MICROSTRATEGY INC, PRER14A, 2000-05-16

MICROSTRATEGY INC
PRER14A, 2000-05-16
PREPACKAGED SOFTWARE

Previous: GLOBAL SOURCES LTD, NT 10-Q, 2000-05-16

Next: SKYNET HOLDINGS INC, NT 10-Q, 2000-05-16

<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement

[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

MICROSTRATEGY INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

-------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

-------------------------------------------------------------------------

(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):

-------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

-------------------------------------------------------------------------

(5) Total fee paid:

-------------------------------------------------------------------------

[_] 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:

-------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

-------------------------------------------------------------------------

(3) Filing Party:

-------------------------------------------------------------------------

(4) Date Filed:

-------------------------------------------------------------------------

Notes:

Reg. (S) 240.14a-101.

SEC 1913 (3-99)
<PAGE>

8000 Towers
Crescent Drive
Vienna, Virginia
22182 703.848.8600
703.848.8610 Fax
[LOGO OF MICROSTRATEGY] [email protected]
-------------------------------- www.microstrategy.com

May 29, 2000

Dear MicroStrategy Stockholder:

You are cordially invited to our 2000 Annual Meeting of Stockholders on
Monday, June 19, 2000, beginning at 8:30 a.m. local time at the Hilton
Washington Dulles Airport, 13869 Park Center Road, Herndon, Virginia 22071.
This will be MicroStrategy's second Annual Meeting of Stockholders since our
initial public offering in June 1998.

The enclosed proxy statement describes the matters that will be presented at
the meeting: (1) the election of six directors for the next year; (2) the
approval of an amendment to our 1997 Director Option Plan; (3) the approval of
an amendment to our 1999 Stock Option Plan; (4) the approval of an amendment
to our Amended and Restated Certificate of Incorporation; and (5) the
ratification of the selection of PricewaterhouseCoopers LLP as our independent
auditors for the current fiscal year. The Board of Directors recommends that
stockholders vote "FOR" these proposals.

A reception for all stockholders will be held immediately following the
meeting. We look forward to seeing you there.

Very truly yours,

/s/ Michael J. Saylor
Michael J. Saylor
President, Chief Executive Officer
and Chairman of the Board
<PAGE>

[LOGO OF MICROSTRATEGY]
8000 Towers Crescent Drive
Vienna, Virginia 22182

Notice of Annual Meeting of Stockholders to
be Held on Monday, June 19, 2000

The Annual Meeting of Stockholders (the "Annual Meeting") of MicroStrategy
Incorporated, a Delaware corporation (the "Company"), will be held at the
Hilton Washington Dulles Airport, 13869 Park Center Road, Herndon, Virginia
22071 on Monday, June 19, 2000 at 8:30 a.m., local time, to consider and act
upon the following matters:

1. To elect six (6) directors for the ensuing year;

2. To approve an amendment to the Company's 1997 Director Option Plan to
increase the maximum number of shares of Class A Common Stock available
under the plan from 400,000 shares to 600,000 shares;

3. To approve an amendment to the Company's 1999 Stock Option Plan to
increase the maximum number of shares of Class A Common Stock available
under the plan from 5,000,000 shares to 11,000,000 shares;

4. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to provide for (a) an increase in the number
of authorized shares of Class A Common Stock, par value $0.001 per share,
from 100,000,000 shares to 330,000,000 shares and (b) an increase in the
number of authorized shares of Class B Common Stock, par value $0.001 per
share, from 100,000,000 shares to 165,000,000 shares;

5. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year; and

6. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.

Stockholders of record at the close of business on May 1, 2000 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. The stock transfer books of the Company will remain open.

By Order of the Board of Directors,

/s/ Sanju K. Bansal
Sanju K. Bansal,
Executive Vice President, Chief
Operating Officer and Secretary

Vienna, Virginia

May 29, 2000

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>

MICROSTRATEGY INCORPORATED
8000 Towers Crescent Drive
Vienna, Virginia 22182

Proxy Statement for the Annual Meeting of Stockholders
to be Held on Monday, June 19, 2000

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MicroStrategy Incorporated (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Monday, June 19, 2000 at 8:30 a.m., local time, and at
any adjournment of the Annual Meeting. All executed proxies will be voted in
accordance with the stockholders' instructions, and if no choice is specified,
executed proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in
person at the Annual Meeting.

On May 1, 2000, the record date for the determination of stockholders
entitled to vote at the Annual Meeting (the "Record Date"), there were
outstanding and entitled to vote an aggregate of 24,361,662 shares of Class A
Common Stock of the Company, par value $0.001 per share ("Class A Common
Stock"), and an aggregate of 55,179,115 shares of Class B Common Stock of the
Company, par value $0.001 per share ("Class B Common Stock," and together with
the Class A Common Stock, the "Common Stock"). Each share of Class A Common
Stock entitles the record holder thereof to one vote on each of the matters to
be voted on at the Annual Meeting and each share of Class B Common Stock
entitles the record holder thereof to ten votes on each of the matters to be
voted on at the Annual Meeting.

The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1999 ("Fiscal Year 1999") is being mailed to stockholders, along
with these proxy materials, on or about May 29, 2000.

A copy of the Company's Annual Report on Form 10-K for Fiscal Year 1999, as
filed with the Securities and Exchange Commission (the "SEC"), except for
exhibits, will be furnished without charge to any stockholder upon written
request to the Secretary of the Company, MicroStrategy Incorporated, 8000
Towers Crescent Drive, Vienna, Virginia 22182.

Votes Required

The holders of a majority of the votes entitled to be cast by the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting shall
constitute a quorum for the transaction of business at the Annual Meeting.
Shares of Common Stock represented in person or by proxy (including shares
which abstain or do not vote with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present at the Annual Meeting.

The affirmative vote of the holders of a plurality of the votes cast by the
holders of Common Stock voting on the matter is required for the election of
directors and the affirmative vote of a majority of the votes cast by the
holders of Common Stock voting on the matter is required to approve the
amendment to the Company's 1997 Director Option Plan and the amendment to the
Company's 1999 Stock Option Plan. The affirmative vote of the holders of a
majority of the votes entitled to be cast by the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting is required to approve
the amendment to the Company's Amended and Restated Certificate of
Incorporation. The affirmative vote of the holders of a majority of the votes
cast by the holders of Common Stock voting on the matter is required to ratify
the selection by the Board of Directors of PricewaterhouseCoopers LLP as the
Company's independent auditors for the current year.

Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
will also not be counted as shares

1
<PAGE>

voting on such matter. Accordingly, abstentions and "broker non-votes" will
have no effect on the voting on matters that require the affirmative vote of a
plurality or a majority of the votes cast by the holders of Common Stock
voting on the matter (such as the election of directors, the approval of the
amendment to the 1997 Director Option Plan, the approval of the amendment to
the 1999 Stock Option Plan and the ratification of the selection of
PricewaterhouseCoopers LLP as the Company's independent auditors). However,
for purposes of the approval of the amendment to the Company's Amended and
Restated Certificate of Incorporation, abstentions and broker non-votes have
the effect of votes against the proposal.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 2000 by (i) each person who is known by the
Company to beneficially own more than 5% of any class of Common Stock, (ii)
each director or nominee for director, (iii) each of the executive officers
named in the Summary Compensation Table set forth under the caption "Executive
Compensation" below (the "Named Executive Officers"), and (iv) all directors
and executive officers as a group as of March 31, 2000:

<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Common Stock
Beneficial Owner(1) Owned(2)(3) Outstanding(4)
------------------- ---------------- --------------
<S> <C> <C>
Michael J. Saylor(5).......................... 43,790,524 55.2%
Sanju K. Bansal(6)............................ 8,698,958 11.0%
Jonathan F. Klein(7).......................... 42,421 *
Mark S. Lynch(8).............................. 26,634 *
Joseph P. Payne(9)............................ 52,380 *
Frank A. Ingari(10)........................... 27,000 *
Jonathan J. Ledecky(11)....................... 20,000 *
Ralph S. Terkowitz(12)........................ 20,000 *
John W. Sidgmore(13).......................... -- *
Thomas P. Spahr(14)........................... 1,470,034 1.9%
Pilgrim Baxter & Associates, Ltd.(15)......... 3,600,700 4.5%
All executive officers and directors as a
group (10 persons)(3)........................ 53,095,863 67.0%
</TABLE>
- --------
* Less than 1%
(1) Each person named above (except Pilgrim Baxter & Associates, Ltd.) has an
address in care of MicroStrategy Incorporated, 8000 Towers Crescent
Drive, Vienna, Virginia 22182.
(2) The inclusion of any shares of Common Stock deemed beneficially owned
does not constitute an admission of beneficial ownership of those shares.
In accordance with the rules of the SEC, each stockholder is deemed to
beneficially own any shares subject to stock options that are currently
exercisable or exercisable within 60 days after March 31, 2000, and any
reference below to shares subject to outstanding stock options held by
the person in question refers only to such stock options.
(3) The shares listed in this table are shares of Class B Common Stock except
as otherwise set forth in the footnotes to this table. Shares held by the
directors and executive officers as a group include options to purchase
154,800 shares of Class A Common Stock that are exercisable within 60
days after March 31, 2000.
(4) Number of shares deemed outstanding includes 23,994,370 shares of Class A
Common Stock and 55,279,115 shares of Class B Common Stock outstanding as
of March 31, 2000, plus any shares of Common Stock subject to outstanding
stock options held by the person in question.
(5) Mr. Saylor's holdings of Common Stock consist of 43,149,324 shares of
Class B Common Stock held beneficially by Mr. Saylor as a result of his
beneficial ownership in Alcantara LLC, 400,000 shares of Class B Common
Stock held in trust (78.8% of the Class B Common Stock outstanding) and
241,200 shares of Class A Common Stock held beneficially by Mr. Saylor in
a foundation.
(6) Mr. Bansal's holdings of Common Stock consist of 8,165,958 shares of
Class B Common Stock and 19,000 shares of Class A Common Stock held
beneficially by Mr. Bansal as a result of his beneficial ownership in
Shangri-La LLC, 439,046 shares of Class B Common Stock held in trust,
16,954 shares of Class B Common Stock held in his own name (15.6% of the
Class B Common Stock outstanding) and 58,000 shares of Class A Common
Stock held beneficially by Mr. Bansal in a foundation.

2
<PAGE>

(7) Mr. Klein's holdings of Common Stock consist of 42,221 shares of Class A
Common Stock and options exercisable within 60 days after March 31, 2000
for 200 shares of Class A Common Stock.
(8) Mr. Lynch's holdings of Common Stock consist of 26,634 shares of Class A
Common Stock.
(9) Mr. Payne's holdings of Common Stock consist of 2,380 shares of Class A
Common Stock and options exercisable within 60 days after March 31, 2000
for 50,000 shares of Class A Common Stock.
(10) Mr. Ingari's holdings of Common Stock consist of 20,000 shares of Class A
Common Stock and options exercisable within 60 days after March 31, 2000
for 7,000 shares of Class A Common Stock.
(11) Mr. Ledecky's holdings of Common Stock consist of 2,000 shares of Class A
Common Stock and options exercisable within 60 days after March 31, 2000
for 18,000 shares of Class A Common Stock.
(12) Mr. Terkowitz's holdings of Common Stock consist of 2,000 shares of Class
A Common Stock and options exercisable within 60 days after March 31,
2000 for 18,000 shares of Class A Common Stock.
(13) Mr. Sidgmore was elected as a director on February 16, 2000.
(14) Mr. Spahr's holdings of Common Stock consist of 1,379,000 shares of Class
B Common Stock (2.5% of the Class B Common Stock outstanding), 48,000
shares of Class A Common Stock held beneficially by Mr. Spahr in trust,
19,000 shares of Class A Common Stock held beneficially by Mr. Spahr in a
foundation and options exercisable within 60 days after March 31, 2000
for 24,034 shares of Class A Common Stock.
(15) Pilgrim Baxter & Associates, Ltd.'s holdings of Common Stock consist of
3,600,700 shares of Class A Common Stock (15.0% of the Class A Common
Stock outstanding). The address of Pilgrim Baxter & Associates, Ltd. is
1255 Drummers Lane, Wayne, Pennsylvania 19087.

<PAGE>

PROPOSAL 1

ELECTION OF DIRECTORS

The persons named in the enclosed proxy will vote to elect as directors the
six nominees named below, all of whom are presently directors of the Company,
unless authority to vote for the election of any or all of the nominees is
withheld by marking the proxy to that effect. All of the nominees have
indicated their willingness to serve, if elected, but if any should be unable
or unwilling to serve, proxies may be voted for a substitute nominee
designated by the Board of Directors. Each director will be elected to hold
office until the next annual meeting of stockholders (subject to the election
and qualification of his successor and to his earlier death, resignation or
removal).

Nominees

Set forth below, for each nominee, are his name and age, his positions with
the Company, his principal occupation and business experience during the past
five years and the year of the commencement of his term as a director of the
Company:

Michael J. Saylor (35) has served as President, Chief Executive Officer and
Chairman of the Board of Directors since founding the Company in November
1989. Prior to that, Mr. Saylor was employed by E.I. du Pont de Nemours &
Company as a Venture Manager from 1988 to 1989 and by Federal Group, Inc. as a
Consultant from 1987 to 1988. Mr. Saylor received an S.B. in Aeronautics and
Astronautics and an S.B. in Science, Technology and Society from the
Massachusetts Institute of Technology.

Sanju K. Bansal (34) has served as Executive Vice President and Chief
Operating Officer since 1993 and was previously Vice President, Consulting
since joining the Company in 1990. He has been a member of the Board of
Directors of the Company since September 1997. Prior to joining the Company,
Mr. Bansal was a consultant at Booz Allen & Hamilton, a worldwide technical
and management consulting firm, from 1987 to 1990. Mr. Bansal received an S.B.
in Electrical Engineering from the Massachusetts Institute of Techonology and
an M.S. in Computer Science from the John Hopkins University.

Frank A. Ingari (50) has been a member of the Board of Directors of the
Company since October 1997. Mr. Ingari is Founder and Chief Executive Officer
of Wheelhouse Corporation, an eMarketing services firm formed in April of
1999. Between 1997 and April 1999, Mr. Ingari founded Growth Ally, L.L.C., a
consulting firm specializing in assisting private technology companies in
accelerating their growth and served as its Chief Executive Officer. Mr.
Ingari was Chairman and Chief Executive Officer of Shiva Corporation from 1993
to 1997. Prior to joining Shiva Corporation, Mr. Ingari was Vice President,
Marketing at Lotus Development Corporation. Mr. Ingari received a B.A. in
Creative Writing and U.S. Foreign Relations from Cornell University.

Jonathan J. Ledecky (42) has been a member of the Board of Directors of the
Company since June 1998. Mr. Ledecky is currently Vice Chairman of Lincoln
Holdings LLC, which owns the Washington Capitals, the Washington Wizards and
the Washington Mystics sports teams. Mr. Ledecky founded U.S. Office Products
Company in October 1994 and served as its Chairman of the Board and Chief
Executive Officer from inception through November 1997 and thereafter as a
director until May 1998. In February 1997, Mr. Ledecky founded Building One
Services Corp., now Encompass Services Corporation, and served as its Chairman
until February 2000 and Chief Executive Officer until June 1999. Mr. Ledecky
is also a director of publicly traded Aztec Technology Partners, UniCapital
Corporation and School Speciality.

Ralph S. Terkowitz (49) has been a member of the Board of Directors of the
Company since September 1997. Mr. Terkowitz is Vice President, Technology for
the Washington Post Company, a position he has held since 1992. Until February
1996, Mr. Terkowitz was Chief Executive Officer, President and publisher of
Digital Ink, an Internet publishing venture that launched, among other
ventures, WashingtonPost.com and PoliticsNow. In 1998 he was co-Chief
Executive Officer of HireSystems and instrumental in the formation of
BrassRing.com.

<PAGE>

Mr. Terkowitz is a director of ICSA, BigStep and OutTask. Mr. Terkowitz
received an A.B. in Chemistry from Cornell University and an M.S. in Chemical
Physics from the University of California, Berkeley.

John W. Sidgmore (49) has been a member of the Board of Directors of the
Company since February 2000. Mr. Sidgmore was the President and Chief
Executive Officer of UUNET Technologies, Inc., a provider of worldwide
Internet services, from June 1994 until November 1998 and has served as
chairman since November 1998. Since December 1996, Mr. Sidgmore has served as
the Chief Operating Officer and Vice Chairman of WorldCom Inc., now MCI
WorldCom, a provider of long distance, Internet and telecommunication
services. Prior to joining UUNET, Mr. Sidgmore was President and Chief
Executive Officer of Intelicom Solutions, now CSC Intelicom, a
telecommunications software company. Mr. Sidgmore is also a member of the
board of directors of MCI WorldCom and ADC Telecommunications, Inc.

Board and Committee Meetings

The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
auditors and the Board. The Audit Committee met five times during Fiscal Year
1999. The current Audit Committee members are Mr. Ingari (Chairman) and
Mr. Terkowitz.

The Company has a standing Compensation Committee of the Board of Directors,
which makes compensation decisions regarding the officers of the Company and
provides recommendations to the Board regarding compensation programs of the
Company. The Compensation Committee met two times during Fiscal Year 1999. The
current members of the Compensation Committee are Mr. Terkowitz (Chairman) and
Mr. Ingari.

The Board of Directors met six times during Fiscal Year 1999. Each director
attended at least 75% of the aggregate of the number of Board meetings and the
number of meetings held by all committees on which he then served.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of
the Company's Class A Common Stock to file with the SEC initial reports of
ownership of the Company's Class A Common Stock and other equity securities on
a Form 3 and reports of changes in such ownership on a Form 4 or Form 5.
Officer's, directors and holders of 10% of the Company's Class A Common Stock
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the Company's records, all Section 16(a) filing requirements were
satisfied with respect to Fiscal Year 1999 except that one Form 4 that was
timely filed by Sanju K. Bansal inadvertently omitted a transaction from the
initial filing.

Directors' Compensation

Directors do not receive any fees or other cash compensation for serving on
the Company's Board of Directors or any committee thereof. Directors of the
Company who are not employees of the Company or any subsidiary ("Outside
Directors") are entitled to receive options under the 1997 Director Option
Plan.

Pursuant to the 1997 Director Option Plan, Outside Directors are granted
options on the following terms: (i) each Outside Director of the Company is
granted an option to purchase 90,000 shares of Class A Common Stock upon his
or her initial election to the Board of Directors ("First Options") and (ii)
each Outside Director is granted an option to purchase 10,000 shares of Class
A Common Stock of the Company on the date of each annual meeting of
stockholders occurring after six months of service on the Board of Directors
("Subsequent Options"). Each option granted under the 1997 Director Plan has
an exercise price equal to the fair market value of the Class A Common Stock
on the date of grant. First Options granted under the 1997 Director Option
Plan become exercisable in equal annual installments over a five-year period
and Subsequent Options become exercisable in full on the fifth anniversary of
the date of grant. In the event of a merger of the Company with or into
another corporation or a sale of all or substantially all of the Company's
assets, each option will be assumed

5
<PAGE>

or an equivalent option will be substituted by the successor corporation. If
the successor corporation does not assume outstanding options, the
exercisability of all outstanding options will accelerate. The term of each
option granted under the 1997 Director Plan is ten years, provided that, in
general, an option may be exercised only while the Outside Director continues
to serve as a director of the Company or within 60 days thereafter. In Fiscal
Year 1999, options for 30,000 shares of Class A Common Stock were granted
under the 1997 Director Option Plan as Subsequent Options.

Executive Compensation

Summary Compensation

The following table sets forth certain information concerning the
compensation for each of the last two fiscal years of the Company's Chief
Executive Officer and the Company's four other most highly compensated
executive officers for Fiscal Year 1999 and the fiscal year ended December 31,
1998 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation
---------------------- ------------------
Awards
------------------
Name and Fiscal Number of Shares
Principal Position Year Salary Bonus Underlying Options
- ------------------ ------ -------- ------ ------------------
<S> <C> <C> <C> <C>
Michael J. Saylor..................... 1999 $139,628 50,000 --
Chairman of the Board, Chief 1998 124,366 -- --
Executive Officer and President 1997 124,000 30,000 --

Sanju K. Bansal....................... 1999 104,542 40,000 --
Executive Vice President, Chief 1998 111,205 -- --
Operating Officer and Director 1997 132,130 30,000 --

Jonathan F. Klein(2).................. 1999 102,241 30,000 30,000
Vice President, Law and General 1998 98,108 15,000 80,500
Counsel 1997 46,420 -- 20,000

Mark S. Lynch(3)...................... 1999 132,191 -- 100,000
Vice President, Finance and Chief 1998 126,000 65,000 --
Financial Officer 1997 44,135 25,000 500,000

Joseph P. Payne(4).................... 1999 118,319 15,000 250,000
Vice President, Marketing and Chief 1998 -- -- --
Marketing Officer 1997 -- -- --
</TABLE>
- --------

(1) In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted because such
perquisites and other personal benefits constituted less than the lesser
of $50,000 or 10% of the total annual salary of such Named Executive
Officer.
(2) Mr. Klein joined the Company in June 1997 as Corporate Counsel and became
Vice President, Law and General Counsel in November 1998. Accordingly, the
1997 information for Mr. Klein is for the period from June 9, 1997 to
December 31, 1997.
(3) Mr. Lynch joined the Company in September 1997 as Vice President, Finance
and Chief Financial Officer. Accordingly, the 1997 information for Mr.
Lynch is for the period from September 2, 1997 to December 31, 1997.
(4) Mr. Payne joined the Company in April 1999 as Vice President, Marketing
and Chief Marketing Officer. Accordingly, the 1999 information for Mr.
Payne is for the period from April 22, 1999 to December 31, 1999 and there
is no information for 1998 and 1997.

<PAGE>

Option Grants Table

The following table contains information concerning grants of stock options
made to each of the Named Executive Officers during Fiscal Year 1999:

Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------
Potential Realizable
Value at Assumed
% of Total Annual Rates of Stock
Number of Shares Options Price Appreciation
of Class A Common Granted to Exercise for Option Term(3)
Stock Underlying Employees Price Per Expiration ---------------------
Name Options Granted(1) in 1999 Share(2) Date 5% 10%
- ---- ------------------ ---------- --------- ---------- -- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Saylor....... -- -- % $ -- -- $ -- $ --
Sanju K. Bansal......... -- -- -- -- -- --
Jonathan F. Klein....... 30,000 0.6 13.22 8/10/09 249,401 632,030
Mark S. Lynch........... 100,000 1.9 13.22 8/10/09 831,336 2,106,768
Joseph P. Payne......... 250,000 4.8 8.88 4/22/09 1,395,360 3,536,116
</TABLE>
- --------
(1) The options vest over a five-year period and expire on the tenth
anniversary of the date of grant.
(2) The exercise price may be paid in cash or in shares of Class A Common
Stock valued at fair market value on the exercise date. All stock options
were granted with an exercise price equal to the fair market value of the
Common Stock as determined by the Board of Directors on the grant date
using a revenue multiple valuation methodology.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that
the fair market value of the Class A Common Stock on the date of grant
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and sold on the
last day of its term for the appreciated stock price.

Option Exercises and Holdings

The following table sets forth information concerning each exercise of a
stock option during Fiscal Year 1999 by each of the Named Executive Officers
and the number and value of unexercised options held by each of the Named
Executive Officers on December 31, 1999.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
Number of Shares of
Class A Common Stock Value of Unexercised
Number of Underlying Unexercised in-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End(2)
Acquired Value -------------------------- -------------------------
Name on Exercise Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- ----------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael J. Saylor....... -- $ -- --/-- $ --/$--
Sanju K. Bansal......... -- -- --/-- --/--
Jonathan F. Klein....... 20,000 119,000 4,100/106,400 426,185/10,634,170
Mark S. Lynch........... 200,000 7,186,979 --/400,000 --/40,303,100
Joseph P. Payne......... -- -- --/250,000 --/24,031,250
</TABLE>
- --------
(1) Represents the difference between the exercise price and the fair market
value of the Class A Common Stock on the date of exercise.
(2) Value is determined by subtracting the exercise price per share from the
fair market value of the Class A Common Stock on December 31, 1999
($105.00 per share), multiplied by the number of shares underlying the
options.

<PAGE>

Employment Agreements

Employees of the Company are generally required to enter into
confidentiality agreements prohibiting the employees from disclosing any
confidential or proprietary information of the Company. In addition, the
agreements generally provide that upon termination, an employee will not work
for a competitor and will not solicit Company customers and employees for a
period of one year. At the time of commencement of employment, the Company's
employees also generally sign offer letters specifying certain basic terms and
conditions of employment. Otherwise, employees of the Company are not subject
to written employment agreements.

Certain Relationships and Related Transactions

On December 30, 1999 the Company entered into a business alliance agreement
with Wheelhouse Corporation, a company for which Frank A. Ingari, a director
of the Company, is a founding stockholder and Chief Executive Officer.
Wheelhouse acquired the right to offer Company products in the marketplace as
a sales agent. In addition, Wheelhouse is entitled to a finders fee of 1.5% of
the license fees paid to the Company by any company referred to the Company by
Wheelhouse. Wheelhouse also acquired from the Company a suite of certain
development software and technology training for a fee of $160,000.

<PAGE>

COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

This report addresses the compensation policies of the Company applicable to
its officers during Fiscal Year 1999. The Company's executive compensation
program is administered by the Compensation Committee of the Board of
Directors (the "Committee"), which is comprised of two non-employee directors.
The Committee is responsible for determining the compensation package of each
executive officer, including the Chief Executive Officer. In Fiscal Year 1999,
the Board of Directors did not modify in any material way or reject any action
or recommendation of the Committee with respect to executive officer
compensation.

Executive Compensation Policy

The objectives of the Committee in determining executive compensation are
(i) to recognize and reward exceptional performance by the Company's
executives, (ii) to provide incentives for high levels of current and future
performance, and (iii) to align the objectives and rewards of Company
executives with those of the stockholders of the Company. The Committee
believes that an executive compensation program that achieves these objectives
will not only properly motivate and compensate the Company's current officers,
but will enable the Company to attract other officers that may be needed by
the Company in the future. The executive compensation program is implemented
through three principal elements--base salary, bonus and stock option grants.

Executive Officer Compensation

In setting base salaries for Fiscal Year 1999, the Committee used a
subjective evaluation process considering the performance of the Company, the
officer's position, level and scope of responsibility, as well as the
recommendations of management with respect to base salary for such executive
officer. The Committee also generally sought to set salaries at levels that,
in the opinion of the members of the Committee, approximate the salary levels
for companies that are comparable to the Company.

Bonuses are awarded principally on the basis of the Company's performance
during the period and on the Committee's assessment of the extent to which the
executive officer contributed to the overall performance of the Company or a
particular department of the Company for a specific period. In awarding
performance-based bonuses for Fiscal Year 1999, the Committee sought to set
such bonuses at a level that would provide executive officers eligible to
receive such bonuses with a strong incentive to contribute to the success and
profitability of the Company. During Fiscal Year 1999, a total of $135,000 was
paid in bonuses to six executive officers of the Company.

In a further attempt to link compensation to the long-term performance of
the Company, stock options were awarded to certain executive officers. In
Fiscal Year 1999, option awards were made based principally on the
recommendations of management. All of the options granted under the Amended
and Restated 1996 Stock Plan (the "1996 Stock Plan") and the 1999 Stock Option
Plan in Fiscal Year 1999 were granted with an exercise price that was equal to
the fair market value of the Class A Common Stock on the option grant date.
Generally, the options granted to executive officers under the 1996 Stock Plan
and the 1999 Stock Option Plan vest ratably over a five-year period on the
anniversary date of the option grant date. Under the 1996 Stock Plan, options
to purchase an aggregate of 250,000 shares of Class A Common Stock were
granted to one executive officer of the Company during Fiscal Year 1999. Under
the 1999 Stock Option Plan, options to purchase an aggregate of 230,000 shares
of Class A Common Stock were granted to three executive officers of the
Company during Fiscal Year 1999. It has been the practice of the Committee to
fix the exercise price of options granted at 100% of the fair market value of
the Class A Common Stock on the date of grant.

Chief Executive Officer Compensation

The Committee believes that the base salary and bonus paid to Mr. Saylor in
Fiscal Year 1999 was justified in light of the significant and material
contributions of Mr. Saylor to the day-to-day business operations of the

9
<PAGE>

Company and the preparations in 1999 for the Company's follow-on offering. The
Committee did not make any stock option or other stock-based incentive awards
to Mr. Saylor during Fiscal Year 1999. In the subjective view of the
Committee, Mr. Saylor's base salary and bonus is below the median base salary
and bonus awarded by comparable companies to their Chief Executive Officers.
The Committee determined that, given Mr. Saylor's substantial beneficial
ownership of the Company's Common Stock, his long-term interests in the
performance and profitability of the Company are aligned with those of other
stockholders and, accordingly, no additional financial or stock-based
incentives were warranted.

Section 162(m) of the Internal Revenue Code

The Committee also takes into account, to the extent it believes
appropriate, the limitations on the deductibility of executive compensation
imposed by Section 162(m) of the Internal Revenue Code in determining
compensation levels and practices.

COMPENSATION COMMITTEE

Ralph S. Terkowitz
Frank A. Ingari

<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return on the
Class A Common Stock of the Company from June 11, 1998 (the date the Company's
shares of Class A Common Stock were first offered to the public) to December
31, 1999 (the end of Fiscal Year 1999) with the cumulative total return of (i)
the CRSP Total Return Index for the Nasdaq National Market (U.S. Companies)
(the "Nasdaq Index") and (ii) a peer group of companies consisting of Business
Objects, Cognos, Inc., Brio Technology, Inc. and Actuate Software Corporation
(the "Peer Index"). This graph assumes the investment of $100.00 on June 11,
1998 in the Company's Class A Common Stock, the Nasdaq Index and the Peer
Index, and assumes any dividends are reinvested. Measurement points are June
11, 1998, December 31, 1998 and December 31, 1999.

[Comparison Graph Appears Here]

<TABLE>
<CAPTION>
June 11, 1998 Dec. 31, 1998 Dec. 31, 1999
------------- ------------- -------------
<S> <C> <C> <C>
MicroStrategy Incorporated............ $100 $262.50 $1,750.01
Nasdaq Index.......................... $100 $125.00 $ 225.83
Peer Index (1)........................ $100 $116.55 $ 327.05
</TABLE>
- --------
(1) The Company notes that Information Advantage, Inc., a former constituent of
the Peer Index in the Company's proxy statement for the 1999 Annual Meeting
of Stockholders, is no longer in existence as a result of an acquisition by
Sterling Software in August 1999.

11
<PAGE>

PROPOSAL 2

AMENDMENT TO THE 1997 DIRECTOR OPTION PLAN

Introduction

A proposal will be presented at the Annual Meeting that the Stockholders
approve an amendment to the Company's 1997 Director Option Plan to increase
the maximum number of shares of Class A Common Stock available under the plan
from 400,000 shares to 600,000 shares (subject to a proportionate adjustment
for certain changes in the Company's capitalization, such as a stock split).
Approval of the proposed amendment to the 1997 Director Option Plan by the
affirmative vote of a majority of the votes cast by the holders of Common
Stock present, or represented, and entitled to vote at the Annual Meeting is
appropriate in order to ensure that the Company will have sufficient shares of
Class A Common Stock available under the 1997 Director Option Plan to continue
to provide option grants in order to attract and retain the best available
personnel for service as Outside Directors of the Company.

On February 16, 2000, John W. Sidgmore was granted an option to purchase
90,000 shares of the Company's Class A Common Stock pursuant to the 1997
Director Option Plan. Due to prior grants under the 1997 Director Option Plan,
10,000 of Mr. Sidgmore's 90,000 shares subject to option are subject to
stockholder approval of this proposal.

Set forth below is a brief summary of the principal provisions of the 1997
Director Option Plan.

Summary of the Plan

The Company's 1997 Director Option Plan was adopted by the Board of
Directors and the stockholders in September of 1997. The Director Option Plan
provides that each person who becomes a non-employee director of the Company
shall, on the date on which the optionee first becomes a director of the
Company, be granted an option to purchase 90,000 shares of Class A Common
Stock (the "First Option"). On the date of each annual stockholders meeting
thereafter, each non-employee director shall be granted an option to purchase
10,000 shares of Class A Common Stock (a "Subsequent Option") if, on such
date, he or she shall have served on the Company's Board of Directors for at
least six months prior to the annual meeting.

The Director Option Plan sets neither a maximum nor a minimum number of
shares subject to options that may be granted to any one non-employee
director, but does stipulate the method of making a grant. No option granted
under the Director Option Plan is transferable by the optionee other than by
will or the laws of descent and distribution, and each option is exercisable,
during the lifetime of the optionee, only by such optionee. The Director
Option Plan provides that the First Option shall become exercisable in
installments of one-fifth of the shares subject to the First Option on each of
the first, second, third, fourth and fifth anniversaries of the date of grant
of the First Option, and that each Subsequent Option shall become exercisable
in full on the fifth anniversary of its date of grant. The exercise price of
all stock options granted under the Director Option Plan shall be equal to the
fair market value of the shares of Class A Common Stock on the date of grant
of the option. Options granted under the Director Option Plan have a term of
10 years. In the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each
option will be assumed or an equivalent option substituted by the successor
corporation. If the successor corporation does not assume outstanding options,
the exercisability of all outstanding options shall be accelerated. The Board
of Directors may amend or terminate the Director Option Plan, provided,
however, that no such action may adversely affect any outstanding option and
provided further that the provisions affecting the grant and terms of options
may not be amended more than once during any six-month period.

In fiscal 2000, the Company anticipates that it will award to non-executive
directors as a group options to purchase 120,000 shares under the 1997
Director Option Plan. The Named Executive Officers and other officers of the
Company are not eligible to receive awards under the 1997 Director Option Plan
and therefore will not receive any grants under the plan in fiscal 2000.

12
<PAGE>

Federal Income Tax Consequences

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under
the 1997 Director Option Plan and with respect to the sale of Common Stock
acquired under the 1997 Director Option Plan.

Tax Consequences to Participants. A participant will not recognize taxable
income upon the grant of an option under the 1997 Director Option Plan.
Nevertheless, a participant generally will recognize ordinary compensation
income upon the exercise of the option in an amount equal to the excess of the
fair market value of the Common Stock acquired through the exercise of the
option (the "Option Stock") on the exercise date over the exercise price.

A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the Option
Stock and the participant's tax basis in the Option Stock. This capital gain
or loss will be a long-term capital gain or loss if the participant has held
the Option Stock for more than one year prior to the date of the sale and will
be a short-term capital gain or loss if the participant has held the Option
Stock for a shorter period.

Tax Consequences to the Company. The grant of an option under the 1997
Director Option Plan will have no tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the Director Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO THE COMPANY'S 1997 DIRECTOR OPTION PLAN.

13
<PAGE>

PROPOSAL 3

AMENDMENT TO THE 1999 STOCK OPTION PLAN

Introduction

A proposal will be presented at the Annual Meeting that the Stockholders
approve an amendment to the Company's 1999 Stock Option Plan (the "1999 Plan")
to increase the maximum number of shares of Class A Common Stock available
under the plan from 5,000,000 shares to 11,000,000 shares (subject to a
proportionate adjustment for certain changes in the Company's capitalization,
such as a stock split). The proposed amendment to the 1999 Plan requires the
approval by the affirmative vote of a majority of the votes cast by the
holders of Common Stock present, or represented, and entitled to vote at the
Annual Meeting.

As of April 30, 2000, options to purchase 4,405,957 shares of the 5,000,000
shares currently authorized under the 1999 Plan were outstanding. Accordingly,
on May 11, 2000, the Board of Directors adopted, subject to stockholder
approval, the proposed amendment to ensure that the Company will have a
sufficient number of shares of Class A Common Stock available under the 1999
Plan to continue to provide option grants to attract, retain and motivate
personnel, including the ability to grant to certain of its existing employees
additional stock options to purchase an aggregate of approximately 2,000,000
shares.

Summary of the Plan

Description of Awards

The 1999 Plan provides for the grant of incentive stock options intended to
qualify as such under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and nonstatutory stock options (collectively "Awards").

Incentive Stock Options and Nonstatutory Stock Options. Optionees receive the
right to purchase a specified number of shares of Class A Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to, or greater than the fair
market value of the Class A Common Stock on the date of grant. Under present
law, however, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Class A
Common Stock on the date of grant (or less than 110% of the fair market value
in the case of incentive stock options granted to optionees holding more than
10% of the total combined voting power of the Company or of any parent or
subsidiary corporation). The 1999 Plan permits the Board of Directors to
determine the manner of payment of the exercise price of options, including
through payment by cash, check, or in connection with a "cashless exercise"
through a broker, by surrender to the Company of shares of Class A Common
Stock, by delivery to the Company of a promissory note, or by any other lawful
means.

Eligibility to Receive Awards

Officers, employees, consultants and advisors of the Company and its
subsidiaries are eligible to be granted Awards under the 1999 Plan. Under
present law, however, incentive stock options may only be granted to
employees. The maximum number of shares with respect to which Awards may be
granted to any participant under the 1999 Plan is 1,000,000 shares per
calendar year.

As of April 30, 2000, approximately 2,090 persons were eligible to receive
Awards under the 1999 Plan, including the Company's six executive officers.
The granting of Awards under the 1999 Plan is discretionary, and the Company
cannot now determine the number or type of Awards to be granted in the future
to any particular person or group.

On April 30, 2000, the last reported sale price of the Company's Class A
Common Stock on the Nasdaq National Market was $25.875.

14
<PAGE>

Administration

The 1999 Plan is administered by the Board of Directors. The Board of
Directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the 1999 Plan and to interpret the
provisions of the 1999 Plan. Pursuant to the terms of the 1999 Plan, the Board
of Directors may delegate authority under the 1999 Plan to one or more
committees of the Board of Directors, and subject to certain limitations, to
one or more executive officers of the Company. The Board of Directors has
authorized the Compensation Committee to administer certain aspects of the
1999 Plan, including the granting of options to executive officers. Subject to
any applicable limitations contained in the 1999 Plan, the Board of Directors,
the Compensation Committee, or any other committee or executive officer to
whom the Board of Directors delegates authority, as the case may be, selects
the recipients of Awards and determines (i) the number of shares of Class A
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options and (iii) the duration of
options.

The Board of Directors is required to make appropriate adjustments in
connection with the 1999 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger or
other Acquisition Event (as defined in the 1999 Plan), the Board of Directors
must provide for outstanding options to be assumed, or substituted for, by the
acquiring or succeeding corporation. In the event that the acquiring or
succeeding corporation does not agree to assume, or substitute for, such
options, the exercisability of all outstanding options will accelerate. In
certain circumstances, the Board of Directors may also provide for a cash out
of the value of any outstanding options. If any Award expires or is
terminated, surrendered, canceled or forfeited, the unused shares of Class A
Common Stock covered by such Award will again be available for grant under the
1999 Plan subject, however, to any limitations under the Code.

Amendment or Termination

No Award may be made under the 1999 Plan on or after April 21, 2009, but
Awards previously granted may extend beyond that date. The Board of Directors
may at any time amend, suspend or terminate the 1999 Plan, except that no
Award designated as subject to Section 162(m) of the Code by the Board of
Directors after the date of such amendment shall become exercisable,
realizable or vested (to the extent such amendment was required to grant such
Award) unless and until such amendment shall have been approved by the
Company's stockholders.

Federal Income Tax Consequences

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under
the 1999 Plan and with respect to the sale of Class A Common Stock acquired
under the 1999 Plan.

Incentive Stock Options

In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will
recognize taxable income with respect to an incentive stock option only upon
the sale of Class A Common Stock acquired through the exercise of the option
("ISO Stock"). The exercise of an incentive stock option, however, may subject
the participant to the alternative minimum tax.

Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least
two years from the date the option was granted (the "Grant Date") and one year
from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.

If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of
the gain recognized by the participant will be ordinary compensation income
and the remaining gain,

15
<PAGE>

if any, will be a capital gain. This capital gain will be a long-term capital
gain if the participant has held the ISO Stock for more than one year prior to
the date of sale.

If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of
the exercise price over the sale price of the ISO Stock. This capital loss
will be a long-term capital loss if the participant has held the ISO Stock for
more than one year prior to the date of sale.

Nonstatutory Stock Options

As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the Class
A Common Stock acquired through the exercise of the option ("NSO Stock") on
the Exercise Date over the exercise price.

With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO
Stock for more than one year prior to the date of the sale.

Tax Consequences to the Company

The grant of an Award under the 1999 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Class A Common Stock acquired under the 1999 Plan
will have any tax consequences to the Company. The Company generally will be
entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a participant under the 1999 Plan,
including as a result of the exercise of a nonstatutory stock option or a
Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO THE COMPANY'S 1999 STOCK OPTION PLAN.

16
<PAGE>

PROPOSAL 4

AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

Currently the Company's Amended and Restated Certificate of Incorporation
authorizes the issuance of 100,000,000 shares of Class A Common Stock and
100,000,000 shares of Class B Common Stock. On January 3, 2000 the Company's
Board of Directors approved a two-for-one split of the Company's Class A
Common Stock and Class B Common Stock. As of the close of business on March
31, 2000, 23,994,370 shares of Class A Common Stock were issued and
outstanding and 55,279,115 shares of Class B Common Stock were issued and
outstanding, leaving 76,005,630 shares of Class A Common Stock authorized but
unissued and 44,720,885 shares of Class B Common Stock authorized but
unissued. Of the authorized but unissued shares, the Company has reserved
60,607,047 shares of Class A Common Stock for issuance upon conversion of the
Class B Common Stock and under the Company's stock option plans and employee
stock purchase plan.

The Board of Directors of the Company believes that the adoption of the
proposed amendment to the Company's Amended and Restated Certificate of
Incorporation increasing the authorized shares of Class A Common Stock and
Class B Common Stock is advisable and in the best interests of the Company and
its stockholders and is recommending such amendment to restore the flexibility
to issue Class A Common Stock and Class B Common Stock that existed before the
stock split mentioned above and to assure that an adequate supply of
authorized and unissued shares of Class A Common Stock and Class B Common
Stock is available for general corporate needs, including future stock
dividends, stock splits, issuances under the Company's stock option plans and
employee stock purchase plan, acquisitions and equity financings. The
availability of additional shares of Class A Common Stock and Class B Common
Stock for issuance, without the delay and expense of obtaining the approval of
stockholders at a special meeting, will afford the Company greater flexibility
in taking corporate action.

The newly authorized Class A Common Stock and Class B Common Stock, like the
currently authorized Class A Common Stock and Class B Common Stock, may be
used by the Company for any proper corporate purpose. Such purposes may
include, without limitation, issuance as part or all of the consideration
required to be paid by the Company in the acquisition of other businesses or
properties, or issuance in public or private sales for cash as a means of
obtaining additional capital for use in the Company's business and operations.
Notwithstanding the foregoing, the Company generally does not intend to issue
additional shares of Class B Common Stock except in connection with future
stock splits.

If approved by the stockholders, the increased number of authorized shares
of Class A Common Stock and Class B Common Stock will be available for
issuance from time to time for such purposes and consideration as the Board of
Directors may approve and no further vote of the stockholders of the Company
will be required, except as required under the Delaware General Corporation
Law or the rules of any national securities exchange or quotation system, such
as the NASDAQ National Market, on which the shares of the Company are at the
time listed or quoted.

The additional shares of Class A Common Stock and Class B Common Stock for
which authorization is sought would be identical to the shares of Class A
Common Stock and Class B Common Stock of the Company currently authorized.
Although the Board of Directors will authorize the issuance of additional
Class A Common Stock and Class B Common Stock based on its judgment as to the
best interests of the Company and its stockholders, the issuance of additional
shares could have a dilutive effect on the earnings per share, book value per
share, and on the equity and voting power of existing holders of Class A
Common Stock and Class B Common Stock. Holders of Class A Common Stock and
Class B Common Stock are not now, and will not be, entitled to preemptive
rights to purchase shares of any authorized capital stock of the Company.

In addition, the issuance of additional shares of Class A Common Stock and
Class B Common Stock could, in certain instances, render more difficult or
discourage a merger, tender offer, or proxy contest and thus potentially have
an "anti-takeover" effect, especially if Class A Common Stock and Class B
Common Stock were issued in response to a potential takeover. Such an issuance
could deter the types of transactions which

17
<PAGE>

may be proposed or could discourage or limit the stockholders' participation
in certain types of transactions that might be proposed (such as a tender
offer), whether or not such transactions were favored by the majority of the
stockholders, and could enhance the ability of officers and Directors to
retain their positions. For example, without further stockholder approval, the
Board could (i) adopt a "poison pill" which would, under certain circumstances
related to an acquisition not approved by the Board of Directors, give certain
holders the right to acquire additional shares of Class A Common Stock and/or
Class B Common Stock at a low price, or (ii) sell shares of Class A Common
Stock and Class B Common Stock in a private transaction to purchasers who
would oppose a takeover or favor the current Board. Although this proposal to
increase the authorized shares of Class A Common Stock and Class B Common
Stock has been prompted by business and financial considerations and not by
the threat of any known or threatened hostile takeover attempt, stockholders
should be aware that the approval of this proposal could facilitate future
efforts by the Company to deter or prevent changes in control of the Company,
including transactions in which the stockholders might otherwise receive a
premium for their shares over then current market prices.

If the amendment is approved by the stockholders, the first paragraph of
Article Four of the Company's Amended and Restated Certificate of
Incorporation will be amended to read as follows:

"The total number of shares of capital stock which the corporation shall
have the authority to issue is 500,000,000 shares, consisting of three
classes of capital stock: (a) 330,000,000 shares of Class A Common Stock,
par value $0.001 per share (the "Class A Common Stock"); (b) 165,000,000
shares of Class B Common Stock, par value $0.001 per share (the "Class B
Common Stock") (the Class A Common Stock and the Class B Common Stock are
collectively referred to as the "Common Stock"); and (c) 5,000,000 shares
of Preferred Stock, par value $0.001 per share (the "Preferred Stock")."

If approved by the stockholders, the amendment to the Company's Amended and
Restated Certificate of Incorporation increasing the authorized shares of
Common Stock will become effective upon the filing of an amendment to the
Company's Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.

PROPOSAL 5

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as the Company's independent auditors for the current fiscal year. Although
stockholder approval of the Board of Directors' selection of
PricewaterhouseCoopers LLP is not required by law, the Board of Directors
believes that it is advisable to give stockholders an opportunity to ratify
this selection. If this proposal is not approved at the Annual Meeting, the
Board of Directors may reconsider its selection of PricewaterhouseCoopers LLP.

Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CURRENT FISCAL YEAR.

18
<PAGE>

OTHER MATTERS

The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented at the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.

All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to
retain outside agencies for the purpose of soliciting proxies. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
material to the owners of stock held in their names, and, as required by law,
the Company will reimburse them for their out-of-pocket expenses in this
regard.

Stockholder Proposals

Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders (the "2001 Annual Meeting") must be received by the
Company at its principal offices, 8000 Towers Crescent Drive, Vienna, Virginia
22182 not later than January 19, 2001 for inclusion in the proxy materials for
the 2001 Annual Meeting. The Company suggests that proponents submit their
proposals by certified mail, return receipt requested, addressed to the
Secretary of the Company.

If a stockholder of the Company wishes to present a proposal before the 2001
Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder
must also give written notice to the Secretary of the Company at the address
noted above. The Secretary must receive such notice by April 4, 2001. If a
stockholder fails to provide timely notice of a proposal to be presented at
the 2001 Annual Meeting, the proxies designated by the Board of Directors of
the Company will have discretionary authority to vote on any such proposal.

By Order of the Board of Directors,

/s/ Sanju K. Bansal

Sanju K. Bansal,
Executive Vice President, Chief
Operating Officer and Secretary

May 29, 2000

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN IF THEY HAVE SENT IN
THEIR PROXIES.

19
<PAGE>

Appendix A

MICROSTRATEGY INCORPORATED

1997 DIRECTOR OPTION PLAN

1. Purposes of the Plan. The purposes of this 1997 Director Option Plan are
to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive
to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.

All options granted hereunder shall be nonstatutory stock options.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as amended.

(d) "Company" means Microstrategy Incorporated, a Delaware corporation.

(e) "Director" means a member of the Board.

(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.

(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(h) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:

(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination,
as reported in The Wall Street Journal or such other source as the
Board deems reliable, or;

(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.

(i) "Inside Director" means a Director who is an Employee.

(j) "Option" means a stock option granted pursuant to the Plan.

(k) "Optioned Stock" means the Common Stock subject to an Option.

(l) "Optionee" means a Director who holds an Option.

(m) "Outside Director" means a Director who is not an Employee.

(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(o) "Plan" means this 1997 Director Option Plan.

(p) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.

20
<PAGE>

(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares of Common Stock (the "Pool"). The Shares may
be authorized, but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. Administration and Grants of Options under the Plan.

(a) Procedure for Grants. The provisions set forth in this Section 4(a)
shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall
be made strictly in accordance with the following provisions:

(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.

(i) Each Outside Director shall be automatically granted an Option to
purchase 45,000 Shares (the "First Option") on the date on which the
later of the following events occurs: (A) the effective date of this
Plan, as determined in accordance with Section 6 hereof, or (B) the
date on which such person first becomes an Outside Director, whether
through election by the shareholders of the Company or appointment by
the Board to fill a vacancy; provided, however, that an Inside Director
who ceases to be an Inside Director but who remains a Director shall
not receive a First Option.

(ii) Each Outside Director shall be granted an Option to purchase
5,000 Shares (a "Subsequent Option") each year on the date of the
annual stockholders' meeting provided he or she is then an Outside
Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.

(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has
obtained stockholder approval of the Plan in accordance with Section 16
hereof shall be conditioned upon obtaining such stockholder approval of
the Plan in accordance with Section 16 hereof.

(v) The terms of a First Option granted hereunder shall be as
follows:

(A) the term of the First Option shall be ten (10) years.

(B) the First Option shall vest and become exercisable only
pursuant to the terms of the Director Option Agreement evidencing
such First Option, except as set forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option. In the
event that the date of grant of the First Option is not a trading
day, the exercise price per Share shall be the Fair Market Value on
the next trading day immediately following the date of grant of the
First Option.

(D) subject to Section 10 hereof, the First Option shall become
vested as to twenty percent (20%) of the Shares subject to the First
Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.

(vi) The terms of a Subsequent Option granted hereunder shall be as
follows:

(A) the term of the Subsequent Option shall be ten (10) years.

21
<PAGE>

(B) the Subsequent Option shall vest and become exercisable only
pursuant to the terms of the Director Option Agreement evidencing
such Subsequent Option, except as set forth in Sections 8 and 10
hereof.

(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the Subsequent Option. In
the event that the date of grant of the Subsequent Option is not a
trading day, the exercise price per Share shall be the Fair Market
Value on the next trading day immediately following the date of
grant of the Subsequent Option.

(D) subject to Section 10 hereof, the Subsequent Option shall vest
as to one hundred percent (100%) of the Shares subject to the
Subsequent Option on the fifth anniversary of its date of grant,
provided that the Optionee continues to serve as a Director on such
date.

(vii) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the
stockholders to increase the number of Shares which may be issued under
the Plan or through cancellation or expiration of Options previously
granted hereunder.

5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth
in Section 4 hereof.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.

6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 11 of the
Plan.

7. Form of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (A) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) delivery of a
properly executed exercise notice together with such other documentation as
the Company and the broker, if applicable, shall require to effect an exercise
of the option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, or (v) any combination of the foregoing
methods of payment.

8. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall vest and become exercisable at such times as are set forth
in Section 4 hereof and pursuant to the Director Option Agreement;
provided, however, that no Options shall be exercisable until stockholder
approval of the Plan in accordance with Section 16 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

If otherwise exercisable, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 7 of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect

22
<PAGE>

to the Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is
prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

(b) Rule 16b-3. Options granted to Outside Directors must comply with the
applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions,
and other transactions by Outside Directors that otherwise could be matched
with Plan transactions, for the maximum exemption from Section 16 of the
Exchange Act.

(c) Termination of Continuous Status as a Director. Subject to Section 10
hereof, in the event an Optionee's status as a Director terminates other
than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee shall retain any
vested portion of this Option (determined in accordance with the terms of
the Director Option Agreement) and the Optionee (or his or her legal
representative, as applicable) may exercise his or her Option, but only
pursuant to the terms of the Director Option Agreement. To the extent that
the Option was not vested on the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified pursuant to the Director
Option Agreement, the Option shall terminate.

(d) Disability of Optionee. In the event Optionee's status as a Director
terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee shall retain any vested portion
of his or her Option (determined in accordance with the terms of the
Director Option Agreement) and the Optionee (or his legal representative,
as applicable) may exercise his or her Option, but only pursuant to the
terms of the applicable Director Option Agreement. To the extent that the
Option was not vested on the date of termination, or if he or she does not
exercise such Option (to the extent otherwise so entitled) within the time
specified pursuant to the Director Option Agreement, the Option shall
terminate.

(e) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance shall retain the vested portion of the Option
(determined in accordance with the terms of the Director Option Agreement)
and may exercise the Option, but only in accordance with the terms of the
Director Option Agreement (but in no event later than the expiration of its
ten (10) year term). To the extent that the Option was not vested on the
date of death, and to the extent that the Optionee's estate or a person who
acquired the right to exercise such Option does not exercise such Option
(to the extent otherwise so entitled) within the time specified in the
Director Option Agreement, the Option shall terminate.

9. Non-Transferability of Options. No Option may be sold, pledged, assigned
or transferred in any manner other than by a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder ("QDRO") or by will
or the laws of descent and distribution unless and until such Option has been
exercised, or the shares underlying such Option have been issued, and all
restrictions applicable to such shares have lapsed; provided, however, an
Optionee may transfer an Option to a Permitted Transferee (as defined below)
to the extent permitted by any applicable law or regulations and subject to
the following terms and conditions:

(a) An Option transferred to a Permitted Transferee shall not be
assignable or transferable by the Permitted Transferee other than by a QDRO
or by will or the laws of descent and distribution.

(b) Any Option which is transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Option as
applicable to the original holder (other than the ability to further
transfer the Option).

23
<PAGE>

(c) The Optionee and the Permitted Transferee shall execute any and all
documents reasonably requested by the Board, including without limitation
documents to (i) confirm the status of the transferee as a Permitted
Transferee, (ii) satisfy any requirements for an exemption for the transfer
under applicable federal and state securities laws and (iii) evidence the
transfer.

(d) Shares of Common Stock acquired by a Permitted Transferee through
exercise of an Option have not been registered under the Securities Act of
1933, as amended, or any state securities act and may not be transferred,
nor will any assignee or transferee thereof be recognized as an owner of
such shares of Common Stock for any purpose, unless a registration
statement under the Securities Act of 1933, as amended, and any applicable
state securities act with respect to such shares shall then be in effect or
unless the availability of an exemption from registration with respect to
any proposed transfer or disposition of such shares shall be established to
the satisfaction of counsel for the Company.

As used in this Section 9, "Permitted Transferee" shall mean (i) one or more
of the following family members of an Optionee: spouse, former spouse, child
(whether natural or adopted), stepchild, any other lineal descendant of the
Optionee, (ii) a trust, partnership or other entity established and existing
for the sole benefit of, or under the sole control of the Optionee or one or
more of the above family members of the Optionee, or (iii) any other
transferee specifically approved by the Board after taking into account any
state or federal tax or securities laws applicable to transferable Options.

No interest or right therein shall be liable for the debts, contracts or
engagements of the holder thereof or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and
of no effect, except to the extent that such disposition is permitted by the
preceding provisions of this Section 9. Except as specifically provided in
this Section 9, an Option shall be exercised during the Optionee's lifetime
only by the Optionee or his guardian or legal representative.

10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.

(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares
subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation or the sale of substantially all of the assets of
the Company, outstanding Options may be assumed or equivalent options may
be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee
serves as a Director or a director of the Successor Corporation. Following
such assumption or substitution, if the Optionee's

24
<PAGE>

status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as
to Shares for which it would not otherwise be exercisable. Thereafter, the
Option or option shall remain exercisable in accordance with Sections 8(c)
through (e) above.

If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall
terminate.

For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares).

11. Amendment and Termination of the Plan.

(a) Amendment and Termination. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but
no amendment, alteration, suspension, or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore
made, without his or her consent. In addition, to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act (or any
applicable law or regulation), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.

(b) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated.

12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.

13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

25
<PAGE>

15. Option Agreement. Options shall be evidenced by written option agreements
in such form as the Board shall approve.

16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.

26
<PAGE>

AMENDMENT NO. 1 TO THE 1997 DIRECTOR OPTION PLAN
OF MICROSTRATEGY INCORPORATED

The first sentence of Section 3 of the 1997 Director Option Plan (the
"Plan") of MicroStrategy Incorporated is hereby amended and restated in its
entirety, subject to stockholder approval, to provide as follows:

"Subject to the provisions of Section 10 of the Plan (except as such
provisions relate to stock splits effected prior to February 16, 2000), the
maximum aggregate number of Shares which may be optioned and sold under the
Plan is 600,000 Shares of Common Stock (the "Pool")."

Adopted by the Board of Directors
on February 16, 2000

27
<PAGE>

Appendix B

MICROSTRATEGY INCORPORATED

1999 STOCK OPTION PLAN

1. Purpose

The purpose of this 1999 Stock Option Plan (the "Plan") of MicroStrategy
Incorporated, a Delaware corporation (the "Company"), is to enhance the
Company's ability to attract, retain and motivate persons who make (or are
expected to make) important contributions to the Company by providing such
persons with equity ownership opportunities and performance-based incentives
and thereby better aligning the interests of such persons with those of the
Company's stockholders. Except where the context otherwise requires, the term
"Company" shall include any of the Company's present or future subsidiary
corporations as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").

2. Eligibility

All of the Company's employees, officers, consultants and advisors (and any
individuals who have accepted an offer for employment) are eligible to be
granted options (each, an "Award") under the Plan. Each person who has been
granted an Award under the Plan shall be deemed a "Participant".

3. Administration, Delegation

(a) Administration by Board of Directors. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board shall
have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it
shall deem advisable. The Board may correct any defect, supply any omission
or reconcile any inconsistency in the Plan or any Award in the manner and
to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the
Board shall be made in the Board's sole discretion and shall be final and
binding on all persons having or claiming any interest in the Plan or in
any Award. No director or person acting pursuant to the authority delegated
by the Board shall be liable for any action or determination relating to or
under the Plan made in good faith.

(b) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of
the Company the power to make Awards and exercise such other powers under
the Plan as the Board may determine, provided that the Board shall fix the
maximum number of shares subject to Awards and the maximum number of shares
for any one Participant to be made by such executive officers.

(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All
references in the Plan to the "Board" shall mean the Board or a Committee
of the Board or the executive officer referred to in Section 3(b) to the
extent that the Board's powers or authority under the Plan have been
delegated to such Committee or executive officer.

4. Stock Available for Awards

(a) Number of Shares. Subject to adjustment under Section 6, Awards may
be made under the Plan for up to 2,500,000 shares of Class A Common Stock,
$0.001 par value per share, of the Company (the "Common Stock"). If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any
Common Stock not being issued, the unused Common Stock covered by such
Award shall again be available for the grant of Awards under the Plan,
subject, however, in the case of Incentive Stock Options (as hereinafter
defined), to any limitation required under the Code. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares
or treasury shares.

28
<PAGE>

(b) Per-Participant Limit. Subject to adjustment under Section 6, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any
Participant under the Plan shall be 500,000 per calendar year. The per-
Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the
conditions and limitations applicable to the exercise of each Option,
including conditions relating to applicable federal or state securities
laws, as it considers necessary or advisable. An Option which is not
intended to be an Incentive Stock Option (as hereinafter defined) shall be
designated a "Nonstatutory Stock Option".

(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an
"Incentive Stock Option") shall only be granted to employees of the Company
and shall be subject to and shall be construed consistently with the
requirements of Section 422 of the Code. The Company shall have no
liability to a Participant, or any other party, if an Option (or any part
thereof) which is intended to be an Incentive Stock Option is not an
Incentive Stock Option.

(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option
agreement.

(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.

(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by
any other form of notice (including electronic notice) approved by the
Board together with payment in full as specified in Section 5(f) for the
number of shares for which the Option is exercised.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly
to the Company sufficient funds to pay the exercise price or (ii)
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price;

(3) to the extent permitted by the Board, in its sole discretion, by
delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by (or in a manner approved by)
the Board in good faith ("Fair Market Value"), provided (i) such method
of payment is then permitted under applicable law and (ii) such Common
Stock was owned by the Participant at least six months prior to such
delivery;

(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on
terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

(g) Buyout Provisions. The Board may at any time offer to purchase for a
payment in cash, promissory note or shares of Common Stock, an Option
previously granted, based on such terms and conditions as the Board shall
establish and communicate to the Participant at the time that such offer is
made.

29
<PAGE>

6. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock
other than a normal cash dividend, (i) the number and class of securities
available under this Plan, (ii) the per-Participant limit set forth in
Section 4(b), (iii) the number and class of securities and exercise price
per share subject to each outstanding Option, and (iv) the terms of each
other outstanding Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board
shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 6(a) applies and Section 6(c)
also applies to any event, Section 6(c) shall be applicable to such event,
and this Section 6(a) shall not be applicable. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock subject to an Award.

(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior
to the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent
exercised before such effective date. The Board may specify the effect of a
liquidation or dissolution on any Award granted under the Plan at the time
of the grant of such Award.

(1) Definition. An "Acquisition Event" shall mean:

(a) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is converted
into or exchanged for the right to receive cash, securities or other
property; or

(b) any exchange of shares of the Company for cash, securities or
other property pursuant to a statutory share exchange transaction.

(2) Effect on Options. Upon the occurrence of an Acquisition Event,
or the execution by the Company of any definitive agreement with
respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an
affiliate thereof); provided that if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or
substitute for, such Options, then the Board shall, upon written notice
to the Participants, provide that all of the then unexercised Options
will become exercisable in full as of a specified time prior to the
Acquisition Event, and will terminate immediately prior to the
occurrence of the Acquisition Event, except to the extent exercised by
the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), then the
Board may instead provide that all outstanding Options shall terminate
upon consummation of such Acquisition Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount
(if any) by which (A) the Acquisition Price multiplied by the number of
shares of Common Stock subject to the outstanding Options held by such
Participant (whether or not exercisable), exceeds (B) the aggregate
exercise price of such Options. For purposes hereof, an Option shall be
considered to be assumed if, following consummation of the Acquisition
Event, the Option confers the right to purchase, for each share of
Common Stock subject to the Option immediately prior to the
consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition
Event by holders of Common Stock for each share of Common Stock held
immediately prior to the consummation of the Acquisition Event (and if
holders were offered a choice of

30
<PAGE>

consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however,
that if the consideration received as a result of the Acquisition Event
is not solely common stock of the acquiring or succeeding corporation
(or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to
be received upon the exercise of Options to consist solely of common
stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration
received by holders of outstanding shares of Common Stock as a result
of the Acquisition Event.

7. General Provisions Applicable to Awards

(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution, and, during the life of the Participant,
shall be exercisable only by the Participant. References to a Participant,
to the extent relevant in the context, shall include references to
authorized transferees.

(b) Documentation. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.

(c) Board Discretion. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award.
The terms of each Award need not be identical, and the Board need not treat
Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or
other change in the employment or other status of a Participant and the
extent to which, and the period during which, the Participant, the
Participant's legal representative, conservator or guardian may exercise
rights under the Award.

(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in connection with Awards to such Participant no later
than the date of the event creating the tax liability. Except as the Board
may otherwise provide in an Award, when the Common Stock is registered
under the Exchange Act, Participants may, to the extent then permitted
under applicable law, satisfy such tax obligations in whole or in part by
delivery of shares of Common Stock, including shares retained from the
Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.

(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor
another Award of the same or a different type, changing the date of
exercise or realization, and converting an Incentive Stock Option to a
Nonstatutory Stock Option, provided that the Participant's consent to such
action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant.

(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal
matters in connection with the issuance and delivery of such shares have
been satisfied, including any applicable securities laws and any applicable
stock exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such representations
or agreements as the Company may consider appropriate to satisfy the
requirements of any applicable laws, rules or regulations.

(h) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as
the case may be.

31
<PAGE>

8. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not
be construed as giving a Participant the right to continued employment or
any other relationship with the Company. The Company expressly reserves the
right at any time to dismiss or otherwise terminate its relationship with a
Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant shall have any rights as a stockholder with respect
to any shares of Common Stock to be distributed with respect to an Award
until becoming the record holder of such shares. Notwithstanding the
foregoing, in the event the Company effects a split of the Common Stock by
means of a stock dividend and the exercise price of and the number of
shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date
and the distribution date for such stock dividend shall be entitled to
receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise, notwithstanding
the fact that such shares were not outstanding as of the close of business
on the record date for such stock dividend.

(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated by the Board as subject to Section 162(m) of the
Code by the Board shall become exercisable, vested or realizable, as
applicable to such Award, unless and until the Plan has been approved by
the Company's stockholders to the extent stockholder approval is required
by Section 162(m) (including the vote required under Section 162(m)). No
Awards shall be granted under the Plan after the completion of ten years
from the earlier of (i) the date on which the Plan was adopted by the Board
or (ii) the date the Plan was approved by the Company's stockholders, but
Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted after the date of such
amendment to a Participant designated as subject to Section 162(m) by the
Board shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the Plan was required to grant
such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).

(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws
of the State of Delaware, without regard to any applicable conflicts of
law.

32
<PAGE>

AMENDMENT NO. 1 TO THE 1999 STOCK OPTION PLAN

OF MICROSTRATEGY INCORPORATED

The first sentence of Section 4(a) of the 1999 Stock Option Plan (the
"Plan") of MicroStrategy Incorporated is hereby amended and restated in its
entirety, subject to stockholder approval, to provide as follows:

"Subject to adjustment under Section 6 (except as such provisions relate to
stock splits effected prior to May 11, 2000), Awards may be made under the
Plan for up to 11,000,000 shares of Class A Common Stock, $0.001 par value per
share, of the Company (the "Common Stock")."

Adopted by the Board of Directors

on May 11, 2000

33
<PAGE>

Appendix C
----------
PROXY MICROSTRATEGY INCORPORATED PROXY

Proxy for the Annual Meeting of Stockholders to be held June 19, 2000

This Proxy is Solicited on Behalf of the Board of Directors of the Company

The undersigned, revoking all prior proxies, hereby appoint(s) Michael J.
Saylor, Mark S. Lynch and Jonathan F. Klein, and each of them, with full power
of substitution, as proxies to represent and vote, as designated herein, all
shares of stock of MicroStrategy Incorporated (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Hilton Washington
Dulles Airport, 13869 Park Center Road, Herndon, VA 22071 on Monday, June 19,
2000 at 8:30 a.m., local time, and at any adjournment thereof (the "Meeting").

In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Meeting.

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy
will be voted FOR all proposals. Attendance of the undersigned at the Meeting
will not be deemed to revoke this proxy unless the undersigned shall revoke this
proxy in writing or shall deliver a subsequently dated proxy to the Secretary of
the Company or shall vote in person at the Meeting.

PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE.

<TABLE>
<S> <C> <C> <C> <C>
1. To elect the following six (6) directors 2. Approval of an amendment to the Company's 1997 For Against Abstain
(except as marked below) for the ensuing year. Director Option Plan, as set forth in the
accompanying Proxy Statement. [ ] [ ] [ ]
Nominees: Michael J. Saylor, Sanju K. Bansal,
Ralph S. Terkowitz, Frank A. Ingari, Jonathan 3. Approval of an amendment to the Company's 1999 [ ] [ ] [ ]
J. Ledecky and John W. Sidgmore Stock Option Plan, as set forth in the
accompanying Proxy Statement.
[ ] FOR all nominees [ ] WITHHOLD authority
(except as marked below) to vote for all 4. Approval of an amendment to the Company's
nominees Amended and Restated Certificate of Incorporation [ ] [ ] [ ]
to increase the number of authorized Class A
Common Stock and Class B Common Stock,
FOR all nominees except the following nominee(s): as set forth in the accompanying Proxy Statement.

5. Ratification of selection of [ ] [ ] [ ]
____________________________________________ PricewaterhouseCoopers LLP as the Company's
independent public accountants for the current
____________________________________________ fiscal year.

NOTE: Please sign exactly as name appears hereon.
If the stock is registered in the names of two or
more persons, each should sign. Executors,
administrators, trustees, guardians, attorneys and
corporate officers should add their titles.

Signature:____________________ Date:_________ Signature:____________________ Date:_________
</TABLE>