Document:

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                                                                  EXHIBIT 4.05

                             INSIGNIA SOLUTIONS PLC

                                    THE RULES

                                     OF THE

                               INSIGNIA SOLUTIONS
                     U.K. EMPLOYEE SHARE OPTION SCHEME 1996

                   ADOPTED IN GENERAL MEETING ON 19 APRIL 1996
                  AND AMENDED IN GENERAL MEETING ON 29 MAY 1997
                      AND IN GENERAL MEETING ON 27 MAY 1999

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                                    CONTENTS
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CLAUSE                                                                PAGE
<S>               <C>                                                <C>
1                 Definitions                                            1
2                 Grant of Options                                       5
3                 Exercise Price                                         5
4                 Limitations                                            6
5                 Exercise and Lapse of Options                          6
6                 Payment of Exercise Price                              9
7                 Takeover and Liquidation                              10
8                 Variation in the Share Capital of the Company         14
9                 Rights of Ordinary Shares Allotted                    14
10                Availability of Shares                                15
11                Buyout of Options                                     15
12                Transfers of Options                                  15
13                Employment with the Company                           16
14                Documents                                             16
15                Administration                                        16
16                Governing Law                                         17

APPENDIX - Option Certificate
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                               INSIGNIA SOLUTIONS
                     U.K. EMPLOYEE SHARE OPTION SCHEME 1996

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1                 DEFINITIONS

1.1               In this Scheme references to the following words and
                  expressions shall bear the following meanings:-

                  ACT:  the Income and Corporation Taxes Act 1988;

                  ADOPTION DATE: the date on which the Scheme is adopted by the
                  Company in general meeting;

                  AFFILIATE: any company that directly, or indirectly through
                  one or more intermediaries, controls or is controlled by, or
                  is under common control with the Company where "control"
                  (including the terms "controlled by" and "under common control
                  with") means the possession, direct or indirect, of the power
                  to cause the direction of the management and policies of the
                  company, whether through the ownership of voting securities,
                  by contract or otherwise;

                  AUDITORS:  the auditors for the time being of the Company;

                  BOARD:  the Board of Directors of the Company;

                  COMMITTEE: the Compensation Committee of the Board or such
                  duly constituted committee of the Board comprising of at least
                  two Disinterested Persons and which complies with the
                  provisions of Section 16 of the Exchange Act whilst the
                  Company is subject to the provisions of such Section;

                  COMPANY:  Insignia Solutions plc;

                  CONTROL:  has the same meaning as in Section 840 of the Act;

                  CONVERSION RATE: the average currency conversion rate quoted
                  by the Bank of

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                  America in London as the price for Pounds Sterling purchased
                  with US Dollars;

                  DATE OF GRANT: the date on which an Option is granted as
                  specified in the relevant Option Certificate;

                  DISINTERESTED PERSON: a director who has not, during the
                  period that person is a member of the Committee and for one
                  year prior to service as a member of the Committee, been
                  granted or awarded equity securities pursuant to the Scheme or
                  any other employee share scheme of the Company or any Parent,
                  Subsidiary or Affiliate of the Company, except in accordance
                  with the requirements set forth in rules as promulgated by the
                  SEC under Section 16(b) of the Exchange Act, as such rules are
                  amended from time to time and as interpreted by the SEC;

                  EXCHANGE ACT: the statute in the United States of America
                  known as the Securities Exchange Act 1934, as amended;

                  EXERCISE PRICE: the amount payable for an Option Share on the
                  exercise of an Option to be determined in accordance with Rule
                  3;

                  GROUP: the Company, its holding company and subsidiaries (as
                  defined in Section 736 of the Companies Act 1985);

                  INSIDER: an officer or director of the Company or any other
                  person whose transactions in the Ordinary Shares are subject
                  to Section 16 of the Exchange Act;

                  LAST EXERCISE DATE: in respect of any Option or part of any
                  Option, the date specified in the relevant Option Certificate
                  as determined by the Committee being a date not later than ten
                  years after the Date of Grant of the Option;

                  MARKET VALUE:

                  (a)     if Ordinary Shares, or instruments evidencing
                          Ordinary Shares, are then quoted on the Nasdaq
                          National Market the closing price on the Nasdaq
                          National Market System on the trading day immediately
                          preceding the Date of Grant of an Option, or, if no
                          such reported sale takes place on such date,

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                           the closing price on the next preceding trading date
                           on which a reported sale occurred;

                  (b)      if Ordinary Shares, or instruments evidencing
                           Ordinary Shares, are publicly traded and are then
                           listed on a national securities exchange, the closing
                           price on the trading day immediately preceding the
                           Date of Grant of an Option, or, if no reported sale
                           takes place on such date, the closing price on the
                           next preceding trading day on which a reported sale
                           occurred;

                  (c)      if Ordinary Shares, or instruments evidencing
                           Ordinary Shares, are publicly traded but are not
                           quoted on the Nasdaq National Market nor listed or
                           admitted to trading on a national securities
                           exchange, the average of the closing bid and asked
                           prices on the day immediately preceding the Date of
                           Grant of an Option, as reported by The Wall Street
                           Journal, for the over-the-counter market;

                  (d)      if none of the foregoing is applicable, by the Board
                           in good faith.

                  1986 SCHEME: the Company's 1986 Executive Share Option Scheme;

                  OPTION SCHEME: a right to acquire Option Shares granted
                  pursuant to the Scheme;

                  OPTION CERTIFICATE: the Option Certificate substantially in
                  the form set out in the Appendix as such certificate may be
                  amended by the Committee from time to time;

                  OPTION HOLDER: a Qualified Person who holds an Option in
                  accordance with the terms of the Scheme or where the context
                  permits a person becoming entitled to any such Option in
                  consequence of the death of the original Option Holder;

                  OPTION SHARES: issued or unissued Ordinary Shares in respect
                  of which an Option is granted;

                  ORDINARY SHARES: the ordinary shares in the capital of the
                  Company and any instruments evidencing such Ordinary Shares;

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                  PARENT: any company (other than the Company) in an unbroken
                  chain of companies ending with the Company, if at the time of
                  the granting of an Option under the Scheme, each of such
                  companies other than the Company owns shares possessing 50 per
                  cent or more of the total combined voting power of all classes
                  of shares in one of the other companies in such chain;

                  QUALIFIED PERSON: any employee (including officers and
                  directors who are also employees) of a company in the Group;

                  THE SCHEME: this Insignia Solutions U.K. Employee Share Option
                  Scheme 1996 in its present form with and subject to any
                  amendments hereto properly effected;

                  SEC: the United States of America Securities and Exchange
                  Commission;

                  SUBSIDIARY: any company (other than the Company) in an
                  unbroken chain of companies beginning with the Company if, at
                  the time of granting of an Option, each of the companies other
                  than the last company in the unbroken chain owns shares
                  possessing 50 per cent or more of the total combined voting
                  power of all classes of shares in one of the other companies
                  in such chain.

1.2               In this Scheme (unless the context requires otherwise):-

1.2.1             any reference to any statute or statutory provision shall be
                  construed as including a reference to any modification,
                  re-enactment or extension of such statute or statutory
                  provision for the time being in force, to any subordinate
                  legislation made under the same and to any former statutes or
                  statutory provisions which it consolidated or re-enacted;

1.2.2             any reference to a Rule is to a Rule of this Scheme, as
                  amended from time to time;

1.2.3             the singular includes a reference to the plural and vice
                  versa;

1.2.4             the masculine gender shall include the feminine gender;

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1.2.5             references to the exercise of an Option shall where the
                  context so allows include the exercise of an Option in part.

2                 GRANT OF OPTIONS

2.1               Subject to the limitations and conditions of the Scheme and
                  unless prohibited by law, the Committee may grant Options
                  following the Adoption Date at any time to any Qualified
                  Person as it may in its sole discretion determine.

2.2               On the grant of an Option, the Committee shall determine the
                  Exercise Price (calculated in accordance with Rule 3) and the
                  Last Exercise Date of the Option and shall specify such
                  details in the Option Certificate.

2.3               There shall be no consideration payable for the grant of an
                  Option.

2.4               As soon as practicable after the grant of an Option the
                  Committee shall arrange for the despatch of an Option
                  Certificate duly sealed or executed as a deed by the Company
                  to each Option Holder to whom an Option has been granted. An
                  Option Holder may disclaim an Option by notice in writing to
                  the Company within fourteen days after the date of the Option
                  Certificate.

3                 EXERCISE PRICE

3.1               Subject to adjustment pursuant to Rule 8, the Exercise Price
                  at the relevant Date of Grant shall be determined by the
                  Committee but it may not be less than the higher of:-

3.1.1             where the Option is an option to subscribe for Ordinary
                  Shares, the US Dollar equivalent of the nominal value of an
                  Ordinary Share calculated by reference to the prevailing
                  Conversion Rate; and

3.1.2             the Market Value of an Ordinary Share.

3.2               The Exercise Price shall be expressed in US Dollars.

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4                 LIMITATIONS

4.1               No Options shall be granted under the Scheme later than ten
                  years after the Adoption Date.

4.2               Subject to adjustment pursuant to Rule 8, no Option shall be
                  granted if the number of Ordinary Shares over which it is
                  proposed to grant the Option when aggregated with all Ordinary
                  Shares which have been issued or which might be issued in the
                  future pursuant to options and rights (excluding those which
                  have lapsed or have been surrendered) granted under the 1988
                  US Stock Option Plan, the 1995 Incentive Stock Option Plan for
                  US Employees and the 1986 Scheme will exceed 5,072,071
                  Ordinary Shares.

4.3               If an Option is granted in excess of the limitation in Rule
                  4.2, such Option shall be limited and take effect over such
                  number of Ordinary Shares as would be within the said
                  limitation and the Committee shall, if appropriate, as soon as
                  practicable arrange for any original Option Certificate to be
                  cancelled and a replacement Option Certificate to be issued in
                  its place.

5                 EXERCISE AND LAPSE OF OPTIONS

5.1               Notwithstanding any other provision of this Rule 5, an Option
                  shall not in any event be exercisable more than ten years
                  after the Date of Grant of that Option.

5.2               Options may be exercised by an Option Holder who is a
                  Qualified Person as follows:-

5.2.1             where such an Option Holder does not hold a subsisting option
                  granted under the 1986 Scheme at the Date of Grant of the
                  first Option granted to him then such first Option may be
                  exercised on or after the first anniversary of the Date of
                  Grant as to 1/48th of the number of Ordinary Shares comprised
                  in such Option (rounded to the nearest whole number) for each
                  complete month he has been employed by the Group since the
                  Date of Grant and shall lapse on the Last Exercise Date;

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                  5.2.1.1           where such an Option Holder holds a
                                    subsisting option granted under the 1986
                                    Scheme at the Date of Grant of the first
                                    Option granted to him; or

                  5.2.1.2           in the case of each Option granted to such
                                    Option Holder after his first Option

                  then such Options may be exercised as to 1/48th of the number
                  of Ordinary Shares comprised in such Option (rounded to the
                  nearest whole number) for each complete month he has been
                  employed by the Group since the Date of Grant and shall lapse
                  on the Last Exercise Date.

5.3               An Option may be exercised otherwise than as set out in Rule
                  5.2 in the circumstances and during the periods set out
                  below:-

5.3.1             if an Option Holder ceases to be employed by the Group by
                  reason of his death his Option may be exercised to the extent
                  that his Option would have been exercisable at the time of his
                  death within eighteen months of his death (or such longer
                  period not exceeding five years as may be determined by the
                  Committee) by his legal personal representatives provided that
                  such exercise is not later than the Last Exercise Date and
                  thereafter the Option shall lapse;

5.3.2             if an Option Holder ceases to be employed by the Group by
                  reason of his disability (as determined by the Committee) his
                  Option may be exercised to the extent that his Option would
                  have been exercisable at the time of his cessation of
                  employment within twelve months of the date of such cessation
                  (or such longer period not exceeding five years as may be
                  determined by the Committee) provided that such exercise is
                  not later than the Last Exercise Date and thereafter the
                  Option shall lapse;

5.3.3             if an Option Holder ceases to be employed by the Group
                  (otherwise than by reason of his death or disability) his
                  Option may be exercised to the extent that his Option would
                  have been exercisable at the time of cessation of his
                  employment within three months of the date of such cessation
                  (or such longer period not exceeding five years as may be
                  determined by the Committee)

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                  provided that such exercise is not later than the Last
                  Exercise Date and thereafter his Option shall lapse.

5.4               Each Option is to be exercisable by an Option Holder to the
                  extent that the Option has become exercisable in whole or in
                  part.

5.5               Exercise of an Option is to be by application in writing
                  addressed to the Company and specifying the number of Option
                  Shares in respect of which the Option is being exercised on
                  that occasion and the method of payment of the Exercise Price
                  for such Option Shares, such application to be delivered or
                  sent by prepaid post to the registered office for the time
                  being of the Company or to such office as may from time to
                  time be specified by the Company in writing to the Option
                  Holder.

5.6               Subject to the regulations and enactments for the time being
                  in force under any applicable national or foreign securities
                  law and any rules, regulations and other requirements of any
                  stock exchange or automated quotation system upon which the
                  Ordinary Shares may be listed or quoted and subject to
                  compliance by the Option Holder with the terms of the Option
                  the Company will after receipt of the application make an
                  allotment to the Option Holder of the number of Ordinary
                  Shares specified in the application at the Exercise Price (as
                  adjusted in accordance with the provisions of the Scheme) and
                  will (subject to the provisions of Rule 5.7) deliver to the
                  Option Holder evidence of title to such Ordinary Shares
                  provided that instead of allotting and issuing the appropriate
                  number of Ordinary Shares the Company shall have the right to
                  satisfy its obligations of allotment by (in whole or in part)
                  procuring that some or all of the Ordinary Shares are
                  transferred by a third party to the relevant Option Holder.
                  For these purposes delivery or transfer to an Option Holder
                  includes delivery or transfer to a nominee for the Option
                  Holder provided that the Option Holder acquires the beneficial
                  ownership of the Ordinary Shares delivered or transferred.

5.7               The Company shall have no obligation to issue or deliver
                  certificates for Ordinary Shares under the Scheme prior to:-

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5.7.1             obtaining any approvals from governmental agencies that the
                  Company determines are necessary or advisable; and

5.7.2             completion of any registration or other qualification of the
                  Ordinary Shares under any applicable national or foreign law
                  or ruling of any governmental body that the Company determines
                  to be necessary or advisable.

6                 PAYMENT OF EXERCISE PRICE

6.1               Payment of the Exercise Price for the Ordinary Shares may be
                  made in cash (by cheque) or where expressly approved for the
                  Option Holder by the Committee and where permitted by law:-

6.1.1             by waiver of remuneration due or accrued to the Option Holder
                  by any company in the Group for services rendered;

6.1.2             provided that a public market for the Ordinary Shares exists:-

                  6.1.2.1           through a "same day sale" commitment from
                                    the Option Holder and a broker-dealer that
                                    is a member of the National Association of
                                    Securities Dealers ("a NASD Dealer") whereby
                                    the Option Holder irrevocably elects to
                                    exercise his Option and to sell a portion of
                                    the Ordinary Shares so subscribed for in
                                    order to pay for the Exercise Price, and
                                    whereby the NASD Dealer irrevocably commits
                                    upon receipt of such Ordinary Shares to
                                    forward the Exercise Price directly to the
                                    Company; or

                  6.1.2.2           through a "margin" commitment from an Option
                                    Holder and a NASD Dealer whereby the Option
                                    Holder irrevocably elects to exercise his
                                    Option and to pledge the Ordinary Shares so
                                    subscribed for to the NASD Dealer in a
                                    margin account as security for a loan from
                                    the NASD Dealer in the amount of the
                                    Exercise Price, and whereby the NASD Dealer
                                    irrevocably commits upon receipt of such
                                    Ordinary Shares to forward the Exercise
                                    Price directly to the Company; or

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6.1.3             by any combination of cash and the methods described in this
                  Rule 6.1.

6.2               Where the payment is to be made in Pounds Sterling then the
                  amount payable shall be calculated by reference to the
                  Conversion Rate prevailing at the date of payment.

7                 TAKEOVER AND LIQUIDATION

7.1               In the event of:-

7.1.1             any person obtaining Control of the Company as a result of
                  making:-

                  7.1.1.1           a general offer to acquire the whole of the
                                    issued ordinary share capital of the Company
                                    (not already owned by such person) which is
                                    made on a condition such that if it is
                                    satisfied the person making the offer will
                                    have Control of the Company; or

                  7.1.1.2           a general offer to acquire all the shares in
                                    the Company which are of the same class as
                                    the Option Shares (not already owned by such
                                    person);

7.1.2             any company obtaining Control of the Company in pursuance of a
                  compromise or arrangement sanctioned by the Court under
                  Section 425 of the Companies Act 1985; or

7.1.3             the sale of substantially all of the assets of the Company;
                  the purchaser or acquiring company ("the Acquiring Company")
                  may:-

7.1.4             in consideration for the release by an Option Holder of his
                  subsisting Option grant to such Option Holder a new option
                  over shares in the Acquiring Company which is otherwise
                  equivalent (as defined in Rule 7.8) to his subsisting Option;

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7.1.5             in consideration for the release by an Option Holder of his
                  subsisting Option grant to such Option Holder an equivalent
                  new option over shares in the Acquiring Company governed by
                  the rules of an employee share option scheme of the Acquiring
                  Company; or

7.1.6             offer substantially similar consideration to Option Holders as
                  is offered to shareholders of the Company (after taking into
                  account the existing provisions of the Option).

7.2               In the event that the Acquiring Company, pursuant to a
                  transaction described in Rule 7.1.1 above, refuses to make a
                  proposal as described in Rules 7.1.4 to 7.1.6 above to an
                  Option Holder prior to the commencement of the earliest of the
                  periods described in Rules 7.2.1.1 and 7.2.1.2 below, then:-

7.2.1             if his Option has already become capable of exercise under
                  these Rules then the Option Holder may exercise it to the
                  extent that the Option has become exercisable until the end of
                  whichever of the following periods finishes earliest:-

                  7.2.1.1           a period of one month beginning with the
                                    time when the Acquiring Company has obtained
                                    Control of the Company and (if applicable)
                                    any condition subject to which the offer is
                                    made is satisfied; and

                  7.2.1.2           if the Acquiring Company becomes bound or
                                    entitled to acquire the shares in the
                                    Company under Sections 428 to 430F of the
                                    Companies Act 1985, the period when that
                                    person remains so bound or entitled

                  and then any such Options as remain unexercised shall lapse;

7.2.2             if his Option has not already become capable of exercise under
                  these Rules then such Option shall lapse at such time and on
                  such conditions as the Board shall determine.

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7.3               For the purposes of Rules 7.1 and 7.2 above a person shall be
                  deemed to have obtained Control of the Company if he and
                  others acting in concert with him have together obtained
                  Control of it.

7.4               In the event that the Acquiring Company, pursuant to a
                  transaction described in Rule 7.1.2 above, refuses to make a
                  proposal as described in Rules 7.1.4 to 7.1.6 above to an
                  Option Holder prior to the expiry of one month after the Court
                  sanctions the compromise or arrangement then his Option shall
                  be subject to the provisions of Rule 7.7.

7.5               In the event that the Acquiring Company, pursuant to a
                  transaction described in Rule 7.1.3 above, refuses to make a
                  proposal as described in Rules 7.1.4 to 7.1.6 above to an
                  Option Holder then his Option shall lapse at such time and on
                  such conditions as the Board shall determine.

7.6               In the event of a members' voluntary winding up of the Company
                  any Option Holder may, by notice in writing to the Company
                  within 60 days of the commencement of the winding up (such
                  notice being accompanied by payment of the Exercise Price),
                  elect in relation to any Option which has already become
                  capable of exercise under these Rules to be treated as if that
                  Option had been exercised either to the full extent that it is
                  then capable of being exercised or to the extent specified in
                  the notice, immediately before the commencement of the winding
                  up, and such Option Holder shall then be entitled to be paid a
                  sum equal to the amount he would have received as a holder of
                  the Ordinary Shares to which he would have been entitled upon
                  such exercise. Subject as aforesaid, all Options shall lapse
                  on the winding up of the Company.

7.7               If under Section 425 of the Companies Act 1985 it is proposed
                  that the court sanctions a compromise or arrangement proposed
                  for the purposes of or in connection with a scheme for the
                  reconstruction of the Company or its amalgamation with any
                  other company or companies the Company shall give notice
                  thereof to all Option Holders at the same time as it sends
                  notices to members of the Company summoning the meeting to
                  consider such a compromise or arrangement. Then at the time
                  that such notice is given:-

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7.7.1             if the Option has already become capable of exercise under
                  these Rules, the Option Holder may exercise the Option, to the
                  extent that the Option has become exercisable, before the
                  expiry of the later of one month from the date of such notice
                  and one month from the date on which the Court sanctions the
                  compromise or arrangement and thereafter the Option shall
                  lapse. The exercise of an Option under this Rule 7.7.1 shall
                  be conditional on such compromise or arrangement becoming
                  effective;

7.7.2             if the Option has not already become capable of exercise under
                  these Rules the Option shall lapse at such time and on such
                  conditions as the Board shall determine.

                  It shall be a condition of exercising the Option under this
                  Rule 7.7 that, after exercising the Option, the Option Holder
                  shall transfer or otherwise deal with the Ordinary Shares
                  issued to him so as to place him in the same position (or as
                  near as possible) as would have been the case if such Ordinary
                  Shares had been subject to such compromise or arrangement.

7.8               For the purposes of Rule 7.1.4 above a new option over shares
                  in the Acquiring Company (hereinafter called the "New Option")
                  shall be equivalent to a subsisting option (hereinafter called
                  the "Old Option") if the date of grant is deemed to be the
                  same date as the Date of Grant of the Old Option; if the
                  aggregate exercise price of the Ordinary Shares subject to the
                  New Option is as nearly as practicable the same as the
                  aggregate Exercise Price of the Ordinary Shares subject to the
                  Old Option; and (save as provided in the Rules and save for
                  the number, description and Exercise Price of the Ordinary
                  Shares subject to the New Option) the other rights and terms
                  attaching to the New Option are as nearly as practicable the
                  same as those attaching to the Old Option. The New Option
                  shall, for all other purposes of the Scheme, be treated as
                  having been acquired at the same time as the Old Option.

7.9               With effect from the date on which an Option Holder releases
                  the Old Option in consideration of the grant to him of the New
                  Option, Rule 1 and Rules 5 to 16 inclusive shall, in relation
                  to the New Option, be construed for the purposes of that New
                  Option as if references directly or indirectly to "the
                  Company" and to

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                  "Ordinary Shares" were references to the Acquiring Company and
                  to shares in the Acquiring Company.

7.10              Subject to the provisions of Rule 7.1 to 7.9 above, if any of
                  the corporate transactions described in such Rules should
                  occur, any outstanding Options shall be treated in the manner
                  provided for in the applicable agreement or plan of such
                  corporate transaction.

8                 VARIATION IN THE SHARE CAPITAL OF THE COMPANY

8.1               On any variation of the share capital of the Company (whether
                  by way of capitalisation or rights issue, sub-division or
                  consolidation of the Ordinary Shares or a share capital
                  reduction) the Exercise Price and/or the number and nominal
                  value of Ordinary Shares comprised in an Option and/or the
                  aggregate maximum number of Ordinary Shares available under
                  the Scheme may be varied in such manner as the Committee shall
                  determine and such decision of the Committee shall be final
                  and binding on the Option Holders and the Company subject to
                  written notification being given to the Option Holders.

8.2               An adjustment to the Exercise Price shall not be made pursuant
                  to the provisions of this Rule 8 which would result in any
                  Option Shares being issued unlawfully at a discount.

8.3               A variation shall not be made pursuant to this Rule 8 until
                  the Auditors shall (acting as experts and not as arbitrators)
                  have notified the Committee in writing that the proposed
                  variation is, in their opinion, fair and reasonable.

9                 RIGHTS OF ORDINARY SHARES ALLOTTED

9.1               Ordinary Shares to be allotted pursuant to the exercise of any
                  Option shall rank pari passu in all respects and as one class
                  with the Ordinary Shares in issue at the date of allotment and
                  Ordinary Shares allotted or transferred shall rank in full for
                  all dividends and distributions the record date of which falls
                  on or after the date of exercise of the Option but shall not
                  rank for any dividend or distribution the record date of which
                  precedes the date of exercise of the Option.

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9.2               The Company shall not be under an obligation to register the
                  Ordinary Shares allotted pursuant to the exercise of an Option
                  with the SEC or to effect compliance with the registration,
                  qualification or listing requirements of any national or
                  foreign securities laws, stock exchange or automated quotation
                  system, and the Company shall have no liability for any
                  inability or failure to do so.

10                AVAILABILITY OF SHARES

                  The Company shall at all times have available sufficient
                  unissued Ordinary Shares to meet any exercise of any Option,
                  taking into account any arrangements made by the Company to
                  procure the transfer by a third party to the relevant Option
                  Holder of Ordinary Shares to satisfy (whether in full or in
                  part) the exercise of any Option.

11                BUYOUT OF OPTIONS

                  The Committee may at any time buy from an Option Holder his
                  Option previously granted with payment in cash, Ordinary
                  Shares or other consideration, based on such terms and
                  conditions as the Committee and the Option Holder shall agree.

12                TRANSFERS OF OPTIONS

12.1              No Option granted pursuant to the Scheme nor the benefit of an
                  Option may be transferred, assigned, charged or otherwise
                  alienated save that nothing in the Rules of the Scheme shall
                  prohibit the transmission of the Option by operation of law in
                  the event of the death of an Option Holder.

12.2              If an Option Holder does or suffers an act or thing whereby he
                  would or might be deprived of the legal or beneficial
                  ownership of an Option that Option shall forthwith lapse and
                  the Committee shall not knowingly permit its exercise.

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13                EMPLOYMENT WITH THE COMPANY

13.1              Nothing in the Scheme or any Option granted under the Scheme
                  shall confer or be deemed to confer on any Option Holder any
                  right to continue in the employ of any member of the Group or
                  limit in any way the right of any member of the Group to
                  terminate the employment of the Option Holder with or without
                  cause.

13.2              If any Option Holder shall cease to be employed by or hold
                  office with a member of the Group for any reason he shall not
                  be entitled by way of compensation for loss of office or
                  otherwise to any sum or other benefit whatsoever to compensate
                  him for the loss of any right under the Scheme notwithstanding
                  any provision to the contrary in his contract of employment.

14                DOCUMENTS

                  The Company shall deliver to each Option Holder a copy of the
                  documents sent to ordinary shareholders of the Company as a
                  class of shareholders.

15                ADMINISTRATION

15.1              The Scheme shall be administered by the Committee. The
                  Committee shall have the power to:-

15.1.1            construe and interpret the Scheme, any Option Certificates and
                  any other agreement or document executed pursuant to the
                  Scheme;

15.1.2            prescribe, amend and rescind rules and regulations relating to
                  the Scheme;

15.1.3            correct any defect, supply any omission, or reconcile any
                  inconsistency in the Scheme or any agreement or document
                  executed pursuant to the Scheme;

15.1.4            make all other determinations necessary or advisable for the
                  administration of the Scheme.

                                       16
<PAGE>

15.2              Any determination made by the Committee with respect to any
                  Option shall be made in its sole discretion at the time of
                  grant of the Option or, unless in contravention of any express
                  term of the Scheme or Option, at any later time, and such
                  determination shall be final and binding on the Company and
                  all persons having an interest in any Option. The Committee
                  may delegate to one or more officers of the Company the
                  authority to grant Options under the Scheme to Option Holders
                  who are not Insiders of the Company.

15.3              An Option shall not be effective unless such Option is in
                  compliance with all relevant national and foreign securities
                  laws, rules and regulations of any governmental body, and the
                  requirements of any stock exchange or automated quotation
                  system upon which the Ordinary Shares may then be listed or
                  quoted, as they are in effect on the Date of Grant of such
                  Option and also on the date of exercise or other issue.

15.4              If any provision of any Rule or any Option conflicts with the
                  applicable requirements of Rule 16b-3 (or its successors) of
                  the SEC promulgated under the Exchange Act in relation to
                  Option Holders who are or may be Insiders then those
                  provisions to the extent possible shall be interpreted or
                  deemed amended so as to avoid such conflict.

15.5              The Board may at any time terminate or amend the Scheme in any
                  respect, including without limitation amendment of any form of
                  Option Certificate or instrument to be executed pursuant to
                  the Scheme, provided however that the Board shall not, without
                  the approval of the shareholders of the Company, amend the
                  Scheme in any manner that requires such shareholder approval
                  pursuant to the Exchange Act or Rule 16b-3 (or its successor),
                  as amended, thereunder, provided, further that no amendment
                  may be made to outstanding Options without the consent of the
                  Option Holders.

16                GOVERNING LAW

                  The Scheme shall be governed by and construed in accordance
                  with the Laws of England and Wales.
</TABLE>

                                       17
<PAGE>

                                    APPENDIX
                               OPTION CERTIFICATE
                     U.K. EMPLOYEE SHARE OPTION SCHEME 1996

                                                      Certificate No. JAN. 96/02

                             INSIGNIA SOLUTIONS PLC
                       (Registered in England No. 1961960)

1         This is to certify that     Name:             [               ]
                                      Address:          [               ]
                                                        [               ]
                                                        [               ]

is a holder of an Option to subscribe for the number of Ordinary Shares of 20p
each in the Company shown in Box `A' below subject to the Rules of the Insignia
Solutions UK Employee Share Option Scheme 1996.

<TABLE>
<CAPTION>
-------------------------------------------- ------------------------------ -------------------------

                    `A'                                   `B'
NUMBER OF ORDINARY SHARES COMPRISED IN THE    EXERCISE PRICE PER ORDINARY             `C'
                  OPTION                                 SHARE              DATE OF GRANT OF OPTION
-------------------------------------------- ------------------------------ -------------------------
<S>                                          <C>                            <C>
                    [ ]                                 US$ [ ]                       [ ]
-------------------------------------------- ------------------------------ -------------------------
</TABLE>

2                 The Date of Grant of the Option is shown in Box `C' above and
                  the Option is exercisable in whole or in part [not earlier
                  than the first anniversary of the Date of Grant] subject to
                  and in accordance with the Rules of the Scheme.

3                 The figures shown in Box `A' and Box `B' above are subject to
                  adjustment in certain circumstances in accordance with the
                  Rules of the Scheme.

4                 The Option is not transferable, assignable or chargeable.

5                 The Option will lapse on the Last Exercise Date being the
                  [tenth] anniversary of the Date of Grant to the extent that it
                  has not been exercised.

6                 The Option [will be exercisable as to 25% of the shares over
                  which it has been granted on [ ] and will be exercisable as to
                  1/48 of the Ordinary Shares over which it has been granted on
                  the expiry of each complete month thereafter] [will be
                  exercisable as to 1/48 of the Ordinary Shares over which it
                  has been granted on the expiry of each complete month since
                  the Date of Grant]. The Option is exercisable only by notice
                  in writing in the form prescribed under the Rules of the
                  Scheme. This certificate must be sent to the Company or such
                  office as may be specified from time to time by the Company
                  whenever the Option is

<PAGE>

                  exercised in whole or in part. Where the Option is exercised
                  in respect of part only of the Ordinary Shares comprised in
                  the certificate, the certificate will be returned to the
                  holder with the balance of Ordinary Shares endorsed overleaf.

7                 The rights under the Option may be renounced in whole or in
                  part by the holder giving notice in writing to the Company
                  WITHIN FOURTEEN DAYS AFTER THE DATE OF THIS CERTIFICATE. This
                  certificate must be returned to the Company if the holder
                  wishes to renounce in whole or in part his rights hereunder.
                  If rights are renounced in part only the appropriate
                  replacement certificate will be issued to the holder.

8                 This document shall be presumed to be delivered and is
                  intended by the parties to be a deed when (and not before) it
                  is dated.

Given under the Common Seal                 )
of INSIGNIA SOLUTIONS PLC                   )
in the presence of:-                        )

--------------------------
Director

--------------------------
Secretary

--------------------------
Date:

                                       2<PAGE>
                                                                     EXHIBIT 4.2

                           CERTIFICATE OF DESIGNATION

                                       OF

                  SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

                         (PURSUANT TO SECTION 151 OF THE
                        DELAWARE GENERAL CORPORATION LAW)

         ISIS PHARMACEUTICALS, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on December 8, 2000:

                           RESOLVED, that pursuant to the authority granted to
                  and vested in the Board of Directors of the Company in
                  accordance with the provisions of its Restated Certificate of
                  Incorporation, the Board of Directors hereby creates a series
                  of Preferred Stock, par value $.001 per share, of the Company
                  and hereby states the designation and number of shares, and
                  fixes the relative designations and the powers, preferences
                  and rights, and the qualifications, limitations and
                  restrictions thereof (in addition to the provisions set forth
                  in the Restated Certificate of Incorporation of the Company,
                  which are applicable to the Preferred Stock of all classes and
                  series), as follows:

Series C Junior Participating Preferred Stock:

         SECTION 1. DESIGNATION AND AMOUNT. One million (1,000,000) shares of
Preferred Stock, $.001 par value, are designated "Series C Junior Participating
Preferred Stock" with the designations and the powers, preferences and rights,
and the qualifications, limitations and restrictions specified herein (the
"Junior Preferred Stock"). Such number of shares may be increased or decreased
by resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Junior Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Company convertible into Junior
Preferred Stock.

         SECTION 2. DIVIDENDS AND DISTRIBUTIONS.

         (A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Junior
Preferred Stock with respect

                                        1.
<PAGE>

to dividends, the holders of shares of Junior Preferred Stock, in preference to
the holders of Common Stock, par value $.001 per share (the "Common Stock"), of
the Company, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of April,
July, October and January in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Junior Preferred Stock. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         (B) The Company shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); PROVIDED, that in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

         (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Junior Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Junior Preferred

                                        2.
<PAGE>

Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.

         SECTION 3. VOTING RIGHTS.  The holders of shares of Junior Preferred
Stock shall have the following voting rights:

         (A) Subject to the provision for adjustment hereinafter set forth, each
share of Junior Preferred Stock shall entitle the holder thereof to 100 votes on
all matters submitted to a vote of the stockholders of the Company. In the event
the Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Junior Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

         (B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Company having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.

         (C) Except as set forth herein, or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.

         SECTION 4. CERTAIN RESTRICTIONS.

         (A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Junior Preferred Stock outstanding shall have been
paid in full, the Company shall not:

              (i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock;

              (ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred Stock, except
dividends paid ratably on the Junior Preferred Stock and all such parity stock
on which dividends are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;

                                        3.
<PAGE>

              (iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided that the
Company may at any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Company ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Junior Preferred Stock; or

              (iv) redeem or purchase or otherwise acquire for consideration any
shares of Junior Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

         (B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

         SECTION 5. REACQUIRED SHARES. Any shares of Junior Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Restated
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

         SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred
Stock shall have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, or if greater, the holders of shares of Junior Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock; or (2)
to the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Junior Preferred Stock,
except distributions made ratably on the Junior Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Junior

                                        4.
<PAGE>

Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Junior Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Junior Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         SECTION 8. NO REDEMPTION. The shares of Junior Preferred Stock shall
not be redeemable.

         SECTION 9. RANK. The Junior Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Company's Preferred Stock.

         SECTION 10. AMENDMENT. The Restated Certificate of Incorporation of the
Company shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Junior Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Junior Preferred Stock, voting
together as a single class.

                                        5.
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this certificate as
of December 12, 2000.

                            By:  /s/ B. LYNNE PARSHALL
                                 ----------------------------------------------
                            Print Name: B. LYNNE PARSHALL
                                        Executive Vice President,
                                        Chief Financial Officer and Secretary

                                        6.

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