<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
META GROUP, INC.
- ----------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ----------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
</TABLE>
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
not applicable
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
not applicable
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
not applicable
-----------------------------------------------------------------------
(5) Total fee paid:
not applicable
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
---------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
not applicable
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
not applicable
-----------------------------------------------------------------------
(3) Filing Party:
not applicable
-----------------------------------------------------------------------
<PAGE>
(4) Date Filed:
not applicable
-----------------------------------------------------------------------
<PAGE>
META GROUP, INC.
208 HARBOR DRIVE
STAMFORD, CONNECTICUT 06912-0061
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
------------------------
To the Stockholders of META Group, Inc.:
The Annual Meeting of Stockholders of META Group, Inc., a Delaware
corporation (the "Corporation"), will be held on Wednesday, May 24, 2000 at
9:00 a.m., local time, at The Sheraton Stamford Hotel, 2701 Summer Street,
Stamford, CT 06905, for the following purposes:
(1) To elect one Class II Director to serve for a three-year term and until
his successor has been duly elected and qualified or until his earlier
resignation or removal.
(2) To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 3, 2000 are
entitled to notice of and to vote at the meeting and at any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
By Order of the Board of Directors
Bernard F. Denoyer
SECRETARY
Stamford, Connecticut
April 14, 2000
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE BY RETURN MAIL PRIOR TO THE DATE OF THE ANNUAL MEETING OF STOCKHOLDERS
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
META GROUP, INC.
208 HARBOR DRIVE
STAMFORD, CONNECTICUT 06912-0061
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO BE HELD ON MAY 24, 2000
APRIL 14, 2000
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of META Group, Inc., a Delaware corporation (the
"Corporation"), for use at the Annual Meeting of Stockholders to be held on
May 24, 2000, at 9:00 a.m., local time, at The Sheraton Stamford Hotel, 2701
Summer Street, Stamford, CT 06905 or at any adjournments or postponements
thereof (the "Annual Meeting"). An Annual Report to Stockholders, containing
financial statements for the fiscal year ended December 31, 1999, is being
mailed together with this proxy statement to all stockholders entitled to vote.
This proxy statement and the form of proxy were first mailed to stockholders on
or about April 14, 2000.
Only stockholders of record at the close of business on April 3, 2000 (the
"Record Date") will be entitled to receive notice of and to vote at the meeting
and any adjournments or postponements thereof. As of that date, 10,452,958
shares of Common Stock, $.01 par value per share (the "Common Stock"), of the
Corporation were issued and outstanding. The holders of Common Stock are
entitled to one vote per share on any proposal presented at the meeting.
Stockholders may vote in person or by proxy. Execution of a proxy will not in
any way affect a stockholder's right to attend the meeting and vote in person.
Any stockholder giving a proxy has the right to revoke it (i) by filing a
later-dated proxy or a written notice of revocation with the Secretary of the
Corporation at any time before it is exercised or (ii) by voting in person at
the Annual Meeting (although attendance at the Annual Meeting will not, in
itself, constitute revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to META Group, Inc., 208
Harbor Drive, Stamford, Connecticut, 06912-0061, Attention: Secretary, at or
before the taking of the vote at the Annual Meeting.
The representation in person or by proxy of at least a majority of the
outstanding Common Stock entitled to vote at the meeting is necessary to
constitute a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker "non-votes" are counted as present or
represented by proxy for purposes of determining the presence or absence of a
quorum for the meeting. A "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a proposal because, in respect of such
proposal, the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
In the election of the Class II Director, the nominee receiving the highest
number of affirmative votes of the shares present or represented and entitled to
vote at the meeting shall be elected as the Class II Director. On any other
matter being submitted to stockholders, an affirmative vote of a majority of the
shares present or represented and voting on each such matter is required for
approval. An automated system administered by the Corporation's transfer agent
tabulates the votes. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter. Broker "non-votes" are not so
included.
1
<PAGE>
The persons named as attorneys-in-fact in the proxies, Dale Kutnick and
Bernard F. Denoyer, are a director and officer and an officer of the
Corporation, respectively. All properly executed proxies returned in time to be
counted at the meeting will be voted. ALL PROXIES WILL BE VOTED IN ACCORDANCE
WITH THE STOCKHOLDERS' INSTRUCTIONS, AND, IF NO CHOICE IS SPECIFIED, THE
ENCLOSED PROXY CARD (OR ANY SIGNED AND DATED COPY THEREOF) WILL BE VOTED FOR THE
MATTERS SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING. Any stockholder giving
a proxy has the right to withhold authority to vote for any individual nominee
to the Board of Directors by writing that nominee's name in the space provided
on the proxy.
The Board of Directors of the Corporation knows of no other matters to be
presented at the meeting. If any other matter should be presented at the meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of the Record Date (unless otherwise
indicated) certain information regarding the beneficial ownership of shares of
the Corporation's Common Stock by (i) each person who, to the knowledge of the
Corporation, owned beneficially more than 5% of the Common Stock of the
Corporation outstanding at the Record Date, (ii) each director or nominee,
(iii) each executive officer identified in the Summary Compensation Table set
forth below under "Compensation and Other Information Concerning Directors and
Officers," and (iv) all executive officers, directors and nominees as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP (1) CLASS (2)
- ------------------------------------ ----------------- ----------
<S> <C> <C>
Dale Kutnick (3)............................................ 1,562,916 14.8%
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
T. Rowe Price Associates, Inc. (4).......................... 1,450,700 13.9%
100 East Pratt Street
Baltimore, MD 21202
Marc Butlein (5)............................................ 982,740 9.4%
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
Massachusetts Financial Services Company (6)................ 740,079 7.1%
500 Boylston Street
Boston, MA 02116
FMR Corporation (7)......................................... 589,367 5.6%
82 Devonshire Street
Boston, MA 02109
George McNamee (8).......................................... 164,500 1.6%
c/o First Albany Corporation
30 South Pearl Street
Albany, NY 12207
Larry DeBoever (9).......................................... 79,310 *
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
Michael Simmons (10)........................................ 52,500 *
c/o MS Associates
1865 West Union Avenue, Suite R
Englewood, CO 80110
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP (1) CLASS (2)
- ------------------------------------ ----------------- ----------
<S> <C> <C>
Harry S. Gruner (11)........................................ 40,714 *
c/o JMI Equity Fund
1119 St. Paul Street
Baltimore, MD 21202
Peter Burris (12)........................................... 32,737 *
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
Michael Pedersen (13)....................................... 20,255 *
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
Howard A. Rubin (14)........................................ 10,750 *
c/o Rubin Systems, Inc.
450 Long Ridge Road
Pound Ridge, NY 10576
John Aaron Zornes (15)...................................... 10,740 *
c/o META Group, Inc.
Harbor Plaza, 208 Harbor Drive
Stamford, CT 06912
Francis J. Saldutti (16).................................... 7,101 *
c/o Ardent Research Partners, L.P.
153 East 53rd Street, Suite 4800
New York, NY 10022
All directors and executive officers as a group (13 persons) 2,124,001 19.6%
(17)......................................................
</TABLE>
- ------------------------
* Less than 1%
(1) Except as noted in the footnotes to this table, each person or entity named
in the table has sole voting and investment power with respect to all
shares of Common Stock owned, based upon information provided to the
Corporation by directors (and nominees), officers and principal
stockholders.
(2) Applicable percentage of ownership as of the Record Date is based upon
10,452,958 shares of Common Stock outstanding on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission"), and includes voting and investment
power with respect to shares. Common Stock subject to options currently
exercisable or exercisable within 60 days of the Record Date are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
of any other person.
(3) Includes 74,678 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(4) These securities are owned by various individual and institutional
investors, including the T. Rowe Price New Horizons Fund, Inc. (which owns
1,125,000 shares, representing 10.8% of the shares outstanding), for which
T. Rowe Price Associates, Inc. ("Price Associates") serves as investment
advisor with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, as amended, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
Information included in this table regarding Price Associates was obtained
from its Amendment No. 4 to Schedule 13-G filed with the Commission on or
about February 7, 2000.
(5) Includes 257,750 shares of Common Stock held by the Marc & Michaele Butlein
Charitable Remainder Unit Trust, of which Mr. Butlein is a trustee, 105,000
shares of Common Stock held by the Marc & Michaele Butlein Family Limited
Partnership, of which Mr. Butlein is a general partner, and 31,000 shares
of Common Stock held by the Butlein Private Family Foundation, of which
Mr. Butlein is an officer. Mr. Butlein disclaims beneficial ownership of
all shares of Common Stock except for the
3
<PAGE>
shares he holds of record. Information regarding Mr. Butlein's beneficial
ownership was obtained from Mr. Butlein's Amendment No. 4 to Schedule 13-G
filed with the Commission on or about February 14, 2000.
(6) Information included in this table regarding Massachusetts Financial
Services Company was obtained from its Amendment No. 3 to Schedule 13-G
filed with the Commission on or about February 10, 2000. Massachusetts
Financial Services Company has sole dispositive power over the securities
listed but disclaims sole voting power for a portion of the securities
held.
(7) Information included in this table regarding FMR Corp. was obtained from
its Schedule 13-G filed with the Commission on or about February 11, 2000.
FMR Corp. has sole dispositive power over the securities listed but
disclaims sole voting power for a portion of the securities held.
(8) Includes 134,500 shares of Common Stock owned by First Albany Corporation
and 30,000 shares issuable to Mr. McNamee pursuant to stock options
exercisable within 60 days of the Record Date. Mr. McNamee, a director of
the Corporation, is Chairman and Co-Chief Executive Officer of First Albany
Corporation, and may therefore be deemed to share voting and investment
power over the shares owned by First Albany Corporation. Mr. McNamee
disclaims beneficial ownership of the 134,500 shares owned by First Albany
Corporation, except to the extent of his pecuniary interest therein.
(9) Consists of 79,310 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days of the Record Date.
(10) Includes 22,500 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(11) Includes 22,500 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(12) Consists of 32,737 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days of the Record Date.
(13) Includes 19,103 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(14) Includes 10,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(15) Includes 10,696 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(16) Consists of 7,101 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
(17) Includes 397,003 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of the Record Date.
4
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Corporation's Board of Directors is currently fixed at six members. The
Corporation's By-laws divide the Board of Directors into three classes. The
members of each class of directors serve for staggered three-year terms.
Messrs. Dale Kutnick and Francis J. Saldutti are Class I Directors, Mr. Harry S.
Gruner is a Class II Director, and Messrs. Michael Simmons, George McNamee and
Howard Rubin are Class III Directors. The Class II Director's term will expire
at the Annual Meeting. On May 31, 1999, Mr. Marc Butlein, a Class II director,
resigned from the Board of Directors.
The Board of Directors has nominated and recommended that Mr. Harry S.
Gruner, who currently serves as a Class II Director, be reelected as a Class II
Director, to hold office until the Annual Meeting of Stockholders for the fiscal
year ending December 31, 2002, and until his successor has been duly elected and
qualified or until his earlier resignation or removal. The Board of Directors
knows of no reason why the nominee should be unable or unwilling to serve, but
if the nominee should for any reason be unable or unwilling to serve, the
proxies will be voted for the election of such other person for the office of
director as the Board of Directors may recommend in the place of such nominee.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them FOR the election of the nominee.
The following table sets forth the name of the nominee to be voted upon at
the meeting and each director whose term of office will extend beyond the
meeting, the year such nominee or director was first elected a director, the
positions currently held by the nominee and each director with the Corporation,
the year each nominee's or director's term will expire and class of director of
each nominee and each director.
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S
NAME AND YEAR NOMINEE OR
DIRECTOR POSITION(S) WITH YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR THE CORPORATION WILL EXPIRE DIRECTOR
- ------------------------ ------------------------- ----------- --------
<S> <C> <C> <C>
NOMINEE:
Harry S. Gruner (1994).......................... Director 2003 II
CONTINUING DIRECTORS:
Michael Simmons (1994).......................... Director 2001 III
George McNamee (1996)........................... Director 2001 III
Howard Rubin (1999)............................. Director 2001 III
Dale Kutnick (1989)............................. President, Co-Research 2002 I
Director, Chief Executive
Officer and Chairman of
the Board of Directors
Francis J. Saldutti (1991)...................... Director 2002 I
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times and took action by unanimous written
consent three times during the fiscal year ended December 31, 1999. The Audit
Committee of the Board of Directors, of which Messrs. Gruner, Saldutti and
Simmons are currently members, is responsible for reviewing the results and
scope of audits and other services provided by the Corporation's independent
auditors and reviewing the Corporation's internal controls. The Audit Committee
met once, on October 28, 1999, during the year ended December 31, 1999. The
Compensation Committee, which consisted in 1999 of Messrs. Saldutti and Simmons,
makes recommendations concerning the salaries and incentive compensation of
employees of, and consultants to, the Corporation and oversees and administers
the Corporation's stock plans. The Compensation Committee met three times during
1999 and took action by unanimous written consent twice. The Board of Directors
does not currently have a standing nominating committee.
5
<PAGE>
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the director nominee to be voted upon at the
meeting, the directors and the executive officers of the Corporation, their ages
and the positions currently held by each such person with the Corporation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Dale Kutnick.............................. 50 President, Co-Research Director, Chief
Executive Officer and Chairman of the
Board of Directors
Peter Burris.............................. 41 Senior Vice President--Publications &
Co-Research Director
Larry DeBoever............................ 49 Executive Vice President--Worldwide Sales
and Marketing
Bernard F. Denoyer........................ 52 Senior Vice President--Finance, Chief
Financial Officer, Treasurer and Secretary
James J. Harrison......................... 32 Executive Vice President and Director, New
Business Development
CD Hobbs.................................. 56 Senior Vice President and General Manager,
Executive Services
Michael Pedersen.......................... 39 Senior Vice President and Managing
Director, META Group Consulting
John Aaron Zornes......................... 46 Executive Vice President and Service
Director, Application Delivery Strategies
Harry S. Gruner (1)....................... 40 Director
George McNamee............................ 53 Director
Howard A. Rubin........................... 51 Director
Francis J. Saldutti (1) (2)............... 52 Director
Michael Simmons (1) (2)................... 61 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee during 1999.
(2) Member of the Compensation Committee during 1999.
DALE KUTNICK, a co-founder of the Corporation, has served as President,
Chief Executive Officer and a Director of the Corporation since its inception in
January 1989. Mr. Kutnick was appointed Chairman of the Board of Directors in
May 1998. In addition, Mr. Kutnick served as Research Director from the
inception of the Corporation in January 1989 to June 1998 and has served as
Co-Research Director since July 1998. Prior to co-founding META Group,
Mr. Kutnick was Executive Vice President of Research at Gartner Group, Inc. and
an Executive Vice President at Gartner Securities. Prior to his experience at
Gartner Group, Inc., he served as an Executive Director, Research Director and
Principal at Yankee Group and as a Principal at Battery Ventures, a venture
capital firm. Mr. Kutnick is a graduate of Yale University.
PETER BURRIS has served as Senior Vice President--Publications and
Co-Research Director since July 1998. Previously, Mr. Burris held the position
of Vice President and Service Director of the
6
<PAGE>
Corporation's OPEN COMPUTING & SERVER STRATEGIES service from April 1995 to
June 1998. Prior to joining the Corporation in April 1995, Mr. Burris served as
Director of International Data Corporation's Worldwide Systems & Servers
Research Group. Mr. Burris is a graduate of Yale University.
LARRY DEBOEVER has served as Executive Vice President--Worldwide Sales and
Marketing and META Research Fellow since July 1999. Previously, Mr. DeBoever
held the positions of Senior Vice President--Executive Services from
January 1999 to June 1999 and Senior Vice President and Service Director of the
Corporation's ENTERPRISE ARCHITECTURE STRATEGIES service from November 1996 to
January 1999. Prior to joining the Corporation in November 1996, Mr. DeBoever
was the founder and president of DeBoever Architectures, Inc., a consulting firm
specializing in enterprise architecture, since 1993. META Group acquired
DeBoever Architectures, Inc. in October 1996. Mr. DeBoever received a MS from
Purdue University and a MBA from the University of Southern California. See
"Certain Relationships and Related Transactions."
BERNARD F. DENOYER has served as Senior Vice President--Finance since
January 1998. Mr. Denoyer joined the Corporation in October 1994 as Vice
President--Finance and was elected Chief Financial Officer and Treasurer of the
Corporation in July 1995. In May 1996, the Board of Directors appointed
Mr. Denoyer Secretary of the Corporation. Prior to joining the Corporation,
Mr. Denoyer was an independent turnaround financial consultant and Vice
President--Finance at Gartner Group, Inc. Mr. Denoyer earned his CPA in 1975
while at Ernst & Young. Mr. Denoyer has a MBA in Finance from the Columbia
Business School and a BA in Economics from Fairfield University.
JAMES J. HARRISON has served as Executive Vice President and Director, New
Business Development since August 1997. His previous experience within the
Corporation has included positions as Senior Vice President and Service Director
of META METRIX from September 1996 to July 1997, Senior Vice President of New
Product Development from January 1997 to June 1997, Vice President and Service
Director of the Corporation's SERVICES & SYSTEMS MANAGEMENT STRATEGIES service
from January 1995 to April 1996, and Senior Research Analyst of the GLOBAL
NETWORKING STRATEGIES service from July 1990 to January 1995. Mr. Harrison
received a BS in Electrical Engineering from the Massachusetts Institute of
Technology.
CD HOBBS has served as Senior Vice President and General Manager, Executive
Services since October 1, 1999. Previously, Mr. Hobbs held the position of
Senior Vice President and Service Director of the Corporation's ENERGY
INFORMATION STRATEGIES service from January 1, 1999 to September 30, 1999,
Senior Vice President of Energy Information Strategies from September 1998 to
December 31, 1998, and Vice President and Director of Energy Information
Strategies from September 1996 to September 1998. Prior to joining the
Corporation in September 1996, Mr. Hobbs served as Managing Director of
CLI, Inc., a strategic planning and IT infrastructure development firm founded
by him in 1992. Mr. Hobbs declared personal bankruptcy in 1996. Mr. Hobbs
received a MBA in Finance and Economics from the University of Florida.
MICHAEL PEDERSEN has served as Senior Vice President and Managing
Director--META Group Consulting ("MGC") since September 1998. Previously,
Mr. Pedersen held the positions of Senior Vice President, MGC, from
September 1997 to September 1998; Vice President and Director, MGC, from
September 1995 to August 1997; Director, MGC, from January 1995 to August 1995;
and Manager, MGC, from April 1994 to December 1994. Prior to joining the
Corporation in April 1994, Mr. Pedersen held technology planning positions at
Ernst & Young and Booz-Allen & Hamilton. He received a MS in Computer Science
from Brooklyn Polytechnic Institute and a BS in Physics from Clarkson College of
Technology.
JOHN AARON ZORNES has served as Executive Vice President and Service
Director of the Corporation's APPLICATION DELIVERY STRATEGIES service since
January 1996. From October 1990 until December 1995, he held the position of
Vice President and Service Director of the APPLICATION DEVELOPMENT STRATEGY
service. Mr. Zornes received a MS in Management Information Systems from the
University of Arizona.
7
<PAGE>
HARRY S. GRUNER has served as a Director of the Corporation since
July 1994. Mr. Gruner has been a general partner of JMI Partners, L.P., the
general partner of JMI Equity Fund, L.P., and an affiliate of JMI Associates, a
venture capital firm, since 1992. From 1986 until joining JMI Equity Fund, L.P.,
Mr. Gruner was at Alex Brown & Sons Incorporated, an investment banking firm.
Mr. Gruner also serves as a Director of Hyperion Solutions Corporation and
Optika, Inc., both of which are publicly traded corporations. See "Certain
Relationships and Related Transactions."
GEORGE MCNAMEE has served as a Director of the Corporation since
August 1996. Since 1984, Mr. McNamee has been the Chairman and Co-Chief
Executive Officer of First Albany Companies, Inc., the publicly traded holding
company for First Albany Corporation, the specialty investment banking firm.
Mr. McNamee is also Chairman of Plug Power Inc. and Mechanical Technology Inc.,
and a director of MapInfo Corporation, all publicly traded companies. He also
serves on the Board of Directors of the New York Stock Exchange. See "Certain
Relationships and Related Transactions."
HOWARD A. RUBIN has served as a Director of the Corporation since
January 1999. Dr. Rubin is a full tenured professor and Chair of the Department
of Computer Science of Hunter College in New York since September 1974.
Dr. Rubin is also the founder and Chief Executive Officer of Rubin
Systems Inc., an IT strategy benchmarking and consulting firm, since its
inception in January 1986. "See Certain Relationship and Related Transactions."
FRANCIS J. SALDUTTI has served as a Director of the Corporation since
November 1991. Mr. Saldutti has been a general partner of Ardent Research
Partners, L.P., a technology focused money management partnership, since
April 1992 and was a senior technology analyst at Amerindo Investment Advisors,
an investment firm, from October 1989 through February 1995. Prior to
October 1989, Mr. Saldutti was Senior Vice President and Director of Research
for Gartner Securities, Director of Technology Research for LF Rothschild,
Unterberg, Towbin, an investment banking firm, and senior technology analyst for
Merrill Lynch Asset Management's Science/Technology Fund.
MICHAEL SIMMONS has served as a Director of the Corporation since
September 1994. Mr. Simmons serves as Principal and President of M.S.
Associates, a technology management and operations consulting firm founded by
him in October 1993. Mr. Simmons also served as the Chief Administrative Officer
of Security Capital Group, a real estate investment firm, from June 1995 to
March 1997. In 1993 and 1994, Mr. Simmons worked as an independent management
consultant, and from 1990 through 1993, Mr. Simmons was an Executive Vice
President at the Bank of Boston.
Executive officers of the Corporation are elected by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified or their earlier resignation or removal. There are no family
relationships among any of the executive officers or directors of the
Corporation.
8
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth summary information concerning the
compensation paid or earned for services rendered to the Corporation in all
capacities during the fiscal years ended December 31, 1997, 1998 and 1999 to
(i) the Corporation's Chief Executive Officer and (ii) each of the four other
most highly compensated executive officers of the Corporation who received total
annual salary and bonus in excess of $100,000 in fiscal 1999 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION/AWARDS (2)
-------------------------- -----------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (# OF SHARES) COMPENSATION ($) (1)
- --------------------------- -------- ---------- --------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
Dale Kutnick................. 1999 $301,500 $150,000 72,000 $4,189(3)
President, Co-Research 1998 $279,114 $349,556 37,500 $7,674(3)
Director, Chief Executive 1997 $258,500 $249,580 30,000 $8,144(3)
Officer and Chairman of the
Board of Directors
Peter Burris................. 1999 $180,000 $ 76,140 50,000 $6,000(4)
Senior Vice President-- 1998 $159,750 $141,825 6,000
Publications and 1997 $143,750 $ 61,872 11,250
Co-Research Director
Larry DeBoever............... 1999 $225,417 $ 60,000 38,000
Executive Vice President-- 1998 $175,000 $112,783 7,500
Worldwide Sales and 1997 $160,000 $ 68,306
Marketing
Michael Pedersen............. 1999 $200,000 $200,000 33,000
Senior Vice President and 1998 $158,333 $ 42,726 11,250
Managing Director--META 1997 $123,333 $115,250 6,000
Group Consulting
John Aaron Zornes............ 1999 $216,000 $ 50,529 25,000
Executive Vice President 1998 $200,000 $205,096 11,250
and Service 1997 $185,000 $152,602 11,250
Director--Application
Delivery Strategies
</TABLE>
- ------------------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers
which are available generally to all salaried employees of the Corporation
and certain perquisites and other personal benefits, securities or property
received by the Named Executive Officers that do not exceed the lesser of
$50,000 or 10% of any such officer's aggregate salary and bonus disclosed in
this table.
(2) The Corporation did not grant any restricted stock awards or stock
appreciation rights or make any long-term incentive plan payouts during
fiscal year 1999.
(3) Consists of premiums for term life insurance paid by the Corporation for the
benefit of the Named Executive Officer.
(4) Consists of reimbursement by the Corporation of relocation expenses incurred
by the Named Executive Officer.
9
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth each grant of stock options made during the
year ended December 31, 1999 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM (1)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED (2) YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ----------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dale Kutnick..................... 22,000(3) 1.75% $8.25 4/16/09 $ 50,145 $110,808
50,000(4) 3.98% $8.25 4/11/06 $113,685 $251,142
Peter Burris..................... 8,000(5) 0.64% $8.25 4/16/09 $ 41,507 $105,187
42,000(6) 3.34% $8.25 4/11/06 $140,735 $327,849
Larry DeBoever................... 5,000(7) 0.40% $8.25 4/16/09 $ 25,942 $ 65,742
33,000(8) 2.60% $8.25 4/11/06 $110,577 $257,596
Michael Pedersen................. 8,000(9) 0.64% $8.25 4/16/09 $ 41,507 $105,187
25,000(10) 1.99% $8.25 4/11/06 $ 83,771 $195,148
John Aaron Zornes................ 5,000(11) 0.40% $8.25 4/16/09 $ 25,942 $ 65,742
20,000(12) 1.59% $8.25 4/11/06 $ 67,016 $156,119
</TABLE>
- ------------------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%) on
the market value of the Corporation's Common Stock over the term of the
options. These numbers are calculated based on rules promulgated by the
Commission and do not reflect the Corporation's estimate of future stock
price growth. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the timing of such exercises and the future
performance of the Corporation's Common Stock. There can be no assurance
that the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the individuals.
(2) All options detailed in this Option Grants in Fiscal Year 1999 table were
granted on April 16, 1999. The exercise price for each option is $8.25 per
share, the fair market value of the Corporation's Common Stock on the date
of grant.
(3) Time vesting options that vest one-fourth on April 16, 2000, an additional
one-fourth on April 16, 2001, an additional one-fourth on April 16, 2002 and
fully vest on April 16, 2003. These options were granted as Non-Qualified
Stock Options ("NQSOs").
(4) Performance vesting options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain operating margin and revenue performance goals. 5,428 option shares
will vest in connection with 1999 performance. These options were granted as
NQSOs.
(5) Time vesting options that vest one-fourth on April 16, 2000, an additional
one-fourth on April 16, 2001, an additional one-fourth on April 16, 2002 and
fully vest on April 16, 2003. These options were granted as Incentive Stock
Options ("ISOs").
(6) Performance vesting options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain revenue and billing performance goals. 8,550 option shares will vest
in connection with 1999 performance. These options were granted as NQSOs.
10
<PAGE>
(7) Time vesting options that vest one fourth on April 16, 2000, an additional
one-fourth on April 16, 2001, an additional one-fourth on April 16, 2002 and
fully vest on April 16, 2003. These options were granted as ISOs.
(8) Performance vesting options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain billing performance goals. 3,060 option shares will vest in
connection with 1999 performance. These options were granted as NQSOs.
(9) Time vesting options that vest one-fourth on April 16, 2000, an additional
one-fourth on April 16, 2001, an additional one-fourth on April 16, 2002 and
fully vest on April 16, 2003. These options were granted as ISOs.
(10) Performance vesting options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain revenue performance goals. 5,727 option shares will vest in
connection with 1999 performance. These options were granted as NQSOs.
(11) Time vesting options that vest one-fourth on April 16, 2000, an additional
one-fourth on April 16, 2001, an additional one-fourth on April 16, 2002 and
fully vest on April 16, 2003. These options were granted in two parts (2,500
option shares were granted as ISOs and 2,500 option shares were granted as
NQSOs) in accordance with the $100,000 annual limitation on ISO vesting.
(12) Performance vesting options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain billing performance goals. 6,633 option shares will vest in
connection with 1999 performance. These options were granted as NQSOs.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END VALUES
The following table sets forth, for each of the Named Executive Officers,
information with respect to the exercise of stock options during the year ended
December 31, 1999 and the year-end value of unexercised options:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED IN-THE-
SHARES UNEXERCISED OPTIONS AT YEAR- MONEY OPTIONS AT
ACQUIRED ON VALUE END YEAR-END ($) (2)
NAME EXERCISE (#) REALIZED ($) (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ---------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Dale Kutnick.......... 46,875/122,625 $203,622/$979,524
Peter Burris.......... 1,000 $11,958 16,936/61,064 $167,746/$597,025
Larry DeBoever........ 76,875/43,625 $181,406/$427,719
Michael Pedersen...... 3,800 $67,392 8,062/45,188 $ 40,295/$408,142
John Aaron Zornes..... 12,626 $36,080 11,813/42,063 $ 46,361/$350,146
</TABLE>
- ------------------------
(1) Amounts disclosed in this column were calculated based on the difference
between the fair market value of the Corporation's Common Stock on the date
of exercise and the exercise price of the options in accordance with
regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and may not reflect amounts actually received
by the named officers.
(2) Value is based on the difference between the option exercise price and the
fair market value at December 31, 1999, the fiscal year-end ($19.00 per
share), multiplied by the number of shares underlying the options.
STOCK PLANS
The Corporation currently maintains six employee stock plans: the Restated
and Amended 1989 Stock Option Plan, the 1993 Stock Option and Incentive Plan,
the Amended and Restated 1995 Stock Plan, the 1995 Non-Employee Director Stock
Option Plan, the Amended and Restated 1995 Employee Stock
11
<PAGE>
Purchase Plan and the Amended and Restated 1996 Equity Compensation Plan of The
Sentry Group, Inc. (collectively, the "Stock Plans"). Following is a summary of
the material features of the Stock Plans.
The Restated and Amended 1989 Stock Option Plan (the "1989 Plan") provided
for the issuance of a maximum of 5,400,000 shares of Common Stock pursuant to
the grant of ISOs to employees and NQSOs to employees, consultants, directors
and officers of the Corporation. The terms of such options, including number of
shares, exercise price, duration and vesting, were generally determined by the
Compensation Committee of the Board of Directors. As of December 31, 1999,
options to purchase a total of 79,750 shares of Common Stock were outstanding
under the 1989 Plan, all of which were then exercisable. The Corporation's Board
of Directors resolved on March 3, 1993 that after that date, no further options
may be granted or issued under the 1989 Plan. Accordingly, no options were
granted under the 1989 Plan during the fiscal year ended December 31, 1999. The
1989 Plan, but not any options previously granted under the 1989 Plan,
terminated pursuant to its terms on July 31, 1999.
The 1993 Stock Option and Incentive Plan (the "1993 Plan") provides for the
issuance of a maximum of 2,400,000 shares of Common Stock pursuant to the grant
of ISOs to employees and the grant of NQSOs to employees, consultants, directors
and officers of the Corporation. The terms of such options, including number of
shares, exercise price, duration and vesting are generally determined by the
Compensation Committee of the Board of Directors. As of December 31, 1999,
options to purchase a total of 173,611 shares of Common Stock were outstanding
under the 1993 Plan, all of which were then exercisable. The Corporation's Board
of Directors resolved on October 2, 1995 that after November 30, 1995 no further
options may be granted or issued under the 1993 Plan. Accordingly, no options
were granted under the 1993 Plan during the fiscal year ended December 31, 1999.
The Amended and Restated 1995 Stock Plan (the "1995 Plan") provides for the
issuance of a maximum of 4,500,000 shares of Common Stock pursuant to the grant
of ISOs to employees and the grant of NQSOs, stock awards and opportunities to
make direct purchases of stock to employees, consultants, directors and officers
of the Corporation. The terms of such options, including number of shares,
exercise price, duration and vesting are generally determined by the
Compensation Committee of the Board of Directors. As of December 31, 1999
options to purchase a total of 2,769,330 shares of Common Stock were outstanding
under the 1995 Plan, of which options for 781,725 shares were then exercisable.
Shares available for future stock option grants at December 31, 1999 totaled
1,564,995 shares. During 1999, ISOs to purchase 759,350 shares of Common Stock
and NQSOs to purchase 500,000 shares of Common Stock were granted under the 1995
Plan.
The 1995 Non-Employee Director Stock Option Plan (the "Director Plan")
provides for the grant of options to purchase a maximum of 225,000 shares of
Common Stock to non-employee directors of the Corporation. The Director Plan
authorizes the automatic grant of stock options only to members of the Board of
Directors who are neither employees nor officers of the Corporation
(individually, a "Non-Employee Director" and collectively, the "Non-Employee
Directors"). The Director Plan is administered by the Compensation Committee.
The Director Plan authorizes the grant (a) to each Non-Employee Director who is
first elected to the Board after December 1, 1995, on the date such person is
first elected to the Board of Directors without further action by the Board of
Directors, of an option to purchase 15,000 shares of Common Stock and (b) to
each person who is a Non-Employee Director on each successive one-year
anniversary of the date such person was first elected to the Board of Directors,
during the term of the Director Plan, of an option to purchase 7,500 shares of
Common Stock. Options granted to newly elected Non-Employee Directors as
described in part (a) of the preceding sentence vest 33 1/3% on the date of
grant and an additional 33 1/3% on each successive one-year anniversary, and
options granted as described in part (b) of the preceding sentence vest in full
on the one-year anniversary of the date of grant. The exercise price per share
for all options granted under the Director Plan is equal to 100% of the fair
market value per share of the Common Stock on the date of grant. The term of
each option is for a period of ten years from the date of grant. As of
December 31, 1999, options to purchase a total of 137,101 shares of Common Stock
were outstanding under the Director Plan, of which options for 97,101 shares
were then
12
<PAGE>
exercisable. Shares available for future stock option grants at December 31,
1999 totaled 82,500 shares. During 1999, NQSOs to purchase 45,000 shares of
Common Stock were granted under the Director Plan.
The Amended and Restated 1995 Employee Stock Purchase Plan (the "Purchase
Plan") provides for the issuance of a maximum of 375,000 shares of Common Stock
pursuant to the exercise of non-transferable options granted to participating
employees. To participate in the Purchase Plan, an eligible employee must
authorize the Corporation to make payroll deductions in an amount not less than
1% of the employee's base pay or salary but not more than 15% of the employee's
total compensation during the six month periods beginning January 1 and July 1
(the "Payment Periods"). On the first business day of each Payment Period, the
Corporation grants to each eligible employee participating in the Purchase Plan,
an option to purchase on the last day of such Payment Period a maximum of 750
shares of Common Stock provided that such employee remains eligible to
participate in the Plan throughout such Payment Period. The exercise price of
options is the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of such Payment Period or (ii) 85% of the average
market price of the Common Stock on the last business day of such Payment
Period. The employee is entitled to exercise such option only to the extent of
the employee's accumulated payroll deductions on the last day of such Payment
Period. The Purchase Plan is administered by the Compensation Committee of the
Board of Directors. As of December 31, 1999, options to purchase 122,595 shares
of Common Stock were exercised under the Purchase Plan.
The Amended and Restated 1996 Equity Compensation Plan of The Sentry
Group, Inc. (the "Sentry Plan") was assumed by the Corporation pursuant to the
acquisition by the Corporation of all of the capital stock of The Sentry
Group, Inc. on October 20, 1998. The Sentry Plan provides for the issuance of a
maximum of 359,500 shares of Common Stock of the Corporation pursuant to the
grant of ISOs to employees and the grant of NQSOs, stock awards and
opportunities to make direct purchases of stock to employees, consultants,
directors and officers of the Corporation. The terms of such options, including
number of shares, exercise price, duration and vesting are generally determined
by the Compensation Committee of the Board of Directors. As of December 31,
1999, options to purchase a total of 256,590 shares of Common Stock were
outstanding under the Sentry Plan, of which options for 13,294 shares were then
exercisable. Shares available for future stock option grants at December 31,
1999 totaled 102,294 shares. During 1999, no ISOs and no NQSOs were granted
under the Sentry Plan.
LONG TERM INCENTIVE PLAN
The META Group, Inc./JMI Long Term Incentive Compensation Plan (the "Long
Term Incentive Plan") was adopted by the Corporation in July 1998. The Long Term
Incentive Plan provides for the issuance of a maximum of 1,000 units to key
officers of the Corporation. The total number of units to be granted, selection
of key officers for participation in the Long Term Incentive Plan, the number of
units to be granted to each participant, the vesting period and the
determination of the value of each participant's units are generally determined
by the Compensation Committee of the Board of Directors. As of December 31,
1999, a total of 280 units were granted to key officers of the Corporation and
720 units were available for future grants. During 1999, no units were granted
under the Long Term Incentive Plan. See "Certain Relationships and Related
Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation's Board of Directors has established a Compensation
Committee, consisting of Messrs. Saldutti and Simmons. No members of the
Compensation Committee were officers, employees or former officers of the
Company. During the fiscal year ended December 31, 1999, the Board of Directors
performed certain functions of the Compensation Committee. During this period,
Mr. Kutnick, the Corporation's President, Co-Research Director, Chief Executive
Officer and Chairman of the Board, participated in deliberations of the
Corporation's Board of Directors concerning the compensation of executive
officers. As noted below, however, all executive compensation for 1999 was
reviewed, approved
13
<PAGE>
and confirmed by the Compensation Committee. No executive officer of the
Corporation served as a member of the compensation committee or board of
directors of another entity (or other committee of the board of directors
performing equivalent functions or, in the absence of any such committee, the
entire board of directors), one of whose executive officers served as a director
of the Corporation.
COMPENSATION OF DIRECTORS
Commencing with the January 29, 1999 meeting of the Board of Directors, each
non-employee director was either paid a stipend of $2,500 for each scheduled
meeting of the Board of Directors attended in person, in addition to reasonable
out-of-pocket expenses incurred in attending the meeting, or a stipend of $1,000
for each scheduled meeting of the Board of Directors attended by telephone.
Non-employee directors were not paid any additional amounts for participation on
committees of the Board of Directors or special assignments. Non-employee
directors are also eligible to participate in the Director Plan, as described
above. Directors who were employed by the Corporation received no fees or
expense reimbursements for attending meetings of the Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Corporation's Compensation Committee (the
"Committee"), which currently consists of Messrs. Saldutti and Simmons, each of
whom is an independent, non-employee director of the Corporation. The Committee,
pursuant to authority delegated by the Board of Directors, is responsible for
the development and administration of the Corporation's executive compensation
policies and the administration of the 1989 Plan, the 1993 Plan, the 1995 Plan,
the Director Plan, the Purchase Plan, the Sentry Plan and the Long Term
Incentive Plan. The Committee also oversees the compensation structure of the
Corporation's senior management and other employees.
The Corporation's executive compensation program for fiscal year 1999 was
initially established by the Corporation's Board of Directors and subsequently
reviewed, confirmed and approved by the Compensation Committee. The executive
compensation program is designed to provide a compensation package that will
attract, motivate, retain and reward highly qualified executive officers while
providing incentives for executives to maximize the Corporation's financial
results for the benefit of the Corporation's stockholders.
The executive compensation program is designed to achieve the above goals
through a combination of base salary, cash bonuses and long-term incentive
compensation in the form of stock options and Long Term Incentive Plan units.
Base salary compensation levels for each of the Corporation's executive
officers are determined annually by the Committee by evaluating the individual
officer's responsibilities, experience and performance, as well as generally
available information regarding salaries paid to executive officers with
comparable qualifications at companies in businesses comparable to the
Corporation.
Cash bonus targets are determined annually at the beginning of each year. In
early 1999, the Committee set target bonus amounts for each executive officer.
Such amounts were tied to the attainment of certain financial objectives by the
Corporation determined by the Committee to be applicable to such executive
officer's area or areas of responsibility. For certain executive officers, the
Committee set multiple target bonus amounts, which amounts increased with
improvement in the Corporation's performance. Financial objectives included
total revenues, operating margins, expenses, and in certain cases, billings and
expenses in an executive's specific area or areas of responsibility, and various
combinations of the above. The attainment of financial objectives and bonus
payments based on such performance, are reviewed and approved by the Committee
annually.
Equity compensation in the form of stock option grants is designed to align
the interests of executive officers more closely with those of the Corporation's
stockholders by allowing those officers to share in the
14
<PAGE>
long-term appreciation in the value of the Corporation's Common Stock. It is the
Corporation's policy to grant stock options to executive officers at the time
they join the Corporation in an amount consistent with the employee's position
and level of seniority. In addition, the Committee generally reviews the
performance of each executive officer and annually grants stock options to the
executive officers based upon such reviews. In making such annual grants, the
Committee considers both individual and general corporate performance,
recommendations of the Chief Executive Officer, existing levels of officer stock
ownership, previous option grants and the current stock price. In 1999, the
Committee granted to executive officers both stock options that vest based upon
continued employment with the Corporation and stock options that vest after
seven years unless vesting is accelerated to the first, second and third years
based on the achievement of certain performance goals, including revenue,
billing and operating margin goals. For additional information regarding the
grant of options in 1999, see the table under the heading "Option Grants in
Fiscal Year 1999."
Long-term incentive compensation in the form of units awarded under the Long
Term Incentive Plan is designed to motivate and retain key officers of the
Corporation by rewarding the performance of those officers based upon the
long-term appreciation in the value of the Corporation's limited partnership
interest in the JMI Equity Side Fund, L.P. (the "JMI Fund"). See "Certain
Relationships and Related Transactions." It is the Corporation's policy to award
Long-Term Incentive Plan units to key management personnel in an amount
consistent with the employee's position and level of seniority either at the
time they join the Corporation or upon promotion to a management level meriting
such a grant. No Units were awarded under the Long-Term Incentive Plan in 1999.
See "Long Term Incentive Plan."
Compensation for the Corporation's President, Co-Research Director, Chief
Executive Officer, and Chairman of the Board of Directors, Dale Kutnick, is
determined in accordance with the policies applicable to other executive
officers of the Corporation described above. In 1999, Mr. Kutnick received base
salary and cash bonus totaling $451,500. Mr. Kutnick's base salary of $301,500
represented an increase of $22,386, or 8%, over 1998, and his bonus of $150,000
represented a decrease of $199,556, or 57%, below 1998. In 1999, Mr. Kutnick was
granted both stock options that vest based upon continued employment with the
Corporation and stock options that vest after seven years unless vesting is
accelerated to the first, second and third years based on the achievement of
certain operating margin and revenue performance goals. Of the 16,700 option
shares eligible for acceleration of vesting in connection with the achievement
of certain 1999 operating margin and revenue performance goals, only 5,428
option shares vested. For a description of option grants to Mr. Kutnick in 1999,
see "Compensation and Other Information Concerning Directors and
Officers--Option Grants in Fiscal Year 1999. The Committee determined that
Mr. Kutnick's 1999 compensation was justified by the Corporation's financial
performance in 1999, a year in which the Corporation reported continued
profitability and revenue growth in each quarter, but such attainment was below
1998. For additional information regarding Mr. Kutnick's 1999 compensation, see
"Compensation and Other Information Concerning Directors and Officers--Summary
Compensation Table."
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Corporation cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Committee has considered the limitations on deductions imposed by
Section 162(m) of the Code, and it is the Committee's present intention that,
for so long as it is consistent with its overall compensation objective,
substantially all tax deductions attributable to executive compensation will not
be subject to the deduction limitations of Section 162(m) of the Code.
THE COMPENSATION COMMITTEE:
Francis J. Saldutti
Michael Simmons
15
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
stockholder return on the Corporation's Common Stock during the period from the
Corporation's initial public offering on December 1, 1995 through December 31,
1999, with the cumulative total return on the Media General Market Weighted
Nasdaq Index Return ("Nasdaq Market Index") and the Media General Industry Group
076--Other Business Services Index ("MG Group Index"). The comparison assumes
$100 was invested on December 1, 1995 in the Corporation's Common Stock and in
each of the foregoing indices and assumes reinvestment of dividends, if any.
Comparison of Five Year(1)(2) Cumulative Total Return Among
META Group, Inc., Nasdaq Market Index
and MG Group Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C> <C> <C>
12/1/95 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
Meta Group, Inc. 100.00 120.10 105.88 86.27 174.91 111.71
MG Group Index 100.00 102.02 119.51 147.06 141.89 130.17
NASDAQ Market Index 100.00 99.63 123.81 151.45 213.61 376.74
</TABLE>
<TABLE>
<CAPTION>
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
1, 31, 31, 31, 31, 31,
1995 1995 1996 1997 1998 1999
% % % % % %
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
META Group, Inc. Common Stock.............. 100.00 120.10 105.88 86.27 174.91 111.71
MG Group Index............................. 100.00 102.02 119.51 147.06 141.89 130.17
Nasdaq Market Index........................ 100.00 99.63 123.81 151.45 213.61 376.74
</TABLE>
- ------------------------
(1) Prior to December 1, 1995 the Corporation's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on the graph was obtained from
Media General Financial Services, a source believed to be reliable, but the
Corporation is not responsible for any errors or omissions in such
information.
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1996, the Corporation acquired all of the assets of DeBoever
Architectures, Inc. (the "DeBoever Acquisition"), an IT architecture planning
and implementation advisory services firm wholly owned and managed by Larry
DeBoever. The business of DeBoever Architectures, Inc. was merged into the
Corporation's portfolio of Research and Advisory Services. In connection with
the DeBoever Acquisition, in November 1996 the Corporation loaned $500,000 to
Mr. DeBoever pursuant to a Promissory Note and Pledge and Security Agreement
("the Promissory Note"). Under the terms of the Promissory Note, as amended, the
principal balance of $500,000, plus 9% interest per annum, will be extinguished
over a three-year period ending December 31, 2001, provided the Corporation's
ENTERPRISE ARCHITECTURE STRATEGIES service meets certain financial performance
criteria through 2001. In September 1996, Mr. DeBoever was granted a
non-qualified stock option to purchase 75,000 shares of Common Stock of the
Corporation, at an exercise price of $16.6667 per share, which he pledged as
collateral for the loan pursuant to the terms of the Pledge and Security
Agreement.
In 1999, the Corporation received $875,000 from First Albany Corporation in
consideration of the exclusive right to distribute the Corporation's written
research and analysis to certain financial services customers of First Albany
Corporation. See Note 12 of Notes to Financial Statements in the Annual Report
for a more detailed description of this strategic alliance. As noted elsewhere
in this Proxy Statement, Mr. McNamee, a director of the Corporation, is also the
Chairman and Co-Chief Executive Officer of First Albany Companies, Inc.
Mr. McNamee does not have any direct material interest in relation to this
transaction.
Concurrently with the adoption of the Long Term Incentive Plan in
July 1998, the Corporation subscribed for up to four million dollars in limited
partnership interests in the JMI Fund, a venture capital fund managed by JMI
Side Associates, L.L.C. ("JMI Associates"). As of December 31, 1999 and 1998,
the Corporation invested $2,154,000 and $634,000, respectively, in the JMI Fund.
Certain executive officers and directors of the Corporation also subscribed for
limited partnership interests in the JMI Fund in July 1998. The JMI Fund will
co-invest along with other funds affiliated with JMI Associates. The Corporation
has agreed to use the potential returns on the Corporation's investment in the
JMI Fund to fund payouts under the Long Term Incentive Plan to key management
employees. Contemporaneously with the Corporation's subscription to the JMI
Fund, JMI Partners, L.P., an affiliate of the JMI Fund, became a full-service
client of the Corporation (the "Purchase Transaction"). In 1999 and 1998, the
Corporation received $125,000 from JMI Partners, L.P. in consideration of
services and consulting pursuant to the Purchase Transaction. As noted elsewhere
in this Proxy Statement, Mr. Gruner, a director of the Corporation, is also a
general partner of JMI Partners, L.P., the general partner of JMI Equity Fund,
L.P. and an affiliate of JMI Associates. Mr. Gruner does not have a direct
material interest in the Purchase Transaction and does not have a direct
material interest in the JMI Fund.
In October 1996, the Corporation entered into a development and services
agreement (the "Development and Services Agreement") with Rubin Systems, Inc.
("RSI"), a provider of IT and software engineering measurement consulting. Under
the Development and Services Agreement, RSI provides, on an exclusive basis,
measurement research and analysis for use in the Corporation's PEMS service. In
June 1998, the Corporation and RSI entered into an addendum to the Development
and Services Agreement whereby the Corporation distributes for RSI certain
published research products, primarily the WORLDWIDE BENCHMARK REPORT (a
publication presenting facts and trend-line data concerning IT performance and
productivity, budgets and spending, emerging technologies and business
requirements compiled from a worldwide sample of IT organizations). The
Corporation recognized $3,411,000, $1,769,000 and $553,300 in revenues from the
sale of RSI derivative products during the years ended December 31, 1999, 1998
and 1997, respectively. In exchange for the content provided by RSI, the
Corporation paid $825,500, $470,700 and $237,000 in royalties to RSI during the
years ended December 31, 1999, 1998 and 1997, respectively. RSI is wholly-owned
by Howard Rubin, a director of the Company.
In 1999, the Corporation received $84,124 from T. Rowe Price
Associates, Inc. in consideration for a one-year subscription to the
Corporation's Research and Advisory Services. As noted elsewhere in this
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Proxy Statement, T. Rowe Price Associates, Inc. is a beneficial owner of 13.9%
of the Corporation's Common Stock.
INDEPENDENT AUDITORS FOR 2000
The Board of Directors has selected the firm of Deloitte & Touche LLP,
independent certified public accountants, to serve as auditors for the year
ending December 31, 2000. Deloitte & Touche LLP has served as the Corporation's
auditors since 1992. It is expected that a representative of Deloitte & Touche
LLP will be present at the Annual Meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires the Corporation's directors,
executive officers and holders of more than 10% of the Corporation's Common
Stock (collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of the
Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year ended
December 31, 1999 and written representations from certain Reporting Persons,
the Corporation believes that all Reporting Persons, other than Messrs. Daniel
Fitzgerald, Howard Rubin, and Michael Simmons complied with all Section 16(a)
filing requirements in the fiscal year ended December 31, 1999. Mr. Rubin failed
to file an Initial Statement of Beneficial Ownership of Securities on Form 3 in
January 1999 and subsequently filed a late Form 3. Mr. Simmons failed to file a
Statement of Changes in Beneficial Ownership of Securities on Form 4 during
February 1999 for one transaction and subsequently filed a late Form 4.
Mr. Fitzgerald failed to file a Statement of Changes in Beneficial Ownership of
Securities on Form 4 during December 1999 for one transaction and subsequently
filed a late Form 4.
STOCKHOLDER PROPOSALS
The Corporation's By-laws establish an advance notice procedure with regard
to stockholder proposals not included in the Corporation's proxy statement. In
general, proposals of stockholders intended for inclusion in the proxy statement
to be furnished to all stockholders entitled to vote at the next Annual Meeting
of Stockholders of the Corporation must be received at the Corporation's
principal executive offices not later than December 15, 2000 nor earlier than
November 15, 2000. If a stockholder who wishes to present a proposal fails to
notify the Corporation by December 15, 2000, the stockholder would not be
entitled to present the proposal at the meeting. If, however, notwithstanding
the requirements of the Corporation's By-laws, the proposal is brought before
the meeting, then under the Commission's rules the proxies solicited by
management with respect to the next Annual Meeting of Stockholders will confer
discretionary voting authority with respect to the stockholder's proposal on the
persons selected by management to vote the proxies. If a stockholder makes a
timely notification, the persons selected by management to vote the proxies may
still exercise discretionary voting authority under circumstances consistent
with the Commission's rules. In order to curtail controversy as to the date on
which a proposal was received by the Corporation, it is suggested that
proponents submit their proposals by certified mail, return receipt requested to
META Group, Inc., 208 Harbor Drive, Stamford, Connecticut 06912-0061, Attention:
Secretary.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and in
addition to soliciting stockholders by mail through its regular employees, the
Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some stockholders in person or by mail, telephone or
telegraph following the original solicitation.
The Board of Directors of the Corporation has approved the contents and the
sending of this proxy statement.
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META GROUP, INC.
Proxy for Annual Meeting of Stockholders
May 24, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF META GROUP, INC.
The undersigned, revoking all prior proxies, hereby appoints Dale
Kutnick and Bernard F. Denoyer, and each of them alone, proxies, with full
power of substitution, to vote all shares of Common Stock, par value $.01 per
share, of META Group, Inc. (the "Corporation") that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Corporation, to
be held on Wednesday, May 24, 2000, at 9:00 a.m., Connecticut time, at The
Sheraton Stamford Hotel, 2701 Summer Street, Stamford, Connecticut 06905, and
at any adjournments or postponements thereof, with all powers the undersigned
would possess if present, upon the matters set forth in the Notice of Annual
Meeting of Stockholders and related Proxy Statement dated April 14, 2000, a
copy of which has been received by the undersigned, AND IN THEIR DISCRETION
UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF. Attendance of the undersigned at the
meeting or at the meeting or at any adjourned or postponed session thereof
will not be deemed to revoke this proxy unless the undersigned affirmatively
indicates at the meeting the intention of the undersigned to vote said shares
in person.
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<PAGE>
<TABLE>
<S><C>
Please Mark
your votes as /X/
indicated in
this example
1. To elect one (1) Class II director to serve for a three-year term and until his successor has been duly elected and qualified,
or until his earlier resignation or removal.
FOR the nominee WITHHOLD NOMINEE: Harry S. Gruner
listed to the right AUTHORITY
to vote for the nominee
listed to the right
/ / / /
2. To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.
THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE
NOMINEE LISTED ABOVE FOR ELECTION AS A
DIRECTOR AND DISCRETIONARY AUTHORITY
WILL BE DEEMED GRANTED UNDER PROPOSAL 2.
Dated: , 2000
-----------------------------
-----------------------------------------
Signature(s) of Stockholder(s)
-----------------------------------------
Please Print Name Exactly As It Appears
on Books of the Corporation:
(If signing as attorney, executor,
trustee or guardian, please give your
full title as such. If stock is held
jointly, each owner should sign.)
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</TABLE>
