<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))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
GARTNER GROUP, INC.
- --------------------------------------------------------------------------------
(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
[Gartner Group Logo]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 28, 1999
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 Thursday,
January 28, 1999, at 9:00 A.M., local time, at the Intercontinental Hotel, 111
East 48th Street, New York, New York for the following purposes:
1. To elect eight directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve the amendment to the Company's 1991 Stock Option Plan to
increase the number of shares of Class A Common Stock available for
issuance.
3. To approve the Company's 1998 Long Term Stock Option Plan.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the 1999 fiscal year.
5. 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 4, 1998
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,
date and return the enclosed proxy as promptly as possible in the enclosed
postage-prepaid envelope. 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 23, 1998
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 28, 1999
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 Thursday, January 28, 1999, at 9:00 A.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 Intercontinental Hotel, 111 East 48th Street, New York, New York.
The proxy solicitation materials were mailed on or about December 23, 1998
to all stockholders of record on December 4, 1998.
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 written notice of revocation or
a duly executed proxy bearing a later date to the Secretary, Gartner Group,
Inc., P.O. Box 10212, 56 Top Gallant Road, Stamford, Connecticut 06904, or by
attending the meeting and voting in person.
RECORD DATE AND NUMBER OF SHARES OUTSTANDING
Stockholders of record at the close of business on December 4, 1998 are
entitled to vote at the Annual Meeting. There were 101,738,703 shares of Class A
Common Stock, par value $0.0005 per share (the "Class A Common Stock") issued
and outstanding on December 4.
VOTING AND SOLICITATION
Proxies that are 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
proposals and will be counted as present for the purposes of determining the
existence of a quorum regarding such items.
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 adjournment 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 for purposes of determining the presence of
a quorum. 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. With respect to the other matters to be voted upon at the
meeting or any adjournment thereof, abstentions will have the effect of a
negative vote and broker non-votes will have no effect on the outcome of the
vote.
<PAGE> 4
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 Class A Common Stock held of
record by such persons and will reimburse such brokers and other fiduciaries for
their reasonable out-of-pocket expenses incurred when the solicitation materials
are forwarded.
The Company has retained Morrow & Co., Inc., 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 25, 1999.
PROPOSAL ONE:
ELECTION OF DIRECTORS
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
A board of eight directors is to be elected at the Annual Meeting. 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 eight nominees named below. Except
for Mr. Clifford, all nominees are presently directors of the Company. Mr.
Clifford has been elected a director effective January 1, 1999. All nominees
have indicated their willingness to serve. However, if any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for the nominee designated by the present Board of Directors to
fill the vacancy. The term of office of each person elected as a director will
continue until the next Annual Meeting or until a successor has been elected and
qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED BELOW:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
<S> <C> <C>
Chairman of the Board of Directors and Chief Executive
Manuel A. Fernandez.......... 52 Officer
William T. Clifford.......... 52 President and Chief Operating Officer
William O. Grabe............. 60 General Partner, General Atlantic Partners
John P. Imlay................ 62 Chairman, Imlay Investments, Inc.
Max D. Hopper................ 64 Retired Chairman of SABRE Technology Group
Stephen G. Pagliuca.......... 43 Managing Partner, Bain Capital Inc.
Dennis G. Sisco.............. 52 Partner, Behrman Capital
Robert E. Weissman........... 58 Chairman and Chief Executive Officer, IMS Health Incorporated
</TABLE>
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 IMS Health Incorporated
("IMS Health"). See "Certain Relationships and Transactions -- Relationship with
IMS Health Incorporated". Also, Mr. Fernandez' and Mr. Clifford's employment
agreements with the Company provide that they will be included on the Company's
slate of nominees to be elected to the Board. See "Executive
Compensation -- Employment Agreements". There is no family relationship among
any directors or executive officers of the Company.
MR. FERNANDEZ has served as Chairman of the Board of Directors since April
1996, as Chief Executive Officer since April 1991, as Director since January
1991, and as President from January 1991 through September 1997. Mr. Fernandez
will retire as Chief Executive Officer on December 31, 1998, but will remain
Chairman of the Board. Prior to joining the Company, he was President and Chief
Executive Officer of Dataquest, Incorporated. Before joining Dataquest, Mr.
Fernandez was President and Chief Executive Officer
2
<PAGE> 5
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 (Southwestern Area Commerce and Industry
Association of Connecticut) and Norwalk Community-Technical College (Norwalk,
Connecticut).
MR. CLIFFORD has served as President since October 1997 and as Chief
Operating Officer of the Company since April 1995. He has been elected Chief
Executive Officer effective January 1, 1999. Mr. Clifford served as President,
Gartner Group Research from October 1995 through September 1997, and Executive
Vice President, Operations of the Company from October 1993 through September
1997. Prior to joining the Company, 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. Clifford serves on the board of directors of ProBusiness
Services, Inc.
MR. GRABE has served as a Director of the Company since April 1993. He has
been with General Atlantic Partners, an investment firm, since March 1992 and he
has been a General Partner of General Atlantic Partners 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; LHS Group, Inc.; TDS GmbH;
MARCAM Corporation, an enterprise resource planning software provider for
process manufacturing companies; and BAAN Company N.V., an enterprise resource
planning system provider for open systems and client-server environments. He is
also on the board of directors 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 a 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 IMS Health and has served on the board of directors of
IMS Health since June 1998 and of Cognizant Corporation from October 1996
through June 1998. He was Chairman of Dun & Bradstreet Software Services, Inc.,
a software company, from January 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. 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 Metrocall, Inc., Payless Cashways Inc., VTEL
Corporation, USDATA Corporation, Inc., Exodus Communications, Inc., United
Stationers Inc., 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 Corporation, Dade
Behring, Inc., Epoch Senior Living, Inc., Jostens Learning, Coram Health Care,
Medical Specialties Group, Inc., Physio Control, Wesley Jessen Visioncare, Inc.,
and Physicians Quality Care, Inc. (PQC). Mr. Pagliuca is a certified public
accountant, holds a B.A. degree from Duke University and a M.B.A. degree from
the Harvard Business School.
3
<PAGE> 6
MR. SISCO has been a Director of the Company since October 1990. Since
January 1998 he has been a partner in Behrman Capital, a private equity firm.
From January 1997 through December 1997, he served as the President of Storm
Ridge Capital, a venture capital firm. From 1988 to February 1997, Dun &
Bradstreet Corporation and Cognizant Corporation employed him in various
capacities, most recently as Executive Vice President of Cognizant Corporation
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. Sisco holds a B.A.
degree from Western Maryland College.
MR. WEISSMAN has been a Director of the Company since April 1997 and is a
designee of IMS Health. Since June 1998 he has been Chairman and Chief Executive
Officer of IMS Health, and prior to that he was Chairman and Chief Executive
Officer of Cognizant Corporation from July 1996 through June 1998. Previously,
Mr. Weissman was Chairman and Chief Executive Officer of Dun & Bradstreet
Corporation 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 holds a B.A. degree from Babson College.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held five meetings during fiscal
1998.
The Audit Committee held four meetings during fiscal 1998. The Audit
Committee consisted of Messrs. Hopper, Imlay and Weissman through August 23,
1998 and consists of Messrs. Hopper, Pagliuca and Sisco since August 24, 1998.
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 personnel. 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 held four meetings during fiscal 1998. Messrs.
Grabe, Pagliuca and Sisco served on the Committee through August 23, 1998 and
Messrs. Grabe, Imlay and Weissman serve on the Committee since August 24, 1998.
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, Long Term
Stock Option Plan and 1996 Long Term Stock Option Plan. The Compensation
Committee will also administer the 1998 Long Term Stock Option Plan, if such
plan is approved by the stockholders (see Proposal Three). As part of this
administration function, 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 two meetings during fiscal 1998. The Corporate
Governance Committee reviews issues regarding the governance of the Company.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Each director attended at least 75 percent of the aggregate of (i) the
total number of meetings of the Board of Directors held during fiscal 1998 and
(ii) the total number of meetings of all committees of the Board of Directors
held during fiscal 1998 while such director served on such committee.
4
<PAGE> 7
EXECUTIVE OFFICERS
Listed below are the executive officers of the Company as of September 30,
1998:
<TABLE>
<CAPTION>
NAMES AGE TITLE
- ----- --- -----
<S> <C> <C>
Manuel A. Fernandez.................. 52 Chairman of the Board of Directors and Chief Executive
Officer
William T. Clifford.................. 52 President and Chief Operating Officer
E. Follett Carter.................... 56 Executive Vice President, President, Distribution
Services and Chief Marketing Officer
John F. Halligan..................... 51 Executive Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary
Michael D. Fleisher.................. 33 Executive Vice President and President, Emerging
Businesses
</TABLE>
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 under "Election of Directors."
MR. CLIFFORD has served as President of the Company since October 1997 and
Chief Operating Officer of the Company since April 1995. He was President,
Gartner Group Research from October 1995 through September 1997 and Executive
Vice President, Operations of the Company from October 1993 through September
1997. Mr. Clifford has been elected Chief Executive Officer effective January 1,
1999. For more information on Mr. Clifford's business experience, see the
description provided above under "Election of Directors."
MR. CARTER has been with the Company since November 1988 and has been
President, Gartner Group Distribution Services since October 1995, Chief
Marketing Officer of the Company since April 1995 and Executive Vice President
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 a 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 the
Company, 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 and Top of the Tree Baking Company.
MR. FLEISHER has been an Executive Vice President of the Company and
President, Emerging Businesses since November 1996. From October 1995 through
October 1996, he was Senior Vice President, Emerging Businesses; from October
1994 to September 1995, he was Vice President Worldwide Events; from February
1994 to September 1994 he was Vice President of Business Development; and from
April 1993 through January 1994 he was director of Strategic Planning. 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.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Two of the members of the Compensation Committee, Messrs. Imlay and
Weissman, serve on the board of directors of IMS Health and are designees of IMS
Health to the Company's Board. Mr. Imlay is also a member of the Compensation
Committee of IMS Health.
5
<PAGE> 8
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 plus $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 only to the extent exercisable when such person ceases to be a
non-employee director. Mr. Weissman receives no compensation for serving as a
director.
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 1998 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, 1998, 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
COMPENSATION
ANNUAL ------------------
COMPENSATION(1) AWARDS
FISCAL --------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) UNDERLYING OPTIONS
- --------------------------- ------ -------- --------- ------------------
<S> <C> <C> <C> <C>
Manuel A. Fernandez.......................... 1998 $400,000 $320,000 60,000
Chairman of the Board of Directors and 1997 $350,000 $700,000 108,500
Chief Executive Officer 1996 $270,000 $700,000 45,000
William T. Clifford.......................... 1998 $300,000 $150,000 120,000
President and Chief Operating Officer 1997 $250,000 $300,000 77,500
1996 $220,000 $260,000 10,000
E. Follett Carter............................ 1998 $235,000 $ 75,000 30,000
Executive Vice President, President, 1997 $220,000 $240,000 77,500
Distribution
Services and Chief Marketing Officer 1996 $200,000 $320,000 27,000
John F. Halligan............................. 1998 $235,000 $125,000 30,000
Executive Vice President, Chief Financial 1997 $215,000 $240,000 77,500
Officer,
Treasurer and Corporate Secretary 1996 $185,000 $250,000 18,000
Michael D. Fleisher.......................... 1998 $230,000 $130,000 60,000
Executive Vice President and President, 1997 $200,000 $180,000 77,500
Emerging Businesses 1996 $148,640 $200,000 10,000
</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.
6
<PAGE> 9
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, 1998, the last day of
the Company's 1998 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
SECURITIES % OF TOTAL OPTIONS EXERCISE OR
UNDERLYING GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS IN FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ------------------ -------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Manuel A.
Fernandez.......... (1) 60,000 1.19% $31.66 10/9/07 $1,032,230 $2,768,956
William T.
Clifford........... (1) 60,000 1.19% $31.66 10/9/07 $1,032,230 $2,768,956
(2) 60,000 1.19% $31.66 10/9/07 $1,032,230 $2,768,956
E. Follett Carter.... (1) 30,000 0.59% $31.66 10/9/07 $ 516,115 $1,384,478
John F. Halligan..... (1) 30,000 0.59% $31.66 10/9/07 $ 516,115 $1,384,478
Michael D.
Fleisher........... (1) 30,000 0.59% $31.66 10/9/07 $ 516,115 $1,384,478
(2) 30,000 0.59% $31.66 10/9/07 $ 516,115 $1,384,478
</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 Long Term Stock
Option Plan and is subject to the terms of such plan. The options become
exercisable five years from the date of grant subject to acceleration of
vesting and exercisability upon the achievement of certain annual and
cumulative performance targets for fiscal years 1998, 1999 and 2000.
(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 Class A Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<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........ 280,000 $9,144,946 93,990 239,510 $ 519,738 $1,378,733
William T. Clifford........ 50,000 $1,562,500 104,770 305,250 $1,170,287 $2,048,544
E. Follett Carter.......... 20,000 $ 567,812 160,250 159,250 $1,968,220 $ 991,544
John F. Halligan........... 105,000 $3,124,446 107,350 165,650 $1,101,305 $1,104,843
Michael D. Fleisher........ 41,200 $1,342,534 59,750 159,350 $ 693,660 $ 529,471
</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 Class A
Common Stock on September 30, 1998, which was $20.88 per share.
7
<PAGE> 10
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. In April 1998, the Board of
Directors adopted an amendment, subject to shareholder approval (see Proposal
Two) to the 1991 Plan to increase the number of shares reserved for issuance
thereunder by 10,000,000 shares. A total of 22,800,000 shares of Class A Common
Stock have been reserved for issuance under the 1991 Option Plan, and if
Proposal Two is approved, a total of 32,800,000 shares of Class A Common Stock
will be approved 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 and
approved by the stockholders in October 1994. A total of 6,560,000 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 and approved by the stockholders in January 1997. A total of
1,800,000 shares of Class A Common Stock has been reserved for issuance under
the 1996 Long Term Plan.
1998 Long Term Stock Option Plan. Each Named Executive Officer is entitled
to participate in the Company's 1998 Long Term Stock Option Plan (the "1998 Long
Term Plan"), if the plan is approved by the stockholders (see Proposal Three). A
total of 2,500,000 shares of Class A Common Stock has been reserved for issuance
under the 1998 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 stockholders adopted the Purchase Plan 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 AGREEMENTS
During fiscal 1998, Mr. Fernandez served as Chairman and Chief Executive
Officer of the Company pursuant to the terms of employment agreements with the
Company. An employment agreement entered in April 1997, as amended in October
1997 (together, the "1997 Agreement"), provided that he would serve as Chairman
and Chief Executive Officer of the Company through October 1, 2000 at a salary
in fiscal 1998 determined by the Board or the Compensation Committee, in their
sole discretion. In February 1998, Mr. Fernandez and the Company entered into a
new employment agreement which was amended in August 1998 (together, the "1998
Agreement"). The 1998 Agreement provided that Mr. Fernandez would serve as Chief
Executive Officer through December 31, 1998 and as Chairman through October 1,
2000 and contained substantially similar terms as the 1997 Agreement, except
that Mr. Fernandez' fiscal 1998 salary was set at $400,000, subject thereafter
to annual adjustments by the Board or the Compensation Committee, in their sole
discretion. Under both the 1997 Agreement and the 1998 Agreement, Mr. Fernandez
was entitled to participate in the Company's executive bonus program, with the
annual target bonus established by the Board or the Compensation Committee in
their sole discretion, payable based on achievement of specified Company and
individual objectives. The target bonus for fiscal 1998 had been set at $400,000
prior to entering into the 1998 Agreement. Both the 1997 Agreement and the 1998
Agreement contained provisions relating to the termination of Mr. Fernandez'
employment with the Company.
Mr. Fernandez entered into an employment agreement with the Company
effective November 12, 1998 (the "Fernandez Agreement"). Under the Fernandez
Agreement, Mr. Fernandez will continue to serve as Chairman and Chief Executive
Officer of the Company through December 31, 1998 and as Chairman through October
1, 2000, unless the term of the Fernandez Agreement is extended by consent of
the parties. During
8
<PAGE> 11
the term of the Fernandez Agreement, Mr. Fernandez will be included on the
Company's slate of nominees to be elected to the Board of Directors.
The Fernandez Agreement provides for a base salary of $400,000 for fiscal
1999 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 and
individual objectives. The target bonus of $400,000 for fiscal 1999 had been set
prior to entering into the Fernandez Agreement.
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 Fernandez Agreement,
the Company terminates the employment of Mr. Fernandez involuntarily without
Business Reasons (as defined in the Fernandez Agreement) or if a Constructive
Termination (as defined in the Fernandez Agreement) occurs, he will be entitled
to receive his salary and vacation accrued through the Termination Date (as
defined in the Fernandez Agreement), salary for three years (one year in case of
termination within one year following a Change in Control (as defined in the
Fernandez Agreement)), 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, Time Accelerated Restricted Stock ("TARPS")
and other equity arrangements subject to vesting, group health benefits until
age 55, auto benefits for one year, and if such termination occurs within 12
months following a Change in Control, forgiveness of all outstanding principal
and interest due to the Company under indebtedness incurred to purchase shares
of Company stock. Payments of salary and bonus will cease if Mr. Fernandez
violates the terms of the non-competition provisions contained in the Fernandez
Agreement during the three years following termination. If a Change of Control
occurs during the term of the Fernandez Agreement, Mr. Fernandez will be
entitled to receive immediately salary and vacation accrued through the
Termination Date, plus three year's salary then in effect, three times maximum
target bonus for the fiscal year in which the Change in Control occurs,
acceleration in full of vesting of all outstanding stock options, TARPS and
other equity arrangements subject to vesting, group health benefits until age
55, auto benefits for one year, forgiveness of all outstanding principal and
interest due to the Company under indebtedness incurred to purchase shares of
Company stock, except that if he violates the terms of the non-competition
provisions contained in the Fernandez Agreement, he will be required to repay to
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.
In February 1998, each of Messrs. Clifford, Carter, Halligan and Fleisher
(collectively, the "Executive Officers") entered into an employment agreement
with the Company (the "Executive Officer Agreements"). Under the Executive
Officer Agreements, each of the Executive Officers agreed to serve the Company
in their then-current capacities through October 1, 2000 and each Executive
Officer Agreement would automatically renew for subsequent one-year periods
unless the Executive Officer or the Company provided written notice of its
termination of the Executive Officer Agreement.
The Executive Officer Agreements provided for base salaries of $300,000,
$235,000, $235,000 and $230,000 for Messrs. Clifford, Carter, Halligan and
Fleisher, respectively, for fiscal 1998, subject thereafter to annual
adjustments by the Board or the Compensation Committee, in their sole
discretion. Each Executive Officer was entitled to participate in the Company's
executive bonus program, with the annual target bonus established by the Board
or the Compensation Committee in their discretion, payable based on achievement
of specified Company and individual objectives. The target bonuses for fiscal
year 1998 had been set at $250,000, $210,000, $170,000 and $150,000 for Messrs.
Clifford, Carter, Halligan and Fleisher, respectively, prior to entering into
the Executive Officer Agreements. The Executive Officer Agreements contained
provisions relating to the termination of the Executive Officers' employment
with the Company.
9
<PAGE> 12
Mr. Clifford entered into a new employment agreement with the Company
effective November 12, 1998 (the "Clifford Agreement"). Under the Clifford
Agreement, Mr. Clifford will continue to serve as President of the Company
through December 31, 1998 and shall serve as President and Chief Executive
Officer of the Company through October 1, 2000. The Clifford Agreement shall
automatically renew for subsequent one year periods unless Mr. Clifford or the
Company provides written notice of its termination of the Clifford Agreement.
During the term of the Clifford Agreement, Mr. Clifford will be included on the
Company's slate of nominees to be elected to the Board of Directors.
The Clifford Agreement provides for a base salary of $375,000 for fiscal
1999 and thereafter it is subject to annual adjustments by the Board or the
Compensation Committee, in their sole discretion. Mr. Clifford 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 and
individual objectives. The target bonus of $325,000 for fiscal 1999 had been set
prior to entering into the Clifford Agreement.
Mr. Clifford's employment is at will and may be terminated by him or the
Company upon fourteen days' notice. If, during the term of the Clifford
Agreement, the Company terminates the employment of Mr. Clifford involuntarily
without Business Reasons (as defined in the Clifford Agreement) or if a
Constructive Termination (as defined in the Clifford Agreement) occurs, he will
be entitled to receive his base salary and vacation accrued through the
Termination Date (as defined in the Clifford Agreement), plus base salary for
one year, any bonus payment previously fixed and declared by the Board or the
Compensation Committee and not previously paid, and group health benefits for 18
months. If, during the term of the Clifford Agreement, a Change in Control (as
defined in the Clifford Agreement) occurs, he will be entitled to receive
immediately his base salary and vacation accrued through the Termination Date,
plus base salary for three years at the current rate, an amount equal to three
times his maximum target bonus for the fiscal year in which the Change in
Control occurs, acceleration in full of vesting of all outstanding stock
options, TARPS and other equity arrangements subject to vesting, forgiveness of
all outstanding principal and interest due to the Company under indebtedness
incurred to purchase shares of capital stock of the Company, group health
benefits for 18 months, and if employment is terminated within 12 months of a
Change in Control, outplacement services. Payments of salary and bonus will
cease if Mr. Clifford violates the terms of the non-competition provisions
contained in the Clifford Agreement during the three years following termination
and he will be required to repay to the Company any amounts received as salary
or bonus with respect to any period following the termination of his employment.
If Mr. Clifford voluntarily terminates his employment, or if the Company
terminates it for Business Reasons, he will not receive any salary or bonus
thereafter.
Each of Messrs. Carter, Halligan and Fleisher (collectively, the "Other
Executive Officers") has also entered into a new employment agreement with the
Company effective November 12, 1998 (the "Other Executive Officer Agreements").
Under the Other Executive Officer Agreements, each of the Other Executive
Officers will continue to serve the Company in their current capacities through
October 1, 1999, and each Other Executive Officer Agreement shall automatically
renew for subsequent one year periods unless the Other Executive Officer or the
Company provides written notice of its termination of the Other Executive
Officer Agreements.
The Other Executive Officer Agreements provide for base salaries of
$255,000, $250,000 and $250,000 for Messrs. Carter, Halligan and Fleisher,
respectively, for fiscal 1999 and thereafter the base salaries are subject to
annual adjustments by the Board or the Compensation Committee, in their sole
discretion. Each Other Executive Officer 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 and individual
objectives. The target bonuses of $220,000, $180,000 and $180,000 for Messrs.
Carter, Halligan and Fleisher, respectively, for fiscal 1999 had been set prior
to entering into the Other Executive Officer Agreements.
Each of the Other Executive Officer's employment is at will and may be
terminated by him or the Company upon fourteen days' notice. If, during the term
of the Other Executive Officer Agreements, the Company terminates the employment
of an Other Executive Officer involuntarily without Business Reasons (as defined
in the Other Executive Officer Agreements) or if a Constructive Termination (as
defined in the
10
<PAGE> 13
Other Executive Officer Agreements) occurs, he will be entitled to receive his
base salary and vacation accrued through the Termination Date (as defined in the
Other Executive Officer Agreements), plus base salary for one year, any bonus
payment previously fixed and declared by the Board or the Compensation Committee
and not previously paid, and group health benefits for 18 months. If, during the
term of the Other Executive Officer Agreement, a Change in Control occurs, he
will be entitled to receive immediately his base salary and vacation accrued
through the Termination Date (as defined in the Other Executive Officer
Agreements), plus base salary for two years at the current rate, an amount equal
to two times his maximum target bonus for the fiscal year in which the Change in
Control occurs, acceleration in full of vesting of all outstanding stock
options, TARPS and other equity arrangements subject to vesting, forgiveness of
all outstanding principal and interest due to the Company under indebtedness
incurred to purchase shares of capital stock of the Company, group health
benefits for 18 months, and if employment is terminated within 12 months of a
Change in Control, outplacement services. Payments of salary and bonus will
cease if the Other Executive Officer violates the terms of the non-competition
provisions contained in the Other Executive Officer Agreement during the three
years following termination and he will be required to repay to the Company any
amounts received as salary or bonus with respect to any period following the
termination of his employment. If an Other Executive Officer 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 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
11
<PAGE> 14
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 a 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. The Compensation Committee, subject to Board approval,
determines compensation of the Company's Chief Executive Officer. Mr. Fernandez'
compensation package in 1998 consisted of the same benefits program as other
executive officers, as itemized above, including base salary, cash bonus, stock
options and other executive and employee benefit programs. Mr. Fernandez
received no material compensation or benefits in 1998 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. Mr. Fernandez'
bonus declined in fiscal 1998 since the Company's performance targets were only
partially met. 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
John P. Imlay
Robert E. Weissman
12
<PAGE> 15
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"), The S & P
500 Index and the Hambrecht & Quist Technology Index ("H&Q Technology Index")
for the fiscal years ended September 30, 1998. 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, the stocks represented in the Nasdaq
Index, the H&Q Technology Index and on September 30, 1993 in the stocks
represented in the S & P 500 Index. The S & P 500 Index is presented because on
September 15, 1998 the Class A Common Stock was listed on the New York Stock
Exchange. 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 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG GARTNER GROUP, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE S & P 500 INDEX AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[Comparison Graph]
<TABLE>
<CAPTION>
HAMBRECHT & NASDAQ
GARTNER GROUP, QUIST STOCK MARKET
INC. TECHNOLOGY (U.S.) S & P 500
<S> <C> <C> <C> <C>
10/5/93 $ 100 $100 $100 $100
SEP-94 $ 259 $116 $101 $104
SEP-95 $ 595 $204 $135 $139
SEP-96 $1236 $224 $162 $165
SEP-97 $1091 $334 $227 $227
SEP-98 $ 759 $310 $232 $248
</TABLE>
* $100 invested on 10/5/93 in Class A Common Stock in Nasdaq Index and H&Q
Technology Index and, on 9/30/93 in S&P 500 Index including reinvestment of
dividends. Fiscal year ending September 30.
13
<PAGE> 16
PROPOSAL TWO:
APPROVAL OF AN AMENDMENT TO THE 1991 STOCK OPTION PLAN
The Board of Directors adopted, and the stockholders approved, the
Company's 1991 Stock Option Plan (the "1991 Plan") in 1991. The 1991 Plan is
designed to retain, motivate and reward eligible employees by providing such
personnel long term equity participation in the Company. It is intended to
provide incentive to such personnel to maximize the financial performance and
long-term growth of the Company and to enable the Company to enlist and retain
qualified personnel for the successful conduct of its business.
A total of 22,800,000 shares of Class A Common Stock have been reserved for
issuance under the 1991 Plan. As of November 30, 1998, awards with respect to
23,898,492 shares of Class A Common Stock had been granted under the 1991 Plan,
including contingent options and shares of time accelerated restricted stock
(see description of contingent options and shares of time accelerated restricted
stock below), of which options to purchase 13,766,923 shares of Class A Common
Stock have been exercised. In order to continue to retain, motivate and reward
such personnel, the Board of Directors has approved an amendment to the Plan to
increase the number of shares authorized for issuance thereunder by an aggregate
of 10,000,000 additional shares, to a total of 32,800,000 shares of Class A
Common Stock. If Proposal Two is approved, a total of 8,901,508 shares of Class
A Common Stock would be available for future grants.
In April 1998, the Board granted 2,101,627 stock options under the 1991
Plan that were contingent upon approval of Proposal Two. In July 1998, the Board
granted an additional 503,600 stock options under the 1991 Plan that were
contingent upon approval of Proposal Two. None of the contingent options were
granted to the Named Executive Officers. In November 1998, the Board of
Directors granted 100,000 shares of time accelerated restricted stock to Mr.
Fernandez, contingent on stockholder approval of Proposal Two. If Proposal Two
is not approved, the grants of contingent options and time accelerated
restricted stock will be cancelled. Prior to the contingent grants of the
contingent grants, IMS Health and Mr. Fernandez indicated their intention to
vote for Proposal Two.
A summary of the material features of the 1991 Plan is attached hereto as
Appendix A.
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 for adoption of the amendment to the 1991 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE AMENDMENT TO THE 1991 PLAN TO INCREASE THE NUMBER OF
SHARES OF CLASS A COMMON STOCK AVAILABLE FOR ISSUANCE.
PROPOSAL THREE:
APPROVAL OF THE 1998 LONG TERM STOCK OPTION PLAN
The Board of Directors adopted the Company's 1998 Long Term Stock Option
Plan (the "1998 Long Term Plan") in October 1998, subject to stockholder
approval. The 1998 Long Term Plan is designed to retain, motivate and reward
senior personnel by providing such personnel long term equity participation in
the Company relating directly to the financial performance and long-term growth
of the Company.
The 1998 Long Term Plan provides for the grant of stock options and time
accelerated restricted stock. A total of 2,500,000 shares of Class A Common
Stock will be available for issuance under the 1998 Long Term Plan.
14
<PAGE> 17
The Board of Directors anticipates that at its meeting following the Annual
Meeting it will grant awards of stock options and time accelerated restricted
stock to selected senior personnel, including the Named Executive Officers, in
an amount aggregating approximately 2,500,000 shares of Class A Common Stock.
Any options will have an exercise price equal to the fair market value of the
Class A Common Stock on the date of the grant. It is anticipated that open
market purchases of Class A Common Stock will be made in an amount approximately
equal to the number of shares subject to purchase upon the exercise of options
and awarded as time accelerated restricted stock under the 1998 Long Term Plan,
subject to certain limitations that may be imposed in connection with the
transaction described under "Certain Relationships and Transactions --
Relationship with IMS Health Incorporated," although there can be no assurance
at what price the Company will be able to purchase a sufficient number of
shares.
A summary of the material features of the 1998 Long Term Plan is attached
hereto as Appendix B.
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 for adoption of the 1998 Long Term Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE 1998 LONG TERM OPTION PLAN.
PROPOSAL FOUR:
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 1999 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. 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 of KPMG Peat Marwick LLP. 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 1999
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
15
<PAGE> 18
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 Class A Common Stock
as of September 30, 1998, (i) by each person (or group of affiliated persons)
which is known by the Company to own beneficially more than five percent of the
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.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
BENEFICIAL OWNER SHARES VOTING STOCK
- ---------------- ---------- ----------------
<S> <C> <C>
IMS Health Incorporated(1).................................. 48,199,097 47.4
200 Nyala Farms Road
Westport, CT 06880
Manuel A. Fernandez(2)...................................... 882,167 *
E. Follett Carter(3)........................................ 361,021 *
John F. Halligan(4)......................................... 247,528 *
Michael D. Fleisher (5)..................................... 101,457 *
William T. Clifford(6)...................................... 261,579 *
William O. Grabe(7)......................................... 103,000 *
John P. Imlay(8)............................................ 98,000 *
Max D. Hopper(9)............................................ 27,200 *
Stephen G. Pagliuca(10)..................................... 53,000 *
Robert E. Weissman(11)...................................... 2,000 *
Dennis G. Sisco(12)......................................... 5,000 *
All directors and executive officers as a group (11
persons)(11)(12).......................................... 2,141,952 2.1
</TABLE>
- ---------------
* Less than 1%
(1) Includes 34,223,993 shares of Class A Common Stock held by IMS Health,
13,257,728 shares of Class A Common Stock held by Enterprises Associates,
Inc., a wholly-owned subsidiary of IMS Health, and 117,376 shares of Class
A Common Stock held by IMS Health Licensing Associates, L.P., in which IMS
Health has a majority interest. Also includes warrants to purchase 600,000
shares of Class A Common Stock held by IMS Health.
(2) Includes 181,540 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1998. Includes 23,200
shares held by members of Mr. Fernandez' family, as to which he disclaims
beneficial ownership.
(3) Includes 218,100 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1998.
(4) Includes 171,600 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1998. Includes 4,400 shares
held by members of Mr. Halligan's family, as to which he disclaims
beneficial ownership.
(5) Includes 101,100 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1998.
(6) Includes 228,620 shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 30, 1998.
(7) Includes 53,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1998.
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<PAGE> 19
(8) Includes 53,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(9) Includes 22,200 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1998.
(10) Includes 50,500 shares issuable upon the exercise of stock options that are
exercisable within 60 days of September 30, 1997.
(11) Excludes shares beneficially owned by IMS Health. Mr. Weissman, a director
of the Company, is Chairman and Chief Executive Officer of IMS Health, and
accordingly may be deemed the beneficial owner of such shares. Mr. Weissman
has disclaimed such beneficial ownership.
(12) Includes 5,000 shares issuable upon the exercise of stock options and stock
warrants that are exercisable within 60 days of September 30, 1998.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIP WITH IMS HEALTH INCORPORATED
Prior to June 30, 1998, Cognizant Corporation and affiliates owned the
shares included above as owned by IMS Health. On June 30, 1998, Cognizant
Corporation and affiliates transferred ownership in the Company to IMS Health
and affiliates. IMS Health currently has two representatives on the Board and
has indicated that it does not intend to increase its Board representation in
the future. The Company has announced an agreement in principle with IMS Health,
which is described below, pursuant to which IMS Health would no longer have any
representatives on the Board. There can be no assurances, however, that if the
transaction described below is not consummated, changing business conditions or
other factors will not cause IMS Health to assess its ownership interest and
seek a greater representation on the Board.
As a result of its share ownership, IMS Health may be deemed to have
control over the management and affairs of the Company. Unless and until the
transaction described below is consummated, IMS Health's significant ownership
of the Company may have the effect of making certain transactions more difficult
or impossible to consummate without the support of IMS Health, including proxy
contests, mergers involving the Company, tender offers, open-market purchase
programs or other purchases of Class A 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 Class A Common Stock. Moreover, IMS Health's
voting control could preclude or discourage a competitive bid in the event IMS
Health bids to acquire the remaining shares outstanding. Accordingly, IMS Health
may be able to effect an uncontested bid at a lower price to the Company's
stockholders than if IMS Health did not hold a substantial equity interest in
the Company. Under certain circumstances, Delaware law may impose certain duties
upon IMS Health as a controlling stockholder of the Company.
On November 12, 1998, the Company's Board of Directors approved an
agreement in principle with IMS Health, which owns approximately 47.6 million or
47% of the Company's Class A Common Stock, to undertake a recapitalization of
the Company and facilitate a tax-free spin-off by IMS Health of its equity
position in Gartner Group, Inc. to its shareholders. As part of the
recapitalization, IMS Health will exchange 40.7 million shares of Class A Common
Stock for an equal number of shares of new Class B Common Stock of the Company
prior to the spin-off. This new class of common stock will be entitled to elect
at least 80% of the Company's Board of Directors, but will otherwise be
substantially identical to existing Class A Common Stock. The Class B Common
Stock will be distributed to IMS Health shareholders in a tax-free distribution.
IMS Health will continue to hold 6.9 million shares of Class A Common Stock
after the spin-off. It is the intention of IMS Health to sell these shares
within one year of the spin-off, subject to certain conditions. In addition, the
Company agreed that it would pay a one-time special cash dividend of $300.0
million to its shareholders of record immediately prior to the IMS Health
spin-off. Further, the Company also agreed that it would repurchase up to $300.0
million of its common stock on the open market after the spin-off. The exchange,
spin-off and special cash dividend are expected to be completed in the third
quarter of fiscal 1999, subject to approval by the IRS of the tax-free status of
the spin-off and approval of the recapitalization plan by
17
<PAGE> 20
the non-IMS Health shareholders of the Company. The share repurchase program
will commence after the spin-off and is expected to be completed within one
year.
LOANS TO EXECUTIVE OFFICERS OF THE COMPANY
On June 4, 1997, with the Board of Directors approval, the Company provided
loans totaling $7.2 million to certain executive officers to facilitate the
purchase of Class A Common Stock arising out of the exercise of stock options.
The loan proceeds were not used to fund the option exercise price of the Class A
Common Stock acquired. The loans were full recourse obligations to the officers
and were secured by shares of Class A Common Stock. The loans bore interest at
an annual rate of 6.14%. On December 18, 1997, with the Board of Directors
approval, the Company provided additional loans under the same conditions to the
same executive officers totaling $2.5 million. The loans bore interest at an
annual rate of 5.6%. On July 23, 1998, with Board of Directors' approval, the
Company received 302,003 shares of Class A Common Stock in settlement of the
outstanding loan balances and accrued interest due. The following table provides
additional information concerning the loans:
<TABLE>
<CAPTION>
INDEBTEDNESS AS OF JULY 23, 1998
------------------------------------
NAME PRINCIPAL INTEREST TOTAL*
- ---- ---------- -------- ----------
<S> <C> <C> <C>
Manuel A. Fernandez............................. $7,375,000 $265,539 $7,640,539
William T. Clifford............................. 500,000 18,453 518,453
John F. Halligan................................ 762,500 27,448 789,948
E. Follett Carter............................... 1,000,000 36,018 1,036,018
---------- -------- ----------
Total................................. $9,637,500 $347,458 $9,984,958
========== ======== ==========
</TABLE>
- ---------------
* Largest amount outstanding during the fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All reports required to be filed during fiscal year 1998 pursuant to
Section 16(a) of the Securities Exchange Act of 1934 by directors, executive
officers and 10% beneficial owners were filed on timely basis, except as
follows. Mr. Carter filed one late report on Form 5 to report one transaction.
Mr. Clifford filed one late report on Form 5 to report two transactions. Mr.
Halligan filed one late Form 4 to report six transactions and one late Form 5 to
report one transaction. Mr. Fleisher filed one late Form 5 to report two
transactions. Mr. Hopper filed one late report on Form 4 to report six
transactions.
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.
18
<PAGE> 21
MISCELLANEOUS
The Company's Annual Report for the fiscal year ended September 30, 1998 is
being mailed to the stockholders of record concurrently with this Proxy
Statement. The Company's Annual Report is not part of this Proxy Statement.
Upon written request of any person solicited hereunder, the Company's
Report on Form 10-K for the fiscal year ended September 30, 1998 as filed with
the Securities and Exchange Commission may be obtained, without charge, by
writing to Investor Relations, Gartner Group, Inc., P.O. Box 10212, 56 Top
Gallant Road, Stamford, Connecticut 06904.
THE BOARD OF DIRECTORS
GARTNER GROUP, INC.
Stamford, Connecticut
December 23, 1998
19
<PAGE> 22
APPENDIX A
DESCRIPTION OF THE 1991 STOCK OPTION PLAN
General. The Company's 1991 Stock Option Plan (the "1991 Option Plan") was
adopted by the Board of Directors in March 1991 and approved by the stockholders
in April 1991. The 1991 Option Plan authorizes the Board of Directors (the
"Board"), or one or more committees which the Board may appoint from among its
members (the "Committee"), to grant (1) stock options, (2) stock purchase
rights, (3) stock appreciation rights ("SARs") and (4) Long-Term Performance
Awards. A total of 22,800,000 shares of Common Stock has been reserved for
issuance under the 1991 Option Plan. Options granted under the 1991 Option Plan
may be either "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options, as determined by the Board or the Committee.
Purpose. The general purpose of the 1991 Option Plan is to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to employees, consultants and officers to
promote the success of the Company's business.
Administration. The 1991 Option Plan may be administered by the Board or
the Committee. Subject to the other provisions of the 1991 Option Plan, the
Board has the authority to: (i) interpret the plan and apply its provisions;
(ii) prescribe, amend or rescind rules and regulations relating to the plan;
(iii) select the persons to whom options and SARs are to be granted; (iv)
determine the number of shares to be made subject to each option and SAR; (v)
determine whether and to what extent options and SARs are to be granted; (vi)
prescribe the terms and conditions of each option and SAR (including the
exercise price, whether an option will be classified as an incentive stock
option or a nonstatutory option and the provisions of the stock option or stock
purchase agreement to be entered into between the Company and the grantee);
(vii) amend any outstanding option or SAR subject to applicable legal
restrictions; (viii) authorize any person to execute, on behalf of the Company,
any instrument required to effect the grant of an option or SAR; and (ix) take
any other actions deemed necessary or advisable for the administration of the
1991 Option Plan. All decisions, interpretations and other actions of the
Committee shall be final and binding on all holders of options or SARs and on
all persons deriving their rights therefrom.
Eligibility. The 1991 Option Plan provides that options and SARs may be
granted to the Company's employees and consultants (as such terms are defined in
the Option Plan). Incentive stock options may be granted only to employees. Any
optionee who owns more than 10 percent of the combined voting power of all
classes of outstanding stock of the Company (a "10% Stockholder") is not
eligible for the grant of an incentive stock option unless the exercise price of
the option is at least 110 percent of the fair market value of the Common Stock
on the date of grant.
Terms and Conditions of Options. Each option granted under the 1991 Option
Plan is evidenced by a written stock option agreement between the optionee and
the Company and is subject to the following terms and conditions:
(a) Exercise Price. The Board or Committee determines the exercise
price of options to purchase shares of Common Stock at the time the options
are granted. However, excluding options issued to 10% Stockholders, the
exercise price under an incentive stock option must not be less than 100
percent of the fair market value of the Common Stock on the date the option
is granted. If the Common Stock is listed on any established stock exchange
or a national market system, the fair market value 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 percent greater or
more than 20 percent 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. If the Common Stock is traded on the
over-the-
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<PAGE> 23
counter market, the fair market value 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 percent greater or more than 20
percent 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.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and
generally may be made by cash, check, a full-recourse promissory note,
other shares of Common Stock of the Company owned by the optionee, delivery
of an exercise notice together with irrevocable instructions to a broker to
deliver the exercise price to the Company from sale or loan proceeds, or by
a combination thereof.
(c) Exercise of the Option. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. However, in no event shall an option granted under the 1991
Option Plan be exercised more than 10 years after the date of grant.
Moreover, in the case of an incentive stock option granted to a 10 percent
Stockholder, the term of the option shall be for no more than five years
from the date of grant.
(d) Termination of Employment. If an optionee's employment terminates
for any reason (other than death or permanent disability), the optionee may
exercise his or her option or SAR, but only within such period of time as
is determined by the Administrator at the time of grant, not to exceed six
(6) months (three (3) months in the case of an Incentive Stock Option) from
the date of such termination, and only to the extent that the optionee was
entitled to exercise it at the date of such termination (but in no event
later than the expiration of the term of such option or SAR as set forth in
the option or SAR Agreement). To the extent that the optionee was not
entitled to exercise an option or SAR at the date of such termination, and
to the extent that the optionee does not exercise such option or SAR (to
the extent otherwise so entitled) within the time specified herein, the
option or SAR shall terminate.
(e) Permanent Disability. If an employee is unable to continue
employment with the Company as a result of permanent and total disability
(as defined in the Code), then all options and SARs held by such optionee
under the 1991 Option Plan shall expire upon the earlier of (i) six months
after the date of termination of the optionee's employment or (ii) the
expiration date of the option or SAR. The optionee may exercise all or part
of his or her option or SAR at any time before such expiration to the
extent that such option or SAR was exercisable at the time of termination
of employment.
(f) Death. If an optionee dies while employed by the Company, the
optionee's estate or a person who acquired the right to exercise the
deceased optionee's option or SAR may exercise the option or SAR, but only
within six (6) months (or such lesser period as the option or SAR agreement
may provide, or such longer period, not to exceed twelve (12) months, as
the option or SAR agreement may provide) following the date of death, and
only to the extent the optionee was entitled to exercise it at the date of
death. To the extent that the optionee was not entitled to exercise an
option or SAR at the time of death, and to the extent that the optionee's
estate or a person who acquired the right to exercise such option does not
exercise such option or SAR within the period described above, the option
or SAR shall terminate.
(g) Termination of Options. Each stock option agreement will specify
the term of the option and the date when all or any installment of the
option is to become exercisable. Notwithstanding the foregoing, however,
the term of any incentive stock option shall not exceed 10 years from the
date of grant. No options may be exercised by any person after the
expiration of its term.
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<PAGE> 24
(h) Nontransferability of Options. Unless the Committee determines
otherwise, during an optionee's lifetime, his or her option(s) shall be
exercisable only by the optionee and shall not be transferable other than
by will or laws of descent and distribution. The Committee may provide for
the transfer of nonstatutory options by the optionee to any member of the
optionees immediate family, as defined in the 1991 Option Plan. Following
such transfer, the nonstatutory option will continue to be subject to the
same conditions as before the transfer.
(i) Value Limitation. If the aggregate fair market value of all
shares of Common Stock subject to an optionee's incentive stock option
which are exercisable for the first time during any calendar year exceeds
$100,000, the excess options shall be treated as nonstatutory options.
(j) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions not inconsistent with the 1991 Option Plan
as may be determined by the Board or Committee.
Stock Appreciation Rights. The 1991 Option Plan permits the Company to
grant SARs in connection with all or any part of an option, either concurrently
with the grant of the option or at any time thereafter during the term of the
option. The SAR shall entitle the optionee to exercise the SAR by surrendering
to the Company unexercised a portion of the related option. The optionee shall
receive in exchange from the Company an amount equal to the excess of (1) the
fair market value on the date of exercise of the SAR of the Common Stock covered
by the surrendered portion of the related option over (2) the exercise price of
the Common Stock covered by the surrendered portion of the related option. The
Administrator may place limits on the amount that may be paid upon exercise of
an SAR; provided, however, that such limits shall not restrict the
exercisability of the related option. When an SAR is exercised, the related
option, to the extent surrendered, shall cease to be exercisable. An SAR may
only be exercised at a time when the fair market value of the Common Stock
covered by the related option exceeds the exercise price of the Common Stock
covered by the related option.
At the discretion of the Administrator, SARs may be granted without related
options. Such an SAR shall entitle the optionee, by exercising the SAR, to
receive from the Company an amount equal to the excess of (1) the fair market
value of the Common Stock covered by the exercised portion of the SAR, as of the
date of such exercise, over (2) the fair market value of the Common Stock
covered by the exercised portion of the SAR, as of the last market trading date
prior to the date on which the SAR was granted; provided, however, that the
Administrator may place limits on the aggregate amount that may be paid upon
exercise of an SAR. SARs shall be exercisable, in whole or in part, at such
times as the Administrator shall specify in the optionee's SAR agreement.
Stock Purchase Rights. The 1991 Option Plan permits the Company to grant
rights to purchase Common Stock either alone or in combination with other awards
granted under the 1991 Option Plan or in combination with cash awards made
outside of the 1991 Option Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to purchase,
the price to be paid, and the time within which the offeree must accept such
offer, which shall in no event exceed thirty (30) days from the date upon which
the Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
Unless the Administrator determines otherwise, the Restricted Stock
Purchase Agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with the
Company for any reason (including death or disability). The purchase price for
Shares repurchased pursuant to the Restricted Stock purchase agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine.
Long-Term Performance Awards. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone or in addition to other
awards granted under the 1991 Option Plan. Such awards shall be granted for no
cash consideration. The Administrator shall determine the nature, length and
starting
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<PAGE> 25
date of any performance period (the "Performance Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors, if
any, to be used in the determination of Long-Term Performance Awards and the
extent to which such Long-Term Performance Awards are valued or have been
earned. Long-Term Performance Awards may vary from participant to participant
and between groups of participants and shall be based upon the achievement of
the Company and individual performance factors or such other criteria or
combination of criteria as the Administrator may deem appropriate. Performance
Periods may overlap and participants may participate simultaneously with respect
to Long-Term Performance Awards that are subject to different Performance
Periods and different performance factors and criteria. Long-Term Performance
Awards shall be confirmed by, and be subject to the terms of, a Long-Term
Performance Award agreement. The terms of such awards need not be the same with
respect to each participant.
At the beginning of each Performance Period, the Administrator may
determine for each Long-Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Common Stock to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Long-Term Performance
Award are met. Such dollar values or number of shares of Common Stock may be
fixed or may vary in accordance with such performance or other criteria as may
be determined by the Administrator.
Adjustment Upon Changes in Capitalization; Corporate Transactions. In the
event that the stock of the Company is changed by reason of any stock split,
reverse stock split, stock dividend, recapitalization or other change in the
capital structure of the Company, appropriate proportional adjustments shall be
made in the number and class of shares of stock subject to the 1991 Option Plan,
the number and class of shares of stock subject to any option or right
outstanding under the 1991 Option Plan, and the exercise price of any such
outstanding option or right. Any such adjustment shall be made upon approval of
the Board and, if required, the stockholders of the Company, whose determination
shall be conclusive. Notwithstanding the above, in connection with any merger,
consolidation, acquisition of assets or like event involving the Company, each
outstanding option and right shall be assumed or an equivalent option or right
substituted by a successor corporation. If the successor corporation does not
assume the options or substitute substantially equivalent options, or if the
Board determines in its sole discretion that the options should not continue to
be outstanding, then the exercisability of all outstanding options and rights
shall be automatically accelerated. In the event of a Change in Control of the
Company (as defined in the 1991 Option Plan, and which includes a merger or a
sale of all or substantially all of the Company's assets), if the Board of
Directors so determines in its discretion, outstanding options and rights shall
have their exercisability fully accelerated and/or the option and right holders
may be paid in cash the excess of the change in control price over the option or
right exercise price.
Amendments, Suspensions and Termination of the 1991 Option Plan. The Board
may amend, suspend or terminate the 1991 Option Plan at any time; provided,
however, that stockholder approval is required for any amendment to the extent
necessary to comply with Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 ("Rule 16b-3") or Section 422 of the Code, or any similar rule or
statute. In any event, the 1991 Option Plan will terminate automatically in
2001.
Federal Tax Information for 1991 Option Plan. Options granted under the
1991 Option Plan may be either "incentive stock options," as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% Stockholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares
A-4
<PAGE> 26
in excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee generally will recognize taxable income measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company may be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
Section 162(m) of the Code limits the Company's deduction for federal
income tax purposes in any one fiscal year to $1,000,000 per person with respect
to each of the Company's Chief Executive Officer and its four other highest paid
executive officers who are employed on the last day of the fiscal year, unless
the compensation was not otherwise subject to the deduction limit. Compensation
which is performance-based and approved by the Company's stockholders is not
subject to the deduction limit. Awards of options are deemed to be
performance-based if, among other conditions, the options are granted at not
less than the fair market value on the date of grant and the plan under which
they are granted specifies the maximum number of shares for which options may be
granted to an optionee in any fiscal year. The 1991 Option Plan provides that no
optionee may be granted options with respect to more than 500,000 shares in any
fiscal year, except that in connection with his or her initial employment, an
optionee may be granted options with respect to 500,000 shares, which shares
shall not count against the annual limit.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1991 Option Plan, does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the income tax laws
of any municipality, state or foreign country in which an optionee may reside.
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<PAGE> 27
APPENDIX B
DESCRIPTION OF THE 1998 LONG TERM STOCK OPTION PLAN
General. The Company's 1998 Long Term Stock Option Plan (the "1998 Long
Term Plan") was adopted by the Board of Directors in October 1998, subject to
stockholder approval. The 1998 Long Term Plan authorizes the Board of Directors
(the "Board"), or one or more committees which the Board may appoint from among
its members (the "Committee"), to grant stock options and shares of restricted
stock (together, "Awards"). A total of 2,500,000 shares of Common Stock has been
reserved for issuance under the 1998 Long Term Plan. Options granted under the
1998 Long Term Plan may be either "Incentive Stock Options", as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
Nonstatutory Stock Options, as determined by the Board or the Committee.
Purpose. The general purpose of the 1998 Long Term Plan is 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 success of the Company's
business.
Eligibility. The 1998 Long Term Plan provides that options may be granted
to the Company's senior personnel (the "Senior Managers").
Administration. The 1998 Long Term Plan may be administered by the Board
or the Committee (collectively the "Administrator"). Subject to the other
provisions of the 1998 Long Term Plan, the Administrator has the authority to:
(i) determine the fair market value of the Common Stock; (ii) select the Senior
Managers to whom Awards may be granted thereunder; (iii) determine whether and
to what extent Awards are granted thereunder; (iv) determine the number of
shares of Common Stock to be covered by each Award granted thereunder; (v)
approve forms of agreement for use under the 1998 Long Term Plan; (vi) determine
the terms and conditions, not inconsistent with the terms of the 1998 Long Term
Plan, of any Award granted thereunder (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 Award 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) 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; (viii)
construe and interpret the terms of the 1998 Long Term Plan and Awards granted
pursuant to the 1998 Long Term Plan; (ix) prescribe, amend and rescind rules and
regulations relating to the 1998 Long Term Plan, including rules and regulations
relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws; (x) modify or amend each option, including
the discretionary authority to extend the post-termination exercisability period
of options longer than is otherwise provided for in the 1998 Long Term Plan;
(xi) institute an Option Exchange Program; (xii) make all other determinations
deemed necessary or advisable for administering the 1998 Long Term Plan.
Terms and Conditions of Options. Each option granted under the 1998 Long
Term Plan is evidenced by a written stock option agreement between the optionee
and the Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price
of options to purchase shares of Common Stock at the time the options are
granted. However, excluding options issued to 10% stockholders (an optionee
who owns more than 10% of the combined voting power of all classes of
outstanding stock of the Company), the exercise price under an Incentive
Stock Option must not be less than 100% of the fair market value of the
Common Stock on the date the option is granted. 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 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
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<PAGE> 28
system or exchange (or the exchange with the greatest value of trading in
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 closing sales 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 closing price (or closing bid, as applicable) on
the date of determination. 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
provided, 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 date
of determination, as reported in The Wall Street Journal or such other
source as the Administrator of the 1998 Long Term 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 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. In the absence
of an established market for the Common Stock, the fair market value shall
be determined in good faith by the Administrator.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and
generally may be made by cash, check, a promissory note, other shares of
Common Stock of the Company owned by the optionee, delivery of an exercise
notice together with irrevocable instructions to a broker to deliver the
exercise price to the Company from sale or loan proceeds, reduction of any
Company liability to the optionee, or by a combination thereof.
(c) Exercise of the Option. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. However, in no event shall an option granted under the 1998
Long Term Plan be exercised more than 10 years after the date of grant or
such shorter term as may be provided in the Notice of Grant. 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 the ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or 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.
(d) Termination of Employment. 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 applicable option agreement. 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
herein below. 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 status, the
Administrator may in its discretion determine that such change of status
shall be treated as a termination of the optionee's continuous status as an
employee or consultant. 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.
(e) Disability. If an employee is unable to continue as an employee
or consultant with the Company as a result of disability (as defined in the
Code), then all options held by such optionee under the 1998 Long Term Plan
shall expire upon the earlier of (i) twelve months after the date of
termination
B-2
<PAGE> 29
of the optionee's employment or (ii) the expiration date of the term of
such option. The optionee may exercise all or part of his or her option at
any time before such expiration to the extent that such option was
exercisable at the time of termination of employment. 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.
(f) Death. 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 of Common Stock covered by
the unexercisable portion of the option shall immediately revert to the
1998 Long Term Plan. If, after death, the optionee's estate or 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 1998
Long Term Plan.
(g) Nontransferability of Options. Unless the Administrator
determines otherwise, an option 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. The Administrator may
provide for the transfer of Nonstatutory Stock Options by the optionee to
any member of the optionee's immediate family, as defined in the 1998 Long
Term Plan. Following such transfer, the Nonstatutory Stock Option will
continue to be subject to the same conditions as before the transfer.
(h) Value Limitation. If the aggregate fair market value of all
shares of Common Stock subject to an optionee's Incentive Stock Option
which are exercisable for the first time during any calendar year exceeds
$100,000, the excess options shall be treated as nonstatutory stock
options.
(i) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions not inconsistent with the 1998 Long Term
Plan as may be determined by the Board or Committee.
Terms and Conditions of Restricted Stock.
Awards of Time Accelerated Restricted Stock ("TARPS") may be made in lieu
of or in addition to awards of options under the 1998 Long Term Plan. At the
time an award of TARPS is made, the Administrator will establish a period (the
"Restricted Period") during which transferability of the Class A Common Stock
applicable to such award is restricted. Awards may provide for the termination
of restrictions upon the termination of the Restricted Period and for an
accelerated termination of the Restricted Period upon the attainment of
performance goals. The Administrator may also, in its discretion, shorten or
terminate the Restricted Period or waive any conditions for the lapse or
termination of restrictions with respect to all or any of the TARPS.
At the time an award of TARPS is made, one or more certificates for the
appropriate number of shares of Class A Common Stock will be issued in the name
of the employee without the payment of any cash consideration by the employee,
but the certificate(s) will be held in custody by the Company for the employee's
account. The shares of Class A Common Stock evidenced by such certificate(s) may
not be sold, transferred, otherwise disposed of or pledged prior to the
termination of the Restricted Period. Upon lapse of the restrictions, the
certificate(s) will be issued to the employee; if the restrictions do not lapse,
the certificate(s) will be forfeited to the Company. The Administrator, in its
sole discretion, will determine whether cash and stock dividends, if any, paid
with respect to such Class A Common Stock will be paid currently to the employee
or held by the Company for the employee's account subject to the same
restrictions as the TARPS and whether and on what terms any dividends withheld
may bear interest. Subject to the foregoing restrictions, the employee will
have, commencing on the date of grant, all rights and privileges of a
shareholder as to such shares of Class A Common Stock.
B-3
<PAGE> 30
Adjustments Upon Changes in Capitalization, Dissolution Liquidation, Merger
or Asset Sale. In the event that the capital stock of the Company is changed by
reason of recapitalization, dissolution, liquidation, merger or asset sale, the
following provisions will apply:
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Award, and the number of shares of Common Stock which
have been authorized for issuance under the 1998 Long Term Plan but as to
which no Awards have yet been granted or which have been returned to the
1998 Long Term Plan upon cancellation, expiration or forfeiture of an
Award, 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 shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.
(b) 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
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 Award may be assumed or an
equivalent Award may be substituted by the successor corporation or a
parent or subsidiary of the successor corporation. The Administrator may,
in lieu of such assumption, provide for an 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 Award shall be considered assumed if, following the merger
or sale of assets, the Award confers the right to purchase or receive, for
each share of stock subject to the Award 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 an 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 of sale of assets.
Amendments, Suspensions and Termination of the 1998 Long Term Plan. The
Board may amend, suspend or terminate the 1998 Long Term Plan at any time;
provided, however, that stockholder approval is required for any amendment to
the extent necessary to comply with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 ("Rule 16b-3") or Section 422 of the Code, or any similar
rule or statute. In any event, the 1998 Long Term Plan will terminate
automatically in 2008.
B-4
<PAGE> 31
Federal Tax Information for 1998 Long Term Plan.
(a) Options. Options granted under the 1998 Long Term Plan may be either
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee generally will recognize taxable income generally
measured as the excess of the then fair market value of the shares purchased
over the purchase price. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee of the Company may be
subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as taxable income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonstatutory option.
(b) Restricted Stock.
An employee will not realize taxable income and the Company will not be
entitled to a deduction upon the grant of TARPS, until the shares are no longer
subject to a substantial risk of forfeiture (as defined in the Code), at which
time the employee will realize taxable ordinary income in an amount equal to the
fair market value for such number of shares of Common Stock at that time, and
the Company will be entitled to a deduction in the same amount. However, an
employee may make an election to recognize taxable ordinary income in the year
the TARPS is granted in an amount equal to their fair market value at the time
of the grant, determined without regard to the restrictions and, in that event,
the Company will be entitled to a deduction in such year in the same amount.
Section 162(m) of the Code limits the Company's deduction for federal
income tax purposes in any one fiscal year to $1,000,000 per person with respect
to each of the Company's Chief Executive Officer and its four other highest paid
executive officers who are employed on the last day of the fiscal year, unless
the compensation was not otherwise subject to the deduction limit. Compensation
which is performance-based and approved by the Company's stockholders is not
subject to the deduction limit. Awards of options are deemed to be
performance-based if, among other conditions, the options are granted at not
less than the fair market value on the date of grant and the plan under which
they are granted specifies the maximum number of shares for which options may be
granted to an optionee in any fiscal year. The 1998 Long Term Plan provides that
no optionee may be granted options with respect to more than 150,000 shares in
any fiscal year, except that in connection with his or her initial employment,
an optionee may be granted options with respect to 150,000 shares, which shares
shall not count against the annual limit. Awards of restricted stock are not
deemed to be performance-based and therefore will be subject to the $1,000,000
limitation on the Company's deduction for federal income tax purposes.
B-5
<PAGE> 32
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1998 Long Term Plan, does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the income tax laws
of any municipality, state or foreign country in which an optionee may reside.
B-6
<PAGE> 33
APPENDIX
Filed Pursuant to Instruction 3 to Item 10 of Regulation 14A under the 1934 Act
GARTNER GROUP, INC.
1991 STOCK OPTION PLAN
AS AMENDED BY STOCKHOLDERS ON JANUARY 28, 1999
This 1991 Stock Option Plan is an amendment and restatement of the
Gartner Group, Inc. 1991 Stock Option and Appreciation Right Incentive
Compensation Plan.
1. Purpose of the Plan. The purpose of this Stock Option Plan is to enable
the Company to provide incentive to eligible employees, consultants and officers
whose present and potential contributions are important to the continued success
of the Company, to afford these individuals the opportunity to acquire a
proprietary interest in the Company, and to enable the Company to enlist and
retain in its employment qualified personnel for the successful conduct of its
business. It is intended that this purpose will be effected through the granting
of (a) stock options, (b) stock purchase rights, (c) stock appreciation rights,
and (d) long-term performance awards.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or such of its Committees as
shall be administering the Plan, in accordance with Section 8 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under applicable securities laws, Delaware
corporate law 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 8 of the Plan.
(f) "Common Stock" means the Common Stock, $.0005 par value, of the
Company.
(g) "Company" means Gartner Group, Inc., a Delaware corporation,
previously known as GGI Holding 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,
<PAGE> 34
provided that 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 is not interrupted or terminated by the
Company, or any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Administrator, including sick leave, military leave, or
any other personal leave; provided, however, that for purposes of Continuous
Status as an Employee or Consultant, no such leave may exceed ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract
(including written Company policies) or statute or unless (in the case of
Options and Rights other than Incentive Stock Options) the Administrator has
expressly designated a longer leave period during which (for purposes of such
Options or Rights) Continuous Status as an Employee or Consultant shall
continue; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor; and provided further
that any vesting or lapsing of the Company's right to repurchase Shares at their
original purchase price shall cease on the ninety-first (91st) consecutive day
of any leave of absence approved by the Administrator and shall not recommence
until such date, if any, upon which the Consultant or Optionee resumes his or
her service with the Company. Continuous employment shall be interrupted and
terminated for an Employee if the Employee's weekly work hours change from full
time (40 hours) to part time (less than 40 hours).
(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 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
<PAGE> 35
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.
(p) "Long-Term Performance Award" means an award under Section 7
below. A Long-Term Performance Award shall permit the recipient to receive a
cash or stock bonus (as determined by the Administrator) upon satisfaction of
such performance factors as are set out in the recipient's individual grant.
Long-term Performance Awards will be based upon the achievement of Company,
Subsidiary and/or individual performance factors or upon such other criteria as
the Administrator may deem appropriate.
(q) "Long-Term Performance Award Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Long-
<PAGE> 36
Term Performance Award grant. The Long-Term Performance Award Agreement is
subject to the terms and conditions of the Plan.
(r) "Nonstatutory Stock Option" means any Option that is not an
Incentive Stock Option.
(s) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option, Stock Purchase Right, SAR or
Long-Term Performance Award grant. The Notice of Grant is part of the Option
Agreement, the SAR Agreement and the Long-Term Performance Award Agreement.
(t) "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.
(u) "Option" means a stock option granted pursuant to the Plan.
(v) "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.
(w) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(x) "Optioned Stock" means the Common Stock subject to an Option or
Right.
(y) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(aa) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(bb) "Plan" means this Stock Option Plan, formerly the 1991 Stock
Option and Appreciation Right Incentive Compensation Plan.
(cc) "Restricted Stock" means shares of Common Stock subject to a
Restricted Stock Purchase Agreement acquired pursuant to a grant of Stock
Purchase Rights under Section 6 below.
(dd) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(ee) "Right" means and includes SARs, Long-Term Performance Awards
and Stock Purchase Rights granted pursuant to the Plan.
<PAGE> 37
(ff) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(gg) "SAR" means a stock appreciation right granted pursuant to
Section 5 of the Plan.
(hh) "SAR Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual SAR grant.
The SAR Agreement is subject to the terms and conditions of the Plan.
(ii) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(jj) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 6 of the Plan, as evidenced by a Notice of Grant.
(kk) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Shares Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the total number of Shares reserved and available for distribution
under the Plan is 32,800,000 Shares. Subject to Section 10 of the Plan, if any
Shares that have been optioned under an Option cease to be subject to such
Option (other than through exercise of the Option), or if any Option or Right
granted hereunder is forfeited or any such award otherwise terminates prior to
the issuance of Common Stock to the participant, the shares that were subject to
such Option or Right shall again be available for distribution in connection
with future Option or right grants under the Plan; provided, however, that
Shares that have actually been issued under the Plan, whether upon exercise of
an Option or Right, shall not in any event be returned to the Plan and shall not
become available for future distribution under the Plan.
4. Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Right may be granted additional Options or Rights.
5. Options and SARs.
(a) Options. The Administrator, in its discretion, may grant Options
to eligible participants and shall determine whether such Options shall be
Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a Notice of Grant which shall expressly identify the Options as
Incentive Stock Options or as Nonstatutory Stock Options, and be in such form
and contain such provisions as the Administrator shall from time to time deem
appropriate. Without limiting the foregoing, the Administrator may at any time
authorize the Company, with the consent of the respective recipients, to issue
new Options or Rights in
<PAGE> 38
exchange for the surrender and cancellation of outstanding Options or Rights.
Option agreements shall contain the following terms and conditions:
(i) Exercise Price; Number of Shares. The per Share
exercise price for the Shares issuable pursuant to an
Option shall be such price as is determined by the
Administrator; provided, however, that in the case of
an Incentive Stock Option, the price shall be no less
than 100% of the Fair Market Value of the Common
Stock on the date the Option is granted, subject to
any additional conditions set out in Section 5(a)(iv)
below.
The Notice of Grant shall specify the number of Shares
to which it pertains.
(ii) Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator will determine
the terms and conditions to be satisfied before
Shares may be purchased, including the dates on which
Shares subject to the Option may first be purchased.
The Administrator may specify that an Option may not
be exercised until the completion of the service
period specified at the time of grant. (Any such
period is referred to herein as the "waiting
period.") At the time an Option is granted, the
Administrator shall fix the period within which the
Option may be exercised, which shall not be earlier
than the end of the waiting period, if any, nor, in
the case of an Incentive Stock Option, later than ten
(10) years, from the date of grant.
(iii) Form of Payment. The consideration to be paid for the
Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive
Stock Option, shall be determined at the time of grant)
and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) in the case of Shares
acquired upon exercise of an option, have been owned by
the Optionee for more than six months on the date of
surrender, and (2) have a Fair Market Value on the date
of surrender not greater than the aggregate exercise
price of the Shares as to which said Option shall be
exercised;
<PAGE> 39
(5) delivery of a properly executed exercise notice
together with such other documentation as the
Administrator and any broker approved by the Company, 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;
(6) any combination of the foregoing methods of
payment; or
(7) such other consideration and method of payment for
the issuance of Shares to the extent permitted by
Applicable Laws.
(iv) Special Incentive Stock Option Provisions. In addition
to the foregoing, Options granted under the Plan which
are intended to be Incentive Stock Options under Section
422 of the Code shall be subject to the following terms
and conditions:
(1) Dollar Limitation. To the extent that the aggregate
Fair Market Value of (a) the Shares with respect to
which Options designated as Incentive Stock Options plus
(b) the shares of stock of the Company, Parent and any
Subsidiary with respect to which other incentive stock
options are exercisable for the first time by an
Optionee during any calendar year under all plans of the
Company and any Parent and Subsidiary exceeds $100,000,
such Options shall be treated as Nonstatutory Stock
Options. For purposes of the preceding sentence, (a)
Options shall be taken into account in the order in
which they were granted, and (b) the Fair Market Value
of the Shares shall be determined as of the time the
Option or other incentive stock option is granted.
(2) 10% Stockholder. If any Optionee to whom an
Incentive Stock Option is to be granted pursuant to the
provisions of the Plan is, on the date of grant, the
owner of Common Stock (as determined under Section
424(d) of the Code) possessing more than 10% of the
total combined voting power of all classes of stock of
the Company or any Parent or Subsidiary of the Company,
then the following special provisions shall be
applicable to the Option granted to such individual:
(a) The per Share Option price of Shares subject
to such Incentive Stock Option shall not be less
than 110% of the Fair Market Value of Common Stock
on the date of grant; and
(b) The Option shall not have a term in excess of
five (5) years from the date of grant.
<PAGE> 40
Except as modified by the preceding provisions of this
subsection 5(a)(iv) and except as otherwise limited by
Section 422 of the Code, all of the provisions of the
Plan shall be applicable to the Incentive Stock Options
granted hereunder.
(v) Other Provisions. Each Option granted under the Plan may
contain such other terms, provisions, and conditions not
inconsistent with the Plan as may be determined by the
Administrator.
(vi) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an
Option previously granted, based on such terms and
conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer
is made.
(b) SARs.
(i) In Connection with Options. At the sole discretion of
the Administrator, SARs may be granted in connection
with all or any part of an Option, either concurrently
with the grant of the Option or at any time thereafter
during the term of the Option. The following provisions
apply to SARs that are granted in connection with
Options:
(1) The SAR shall entitle the Optionee to exercise the
SAR by surrendering to the Company unexercised a portion
of the related Option. The Optionee shall receive in
Exchange from the Company an amount equal to the excess
of (1) the Fair Market Value on the date of exercise of
the SAR of the Common Stock covered by the surrendered
portion of the related Option over (2) the exercise
price of the Common Stock covered by the surrendered
portion of the related Option. Notwithstanding the
foregoing, the Administrator may place limits on the
amount that may be paid upon exercise of an SAR;
provided, however, that such limit shall not restrict
the exercisability of the related Option.
(2) When an SAR is exercised, the related Option, to the
extent surrendered, shall cease to be exercisable.
(3) An SAR shall be exercisable only when and to the
extent that the related Option is exercisable and shall
expire no later than the date on which the related
Option expires.
<PAGE> 41
(4) An SAR may only be exercised at a time when the Fair
Market Value of the Common Stock covered by the related
Option exceeds the exercise price of the Common Stock
covered by the related Option.
(ii) Independent of Options. At the sole discretion of the
Administrator, SARs may be granted without related
Options. The following provisions apply to SARs that are
not granted in connection with Options:
(1) The SAR shall entitle the Optionee, by exercising
the SAR, to receive from the Company an amount equal to
the excess of (1) the Fair Market Value of the Common
Stock covered by the exercised portion of the SAR, as of
the date of such exercise, over (2) the Fair Market
Value of the Common Stock covered by the exercised
portion of the SAR, as of the last market trading date
prior to the date on which the SAR was granted;
provided, however, that the Administrator may place
limits on the aggregate amount that may be paid upon
exercise of an SAR.
(2) SARs shall be exercisable, in whole or in part, at
such times as the Administrator shall specify in the
Optionee's SAR agreement.
(iii) Form of Payment. The Company's obligation arising upon
the exercise of an SAR may be paid in Common Stock or in
cash, or in any combination of Common Stock and cash, as
the Administrator, in its sole discretion, may
determine. Shares issued upon the exercise of an SAR
shall be valued at their Fair Market Value as of the
date of exercise.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a Stockholder. Any
Option or SAR granted hereunder shall be exercisable at
such times and under such conditions as determined by
the Administrator and as shall be permissible under the
terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option or SAR shall be deemed to be exercised when
written notice of such exercise has been given to the
Company in accordance with the terms of the Option or
SAR by the person entitled to exercise the Option or SAR
and full payment for the Shares with respect to which
the Option is exercised has been received by the
Company. Full payment may, as authorized by the
Administrator
<PAGE> 42
(and, in the case of an Incentive Stock Option,
determined at the time of grant) and permitted by the
Option Agreement consist of any consideration and method
of payment allowable under subsection 5(a)(iii) of the
Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. 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 10
of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall
be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which
the Option is exercised. Exercise of an SAR in any
manner shall, to the extent the SAR is exercised, result
in a decrease in the number of Shares which thereafter
shall be available for purposes of the Plan, and the SAR
shall cease to be exercisable to the extent it has been
exercised.
(ii) Rule 16b-3. Options and SARs granted to individuals
subject to Section 16 of the Exchange Act
("Insiders") must comply with the applicable
provisions of Rule 16b-3 and shall contain such
additional conditions or restrictions as may be
required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(iii) Termination of Employment or Consulting Relationship. In
the event an Optionee's Continuous Status as an Employee
or Consultant terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise his or
her Option or SAR, but only within such period of time
as is determined by the Administrator at the time of
grant, not to exceed six (6) months (three (3) months in
the case of an Incentive Stock Option) from the date of
such termination, and only to the extent that the
Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration
of the term of such Option or SAR as set forth in the
Option or SAR Agreement). To the extent that Optionee
was not entitled to exercise an Option or SAR at the
date of such termination, and to the extent that the
Optionee does not exercise such Option or SAR (to the
extent otherwise so entitled) within the time specified
herein, the Option or SAR shall terminate.
<PAGE> 43
(iv) Disability of Optionee. In the event an Optionee's
Continuous Status as an Employee or Consultant
terminates as a result of the Optionee's Disability,
the Optionee may exercise his or her Option or SAR,
but only within six (6) months from the date of such
termination, and only to the extent that the Optionee
was entitled to exercise it at the date of such
termination (but in no event later than the
expiration of the term of such Option or SAR as set
forth in the Option or SAR Agreement). To the extent
that Optionee was not entitled to exercise an Option
or SAR at the date of such termination, and to the
extent that the Optionee does not exercise such
Option or SAR (to the extent otherwise so entitled)
within the time specified herein, the Option or SAR
shall terminate.
(v) Death of Optionee. Notwithstanding Sections
5(c)(iii) and 5(c)(iv) above, in the event of an
Optionee's death during Optionee's Continuous Status
as an Employee or Consultant, the Optionee's estate
or a person who acquired the right to exercise the
deceased Optionee's Option or SAR by bequest or
inheritance may exercise the Option or SAR, but only
within six (6) months (or such lesser period as the
Option or SAR Agreement may provide, or such longer
period, not to exceed twelve (12) months, as the
Option or SAR Agreement may provide) following the
date of death, and only to the extent that the
Optionee was entitled to exercise it at the date of
death (but in no event later than the expiration of
the full term of such Option or SAR as set forth in
the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or
SAR at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right
to exercise such Option does not exercise such Option
or SAR (to the extent otherwise so entitled) within
the time specified herein, the Option or SAR shall
terminate.
(d) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an
additional 500,000 Shares which shall not count against
the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the
Company's capitalization as described in Section 10.
<PAGE> 44
(iv) If an Option is canceled in the same fiscal year of
the Company in which it was granted (other than in
connection with a transaction describe in Section 10),
the canceled Option will be counted against the limit
set forth in Section 5(d)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the
grant of a new Option.
6. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the offeree must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 10
of the Plan.
<PAGE> 45
7. Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are cash or stock
bonus awards that may be granted either alone or in addition to other awards
granted under the Plan. Such awards shall be granted for no cash consideration.
The Administrator shall determine the nature, length and starting date of any
performance period (the "Performance Period") for each Long-Term Performance
Award, and shall determine the performance or employment factors, if any, to be
used in the determination of Long-Term Performance Awards and the extent to
which such Long-Term Performance Awards are valued or have been earned.
Long-Term Performance Awards may vary from participant to participant and
between groups of participants and shall be based upon the achievement of
Company, Subsidiary, Parent and/or individual performance factors or upon such
other criteria as the Administrator may deem appropriate. Performance Periods
may overlap and participants may participate simultaneously with respect to
Long-Term Performance Awards that are subject to different Performance Periods
and different performance factors and criteria. Long-Term Performance Awards
shall be confirmed by, and be subject to the terms of, a Long-Term Performance
Award agreement. The terms of such awards need not be the same with respect to
each participant.
At the beginning of each Performance Period, the Administrator may
determine for each Long-Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Common Stock to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Long-Term Performance
Award are met. Such dollar values or number of shares of Common Stock may be
fixed or may vary in accordance with such performance or other criteria as may
be determined by the Administrator.
(b) Adjustment of Awards. The Administrator may adjust the
performance factors applicable to the Long-Term Performance Awards to take into
account changes in legal, accounting and tax rules and to make such adjustments
as the Administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships.
8. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3 and Applicable Laws, the Plan may (but need not)
be administered by different administrative bodies with
respect to (A) Directors who are employees, (B) Officers
who are not Directors and (C) Employees who are neither
Directors nor Officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options and
Rights to eligible participants who are Officers or
Directors of the Company, the Plan shall be
administered
<PAGE> 46
by (A) the Board, if the Board may administer the Plan
in compliance with Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary grant
or award plan, or (B) a Committee designated by the
Board to administer the Plan, which Committee shall be
constituted (1) in such a manner as to permit the Plan
to comply with Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary grant
or award plan and (2) in such a manner as to satisfy the
Applicable Laws.
(iii) Administration with respect to Other Persons. With
respect to grants of Options to eligible participants
who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the
Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section
8(a), such Committee shall continue to serve in its
designated capacity until otherwise directed by the
Board. From time to time the Board may increase the
size of any Committee and appoint additional members
thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable
Laws and, in the case of a Committee appointed under
subsection (ii), to the extent permitted by Rule
16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary grant or award plan.
(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 Consultants and Employees to whom Options
and Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Rights or any combination thereof, are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Right granted hereunder;
<PAGE> 47
(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 or Rights 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 Right
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 construe and interpret the terms of the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) to determine whether and under what circumstances an
Option or Right may be settled in cash instead of Common
Stock or Common Stock instead of cash;
(x) to reduce the exercise price of any Option or Right;
(xi) to modify or amend each Option or Right (subject to
Section 16 of the Plan);
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of
an Option or Right previously granted by the
Administrator;
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions applicable to
Options and Rights and any Restricted Stock; and
(xv) 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 or Rights.
9. Transferability of Options. Unless otherwise determined by the
Administrator to the contrary, Options and Rights 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
<PAGE> 48
exercised, during the lifetime of the Optionee, only by the Optionee. The
Administrator may, in the manner established by the Administrator, provide for
the transfer of a Nonstatuatory Stock Option by the Optionee to any member of
the Optionee's immediate family. In such case, the Nonstatutory Stock Option
shall be exercisable only by such transferee. Following transfer, any such
Nonstatutory Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to the transfer. For purposes of
this Section, an Optionee's "immediate family" shall mean any of the following
who have acquired the Option from the Optionee through a gift or domestic
relations order: a child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, trusts for the exclusive benefit of these persons and any other
entity owned solely by these persons, and such other persons and entities as
shall be eligible to be included as transferees in the Form S-8 Registration
Statement under the Securities Act of 1933, as amended, filed or to be filed by
the Company to register shares of Common Stock to be issued upon the exercise of
Options granted pursuant to the Plan.
.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options or Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Right, as well as the price per
share of Common Stock covered by each such outstanding Option or Right, 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 or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Right
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 or Right shall terminate
as of a date fixed by the Board and give each Optionee the right to exercise his
or her Option or Right as to all or any part of the Optioned Stock, including
Shares as to which the Option or Right would not otherwise be exercisable.
<PAGE> 49
(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 and Right shall be assumed or an
equivalent Option or Right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, in lieu of such assumption or substitution,
provide for the Optionee to have the right to exercise the Option or Right 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 or Right
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 or
Right shall be exercisable for a period of not less than fifteen (15) days from
the date of such notice, and the Option or Right will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Right shall be considered assumed if, immediately following the merger or sale
of assets, the Option or Right confers the right to purchase, for each Share of
Optioned Stock subject to the Option or Right 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 and the participant, provide for
the consideration to be received upon the exercise of the Option or Right, for
each Share of Optioned Stock subject to the Option or Right, 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.
11. Date of Grant. The date of grant of an Option or Right shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Option or Right, 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.
12. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Right unless the exercise of such Option or Right 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 or Right, the Company may require the person exercising such Option or
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment
<PAGE> 50
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.
13. 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 or Right exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional stockholder approval, such
Option or Right shall be void with respect to such excess Optioned Stock, unless
stockholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 16(b)
of the Plan.
14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or 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 stockholder 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.
<PAGE> 51
17. Taxation Upon Exercise of Option or Right. At the discretion of the
Administrator, Optionees may satisfy withholding obligations as provided in this
Section 17. When an Optionee incurs tax liability in connection with an Option
or Right, which tax liability is subject to withholding under applicable tax
laws, the Optionee may satisfy the tax withholding obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) by surrendering to the Company Shares
which (i) in the case of Shares previously acquired from the Company, have been
owned by the Optionee for more than six months on the date of surrender, and
(ii) have a fair market value on the date of surrender equal to or less than
Optionee's marginal tax rate times the ordinary income recognized, or (d) by
electing to have the Company withhold from the Shares to be issued upon exercise
of the Option or Right that number of Shares having a fair market value equal to
the amount required to be withheld. For this purpose, the fair market value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined (the "Tax Date").
If the Optionee is an Insider, any surrender of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is an Insider, the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
18. Term of the Plan. The Plan shall expire, and no further Options shall
be granted pursuant to the Plan, on April 25, 2001.
<PAGE> 52
19. Tax and Social Security Indemnity. An Optionee shall indemnify the
Company against any tax arising in respect of the grant or exercise of an Option
or Right which is a liability of the Optionee but for which the Company is
required to account under the laws of any relevant territory. The Company may
recover the tax from the Optionee in such manner as the Administrator deems
appropriate, including (but without prejudice to the generality of the
foregoing):
(a) withholding shares upon the exercise of the Option and selling
the same;
(b) deducting the necessary amount from the Optionee's compensation;
or
(c) requiring the Optionee to make cash payment to the Company for
such tax.
20. Options Granted to Employees of French Subsidiaries.
(a) Purpose. Options granted under the Plan to Employees of French
subsidiaries are intended to qualify under the French regulations as provided in
articles 208-1 to 208-8-2 of the French Company Act (Code des Societes). The
purpose of this Section is to specify the applicable rules to Options for French
Employees and shall not be applicable to any other Employee of the Company.
(b) General. Options granted to French Employees under the Plan are
subject to the provisions of the Plan and any option agreement unless otherwise
provided in this Section 20.
(c) Eligible Participants. Options may be granted exclusively to
Employees of French subsidiaries as (defined in Section 2(l)) of the Plan.
Payment of Director fees by the Company shall not be sufficient to constitute
employment for any purposes of the Options granted to Employees of French
subsidiaries. Employees of French subsidiaries may not be granted Options if, at
the date of grant, they hold more than ten percent (10%) of the Common Stock of
the Company. Section 5(a)(iv)(2) shall not apply to the grant of Options to
French employees.
(d) Options. Eligible Employees may be granted options as provided
in Section 5(a) of the Plan. If rights or awards mentioned in Section 5(b)
(Stock Appreciation Rights), Section 6 (Stock Purchase Rights) and Section 7
(Long-Term Performance Awards) of the Plan are granted to Employees of French
subsidiaries, the provisions of this Section shall not apply to the Stock
Appreciation Rights, Stock Purchase Rights and Long-Term Performance Awards
granted.
(e) Option Price. The exercise price of the Option shall be
determined as set forth in the Plan but it shall not be less than 80% of the
average Fair Market Value of the Common Stock during the twenty (20) market
trading days prior to the date of the grant. The exercise price shall remain
unchanged once the Option is granted. The authority of Administrator to reduce
the Option exercise price, as set forth in Section 8(b)(x) of the Plan, shall,
with respect to Options granted to Employees of French subsidiaries, be limited
to the extend that such
<PAGE> 53
reduction may not be to a price less than 80% of the average Fair Market Value
of the Common Stock during the twenty (20) market trading days prior to the date
of such reduction.
(f) Exercise of the Option. Upon exercise of an Option, Employees of
French subsidiaries will receive Shares of Common Stock. Section 8(b)(ix) of the
Plan, concerning the ability to settle the Option in cash instead of Shares of
Common Stock, is not applicable to Employees of French subsidiaries.
(g) Qualification of Plan. In order to have the Plan qualify in
France, any other provision of the Plan that would not be consistent with French
company law or tax law requirements shall not apply to Employees of French
subsidiaries.
<PAGE> 54
APPENDIX
Filed Pursuant to Instruction 3 to Item 10 of Regulations 14A under the 1934 Act
GARTNER GROUP, INC.
1998 LONG TERM STOCK OPTION PLAN
AS APPROVED BY STOCKHOLDERS ON JANUARY 28, 1999
1. Purposes of the Plan. The purposes of this 1998 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.
Awards granted under the Plan may be Options or Time Accelerated Restricted
Stock. 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) "Award" means a grant of Options and/or Time Accelerated
Restricted Stock.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(g) "Common Stock" means the Common Stock, Class A, par value
$.0005, of the Company.
(h) "Company" means Gartner Group, Inc., a Delaware corporation.
(i) "Continuous Status as an Employee " means that the employment
relationship with the Company, any Parent, or Subsidiary, is not interrupted or
terminated. Continuous Status as an Employee shall not be considered interrupted
in the case of (i) any leave of absence approved by
<PAGE> 55
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 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. Continuous
employment shall be interrupted and terminated for an Employee if the Employee's
weekly work hours change from full time (40 hours) to part time (less than 40
hours).
(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
<PAGE> 56
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; or
(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) "Holder" means an Employee who holds Shares of Time Accelerated
Restricted Stock.
(p) "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.
(q) "Insider" means an Employee subject to Section 16 of the
Exchange Act.
(r) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(s) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Award. The Notice of Grant is part of the
Option Agreement or Restricted Stock Agreement, as applicable.
(t) "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.
(u) "Option" means an Award of a stock option pursuant to the Plan.
(v) "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.
(w) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(x) "Optioned Stock" means the Common Stock subject to an Option.
<PAGE> 57
(y) "Optionee" means an Employee who holds an outstanding Option.
(z) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(aa) "Restricted Stock Agreement" means a written agreement between
the Company and a Holder evidencing the terms and conditions of an individual
award of Time Accelerated Restricted Stock. The Restricted Stock Agreement is
subject to the terms and conditions of the Plan.
(bb) "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.
(cc) "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.
(dd) "Share" means a share of Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ff) "Time Accelerated Restricted Stock" means an Award of Shares
pursuant to the Plan which are subject to restrictions on transferability.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be subject to Awards
under the Plan is 2,500,000 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
Awards under the Plan (unless the Plan has terminated). If an Award of Shares of
Time Accelerated Restricted Stock is forfeited without having vested, such
Shares shall become available for future Awards 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 Awards under the Plan, except that if unvested Shares of Time
Accelerated Restricted Stock are reacquired by the Company and the Holder of
such Shares did not receive any benefits of ownership of such Shares, such
Shares shall become available for future Awards under the Plan. For purposes of
the preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
<PAGE> 58
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(m) of the Plan;
(ii) to select the Senior Managers to whom Awards may be
granted hereunder;
(iii) to determine whether and to what extent Awards are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Award 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
acceleration of vesting or waiver of forfeiture restrictions,
any acceleration of
<PAGE> 59
the lapse of restrictions on the transferability of Shares of
Time Accelerated Restricted Stock, and any restriction or
limitation regarding any Award 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;
(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 15(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;
(xii) to modify or amend (subject to Section 15(c) of the
Plan) each Restricted Stock Agreement, including the
acceleration of the lapse of restrictions on the
transferability of Shares of Time Accelerated Restricted
Stock;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an
Award previously granted by the Administrator;
(xiii) to institute an Option Exchange Program; and
(xiv) 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 Holders and any other holders of Options and Shares of Time
Accelerated Restricted Stock.
5. Eligibility. Awards may be granted to Senior Managers. If otherwise
eligible, a Senior Manager who has been granted an Award may be granted
additional Awards.
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
<PAGE> 60
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 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.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 150,000 shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an
additional 150,000 Shares which shall not count against the
limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13.
(iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with
a transaction describe in Section 13), the canceled Option
will be counted against the limit set forth in Section
6(c)(i). For this purpose, if the exercise price of an Option
is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 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 19 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 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 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.
<PAGE> 61
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to the 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, Nonstatutory 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);
<PAGE> 62
(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 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 13 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.
<PAGE> 63
(b) Termination of Employment Relationship.
(i) Upon termination of an Optionee's Continuous Status as an
Employee, 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) 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 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. Unless otherwise determined by the
Administrator to the contrary, 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. The Administrator may, in the manner
established by the Administrator, provide for the transfer of a Nonstatutory
Stock Option by the Optionee to any member of the Optionee's immediate family.
Following transfer, any such Nonstatutory Stock Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer. For purposes of this Section, an Optionee's "immediate family"
<PAGE> 64
shall mean any of the following who have acquired the Option from the Optionee
through a gift or domestic relations order: a child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, trusts for the exclusive benefit of these persons and
any other entity owned solely by these persons, and such other persons and
entities as shall be eligible to be included as transferees in the Form S-8
Registration Statement under the Securities Act of 1933, as amended, filed or to
be filed by the Company to register shares of Common Stock to be issued upon the
exercise of Options granted pursuant to the Plan.
12. Time Accelerated Restricted Stock.
(a) Grants of Time Accelerated Restricted Stock. Shares of Time
Accelerated Restricted Stock may be granted either alone, in addition to, or in
tandem with other Awards granted under the Plan and/or cash awards made outside
of the Plan. After the Administrator determines that it will grant Time
Accelerated Restricted Stock under the Plan, it shall advise the Holder in
writing of the terms, conditions and restrictions related to the Award,
including the number of Shares subject to the Award. The Award shall be
evidenced by execution of a Restricted Stock Agreement in the form determined by
the Administrator.
(b) The Restricted Stock Agreement. The Restricted Stock Agreement
shall contain such terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Agreements need not be the same
with respect to each Holder.
(c) Nontransferability. Shares of Time Accelerated Restricted Stock
may not be sold, assigned, transferred, alienated, commuted, anticipated, or
otherwise disposed of (except, subject to the provisions of the Restricted Stock
Agreement, by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA or
the rules promulgated thereunder), or pledged or hypothecated as collateral for
a loan or as security for the performance of any obligation, or be otherwise
encumbered, and are not subject to attachment, garnishment, execution or other
legal or equitable process, prior to the lapse of the period of time
restrictions on the transferability of such Shares remain in effect as set forth
in the Restricted Stock Agreement, and any attempt at action in contravention of
this Section shall be null and void. The lapse of restrictions on the
transferability of such Shares may be accelerated upon the attainment of
performance criteria as set forth in the Restricted Stock Agreement.
(d) Termination of Employment Relationship.
(i) If, prior to the lapse of restrictions on transferability
applicable to Shares of Time Accelerated Restricted Stock, the
Holder's Continuous Status as an Employee ceases, other than
as set forth in subsection (ii) below, such Shares as to which
restrictions on transferability have not lapsed shall be
forfeited to the Company and all rights of the Holder to such
Shares shall terminate without further obligation on the part
of the Company, effective on
<PAGE> 65
the date the Holder's Continuous Status as an Employee ceases,
unless the Administrator determines otherwise.
(ii) If, prior to the lapse of restrictions on transferability
applicable to Shares of Time Accelerated Restricted Stock, the
Holder's Continuous Status as an Employee ceases as a result
of the Holder's death or Disability, the restrictions on the
transferability of such Shares shall lapse.
(e) Rule 16b-3. Time Accelerated Restricted Stock granted to
Insiders, and Shares acquired by Insiders in connection with an Award of Shares
of Time Accelerated Restricted Stock, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b-3.
(f) Rights as a Stockholder. Once Shares of Time Accelerated
Restricted Stock are granted, the Holder shall have the rights equivalent to
those of a stockholder, and shall be a stockholder when the Shares are entered
upon the records of the duly authorized transfer agent of the Company in the
name of the Holder. Certificates representing the Shares may bear a legend, if
the Company deems it advisable, to the effect that they are issued subject to
specified restrictions. Shares issued and transferred to a Holder pursuant to an
Award shall be deposited with an officer of the Company designated by the
Administrator for the Holder's account to be held until the lapse of the
restrictions upon such Shares or the earlier forfeiture of the Shares to the
Company in accordance with the terms of the Restricted Stock Agreement. Each
Holder shall execute and deliver to the Company stock powers enabling the
Company to exercise its rights hereunder.
(g) Dividends. Dividends paid on the Shares of Time Accelerated
Restricted Stock, whether in cash, stock or property, at the discretion of the
Administrator, may be paid to the Holder currently or be held by the Company
subject to the same restrictions on transferability as the Shares to which they
relate. If such cash dividends are held subject to such restrictions on
transferability, the Administrator may determine whether, and on what terms,
interest may be paid on such dividends until the lapse of restrictions on
transferability. If the Shares to which such dividends relate are forfeited to
the Company, such dividends, including interest thereon, if any, shall likewise
be forfeited to the Company without further obligation on the part of the
Company.
13. 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 Award, and the number of shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Award, 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
<PAGE> 66
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 Award.
(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.
14. Date of Grant. The date of grant of an Award shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee and Holder within
a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
<PAGE> 67
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Section 422 or Section 162(m) 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 or
Holder, unless mutually agreed otherwise between the Optionee or Holder and the
Administrator, which agreement must be in writing and signed by the Optionee or
Holder and the Company.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or the grant of Shares of Time Accelerated Restricted
Stock 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.
17. 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 or the number of Shares of Time Accelerated Restricted Stock
exceeds, as of the date of grant, the number of Shares which may be issued under
the Plan without additional shareholder approval, such Award shall be void with
respect to such excess Shares, unless shareholder approval of an amendment
sufficiently increasing the number of Shares subject to the Plan is timely
obtained in accordance with Section 15(b) of the Plan.
18. 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.
<PAGE> 68
19. 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.
20. Tax and Social Security Indemnity. An Optionee or Holder shall
indemnify the Company against any tax arising in respect of the grant or
exercise of the Option or the grant of Shares of Time Accelerated Restricted
Stock which is a liability of the Optionee or Holder but for which the Company
is required to account under the laws of any relevant territory. The Company may
recover the tax from the Optionee or Holder in such manner as the Administrator
deems appropriate, including (but without prejudice to the generality of the
foregoing):
(a) withholding shares upon the exercise of the Option and selling
the same;
(b) deducting the necessary amount from the Optionee's or Holder's
compensation; or
(c) requiring the Optionee or Holder to make cash payment to the
Company for such tax.
21. Options Granted to Employees of French Subsidiaries.
(a) Purpose. Options granted under the Plan to Employees of French
subsidiaries are intended to qualify under the French regulations as provided in
articles 208-1 to 208-8-2 of the French Company Act (Code des Societes). The
purpose of this Section is to specify the applicable rules to Options for French
Employees and shall not be applicable to any other Employee of the Company.
(b) General. Options granted to French Employees under the Plan are
subject to the provisions of the Plan and any option agreement unless otherwise
provided in this Section 21.
(c) Eligible Participants. Options may be granted exclusively to
Employees (as defined in Section 2(l)) of the Plan) of French subsidiaries.
Payment of Director fees by the Company shall not be sufficient to constitute
employment for any purposes of the Options granted to Employees of French
subsidiaries. Employees of French subsidiaries may not be granted Options if, at
the date of grant, they hold more than ten percent (10%) of the Common Stock of
the Company.
(d) Options. Eligible Employees may be granted Options as provided
in the Plan. If Shares of Time Accelerated Restricted Stock mentioned in Section
12 of the Plan are granted to Employees of French subsidiaries, the provisions
of this Section shall not apply to the Shares of Time Accelerated Restricted
Stock granted.
(e) Option Price. The exercise price of the Option shall be
determined as set forth in the Plan but it shall not be less than 80% of the
average Fair Market Value of the Common Stock during the twenty (20) market
trading days prior to the date of the grant. The exercise price shall
<PAGE> 69
remain unchanged once the Option is granted. The authority of Administrator to
reduce the Option exercise price, as set forth in Section 8(b)(x) of the Plan,
shall, with respect to Options granted to Employees of French subsidiaries, be
limited to the extend that such reduction may not be to a price less than 80% of
the average Fair Market Value of the Common Stock during the twenty (20) market
trading days prior to the date of such reduction.
(f) Exercise of the Option. Upon exercise of an Option, Employees of
French subsidiaries will receive Shares of Common Stock. Section 4(b)(vii) of
the Plan, concerning the ability to settle the Option in cash instead of Shares
of Common Stock, is not applicable to Employees of French subsidiaries.
(g) Qualification of Plan. In order to have the Plan qualify in
France, any other provision of the Plan that would not be consistent with French
company law or tax law requirements shall not apply to Employees of French
subsidiaries.
<PAGE> 70
PROXY
GARTNER GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GARTNER GROUP, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated December 23, 1998, and hereby appoints Manuel A.
Fernandez and John F. Halligan, and each of them, Proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Stockholders
of GARTNER GROUP, INC. to be held at the Intercontinental Hotel, 111 East 48th
Street, New York, New York on Thursday, January 28, 1999, at 9:00 a.m. local
time, and at any adjournment or adjournments thereof, and to vote all shares of
Common Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS INDICATED, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR EACH OF THE PERSONS AND THE PROPOSALS ON THE
REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
- --------------- ---------------
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
- --------------- ---------------
<PAGE> 71
DETACH HERE
- -------------------------------------------------------------------------------
[X] Please mark ----
votes as in |
this example. |
1. Election of Directors
Nominees: Manuel A. Fernandez, William T. Clifford, William O. Grabe,
John P. Imlay, Max D. Hopper, Stephan G. Pagliuca, Dennis G. Sisco,
Robert E. Weissman
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
MARK HERE
FOR ADDRESS
[ ] CHANGE AND [ ]
NOTE BELOW
______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the amendment to the
Company's 1991 Stock Option Plan to [ ] [ ] [ ]
increase the number of shares of
Class A Common Stock available for
issuance
3. To approve the Company's 1998 Long [ ] [ ] [ ]
Term Stock Option Plan.
4. To ratify the appointment of KPMG [ ] [ ] [ ]
Peat Marwick LLP as independent
auditors for the Company for the 1999
fiscal year.
5. To vote or otherwise represent the shares on any and all other business
which may properly come before the meeting or any adjournment or
adjournments thereof, according to their discretion and in their discretion.
NOTE: Please sign exactly as your name appears on your stock certificate.
If shares are held jointly, each holder should sign. Executors, administrators,
trustees, guardians, attorneys and agents should sign their full title. If
stockholder is a corporation, sign in full corporate name by the authorized
officer.
