nasdaq and trading in the ADSs shall not have been suspended by the Nasdaq, the SEC or other regulatory authority and no de-listing or suspension shall be reasonably likely for the foreseeable future. (v) The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing as though made at that time and the Company shall have performed, satisfied and complied with the covenants and agreements required by this Agreement to be performed or complied with by the Company at or prior to the Closing. The Purchasers shall have received a certificate, executed by the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing to the foregoing effect and as to such other matters as may be reasonably requested by the Purchasers. (vi) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. (vii) The Purchasers shall have received the officer's certificate described in Section 3.3, dated as of the Closing and there shall be no material changes from the date of signing of this Agreement to the date of the Closing other than as a result of issuance of ADSs pursuant to options, warrants and other obligations disclosed on Schedule 3.3 as of the date of this Agreement. -18- (viii) The Purchasers shall have received opinions of the Company's counsel, dated as of the Closing, in the form attached hereto as Exhibit D. (ix) The Company's Depositary shall have agreed to act in accordance with irrevocable instructions in the form attached hereto as Exhibit E. (x) the Company shall have filed a Form D with respect to the Securities with the SEC (or shall do so following the Closing) as required under Regulation D and shall have provided (or shall provide) a copy thereof to the Purchasers. (xi) The Company shall have filed an Additional Listing Application (and no additional time is required for the effectiveness thereof) with respect to all Shares and Warrant Shares with the National Association of Securities Dealers and has provided a copy thereof to the Purchasers. ARTICLE 8 GOVERNING LAW; MISCELLANEOUS 8.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably consent to the jurisdiction of the United States federal courts located in the State of New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement or the transactions contemplated hereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by the first class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding arising hereunder. Nothing herein shall affect the Purchasers' right to serve process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 8.2 OFFICER AND DIRECTOR TRANSACTIONS. If any executive officer or director of the Company, directly or indirectly, including through family members, trusts or other entities related to such executive officer or director, disposes or provides or files any public notice, including pursuant to Rule 144 of the Securities Act, of a bona fide intent to dispose, of any Ordinary Shares or ADSs beneficially owned by him during the period beginning on the Closing Date and ending on the date which is six (6) months after the Effective Date, the Company shall pay to each Purchaser an amount equal to (x) the number of Shares and Warrant Shares (without giving effect to any exercise or limitation on exercise thereof) then held by the Purchaser times (y) the difference between (m) the closing bid price of the ADSs on the trading day immediately preceding the day on which such disposal was publicly announced (the "Announcement Date") and (n) the lowest closing bid price of the ADSs during the thirty (30) trading day period -19- beginning on the Announcement Date; provided, however, that any individual executive officer or director may transfer up to ten percent (10%) of the Ordinary Shares and/or ADSs beneficially owned by such executive officer or director (which includes ADSs and Ordinary Shares to be received upon exercise of existing options) after the Effective Date without triggering the Company's payment obligations pursuant to this Section 8.2. 8.3 COUNTERPARTS. This Agreement may be executed in two or more counterparts, including, without limitation, by facsimile transmission, all of which counterparts shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause additional original executed signature pages to be promptly delivered to the other parties. 8.4 HEADINGS. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. 8.5 SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. 8.6 SCOPE OF AGREEMENT; AMENDMENTS. This Agreement and the documents and instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, no Purchaser makes any representation, warranty, covenant or undertaking with respect the transactions contemplated hereby. No provision of this Agreement may be waived other than by an instrument in writing signed by the party to be charged with enforcement and no provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Purchaser. 8.7 NOTICE. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by facsimile-machine confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: If to the Company: Insignia Solutions plc 41300 Christy Street Fremont, CA 94538 Telecopy: (510)360-3702 Attention: Stephen M. Ambler -20- with a copy to: Ritchey Fisher Whitman & Klein PC 1717 Embarcadero Road P. O. Box 51050 Palo Alto, California 94303 Telecopy: (650)857-1288 Attention: Peter A. Whitman, Esq. If to the Purchasers, at the address set forth on Schedule A hereto. with a copy to: Irell & Manella, LLP 333 South Hope Street Los Angeles, CA 90071 Telecopy: (213) 229-0515 Attention: Anthony T. Iler, Esq. 8.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Purchasers shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. This provision shall not limit the Purchasers' right to transfer the Securities pursuant to the terms of this Agreement. In addition, and notwithstanding anything to the contrary contained in this Agreement, the Warrants or the Registration Rights Agreement, the Securities may be pledged, and all rights of the Purchasers under this Agreement or any other agreement or document related to the transaction contemplated hereby may be assigned, without further consent of the Company, to a bona fide pledgee in connection with a Purchaser's margin or brokerage accounts. 8.9 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 8.10 SURVIVAL. The representations, warranties, covenants and agreements of the Company in this Agreement shall survive each and every Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Purchasers. The Company agrees to indemnify and hold harmless the Purchasers and each of Purchasers' officers, directors, employees, partners, agents and affiliates for loss or damage to the extent arising as a result of or related to (a) any breach by the Company of any of its representations or covenants set forth herein or (b) any cause of action, suit or claim brought or made against such indemnitee (other than by the Company solely for breach of this Agreement, the Warrants or the Registration Rights Agreement by the indemnitee or by governmental or regulatory authorities) and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto or contemplated hereby, any transaction financed or to be financed in whole or in part, directly or indirectly, with -21- the proceeds of the issuance of the Securities or the status of the Purchasers as an investor in the Company, except to the extent that such actual loss or damage arises out of or results from a breach by such indemnitee of this Agreement, the Warrants or the Registration Rights Agreement or from Purchaser's violation of law. The right to indemnification shall include the right to advancement of expenses as they are incurred. 8.11 PUBLIC FILINGS; PUBLICITY. Immediately following execution of this Agreement, the Company shall issue a press release with respect to the transactions contemplated hereby. Prior to the issuance, filing or other submission of any press releases (including the foregoing press release), SEC or other filings, or any other public statements, with respect to the transactions contemplated hereby, the Company shall provide such press releases, filings or statements to the Purchasers and their counsel for comment and approval, provided, however, that the such approval shall be rendered within 48 hours after receipt thereof by the Purchasers and shall not be unreasonably withheld or delayed and the Company shall be entitled, without the prior approval of the Purchasers, to make any press release or SEC, Nasdaq, NASD or exchange filings with respect to such transactions as is required by applicable law and regulations (although the Purchasers shall (to the extent time permits) be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). 8.12 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the filing of all appropriate documentation and notifications with Nasdaq with respect to the Warrant Shares immediately following each of any applicable Shareholder Approval, any applicable Nasdaq Approval and any applicable Second Nasdaq Approval. 8.13 REMEDIES. No provision of this Agreement providing for any remedy to the Purchasers shall limit any remedy which would otherwise be available to the Purchasers at law or in equity. Nothing in this Agreement shall limit any rights the Purchasers may have with any applicable federal or state securities laws with respect to the investment contemplated hereby. 8.14 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers to action to be taken by any person or entity, or which such person or entity is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such person or entity. 8.15 REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Agreement shall be cumulative and in addition to all other remedies available under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Purchasers' right to actual damages for any failure by the Company to comply with the terms of this Agreement. The Company covenants to the Purchasers that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts -22- set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Purchasers and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, that the Purchasers shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. 8.16 PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to make any cash payment to the Purchasers under this Agreement, such cash payment shall be due on the date (the "Cash Due Date") that any Purchaser delivers written notice from that Purchaser to the Company. Such cash payment shall be made to the Purchaser by the method (by certified or cashier's check or wire transfer of immediately available funds) elected by such Holder. If such payment is not delivered within two (2) days of the Cash Due Date, the Purchaser shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the Holder. 8.17 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of any Purchaser in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. 8.18 TERMINATION. In the event that the Closing shall not have occurred on or before two (2) business days after the date of this agreement, unless the parties agree otherwise, this Agreement shall terminate at the close of business on such date. * * * -23- IN WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this Agreement to be duly executed as of the date first above written. COMPANY: INSIGNIA SOLUTIONS PLC By: s/Richard M. Noling Name: Richard M. Noling Title: President and CEO -24- SECURITIES PURCHASE AGREEMENT (continued) PURCHASERS: VINCENT S. and ROSEMARY PINO By s/Vincent S. Pino VINCENT S. PINO By s/Rosemary Pino ROSEMARY PINO RICHARD N. and BARBARA ZEHNER By s/Richard N. Zehner RICHARD N. ZEHNER By s/Barbara Zehner BARBARA ZEHNER By s/Robert Waley-Cohen ROBERT WALEY-COHEN AVALON PANAMA S.A. By s/Avalon Panama S.A. -25- SCHEDULE A
Name, Address and Purchase Shares Warrants Telecopy Number of Purchaser Price Purchased Purchased - ---------------------------- -------- --------- --------- Vincent S. and Rosemary Pino $250,000 59,084 17,725 Richard N. and Barbara Zehner $250,000 59,084 17,725 Robert Waley-Cohen $250,000 59,084 17,725 Avalon Panama S.A. $250,000 59,084 17,725
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