<PAGE> 1
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(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:
------------------------------------------------------------------------
<PAGE> 2
[LOGO] GARTNERGROUP
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Gartner Group,
Inc., a Delaware corporation (the "Company"), will be held on Tuesday, January
20, 1998, at 4:00 P.M., local time, at the Gartner Group World Headquarters, 56
Top Gallant Road, Stamford, Connecticut 06904 for the following purposes:
1. To elect seven directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the 1998 fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on December 5, 1997
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person if he or she has returned a proxy.
By Order of the Board of Directors
/s/ John F. Halligan
John F. Halligan
Executive Vice President, Chief Financial
Officer, Treasurer and Corporate Secretary
Stamford, Connecticut
December 12, 1997
------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED
TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
------------------------------------------------------------------------------
<PAGE> 3
GARTNER GROUP, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1998
The enclosed Proxy is solicited on behalf of the Board of Directors of
Gartner Group, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held on Tuesday, January 20, 1998, at 4:00 p.m. local time,
or at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at The Gartner Group World Headquarters, 56 Top Gallant Road, Stamford,
Connecticut 06904.
The proxy solicitation materials were mailed on or about December 12, 1997
to all stockholders of record on December 5, 1997.
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to the Secretary of the Company,
Gartner Group, Inc., P.O. Box 10212, 56 Top Gallant Road, Stamford, Connecticut
06904, written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.
RECORD DATE AND PRINCIPAL STOCK OWNERSHIP
Stockholders of record at the close of business on December 5, 1997 are
entitled to vote at the Annual Meeting. The issued and outstanding stock of the
Company on December 5, 1997 consisted of 97,967,634 shares of Class A Common
Stock, par value $0.0005 per share (the "Class A Common Stock").
VOTING AND SOLICITATION
Proxies properly executed, duly returned to the Company and not revoked,
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this proxy is properly
presented for action at the meeting, the persons named in the enclosed form of
proxy will have discretionary authority to vote according to their best
judgment.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on the other
proposal and will be counted as present for the purposes of determining the
existence of a quorum regarding such item.
Each share of Class A Common Stock is entitled to one vote per share. The
affirmative vote of a majority of the shares of Class A Common Stock present in
person or represented by proxy is required for the approval of any matters voted
upon at the meeting or any adjournments thereof, other than the election of
directors. The election of directors will require the affirmative vote of a
plurality of the shares of Class A Common Stock present in person or represented
by proxy. A quorum of stockholders is constituted by the presence, in person or
by proxy, of holders of record of Class A Common Stock representing a majority
of the aggregate number of votes entitled to be cast. Abstentions and broker
non-votes will be considered present and have the effect of a negative vote,
except that with respect to the election of directors, abstentions and broker
non-votes will not be considered in determining whether nominees have received
the vote of a plurality.
The expense of the solicitation of proxies for this meeting, including the
cost of the mailing, will be borne by the Company. The Company requests that
brokerage houses and other custodians, nominees and fiduciaries forward
materials to the beneficial owners of shares of common stock held of record by
such persons and will reimburse such broker and other fiduciaries for their
reasonable out-of-pocket expenses incurred when the solicitation materials are
forwarded.
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<PAGE> 4
The Company has retained Boston EquiServe, its transfer agent, at an
estimated cost of $7,500, to assist in the Company's solicitation of proxies
from brokers, nominees, institutions and individuals.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting must be received by the Secretary, Gartner Group, Inc., P.O. Box 10212,
56 Top Gallant Road, Stamford, Connecticut 06904 no later than August 13, 1998.
PROPOSAL ONE:
ELECTION OF DIRECTORS
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
A board of seven directors is to be elected at the Annual Meeting of
Stockholders. The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting entitled to vote
in the election of directors. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the Company's seven nominees named
below, all of whom are presently directors of the Company. If any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting of Stockholders, the proxies will be voted for the nominee designated by
the present Board of Directors to fill the vacancy. All nominees have indicated
their willingness to serve. The term of office of each person elected as a
director will continue until the next Annual Meeting of Stockholders or until a
successor has been elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW:
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Manuel A. Fernandez 51 Chairman of the Board of Directors and Chief
Executive Officer of the Company
William O. Grabe 59 General Partner of General Atlantic Partners
John P. Imlay 61 Chairman, Imlay Investments, Inc.
Max D. Hopper 63 Retired Chairman of SABRE Technology Group
Stephen G. Pagliuca 42 Managing Partner, Bain Capital Inc.
Dennis G. Sisco 51 President of Storm Ridge Capital
Robert E. Weissman 57 Chairman and Chief Executive Officer,
Cognizant Corporation
There is no arrangement or understanding between any nominee and any other
person pursuant to which the nominee was selected as a nominee, except as
follows. Messrs. Imlay and Weissman are designees of Cognizant Corporation
("Cognizant"), a spin-off of The Dun & Bradstreet Corporation ("D&B"). See
"Certain Relationships and Transactions - Relationship with The Dun & Bradstreet
Corporation and Cognizant Corporation". Also, Mr. Fernandez' Employee Agreement
provides that he will be included on the Company's slate of nominees to be
elected to the Board. See "Executive Compensation - Employment Agreement". There
is no family relationship among any directors or executive officers of the
Company.
Mr. Fernandez has served as Chairman of the Board since April 1996, as
Chief Executive Officer since April 1991, a Director since January 1991, and as
President until September 30, 1997. Prior to joining the Company, he was
President and Chief Executive Officer of Dataquest, Inc. Before joining
Dataquest, Mr. Fernandez was President and Chief Executive Officer of Gavilan
Computer Corporation, a laptop computer manufacturer, and Zilog, Incorporated, a
semiconductor manufacturing company. Mr. Fernandez holds a bachelors degree in
electrical engineering from the University of Florida, and completed
post-graduate work in solid state engineering at the University of Florida and
in business administration at the Florida Institute of Technology. Mr. Fernandez
is also on the board of directors of Brunswick Corporation, Getty Communications
P.L.C., SACIA (The Business Council of Southwestern Connecticut) and Norwalk
Community-Technical College (Norwalk, Connecticut).
Mr. Grabe has served as a Director of the Company since April 1993. He has
been a General Partner of General Atlantic Partners, an investment firm, since
January 1994. Prior to that, he was a Special Partner of General Atlantic
Partners beginning in April 1993. From February 1984 until March 1992, Mr. Grabe
was a corporate officer at IBM Corporation. Mr. Grabe is also a director of
Compuware Corporation, a computer systems software corporation; Centura Software
Corporation, a client-server software corporation; Integrated Systems Solutions
Corporation, a wholly-owned subsidiary of IBM; CODA Group, a financial
application software company; MARCAM Corporation, an enterprise resource
planning software provider for process manufacturing companies; and BAAN Company
N.V., an
3
<PAGE> 5
enterprise resource planning system provider for open systems and client-server
environments. He is also on the board of several privately held companies in the
computer software and services industry. Mr. Grabe holds a B.S. degree in
Engineering from New York University and an M.B.A. degree from the University of
California at Los Angeles.
Mr. Imlay has served as a Director of the Company since April 1993. Mr.
Imlay is a designee of Cognizant and has served on the board of directors of
Cognizant since October 1996. He was Chairman of Dun & Bradstreet Software
Services, Inc., a software company, from March 1990 until November 1996. Prior
to that he was Chairman and Chief Executive Officer of Management Science
America, Inc., a predecessor of Dun & Bradstreet Software Services, Inc., until
the company was purchased by D&B. He presently is Chairman of Imlay Investments,
Inc., and serves on the board of the Atlanta Falcons, Metromedia International
Group, Inc. and several other organizations. Mr. Imlay holds a bachelors degree
in Industrial Management from the Georgia Institute of Technology.
Mr. Hopper has served as a Director of the Company since January 1994. In
1995, he founded Max D. Hopper Associates, Inc., a consulting firm specializing
in creating benefits from the strategic use of advanced information systems. He
is the retired chairman of the SABRE Technology Group, and served as Senior Vice
President for American Airlines, both units of AMR Corporation. Mr. Hopper
serves on the board of directors of Payless Cashways Inc., VTEL, Omniport,
Scopus, USData, Computer Language Research and Worldtalk Corporation. Mr.
Hopper holds a bachelors degree in Mathematics from the University of Houston.
Mr. Pagliuca has been a Director of the Company since July 1990. He was a
founding partner of Information Partners Capital Fund, L.P. (the "Fund") and has
served as its Managing Partner since 1989. He is also a Managing Director of
Bain Capital, Inc., an investment firm with which the Fund is associated. Prior
to 1989, Mr. Pagliuca was a partner at Bain & Company, where he managed client
relationships in the information services, software, credit services and health
care industries. He is on the board of directors of Vivra, Dade Behring,
Blueridge, Jostens, Coram, Medical Specialties, Physio Control, Wesley Jessen
and PQC. Mr. Pagliuca is a certified public accountant, holds a B.A degree from
Duke University and an M.B.A. degree from the Harvard Business School.
Mr. Sisco has been a Director of the Company since October 1990. Since
March 1997 he has been President, Storm Ridge Capital, a venture capital firm.
From 1988 to February 1997, he was employed by D&B and Cognizant in various
capacities, most recently as Executive Vice President with responsibility for
several operating units as well as business development. Mr. Sisco also serves
as a director of Aspect Development, Inc., Oasis Healthcare Holdings and TSI
International Software Ltd.
Mr. Weissman has been a Director of the Company since April 1997 and is a
designee of Cognizant. He was elected Chairman and Chief Executive Officer of
Cognizant in July, 1996. Previously, Mr. Weissman was Chairman and Chief
Executive Officer of D&B from April 1995 until October 1996, after serving as
President and Chief Operating Officer since January 1985. He is a Director of
State Street Boston Corporation and Vice Chairman of the Board of Trustees of
Babson College. Mr. Weissman graduated from Babson College in 1964 with a
degree in business administration.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven meetings during fiscal
1997.
The Audit Committee, which currently consists of Messrs. Hopper, Imlay and
Weissman, held three meetings during fiscal 1997. The Audit Committee assists
the Board in fulfilling its oversight responsibilities by meeting regularly with
the Company's independent auditors and operating and financial management. The
Audit Committee reviews the audit performed by the Company's independent
auditors and reports the results of such audit to the Board. The Audit Committee
reviews the Company's annual financial statements and all material financial
reports provided to the stockholders; reviews the Company's internal auditing,
accounting and financial controls; and reviews the Company's policies governing
compliance with laws, regulations, rules of ethics and conflicts of interest.
The Compensation Committee, which currently consists of Messrs. Grabe,
Pagliuca and Sisco, held three meetings during fiscal 1997. The Compensation
Committee makes recommendations to the Board of Directors regarding the
Company's executive compensation policies, establishes and approves salaries
paid to the executive officers of the Company and administers the Company's
Employee Stock Purchase Plan, 1991 Stock Option Plan, 1994 Long Term Stock
Option Plan and 1996 Long Term Stock Option Plan, in which capacity the
Compensation Committee reviews and approves all stock option grants to
employees.
The Corporate Governance Committee, which currently consists of Messrs.
Grabe, Hopper and Pagliuca, held one meeting during fiscal 1997. The Corporate
Governance Committee reviews issues regarding the governance of the Company.
4
<PAGE> 6
The Board of Directors currently has no nominating committee or committee
performing a similar function.
No director attended fewer than 75 percent of the aggregate of (i) the
total number of meetings of the Board of Directors held during fiscal 1997 and
(ii) the total number of meetings held by all committees of the Board of
Directors during fiscal 1997 on which such director served.
EXECUTIVE OFFICERS
Listed below are the executive officers of the Company as of September 30,
1997:
NAMES AGE TITLE
----- --- -----
Manuel A. Fernandez 51 President, Chairman of the Board and Chief
Executive Officer
William T. Clifford 51 President, Gartner Group Research,
Executive Vice President, Operations
E. Follett Carter 55 President, Gartner Group Distribution,
Executive Vice President, Sales and
Marketing and Chief Marketing Officer
John F. Halligan 50 Executive Vice President, Chief
Financial Officer Treasurer and Corporate
Secretary
Michael D. Fleisher 32 Executive Vice President and President,
Gartner Group Emerging Businesses
Mr. Fernandez has served as a Director of the Company since January 1991,
as Chief Executive officer since April 1991, and as Chairman of the Board since
April 1996. He was President of the Company from January 1991 until September
30, 1997. For more information on Mr. Fernandez' business experience, see the
description provided above in "Election of Directors."
Mr. Clifford has been President, Gartner Group Research since October
1995, Chief Operating Officer of the Company since April 1995 and Executive Vice
President, Operations of the Company since October 1993. On October 1, 1997,
Mr. Clifford was promoted to President of the Company. Prior to joining Gartner
Group, Mr. Clifford served as President, Central Division and Senior IT
Executive for Product Development for ADP Corp., a payroll service provider.
Previously, Mr. Clifford was Executive Vice President and Chief Operating
Officer of Applied Data Research, a supplier of computer software. Mr. Clifford
holds a bachelors degree in economics from the University of Connecticut.
Mr. Carter has been with the Company since November 1988 and has been
President, Gartner Group Distribution since October 1995, Chief Marketing
Officer of the Company since April 1995 and Executive Vice President, Sales and
Marketing since July 1993. From April 1991 to July 1993, he was Senior Vice
President, Sales and Marketing; from May 1990 to March 1991, he was Vice
President, Sales; and from November 1988 to April 1990, he was Vice President
and Service Director of Electronic Output Strategies. Mr. Carter holds a
bachelors degree from Case Western Reserve and an M.B.A. degree in finance and
marketing from Columbia University.
Mr. Halligan has been Executive Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary since September 1991. Prior to joining
Gartner Group, Mr. Halligan spent more than 22 years at General Electric Company
in a variety of financial management roles, including Staff Vice President,
Finance at GE Communications and Services from May 1988 to September 1991. Mr.
Halligan holds a bachelors degree in economics from Providence College. Mr.
Halligan currently serves on the board of directors of the Stamford Chapter of
the American Red Cross.
Mr. Fleisher has been Executive Vice President of the Company and
President, Gartner Group Emerging Businesses since November 1996. From October
1995 to October 1996, he was Senior Vice President, Emerging Businesses; from
October 1994 to October 1995, he was Vice President Worldwide Events; and from
April 1993 to October 1995 he was Vice President of Business Development. Mr.
Fleisher's previous business experience includes working as an associate at
Information Partners, a venture capital firm, from 1990 to 1993. Mr. Fleisher
holds a bachelors degree in economics from Wharton School of Business.
5
<PAGE> 7
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1997 were Messrs.
Grabe, Pagliuca and Sisco, each of whom is a non-employee director. Mr. Imlay
and Mr. Weissman serve on the board of directors of Cognizant and are designees
of Cognizant to the Company's Board. Mr. Imlay is also a member of the
Compensation Committee of Cognizant.
COMPENSATION OF DIRECTORS
Except for Mr. Weissman, each non-employee director of the Company receives
an annual retainer of $10,000 plus $1,000 for each Board meeting attended in
person. In addition, each non-employee director of a standing committee of the
Board receives an additional annual retainer fee of $3,000 and $350 for each
committee meeting attended. Non-employee directors, except Mr. Weissman, also
receive options under the Company's 1993 Director Stock Option Plan. Pursuant to
the Plan, each non-employee director is automatically granted an option to
purchase 15,000 shares of Class A Common Stock on the date the individual first
becomes a director and is automatically granted an option to purchase 3,000
shares of Class A Common Stock on March 1 of each year, if the individual has
been a non-employee director for at least six months. Options are granted at
100% of the fair market value of the Class A Common Stock on the date of the
grant. Each option becomes exercisable in three equal installments on each of
the first three anniversaries of the date of grant. Each option has a term of
five years. Except in the case of death or disability, each option terminates
ninety days after the optionee ceases to be a non-employee director, but is
exercisable during such 90- day period only to the extent exercisable at the
date such status ceases.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, as to the Chief Executive Officer and each of
the four other most highly compensated executive officers during the 1997 fiscal
year (collectively, the "Named Executive Officers"), information concerning
compensation paid for services to the Company in all capacities during the
fiscal year ended September 30, 1997, as well as total compensation paid to the
Named Executive Officers for the Company's previous two fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
---------------------
COMPENSATION (1) AWARDS
---------------------------
FISCAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) UNDERLYING OPTIONS
- -------------------------------------------------------------------- -------- ------------ ------------- ---------------------
<S> <C> <C> <C> <C>
Manuel A. Fernandez 1997 $350,000 $700,000 108,500
Chairman of the Board of Directors, President and 1996 $270,000 $700,000 45,000
Chief Executive Officer 1995 $255,000 $552,000 160,000
William T. Clifford 1997 $250,000 $300,000 77,500
President, Gartner Group Research, Executive Vice 1996 $220,000 $260,000 10,000
President, Operations and Chief Operating Officer 1995 $220,000 $160,000 120,000
E. Follett Carter 1997 $220,000 $240,000 77,500
President, Gartner Group Distribution, Executive Vice 1996 $200,000 $320,000 27,000
President, Sales and Marketing and Chief Marketing Officer 1995 $190,000 $234,000 120,000
John F. Halligan 1997 $215,000 $240,000 77,500
Executive Vice President, Chief Financial Officer, 1996 $185,000 $250,000 18,000
Treasurer and Corporate Secretary 1995 $185,000 $190,000 120,000
Michael D. Fleisher 1997 $200,000 $180,000 77,500
Executive Vice President and President Gartner Group 1996 $148,640 $200,000 10,000
Emerging Businesses 1995 $140,000 $ 80,000 60,000
</TABLE>
- ---------------------------------
(1) Excludes certain perquisites and other personal benefits, such as car
allowances, life insurance premiums, and savings and investment plan
contributions by the Company. These amounts, in the aggregate, did not
exceed the lesser of $50,000 or 10 percent of the total annual salary and
bonus for such executive officer.
(2) Includes bonus awards earned for performance in the fiscal year noted even
though such amounts are payable in the subsequent year. Excludes bonus
awards paid in the fiscal year noted but earned in prior years.
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<PAGE> 8
OPTIONS GRANTED AND OPTIONS EXERCISED IN THE LAST FISCAL YEAR
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during the last fiscal year, as
well as options held by such officers as of September 30, 1997, the last day of
the Company's 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
------------------------------------------------------------------------- -------------------------
NUMBER OF % OF TOTAL OPTIONS EXERCISE OR
SECURITIES GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME UNDERLYING OPTIONS IN FISCAL YEAR PER SHARE DATE 5% 10%
- ----------------------- ------------------ --------------------- ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Manuel A. Fernandez (1) 35,000 0.7380 $ 35.25 10/9/02 $761,646 $1,943,584
(2) 35,000 0.7380 $ 20.86 2/23/03 $866,217 $1,811,768
(1) 38,500 0.8188 $ 25.15 4/23/03 $466,272 $1,316,002
William T. Clifford (1) 25,000 0.5271 $ 35.25 10/9/02 $544,033 $1,388,275
(2) 25,000 0.5271 $ 20.86 2/23/03 $618,726 $1,294,120
(1) 27,500 0.5798 $ 25.15 4/23/03 $333,052 $ 940,001
E. Follett Carter (1) 25,000 0.5271 $ 35.25 10/9/02 $544,033 $1,388,275
(2) 25,000 0.5271 $ 20.86 2/23/03 $618,726 $1,294,120
(1) 27,500 0.5798 $ 25.15 4/23/03 $333,052 $ 940,001
John F. Halligan (1) 25,000 0.5271 $ 35.25 10/9/02 $544,033 $1,388,275
(2) 25,000 0.5271 $ 20.86 2/23/03 $618,726 $1,294,120
(1) 27,500 0.5798 $ 25.15 4/23/03 $333,052 $ 940,001
Michael D. Fleisher (1) 25,000 0.5271 $ 35.25 10/9/02 $544,033 $1,388,275
(2) 25,000 0.5271 $ 20.86 2/23/03 $618,726 $1,294,120
(1) 27,500 0.5798 $ 25.15 4/23/03 $333,052 $ 940,001
</TABLE>
- ------------
(1) Each of these options was granted pursuant to the Company's 1991 Stock
Option Plan and is subject to the terms of such plan. The options become
exercisable in three equal installments on each of the first three
anniversaries of the date of grant.
(2) Each of these options was granted pursuant to the Company's 1996 Long Term
Stock Option Plan and is subject to the terms of such plan. The options
become fully exercisable six years following the date of grant.
Exercisability will accelerate if certain financial performance targets
determined by the Board are achieved. If targets for the first year
following the date of grant are met, 25% of the options become exercisable
on the third anniversary of the date of grant; if they are met for both the
first and second years following the date of grant, a second 25% become
exercisable on the fourth anniversary of the date of grant; if they are met
for all three years following the date of grant, a third 25% become
exercisable on the fifth anniversary of the date of grant and the final 25%
become exercisable on the sixth anniversary of the date of grant.
(3) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or "option spreads" that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option terms. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Commission
and do not represent the Company's estimate or projection of future
increases in the price of its Common Stock.
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<PAGE> 9
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ----------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Manuel A. Fernandez 850,000 $20,286,750 238,150 315,350 $6,391,000 $5,213,659
William T. Clifford 65,000 $ 1,374,642 8,020 332,000 $ 125,025 $6,794,550
E. Follett Carter 155,000 $ 3,681,722 51,890 257,610 $1,167,492 $4,643,584
John F. Halligan 136,000 $ 3,496,722 96,060 251,440 $2,490,594 $4,499,259
Michael D. Fleisher 36,800 $ 997,114 11,400 188,900 $ 258,574 $3,062,991
</TABLE>
- ------------------
(1) The values for "in-the-money" options represent the difference between the
exercise price of the options and the closing price of the Company's Common
Stock on September 30, 1997, which was $30.00 per share.
EMPLOYEE BENEFIT PLANS
1991 Stock Option Plan. Each Named Executive Officer is entitled to
participate in the Company's 1991 Stock Option Plan (the "1991 Option Plan").
The 1991 Option Plan was adopted by the Board of Directors in March 1991 and
approved by the stockholders in April 1991. A total of 22,800,000 shares of
Class A Common Stock has been reserved for issuance under the 1991 Option Plan.
Long Term Stock Option Plan. Each Named Executive Officer is entitled to
participate in the Company's Long Term Stock Option Plan (the "1994 Long Term
Plan"). The 1994 Long Term Plan was adopted by the Board of Directors in October
1994. A total of 7,200,000 shares of Class A Common Stock has been reserved for
issuance under the 1994 Long Term Plan.
1996 Long Term Stock Option Plan. Each Named Executive Officer is entitled
to participate in the Company's 1996 Long Term Stock Option Plan (the "1996 Long
Term Plan"). The 1996 Long Term Plan was adopted by the Board of Directors in
October 1996. A total of 1,800,000 shares of Class A Common Stock has been
reserved for issuance under the 1996 Long Term Plan.
Employee Stock Purchase Plan. Each Named Executive Officer is entitled to
participate in the Company's Employee Stock Purchase Plan (the "Purchase Plan").
The Purchase Plan was adopted by the stockholders in February 1993. A total of
4,000,000 shares of Class A Common Stock has been reserved for issuance under
the Purchase Plan.
EMPLOYMENT AGREEMENT
Mr. Fernandez entered into an employment agreement with the Company
effective April 1, 1997 (the "Agreement"). Under the Agreement, Mr. Fernandez
will continue to serve as Chairman and Chief Executive Officer of the Company
through October 1, 1999, unless extended by consent of the parties. During the
term of the Agreement, Mr. Fernandez will be included on the Company's slate of
nominees to be elected to the Board of Directors. In October 1997, the parties
agreed to extend the Agreement to October 1, 2000.
The Agreement provides for a base salary of $350,000 for fiscal 1997 and
thereafter it is subject to annual adjustments by the Board or the Compensation
Committee, in their sole discretion. Mr. Fernandez is entitled to participate in
the Company's executive bonus program and the annual target bonus will be
established by the Board or the Compensation Committee in their discretion and
shall be payable based on achievement of specified Company or individual
objectives. The target bonus for fiscal year 1997 had been set prior to entering
the Agreement.
8
<PAGE> 10
Mr. Fernandez' employment is at will and may be terminated by him or the
Company upon sixty days' notice. If, during the term of the Agreement, the
Company terminates the employment of Mr. Fernandez involuntarily without
Business Reasons (as defined) or if a Constructive Termination (as defined)
occurs, he will be entitled to receive his salary for two years, 100% of his
target bonus for the fiscal year in which the termination occurs, a pro rata
share (based on the proportion of the year during which he was employed) of the
bonus that would have been payable in excess of the target bonus for the year in
which the termination occurs, 100% of the target bonus for the fiscal year
following termination, acceleration of vesting of all outstanding stock options
and group health benefits until age 55. Payments of salary and bonus will cease
if Mr. Fernandez violates the terms of the Non-Competition Agreement contained
in the Agreement during the two years following termination. Within six months
of a Change of Control (as defined), Mr. Fernandez may voluntarily resign and he
will be entitled to receive the same benefits, except that if he violates the
terms of the Non-Competition Agreement, he will be required to repay the Company
any amounts received as salary or bonus with respect to any period following the
termination of his employment. If Mr. Fernandez voluntarily terminates his
employment, or if the Company terminates it for Business Reasons, he will not
receive any salary or bonus thereafter.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of William O.
Grabe, Stephen G. Pagliuca and Dennis G. Sisco, none of whom is an employee of
the Company. The Board has delegated to the Compensation Committee the
responsibility for establishing and administering the Company's executive
compensation plans, subject to Board approval of major new compensation programs
and the Chief Executive Officer's compensation. In discharging these
responsibilities, the Committee consults with outside compensation consultants,
attorneys and other specialists.
The Company's compensation philosophy is that cash compensation should be
substantially linked to the short-term performance of the Company and that
longer-term incentives, such as stock options and stock ownership, should be
aligned with the Company's objective to enhance stockholder value over the long
term. The Company believes that the use of stock options and stock ownership
links the interest of officers and employees of the Company to the interest of
the stockholders. In addition, the Compensation Committee believes that the
total compensation package must be competitive with other companies in the
industry to ensure that the Company can continue to attract, retain and motivate
key executives who are critical to the long-term success of the Company.
Compensation for the Company's executive officers consists of three
principal components: base salary, cash bonuses and stock options.
Base Salary. The base salaries of executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience and performance of the individual, with reference to the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions based on the Compensation Committee's periodic surveys of
the industry.
Cash Bonuses. The Company's executive cash bonus plan is designed to reward
executive officers for the financial performance of the Company during the year.
Under the plan, cash bonuses are determined based upon the Company's achievement
against specified financial performance objectives, as well as the executive
officer's achievement of individual performance objectives. This plan emphasizes
the Compensation Committee's belief that, when the Company is successful, the
executives should be appropriately compensated. Conversely, if the Company is
not profitable, no bonuses are paid absent extraordinary circumstances. Each
individual executive officer's portion of the total bonus pool is determined by
a formula that is specified at the start of the fiscal year based on the
executive's base salary and the Committee's assessment of the executive's
contribution to the Company. In addition to cash bonuses, the Company has a
Profit Sharing Plan under which a specified percentage of operating profit is
set aside for equal distribution among all employees, including executives.
Stock Options. The principal equity compensation components of executive
compensation are options granted under the Company's stock option programs.
Stock options are generally granted when an executive joins the Company, with
additional options granted from time to time for promotions and performance. The
Compensation Committee believes that the stock option participation provides a
method of retention and motivation for the senior level executives of the
Company and also aligns senior management's objectives with long-term stock
price appreciation. Executives are also eligible to participate in a payroll
deduction employee stock purchase plan pursuant to which stock may be purchased
at 85 percent of the lower of the closing sale price for the Class A Common
Stock reported on the National Market System at the beginning or end of each
six-month offering (up to a maximum stock value of $25,000 per calendar year or
10 percent of salary, whichever is less).
CEO Compensation. Compensation of the Company's Chief Executive Officer is
determined by the Compensation Committee, subject to Board approval. Mr.
Fernandez' compensation package in 1997 consisted of the same benefits program
as other executive officers, as itemized above, including base salary, cash
bonus, stock options
9
<PAGE> 11
and other executive and employee benefit programs. Mr. Fernandez received no
material compensation or benefits in 1997 not provided to all executive
officers. Mr. Fernandez' compensation package was designed, however, to provide
for a higher proportion of his compensation to be dependent on Company
performance as compared to other executive officers. In this regard, Mr.
Fernandez received an increase in base salary in fiscal 1997 larger than he did
fiscal 1996, while continuing to provide Mr. Fernandez the opportunity to
achieve a significant bonus based upon Company performance against specified
financial objectives. The Committee has also sought to provide to Mr. Fernandez
incentive to promote long-term stockholder value, through Mr. Fernandez'
participation in the Company's stock option programs.
Other elements of executive compensation include participation in a
Company-wide life insurance program, including a supplemental life insurance
program and long-term disability insurance program. Executives are also eligible
for Company-wide medical benefits and participation in a 401(k) plan under which
the Company provides matching contributions to all employees.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
William O. Grabe
Stephen G. Pagliuca
Dennis G. Sisco
10
<PAGE> 12
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative stockholder
return as compared to the Nasdaq Stock Market Index ("Nasdaq Index") and the
Hambrecht & Quist Technology Index ("H&Q Technology Index") for the fiscal year
ended September 30, 1997. Total stockholder return assumes $100 invested on
October 5, 1993, the date of the Company's initial public offering, in the Class
A Common Stock of the Company, the stocks represented in the Nasdaq Index and
the H&Q Technology Index. Total return also assumes reinvestment of dividends;
the Company has paid no cash dividends on its Class A Common Stock.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
COMPARISON OF 48 MONTH CUMULATIVE TOTAL RETURN*
AMONG GARTNER GROUP, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
10/05/93 9/94 9/95 9/96 9/97
<S> <C> <C> <C> <C> <C>
GARTNER GROUP, INC. 100 259 595 1236 1091
NASDAQ STOCK MARKET (U.S.) 100 101 139 165 227
HAMBRECHT & QUIST TECHNOLOGY 100 116 204 224 334
</TABLE>
*$100 INVESTED ON 10/05/93 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
11
<PAGE> 13
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
auditors, to audit the financial statements of the Company for the 1998 fiscal
year. This nomination is being presented to the stockholders for ratification at
the meeting. KPMG Peat Marwick LLP has audited the Company's financial
statements since September 25, 1996. For the period September 1991 until
September 25, 1996, Price Waterhouse LLP had been the company's independent
accountants. Price Waterhouse LLP resigned due to a business relationship that
may have impaired the independence of Price Waterhouse LLP. A representative of
KPMG Peat Marwick LLP is expected to be present at the meeting, will have the
opportunity to make a statement, and is expected to be available to respond to
appropriate questions.
The report of Price Waterhouse LLP on the financial statements for the
fiscal year ended September 30, 1995 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. During the fiscal years ended September 30, 1995 and
1994, and during the subsequent interim period through September 25, 1996, there
were no disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, nor did Price Waterhouse LLP advise the Company of any concern or
circumstance relating to any such matter. In addition, the Company has had no
dispute with Price Waterhouse relating to its fees for services. The change in
accountants was approved by the Audit Committee of the Board of Directors.
During the fiscal years ended September 30, 1995 and 1994, and during the
subsequent interim period through September 25, 1996, the Company had not
consulted with KPMG Peat Marwick on any accounting or financial reporting
matters.
A representative of KPMG Peat Marwick LLP is expected to be present at the
meeting, will have the opportunity to make a statement, and is expected to be
available to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the shares represented, in person or
by proxy, and voting at the Annual Meeting (at which a quorum is present) is
required to ratify the Board's selection. If the stockholders reject the
nomination, the Board will reconsider its selection.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 1998
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, based on review of
information on file with the Securities and Exchange Commission and Company
stock records, with respect to beneficial ownership of the Company's Class A
Common Stock as of September 30, 1997, (i) by each person (or group of
affiliated persons) which is known by the Company to own beneficially more than
five percent of the Company's Class A Common Stock, (ii) by each of the
Company's directors, (iii) by each executive officer named in the Summary
Compensation Table, and (iv) by all directors and executive officers as a group.
Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where applicable.
12
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
BENEFICIAL OWNER SHARES VOTING STOCK
---------------- ------ ------------
<S> <C> <C>
Cognizant Corporation(1) 48,199,097 49.8
200 Nyala Farms Road
Westport, CT 06880
Manuel A. Fernandez(2) 1.3
1,276,767
E. Follett Carter(3) *
403,246
John F. Halligan(4) *
280,024
Michael D. Fleisher (5) *
59,922
William T. Clifford(6) *
194,340
William O. Grabe(7) *
142,000
John P. Imlay(8) *
87,000
Max D. Hopper(9) *
98,000
Stephen G. Pagliuca(10) *
42,000
Robert E. Weissman(11) --
--
Dennis G. Sisco *
5,000
All directors and executive
officers as a group (11 persons)(11)(12) 2,588,299 2.7
</TABLE>
- -----------------------------------
* Less than 1%
(1) Includes 31,641,369 shares of Class A Common Stock held by Cognizant
Corporation, 13,257,728 shares of Class A Common Stock held by Cognizant
Enterprises, Inc., 1,972,727 shares of Class A Common Stock held by Nielsen
Media Research, Inc., and 727,273 shares of Class A Common Stock held by
Cognizant Licensing Associates LP. Also includes warrants to purchase
540,000 and 60,000 shares of Class A Common Stock held by Nielsen Media
Research, Inc., and Cognizant Corporation, respectively.
(2) Includes 346,050 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1997. Includes 23,200
shares held by members of Mr. Fernandez' family, as to which he disclaims
beneficial ownership.
(3) Includes 129,990 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1997.
(4) Includes 180,560 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1997. Includes 3,400 shares
held by members of Mr. Halligan's family, as to which he disclaims
beneficial ownership.
(5) Includes 58,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(6) Includes 142,120 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1997.
(7) Includes 142,000 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1997.
(8) Includes 87,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(9) Includes 98,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(10) Includes 42,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(11) Excludes shares beneficially owned by Cognizant. Mr. Weissman, a director
of the Company, is Chairman and Chief Executive Officer of Cognizant, and
accordingly may be deemed the beneficial owner of such shares. Mr.
Weissman has disclaimed such beneficial ownership.
(12) Includes 1,825,720 shares issuable upon the exercise of stock options and
stock warrants that are exercisable within 60 days of September 30, 1997.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIP WITH THE DUN & BRADSTREET CORPORATION AND COGNIZANT CORPORATION
On November 1, 1996, D&B transferred ownership of its Class A and Class B
Common Stock of the Company to Cognizant. During fiscal 1997, the Class B Common
Stock converted to Class A Common Stock. Cognizant is a spin-off of D&B and is
an independent public company. Cognizant management has stated that it intends
to continue its share ownership and level of management consistent with that of
D&B prior to the transfer.
In connection with its acquisition of the Company's stock, D&B and the
Company entered into a Registration Rights Agreement which entitles Cognizant,
as successor to D&B, to certain rights with respect to the registration under
the Securities Act of 1933 (the "Act") of its 47,419,105 shares of Class A
Common Stock. The Registration Rights Agreement provides that if the Company
proposes to register any of its securities under the Act either for its own
account or the account of other security holders, Cognizant and one other
stockholder are each entitled to notice of such registration and entitled to
include its shares of Common Stock there; provided, among other conditions, that
the underwriters of such offering have the right to limit the number of shares
included in such registration in the event of marketing limitations. In
addition, the registration rights holders, on not more than two occasions, may
require the Company to file a registration statement under the Act with respect
to its shares and the Company is required to use its best efforts to effect such
registration, subject to certain conditions and limitations. The registration
rights holders may also require the Company to register all or a portion of
their shares subject to the registration rights on Form S-3, subject to certain
conditions and limitations.
13
<PAGE> 15
Cognizant has advised the Company that Cognizant intends to allow the
Company to continue to operate as an independent company. Cognizant believes
that it can promote value on behalf of its stockholders through significant
ownership of stock in independently managed, emerging growth companies within
industries strategically significant to Cognizant's business. Cognizant believes
that these companies can prosper from the combination of an entrepreneurial
management team, with the capability and motivation to anticipate and respond
quickly to market changes, and the broad experience and market perspective which
Cognizant can offer.
Cognizant currently has two representatives on the Board and has indicated
that it does not intend to increase its Board representation in the foreseeable
future. There can be no assurances, however, that changing business conditions
or other factors will not cause Cognizant to assess its ownership interest and
seek a greater representation on the Board.
As a result of its share ownership, Cognizant may be deemed to have control
over the management and affairs of the Company. Cognizant's significant
ownership of the Company may have the effect of making certain transactions more
difficult or impossible to consummate without the support of Cognizant,
including proxy contests, mergers involving the Company, tender offers,
open-market purchase programs or other purchases of Common Stock that could give
stockholders of the Company the opportunity to realize a premium over the
then-prevailing market price for their shares of Common Stock. Moreover,
Cognizant's voting control could preclude or discourage a competitive bid in the
event Cognizant bids to acquire the remaining shares outstanding. Accordingly,
Cognizant may be able to effect an uncontested bid at a lower price to the
Company's stockholders than if Cognizant did not hold a substantial equity
interest in the Company. Under certain circumstances, Delaware law may impose
certain duties upon Cognizant as a controlling stockholder of the Company.
LOANS TO EXECUTIVE OFFICERS OF THE COMPANY
On June 4, 1997, with Board of Directors approval, the Company provided
loans to certain executive officers to facilitate the purchase of Common Stock
upon the exercise of stock options. The loan proceeds were not used to fund the
option exercise price of the common stock acquired. The loans are full recourse
obligations to the officers and are also secured by shares of the Company's
Class A Common Stock held by officers. The loans bear interest at an annual rate
of 6.14%, which interest is accrues semi-annually and is payable at maturity,
and mature on June 3, 1999. The following table shows information concerning
indebtedness as of September 30, 1997, which was the largest aggregate amount of
indebtedness outstanding:
INDEBTEDNESS
NAME PRINCIPAL INTEREST TOTAL
- -------------------- ----------------------------------------------
Manuel A. Fernandez $5,475,000 $ 111,121 $5,586,121
William T. Clifford 375,000 7,611 382,611
E. Follett Carter 750,000 15,222 765,222
John F. Halligan 562,500 11,417 573,917
- -------------------- ----------------------------------------------
Total $7,162,500 $ 145,371 $7,307,871
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following reports required to be filed during fiscal year 1997 pursuant
to Section 16(a) of the Securities Exchange Act of 1934 were not filed on a
timely basis. Mr. Dennis G. Sisco filed one late report on Form 4 to report one
transaction and Cognizant filed one late report on Form 4 to report one
transaction.
14
<PAGE> 16
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors of the Company may recommend.
MISCELLANEOUS
The Company's Annual Report for the fiscal year ended September 30, 1997 is
being mailed to the stockholders of record concurrently with this Proxy
Statement. The Annual Report is not part of this Proxy Statement.
Upon written request of any person solicited hereunder, the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997 as filed
with the Securities and Exchange Commission may be obtained, without charge, by
writing to Gartner Group, Inc., Investor Relations, P.O. Box 10212, 56 Top
Gallant Road, Stamford, Connecticut 06904.
THE BOARD OF DIRECTORS
GARTNER GROUP, INC.
Stamford, Connecticut
December 12, 1997
15
