<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTER ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-015144
GARTNER GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3099750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 10212 06904-2212
56 Top Gallant Road (Zip Code)
Stamford, CT
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 964-0096
Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- ---
The number of shares outstanding of the Registrant's capital stock as of
December 31, 1996 was 92,158,884 shares of Common Stock, Class A and 1,600,000
shares of Common Stock, Class B.
1
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS Page
Consolidated Balance Sheets at December 31, 1996 and
September 30, 1996 3
Consolidated Statements of Operations for the Three
Months ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for
the Three Months ended December 31, 1996 and 1995 5
Note to Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 12
2
<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
GARTNER GROUP, INC.
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 123,697 $ 96,755
Marketable securities 22,276 30,054
Fees receivable, net 141,708 143,762
Deferred commissions 15,237 17,539
Prepaid expenses and other current assets 22,986 22,040
--------- ---------
Total current assets 325,904 310,150
Long-term marketable securities 1,041 3,047
Property and equipment, net 33,684 32,818
Goodwill, net 91,771 93,144
Other assets 6,535 4,949
--------- ---------
Total assets $ 458,935 $ 444,108
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 75,395 $ 60,527
Commissions payable 7,240 15,148
Accrued bonuses payable 7,080 16,781
Deferred revenues 183,901 198,952
--------- ---------
Total current liabilities 273,616 291,408
--------- ---------
Deferred revenues 2,871 2,465
Commitments
Stockholders' equity:
Preferred stock -- --
Common stock: $.0005 par value 52 52
Additional paid-in capital 147,524 134,711
Cumulative translation adjustment (2,607) (2,965)
Accumulated earnings 51,050 32,008
--------- ---------
196,019 163,806
Less: Treasury stock, at cost (13,571) (13,571)
--------- ---------
Total stockholders' equity 182,448 150,235
--------- ---------
Total liabilities and stockholders' equity $ 458,935 $ 444,108
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
GARTNER GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended
December 31,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Research, advisory and benchmarking services $ 92,090 $ 72,006
Other, principally conferences, consulting and training 33,277 24,468
-------- --------
Total revenues 125,367 96,474
-------- --------
Costs and expenses:
Cost of services and product development 50,523 37,078
Selling, general and administrative 39,234 35,387
Acquisition-related charges -- 1,665
Depreciation 2,595 2,237
Amortization of intangibles 1,496 772
-------- --------
Total costs and expenses 93,848 77,139
-------- --------
Operating income 31,519 19,335
Interest income, net 1,316 802
-------- --------
Income before minority interest and income taxes 32,835 20,137
Minority interest -- (25)
-------- --------
Income before income taxes 32,835 20,162
Provision for income taxes 13,793 8,669
-------- --------
Net income $ 19,042 $ 11,493
======== ========
Net income per common share $ 0.19 $ 0.12
======== ========
Weighted average shares outstanding 101,951 97,492
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
GARTNER GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the three months ended
December 31,
----------------------
1996 1995
--------- --------
<S> <C> <C>
Operating activities:
Cash provided by operating activities $ 9,161 $ 3,805
--------- --------
Investing activities:
Payment for net assets of subsidiaries acquired (excluding cash) -- (18,303)
Additions of property and equipment, net (2,921) (2,617)
Net proceeds from sale of marketable securities 9,784 1,202
Other investing (1,704) --
--------- --------
Cash provided by (used for) investing activities 5,159 (19,718)
--------- --------
Financing activities:
Principal payments on long-term debt and capital lease obligations -- (4,450)
Issuance of common stock and warrants 5,174 1,097
Net changes in Dataquest subsidiary balances due to D&B -- (1,687)
Tax benefits of stock transactions with employees 7,639 3,400
========= ========
Cash provided by (used for) financing activities 12,813 (1,640)
========= ========
Net increase (decrease) in cash and cash equivalents 27,133 (17,553)
Effects of foreign exchange rates on cash and cash equivalents (191) (40)
Cash and cash equivalents, beginning of period 96,755 66,581
--------- --------
Cash and cash equivalents, end of period $ 123,697 $ 48,988
========= ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
GARTNER GROUP, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and should be read in conjunction with
the consolidated financial statements and related notes of Gartner Group, Inc.
(the "Company") on Form 10-K for the fiscal year ended September 30, 1996. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of financial position,
results of operations and cash flows at the dates and for the periods presented
have been included. The results of operations for the first quarter ended
December 31, 1996 may not be indicative of the results of operations for the
remaining quarters in fiscal 1997.
6
<PAGE> 7
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below under
"Quarterly Operating Income Trends," "Other Factors that may Affect Future
Performance" and elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth certain results of operations as a percentage of
total revenues:
<TABLE>
<CAPTION>
For the three months ended
December 31,
-----------------
1996 1995
------ ------
<S> <C> <C>
Revenues:
Research, advisory and benchmarking services 73.5% 74.6%
Other 26.5 25.4
------ ------
Total revenues 100.0 100.0
------ ------
Costs and expenses:
Cost of services and product development 40.3 38.4
Selling, general and administrative 31.3 36.7
Acquisition-related charges -- 1.8
Depreciation 2.1 2.3
Amortization of intangibles 1.2 0.8
------ ------
Total costs and expenses 74.9 80.0
------ ------
Operating income 25.1 20.0
Interest income, net 1.1 0.9
------ ------
Income before minority interest and income taxes 26.2 20.9
Minority interest -- --
------ ------
Income before income taxes 26.2 20.9
Provision for income taxes 11.0 9.0
------ ------
Net income 15.2% 11.9%
====== ======
</TABLE>
TOTAL REVENUES increased 30% to $125.4 million for the first quarter of fiscal
1997 from $96.5 million for the first quarter of fiscal 1996. Revenues from
research, advisory and benchmarking services ("RABS") increased by 28% to $92.1
million from $72.0 million for the first quarter of fiscal 1996. RABS revenues
comprised approximately 73.5% and 74.6% of total revenues for the first quarter
of fiscal 1997 and 1996, respectively. RABS encompass products which, on an
ongoing basis, highlight industry developments, review new products and
technologies, provide quantitative market research, analyze
7
<PAGE> 8
industry trends within a particular technology or market sector and provide
comparative analysis of the information technology operations of organizations.
The Company enters into annually renewable contracts for RABS. Revenues from
RABS are recognized as products and services are delivered, and as the Company's
obligation to the client is completed over the contract period. The increase in
revenues from RABS reflects primarily strong market acceptance of new services
introduced in fiscal 1996, volume increases as a result of increased geographic
and client penetration, offset partially by a volume pricing strategy that
provides more value for the same dollars each year and through the expansion of
electronic distribution within client companies.
Contract value increased 25% to $380.0 million at December 31, 1996 versus
$305.0 million at December 31, 1995. The Company believes that contract value,
which is calculated as the annualized value of all RABS contracts in effect at a
given point in time, without regard to the duration of the RABS contracts
outstanding at such time, is a significant measure of the Company's volume of
RABS business. Historically, the Company has experienced that a substantial
portion of client companies have renewed contracts for an equal or higher level
of total payments each year, and annual RABS revenues in any fiscal year have
approximated contract value at the beginning of the fiscal year. As of December
31, 1996, 83% of the Company's clients had renewed one or more RABS services in
the last twelve months. However, this renewal rate is not necessarily indicative
of the rate of retention of the Company's RABS revenue base, and contract value
at any time may not be indicative of future RABS revenues or cash flows if the
rate of renewal of contracts, or the timing of new business were to
significantly change during the following twelve months compared to historic
patterns. Total deferred revenues of $186.8 million and $201.4 million at
December 31, 1996 and September 30, 1996, respectively, as presented in the
Company's consolidated balance sheets, represent unamortized revenues from RABS
contracts plus unamortized revenues of certain other products and services not
included in RABS. Deferred revenues do not directly correlate to contract value
as of the same date, since contract value represents an annualized value of all
outstanding RABS contracts without regard to the duration of such contracts, and
deferred revenue represents unamortized revenue remaining on all outstanding
contracts including RABS and certain other products and services not included in
RABS.
Other revenues for the first quarter of fiscal 1997 increased 36% compared to
the first quarter of fiscal 1996, to $33.3 million from $24.5 million. Other
revenues consist principally of revenues recognized as earned from conferences,
consulting engagements and sale of technology-based training products and
publications. The increase of $8.8 million in the first quarter of fiscal 1997
over the first quarter of fiscal 1996 was primarily due to increased revenues
from the Company's Symposia conferences and ITxpo exhibition events held
annually during the first quarter of the fiscal year. Technology-based training
products also contributed to the revenue growth in the first quarter of fiscal
1997 compared to first quarter of fiscal 1996 as a result of the acquisition of
J3 Learning in July 1996.
OPERATING INCOME rose 63% to $31.5 million, or 25.1% of total revenues, for the
first quarter of fiscal 1997, from $19.3 million or 20.0% of total revenues in
the first quarter of fiscal 1996. Excluding acquisition-related charges of $1.7
million in the first fiscal quarter of 1996, operating income would have
increased 50% from $21.0 million. Operating income has increased as revenues
continue to grow due to the benefit the Company has gained from economies of
scale and the leveraging of its resources (additional revenues have been
generated using essentially the same resources). The Company's continued focus
on margin improvement has favorably impacted operating results.
While costs and expenses increased to $93.9 million in the first quarter of
fiscal 1997 from $77.1 million in the first quarter of fiscal 1996, such costs
decreased to 74.9% of total revenues from 80.0% (78.2% excluding
acquisition-related costs) in the first quarter of fiscal 1996. The increase in
cost of services and product development expenses ($50.5 million and $37.1
million for the first quarter of fiscal
8
<PAGE> 9
1997 and 1996, respectively) reflected primarily the need to provide additional
support to the growing client base, including investment in strategic areas
such as electronic and Internet distribution, costs associated with
conferences, costs resulting from the Company's new client inquiry process
(Quick Path) and product development costs (particularly for technology-based
training products). As a result, cost of services and product development
expenses, as a percentage of total revenues has increased approximately 2% from
38.4% for the first quarter of fiscal 1996 to 40.3% for the first quarter of
fiscal 1997. The increase in selling, general and administrative expenses
($39.2 million and $35.4 million for the first quarter of fiscal 1997 and 1996,
respectively) is due to the Company's continuing expansion of worldwide
distribution channels and resulting commissions earned on the revenue
generated. This is partially offset by elimination and/or reduction of
redundant general and administrative expenses, including personnel reductions
and facility rationalization relating to the acquisition of Dataquest, which
had a favorable impact on general and administrative costs in the first quarter
of fiscal 1997 compared to the first quarter of fiscal 1996. Consequently,
selling, general and administrative expenses have decreased to 31.3% of total
revenues for the first quarter of fiscal 1997, versus 36.7% of total revenues
for the first quarter of fiscal 1996.
Acquisition-related charges of $1.7 million in the first quarter of fiscal 1996
for the acquisition of Dataquest were not recurring in the first quarter of
fiscal 1997. Additionally, amortization of intangibles increased by $0.7 million
in the first quarter of fiscal 1997 as compared to the first quarter of fiscal
1996, reflecting goodwill associated with fiscal 1996 acquisitions.
INTEREST INCOME, NET was $1.3 million for the first quarter of fiscal 1997, up
from $0.8 million for the first quarter of fiscal 1996. This net increase
resulted from interest income accumulating on the Company's cash, cash
equivalents and marketable securities ($147.0 million at December 31, 1996,
versus $76.6 million at December 31, 1995) and from reduced interest expense
after debt related to fiscal 1993 and 1994 acquisitions was paid during fiscal
1996. Interest rates were not a significant factor in the increase in interest
income earned in the first quarter of fiscal 1997 versus the first quarter of
fiscal 1996.
PROVISION FOR INCOME TAXES increased by $5.1 million to $13.8 million in the
first fiscal quarter of 1997, compared to the first quarter fiscal 1996. The
effective tax rate for the first quarter of fiscal 1997 was 42%, a decrease from
43% in the first quarter of fiscal 1996. The decrease in the effective tax rate
is due to the realization of certain tax-loss carryforwards on the increasingly
profitable international operations plus on-going tax planning initiatives.
NET INCOME PER COMMON SHARE increased 58% to 19 cents per common share for the
first quarter of fiscal 1997, as compared to 12 cents for the first quarter of
fiscal 1996.
QUARTERLY OPERATING INCOME TRENDS. Historically, the Company has realized
significant renewals and growth in contract value at the end of quarters. The
fourth quarter of the fiscal year typically is the fastest growth quarter for
contract value and the first quarter of the fiscal year typically represents the
slowest growth quarter as it is the quarter in which the largest amount of
contact renewals are due. As a result of the quarterly trends in contract value
and overall business volume, fees receivable, deferred revenues, deferred
commissions and commissions payable reflect this activity and typically show
substantial increases at quarter end, particularly at fiscal year end. All
contracts are billable upon signing, absent special terms granted on a limited
basis from time to time. All contracts are non-cancellable and non-refundable,
except for government contracts which have a 30-day cancellation clause, but
which have not produced material cancellations to date. The Company's policy is
to record at the time of signing of a RABS contract the entire amount of the
contract billable as deferred revenue and fees receivable. The Company also
records the related commission obligation upon the signing of the contract and
amortizes the corresponding deferred commission expense over the contract period
in which the related RABS revenues are earned and amortized to income.
9
<PAGE> 10
Historically, RABS revenues have increased significantly in the first quarter of
the ensuing fiscal year over the immediately preceding quarter and other
revenues have increased similarly due to the annual conference and exhibition
events held in the first quarter. Additionally, operating income margin
typically improves in the first quarter of the fiscal year versus the
immediately preceding quarter. The reasons for the improvement in operating
income margin for the first quarter of fiscal 1997 is discussed under the
caption Operating Income. The Company does not expect the operating income
improvement realized in the first quarter of fiscal 1997 to be as significant in
the next three quarters of this fiscal year. Therefore, the operating income for
the first quarter of fiscal 1997 may not be indicative of the quarterly
operating income results for the remainder of fiscal 1997.
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE. The Company's future operating
results will depend upon the Company's ability to continue to compete
successfully in the market for information products and services. The Company
faces competition from a significant number of independent providers of similar
services, as well as the internal marketing and planning organizations of the
Company's clients. The Company also competes indirectly against other
information providers, including electronic and print media companies and
consulting firms. In addition, there are limited barriers to entry into the
Company's market and additional new competitors could readily emerge. There can
be no assurance that the Company will be able to continue to provide the
products and services that meet client needs as the Information Technology
("IT") market rapidly evolves, or that the Company can otherwise continue to
compete successfully. In this regard, the Company's ability to compete is
largely dependent upon the quality of its staff of IT analysts. Competition for
qualified analysts is intense. There can be no assurance that the Company will
be able to hire additional qualified IT analysts as may be required to support
the evolving needs of customers or any growth in the Company's business. Any
failure to maintain a premier staff of IT analysts could adversely affect the
quality of the Company's products and services, and therefore its future
business and operating results. Additionally, there may be increased business
risk as the Company expands product and service offerings to smaller domestic
companies. The Company's operating results are also subject to risks inherent in
international sales, including changes in market demand as a result of exchange
rate fluctuations, tariffs and other barriers, challenges in staffing and
managing foreign sales operations, and higher levels of taxation on foreign
income than domestic income. Further expansion would require additional
management attention and financial resources.
The Company has expanded its presence in the technology-based training industry
with the acquisition of J3 Learning Corporation in July 1996. The success of the
Company in the technology-based training industry will depend on its ability to
compete with vendors of IT products and services which include a range of
education and training specialists, hardware and system manufacturers, software
vendors, system integrators, dealers, value-added resellers and
network/communications vendors, certain of whom have significantly greater
product breadth and market presence in the technology-based training sector.
There can be no assurance that the Company will be able to provide products that
compare favorably with new competitive products or that competitive pressures
will not require the Company to reduce prices. Future success will also depend
on the Company's ability to develop new training products that are released
timely with the introductions of the underlying software products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily financed its operations to date through cash provided
by operating activities. The combination of revenue growth and operating income
margin improvements have contributed to positive cash provided by operating
activities for the three months ended December 31, 1996. In addition, cash flow
has been enhanced by the Company's continuing management of working capital
requirements to support increased sales volumes from growth in the pre-existing
businesses and growth due to acquisitions.
10
<PAGE> 11
The Company's cash and cash equivalents balance at December 31, 1996 and
September 30, 1996 was $123.7 million and $96.8 million, respectively, while
the marketable securities balance (including both current and long-term
maturities) decreased to $23.3 million at December 31, 1996 from $33.1 million
at September 30, 1996. Cash provided by operating activities totaled $9.2
million for the first quarter of fiscal 1997 (compared with $3.8 million for
the first quarter of fiscal 1996) reflecting primarily the impact of quarterly
operating trends on the balance sheet accounts, particularly fees receivable,
deferred revenues, deferred commissions, commissions payable and bonuses
payable. Cash provided by investing activities was $5.2 million for the first
quarter of fiscal 1997 (compared to $19.7 million use of cash for investing
activities for the first quarter of fiscal 1996), and consisted primarily of
cash provided by the net proceeds on the sale of marketable securities of $9.8
million, partially offset by cash used for the addition of property and
equipment of $2.9 million and equity investments in companies of $1.7 million.
Cash provided by financing activities totaled $12.8 million in the first
quarter of fiscal 1997 (compared to a $1.6 million use of cash for financing
activities for the first quarter of fiscal 1996), and resulted from $7.6
million in tax benefits of stock transactions with employees and $5.2 million
from the issuance of common stock. The tax benefit of stock transactions with
employees is due to a reduction in the corporate income tax liability based on
an imputed compensation deduction equal to employees' gain upon the exercise of
stock options at an exercise price below fair market value. As the market value
of the Company's stock has increased, both the volume of exercises and gains on
those exercises has increased, thereby resulting in significant tax benefits
being realized in the current fiscal year.
The Company has available two unsecured credit lines with The Bank of New York
and Chase Manhattan Bank for $5.0 million and $25.0 million, respectively. These
lines may be cancelled by the banks at any time without prior notice or penalty.
Additionally, the Company issues letters of credit in the ordinary course of
business. The Company had outstanding letters of credit with Chase Manhattan
Bank of $5.5 million and $2.0 million with The Bank of New York at December 31,
1996. The Company currently has no material capital commitments. The Company
believes that its current cash balances and marketable securities, together with
cash anticipated to be provided by operating activities and borrowings available
under the existing lines of credit, will be sufficient for the expected
short-term and foreseeable long-term cash needs of the Company, including
possible acquisitions.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on January 23, 1997. Holders of an
aggregate of 92,018,087 shares of Class A Common Stock and 1,600,000 shares of
Class B Common Stock at the close of business on December 13, 1996, were
entitled to vote at the meeting. At such meeting, the stockholders elected the
following persons to the Board of Directors by the following votes:
<TABLE>
<CAPTION>
Total Vote
Total Vote for Withheld from
Each Director Each Director
<S> <C> <C>
Manuel A. Fernandez 83,852,442 57,239
William O. Grabe 83,867,813 41,868
John P. Imlay 83,867,980 41,701
Max D. Hopper 83,867,563 42,118
Stephen G. Pagliuca 83,852,591 57,090
Dennis G. Sisco 83,678,374 231,307
</TABLE>
11
<PAGE> 12
The stockholders approved the Company's 1996 Long Term Stock Option Plan by a
vote of 70,564,381 for, 12,615,629 against, and 60,759 shares abstaining. The
stockholders also ratified the appointment of KPMG Peat Marwick, LLP as
independent auditors for the Company for the 1997 fiscal year. The vote was
83,659,501 for, 229,518 against and 20,662 shares abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Description of Document
11.1 Computation of Net Income per Common Share
10.16 1996 Long Term Stock Option Plan
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant during the three
months ended December 31, 1996.
Items 2, 3, and 5 are not applicable and have been omitted.
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gartner Group, Inc.
------------------------------
Date February 13, 1997 /s/ John F. Halligan
------------------ ------------------------------
John F. Halligan
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.16
GARTNER GROUP, INC.
1996 LONG TERM STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Long Term
Stock Option Plan (the "Plan") are:
- to attract and retain quality personnel for positions of
substantial responsibility,
- to create additional incentive for senior personnel of the
Company by offering long term equity participation in the
Company, and
- to promote the long-term success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant and
subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall administer the Plan in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock, Class A of the
Company.
(g) "Company" means Gartner Group, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized
15
<PAGE> 2
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 91st day of such
leave any Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "Fair Market Value" means, as of any date, the value of
the 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 of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
Common Stock shall be the average of the closing sales prices for such stock (or
the average of the closing bids, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest volume of trading in
Common Stock) on the five market trading days immediately preceding the date of
determination, as reported in The Wall Street Journal or such other source as
the Administrator of the Plan deems reliable; provided, however, that in the
event the Fair Market Value as so determined is more than 20% greater or more
than 20% less than the closing sales price for such stock (or the closing bid,
if no sales were reported) as so quoted on the date of determination, then the
Administrator shall be entitled to determine the Fair Market Value in good
faith, at a price within the range of prices from the Fair Market Value as
otherwise determined above to the closing price (or closing bid, as applicable)
on the date of determination;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or 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 average of the means
between the high bid and low asked prices for the Common Stock on the five
market trading days immediately preceding the day of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; provided, however, that in the event the Fair Market Value as so
determined is more than 20% greater or more than 20% less than the mean between
the high bid and low asked prices for such stock as so quoted on the date of
determination, then the Administrator shall be entitled to determine the Fair
Market Value in good faith, at a price within the range of prices from the Fair
Market Value as otherwise determined above to the mean between the high bid and
low asked prices on the date of determination;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
16
<PAGE> 3
(p) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the
Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(v) "Optioned Stock" means the Common Stock subject to an
Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Senior Manager" means an Employee who is an executive
officer, vice president, director-level employee or senior analyst of the
Company, or such other Employee as the Administrator shall deem eligible to
participate in the Plan.
(aa) "Share" means a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(bb) "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 12 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 1,800,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that 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, except that if unvested Shares are
repurchased by the Company at their original purchase price, and the original
purchaser of such Shares did not receive any benefits of ownership of such
Shares, such Shares shall become available for future grant
17
<PAGE> 4
under the Plan. For purposes of the preceding sentence, voting rights shall not
be considered a benefit of Share ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to Directors, Officers who are
not Directors, and Senior Managers who are neither Directors nor Officers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Senior Managers to whom Options may
be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each Option granted
hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
18
<PAGE> 5
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Options may be granted to Senior Managers. If
otherwise eligible, a Senior Manager who has been granted an Option may be
granted additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan
shall become effective upon the earlier to occur of its adoption by the Board or
its approval by the shareholders of the Company as described in Section 18 of
the Plan. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be ten (10)
years from the date of grant. However, in the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such shorter term as
may be provided in the Notice of Grant. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or
19
<PAGE> 6
any Parent or Subsidiary, the term of the Incentive Stock Option shall be five
(5) years from the date of grant or such shorter term as may be provided in the
Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note (on such terms and conditions as
determined by the Administrator);
(iv) other Shares which 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;
(v) in the case of a "cashless exercise" during the
trading window permitted by the Company's Insider Trading Policy, delivery of a
properly executed exercise notice together with such
20
<PAGE> 7
other documentation as the Administrator 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;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will 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 12 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter 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) Termination of Employment or Consulting Relationship.
(i) Upon termination of an Optionee's Continuous Status
as an Employee or Consultant with the Company, such Optionee may exercise his or
her Option to the extent that he or she was entitled to exercise it as of the
date of such termination. Such exercise may occur only before the end of the
period determined by the Administrator for exercise following termination. In
the case of an Incentive Stock Option, such period shall not exceed three (3)
months. In no event shall such period extend beyond the expiration date of the
term of the Option as set forth in the Option Agreement.
(ii) An Optionee's change of status from Employee to
Consultant shall not be treated as a termination of the Optionee's Continuous
Status as an Employee or Consultant, and any Option held by the Optionee shall
remain in effect, except as provided hereinbelow. Any Incentive Stock Option
held by such Optionee shall automatically cease to be treated for tax purposes
as an Incentive Stock Option and shall be treated as a Nonstatutory Stock Option
on the ninety-first (91st) day following such change of status. Notwithstanding
the above, within thirty (30) days after any such change of
21
<PAGE> 8
status, the Administrator may in its discretion determine that this Section
10(b)(ii) shall not apply to such change of status and that such change of
status shall be treated as a termination of the Optionee's Continuous Status as
an Employee or Consultant as provided in Section 10(b)(i).
(iii) To the extent that the Optionee is not entitled to
exercise his or her Option at the date of such termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Upon termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant),
only to the extent that the Optionee was entitled to exercise it at the date of
such termination. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. Upon the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, only to
the extent that the Optionee was entitled to exercise the Option at the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
11. Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock 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 of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock 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 of Common Stock 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." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
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 Option.
22
<PAGE> 9
(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 will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.
(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, each outstanding Option may be assumed or an
equivalent option may be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. The Administrator may, in lieu of such
assumption or substitution, provide for the Optionee to have the right to
exercise the Option as to all or a portion of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If the Administrator
makes an Option exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the 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);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. Date of Grant. The date of grant of an Option shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Option, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
shareholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
23
<PAGE> 10
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. 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 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, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. 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.
16. Liability of Company.
(a) Inability to Obtain Authority. The 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.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14(b)
of the Plan.
17. 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.
18. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.
24
<PAGE> 1
Exhibit 11.1
Gartner Group, Inc.
Computation of Income per Common Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months ended,
December 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Net income $ 19,042 $11,493
======== =======
Shares:
Weighted average number of common shares outstanding 93,428 88,991
Weighted average number of common shares under
warrant outstanding 316 103
Weighted average number of option shares outstanding 8,207 8,398
-------- -------
Weighted average number of common shares outstanding
as adjusted 101,951 97,492
======== =======
Net income per common share (1) $ 0.19 $ 0.12
======== =======
</TABLE>
(1) Fully diluted income per common share has not been presented because
the effects are not material.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 123,697
<SECURITIES> 22,276
<RECEIVABLES> 146,678
<ALLOWANCES> 4,970
<INVENTORY> 0
<CURRENT-ASSETS> 325,904
<PP&E> 71,646
<DEPRECIATION> 37,962
<TOTAL-ASSETS> 458,935
<CURRENT-LIABILITIES> 273,616
<BONDS> 0
0
0
<COMMON> 52
<OTHER-SE> 182,396
<TOTAL-LIABILITY-AND-EQUITY> 458,935
<SALES> 125,367
<TOTAL-REVENUES> 125,367
<CGS> 50,523
<TOTAL-COSTS> 50,523
<OTHER-EXPENSES> 43,325
<LOSS-PROVISION> 1,072
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 32,835
<INCOME-TAX> 13,793
<INCOME-CONTINUING> 19,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,042
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
