<PAGE> 1
As filed with the Securities and Exchange Commission on June 2, 1999
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GARTNER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3099750
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
P.O. BOX 10212
56 TOP GALLANT ROAD
STAMFORD, CT 06904-2212
(203) 316-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WILLIAM T. CLIFFORD
CHIEF EXECUTIVE OFFICER
GARTNER GROUP, INC.
P.O. BOX 10212
56 TOP GALLANT ROAD
STAMFORD, CT 06904-2212
(203) 316-1111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
HOWARD S. ZEPRUN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
/ / If the only securities being registered on this Form are offered pursuant
to dividend or interest reinvestment plans, check the following box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ / If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
/ / If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER SECURITY (1) OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0005 par value 542,278 $20.31 $11,015,022 $3,062
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The price of $20.31 per share, which was the average of the high and low
prices of the Registrant's Common Stock on the New York Stock Exchange on
April 16, 1999, is set forth solely for the purposes of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE> 2
The Information in this prospects is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
Exchange Commission is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
PROSPECTUS
423,569 SHARES
GARTNER GROUP, INC.
Common Stock
This prospectus relates to the public offering, which is not being underwritten,
of up to 423,569 shares of our Common Stock which is held by some of our current
stockholders. The selling stockholders identified in this prospectus acquired
shares of our Common Stock in private transactions in which Gartner Group
acquired G2R, Inc., a California corporation, and The Research Board, Inc., a
New York corporation.
The prices at which such stockholders may sell the shares will be determined by
the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares.
Our Common Stock is listed on the New York Stock Exchange under the symbol "IT."
On April 16, 1999, the average of the high and low price for our Common Stock
was $20.31 per share.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 2, 1999.
-1-
<PAGE> 3
TABLE OF CONTENTS
Page
----
Where You Can Find More Information.....................................3
About Gartner Group, Inc................................................4
Forward-Looking Statements..............................................4
Risk Factors............................................................5
Use of Proceeds .....................................................11
Selling Stockholders...................................................11
Plan of Distribution...................................................12
Indemnification of Officers and Directors..............................13
Legal Matters..........................................................13
Experts ..............................................................14
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of Gartner Group, Inc. Common Stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of Gartner Group, Inc. Common Stock.
In this prospectus, the "Company," "Gartner Group," "we," "us," and "our" refer
to Gartner Group, Inc.
-2-
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you in this
document by referring you to other filings we have made with the SEC. The
information incorporated by reference is considered to be part of this
Prospectus, and later information filed with the SEC will update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed:
(1) Our Annual Report on Form 10-K for the year ended September
30, 1998;
(2) Our Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998;
(3) Our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999; and
(4) The description of our Common Stock contained in our
Registration Statement on Form S-1 filed with the SEC on August 18, 1993,
including any amendments or reports filed for the purpose of updating such
description.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Michael Fleisher
Chief Financial Officer
Gartner Group, Inc.
P.O. Box 10212
56 Top Gallant Road
Stamford, CT 06904-2212
(203) 316-1111
You should rely only on the information incorporated by reference or provided in
this Prospectus or the prospectus supplement. We have authorized no one to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this Prospectus or any prospectus supplement is accurate
as of any date other than the date on the front of the document.
-3-
<PAGE> 5
ABOUT GARTNER GROUP, INC.
Gartner Group, Inc., founded in 1979, is the world's leading independent
provider of research and analysis on the computer hardware, software,
communications and related information technology (IT) industries.
Gartner Group's products and services provide strategic and tactical advice for
organizations trying to understand, apply and deploy information technology on a
global basis. Our integrated products and services help enterprises stay abreast
of rapidly changing IT trends - a critical ingredient when making multi-million
dollar IT purchasing, marketing or investment decisions. Our products and
services are organized along client segments: IT users - enterprises that
purchase and deploy IT products and services to gain productivity or competitive
advantage, and IT vendors - companies that develop and provide IT products.
Approximately 75 percent of our total revenues are annual renewable
subscription-based products, where contracts are paid up-front and revenue is
recognized ratably over the life of the contract. Total revenues have grown
every year since our inception in 1979. In fiscal 1998, revenue was $642
million, a 30 percent compounded annual growth rate since 1993. Through a field
sales force of over 750 professionals and a global analytical staff of over 800
industry experts, we sell products and services to over 9,000 organizations
worldwide. We employ over 3,200 associates and have locations in 50 countries in
North and South America, Europe, Asia, Australia and Africa.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual results could differ materially from those expressed
or forecasted in any such forward-looking statements as a result of certain
factors, including those set forth in "Risk Factors," as well as those noted in
the documents incorporated herein by reference. In connection with
forward-looking statements which appear in these disclosures, investors should
carefully review the factors set forth in this Prospectus under "Risk Factors."
-4-
<PAGE> 6
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones that we face. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially adversely affected. In such case,
the trading price of our common stock could decline and you could lose all or
part of your investment.
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
the risks faced by us described below and elsewhere in this prospectus.
OUR FUTURE OPERATING RESULTS DEPEND ON A VARIETY OF RISKS, MANY OF WHICH ARE NOT
IN OUR CONTROL
Our future operating results depend upon our ability to continue to compete
successfully in the market for information products and services. We may not be
able to continue to provide the products and services that meet client needs as
the Information Technology ("IT") market evolves rapidly.
Our future operating results, and our ability to compete successfully in the IT
market, will depend on:
- our ability to hire and retain a premier staff of qualified IT
analysts in a competitive employment market, and our ability
to expand our staff to support evolving customer needs and
growth of our business;
- our ability to expand our product and service offerings to
smaller domestic clients;
- our ability to devote the additional management attention and
financial resources necessary to further expand our business;
and
- the risks inherent in international sales, including:
- changes in market demand as a result of exchange rate
fluctuations;
- challenges in staffing and managing our foreign sales
operations; and
- higher levels of taxation on foreign income than
domestic income.
OUR REVENUES DEPEND ON RENEWALS OF EXISTING CONTRACTS AND OUR ABILITY TO
GENERATE NEW BUSINESS
We measure the volume of our advisory and measurement business based on contract
value. We calculate total contract value based on the annualized value of all
advisory and measurement contracts in effect at the time of the calculation,
without regard to the duration of those contracts. While we believe contract
value is a meaningful measure of our business level, contract value at any time
may not be indicative of future advisory and measurement revenues or cash flows.
In this regard, a substantial portion of our clients have historically renewed
our services for an equal or higher level of total payments each year, and,
historically, annual revenues from these services in any fiscal year have
closely correlated to contract value at the
-5-
<PAGE> 7
beginning of the fiscal year. As of September 30, 1998, approximately 85 percent
of our clients had renewed one or more services in the last twelve months.
Nonetheless, this renewal rate is not necessarily indicative of the rate of
retention of our revenue base. Revenues and cash flows in any year depend
significantly on the rate of contract renewal through the year as well as new
business generation. While we have experienced high contract renewal rates in
recent years, we may not be able to sustain high renewal rates in the future.
Any deterioration in our ability to achieve high renewal rates or to continue to
generate significant new business would impact future growth in our business.
Moreover, a significant portion of our new business in any given year has
historically been generated in the last portion of the fiscal year. Accordingly,
any slowdowns in year to year revenue generation might not be apparent until
late in a given fiscal year.
Deferred revenues, as presented in our balance sheets, represent unamortized
revenues from billed advisory and measurement services and products, plus
unamortized revenues of certain other billed services and products not included
in advisory and measurement. Contract value represents an annualized value of
all outstanding advisory and measurement contracts without regard to the
duration of such contracts, while deferred revenues represents unamortized
revenue remaining on all billed and outstanding advisory and measurement
contracts, plus certain other billed services and products not included in
advisory and measurement revenue. Accordingly deferred revenues do not correlate
to contract value as of any one date.
WE MAY NOT BE ABLE TO CONTINUE TO COMPETE SUCCESSFULLY IN THE COMPETITIVE MARKET
FOR IT PRODUCTS AND SERVICES
We believe that the principal competitive factors in our industry are:
- quality of research and analysis;
- timely delivery of information;
- customer service;
- the ability to offer products that meet changing
market needs for information and analysis; and
- price.
We believe that we compete favorably with respect to each of these factors.
However, we face competition from many companies, and we believe that
competition is increasing.
We face competition from other independent providers of similar services, as
well as our clients' internal marketing and planning departments. We also
compete indirectly against other information providers, including electronic and
print media companies and consulting firms. These indirect competitors could
choose to compete directly against us in the future. In addition, although we
have established a significant market presence, there are limited barriers to
entry into our market. New competitors continue to emerge, and additional
competitors could readily emerge in one or more of the market segments we
address. Additional competition also continues to emerge as the IT industries
change and new customer needs evolve. Increased competition could adversely
affect our operating results through downward pricing pressure and loss of
market share.
-6-
<PAGE> 8
WE DEPEND ON OUR KEY EMPLOYEES AND ON OUR ABILITY TO HIRE ADDITIONAL QUALIFIED
PERSONNEL
Our future success will depend heavily upon the continued contributions of our
senior management team, professional analysts, and experienced sales personnel.
Accordingly, future operating results will be largely dependent upon our ability
to retain our key employees and to attract additional qualified personnel. We
experience intense competition for professional personnel from, among others,
other providers of IT research and analysis services, producers of IT products,
management consulting firms and financial services companies. Many of these
firms have substantially greater financial resources than we do to attract and
compensate qualified personnel. The loss of the services of key management and
professional personnel could have a material adverse effect on our business.
WE FACE YEAR 2000 RISKS WHICH COULD NEGATIVELY IMPACT OUR BUSINESS
The Year 2000 problem results from the fact that many technology systems have
been designed using only a two-digit representation of the year portion of the
date. This has the potential to cause errors or failures in those systems that
depend on correct interpretation of the year, but cannot necessarily correctly
interpret "00" as the year "2000". While the potential ramifications of the Year
2000 issue are significant, we believe that we are taking full advantage of our
internal resources and all necessary external resources to understand, identify
and correct all Year 2000 issues within our control.
We recognize that there are significant unknowns, and therefore potential risks,
that are outside of our control and we will take all reasonable steps to
minimize the impact of those exposures.
We expect to have made all essential systems Year 2000 ready before their known
failure dates or January 1, 2000, whichever is sooner. All of our products are,
or are expected to be, Year 2000 ready before their known failure dates or by
January 1, 2000, whichever is sooner, and should any date-related problems be
revealed after that point, they will be fixed at no charge to the customer or
replaced with a product of equal value. Initial testing of the four business
critical applications for product delivery (GG Interactive, GG Lotus Notes, GG
Intraweb, and GG CD) has shown these applications to be compliant with certain
company identified key functions with full Year 2000 internal validation
expected to occur by quarter ended September 30, 1999.
We further expect to take all prudent and reasonable steps to validate the Year
2000-readiness of our direct supply chain interfaces, but we believe that this
area does and will continue to represent a significant level of uncertainty and
business risk at least through the first half of the year 2000.
We have established a separate Year 2000 account to budget and track significant
fiscal 1999 Year 2000 expenditures. All maintenance and modification costs are
expended as incurred, while the cost of new systems is being capitalized
according to generally accepted accounting principles. Identified Year 2000
expenses were $1.9 million for the six months ended March 31, 1999, and are
forecasted to be $3.3 million for the remaining six months of fiscal 1999. These
costs are predominantly for the budgeted replacement or upgrades of systems, but
also include prorated personnel standard unit costs.
The Company believes that the Year 2000 problem may result in an increased
percentage of IT department budgets being directed toward Year 2000 remediation
expenditures in the near term. If this occurs, changes in the customer buying
practices could result in either an increase or decrease in the demand for the
Company's products and services and, therefore, have the potential of benefiting
or adversely impacting future Company revenues and revenue patterns.
WE HAVE UNDERTAKEN TO CREATE A NEW CLASS B COMMON STOCK WHICH WILL CONTROL OUR
BOARD OF DIRECTORS IS IN PROCESS
Our Board of Directors has approved a recapitalization and certain related
transactions which could have a significant impact on control of our company.
These transactions are being undertaken in connection with an agreement in
principle between us and IMS Health. IMS Health currently holds approximately
46% of our outstanding shares of Class A common stock. The agreement with IMS
Health is not yet completed, and the
-7-
<PAGE> 9
proposed transactions must be approved by our stockholders. If the
recapitalization and related transactions are approved, shares of our Class A
common stock held by IMS Health will be exchanged for shares of a newly created
Class B common stock. Upon receipt of the newly issued shares of Class B common
stock, IMS Health will distribute all of the shares of Class B common stock, on
a pro rata basis, to its public stockholders. The Class B common stock will be
identical in all respects to our Class A common stock, except that the Class B
common stock will be entitled to elect at least 80% of the members of our Board
of Directors.
Thus, if any person or group of persons acquires a majority of the outstanding
shares of Class B common stock, that person or group will be able to obtain
control of Gartner Group by electing a majority of the Board of Directors.
Thus, the creation and issuance of the Class B common stock could render
Gartner Group more susceptible to unsolicited takeover bids from third parties.
This risk will be mitigated in part but not in the entirety by an additional
provision that will be included in the certificate of incorporation upon
approval of the recapitalization. This provision would result in a classified
Board of Directors, and by the terms of the Class A and Class B common stock,
which require a combined vote of both classes on a one-share, one-vote basis
for the approval of acquisitions and other fundamental transactions. If this
provision is approved and a classified Board is thereby established, a potential
acquiror could only elect a majority of the Board of Directors over the course
of two annual elections of directors.
The risk may also be mitigated by an additional provision that will be included
in the certificate of incorporation upon approval of the Recapitalization
Proposal, subject to IRS and NYSE approval. This provision states that so long
as any person or entity, or group of persons or entities acting as a group,
beneficially owns 15% or more of the outstanding shares of Class B common stock,
then such person, entity or group may only vote in any election of directors the
number of shares of Class B common stock for which it owns an equivalent
percentage of Class A common stock. This provision is intended to protect the
public stockholders of the Company by ensuring that anyone seeking to obtain
control of the Board of Directors of the Company acquire a majority of the
outstanding shares of each class of common stock. There can be no assurances,
however, that this provision will be approved by the IRS and NYSE.
THE REDUCTION IN CASH AND INCURRENCE OF BORROWINGS ASSOCIATED WITH THE PROPOSED
RECAPITALIZATION AND RELATED TRANSACTIONS COULD LIMIT FUTURE OPERATIONAL
FLEXIBILITY
If our stockholders approve the recapitalization and related transactions that
our Board of Directors has approved, we will expend a significant portion of our
cash and incur significant indebtedness. This will result in significant
interest costs and debt repayment obligations, and will limit the availability
of additional borrowings for other corporate purposes such as cash acquisitions
or significant investments in new areas of business.
If the stockholders approve the proposed recapitalization and related
transactions, we will declare and pay a $125 million cash dividend to our
stockholders. In addition, we will commence a share repurchase program through
which we will acquire our own common stock on the open market for approximately
20% of the company's outstanding common stock. We intend to conduct a Dutch
Auction tender offer for 15% of our outstanding shares, as soon as possible
following the distribution of our Class B common stock to the existing public
stockholders of IMS Health. We expect to purchase the remaining 4.9% of the
shares in the open market within two years following the recapitalization and
distribution.
Our ability to make principal and interest payments on our outstanding debt will
depend on our future operating performance. Our future operating performance
itself depends on a number of factors, many of which are outside of our control.
These factors include prevailing economic conditions and financial, competitive
and other factors affecting our business and operations. Although we believe,
based on current levels of operations, that our cash flow from operations,
together with other source of liquidity, will be adequate to make required
payments of principal and interest on our debt, whether at or prior to maturity,
finance anticipated capital expenditures and fund working capital requirements,
we cannot assure you that sources of cash will indeed be sufficient for such
purposes. If we are unable to generate sufficient cash flow from operations, or
if we require additional equipment loans or equipment and working capital lines
of credit to service our debt, we may be required to sell assets, reduce capital
expenditures, refinance all or a portion of existing indebtedness or obtain
other sources of financing. We cannot assure you we would have access to sources
of refinancing on commercially reasonable terms, or at all.
In addition, the terms of debt financing will limit the amount of cash or
borrowings available to us in the future, and this could adversely affect our
future operations in various ways, including the following:
-8-
<PAGE> 10
In order to pay the cash dividend to our stockholders and finance the stock
repurchase program, we will use available cash and we will incur up to
approximately $450 million of debt financing. Our ability to make principal and
interest payments on our outstanding debt will depend on our future operating
performance. Our future operating performance itself depends on a number of
factors, many of which are outside of our control. These factors include
prevailing economic conditions and financial, competitive and other factors
affecting our business and operations. Although we believe, based on current
levels of operations, that our cash flow from operations, together with other
sources of liquidity, will be adequate to make required payments of principal
and interest on our debt, whether at or prior to maturity, finance anticipated
capital expenditures and fund working capital requirements, we cannot assure you
that sources of cash will indeed be sufficient for such purposes. If we are
unable to generate sufficient cash flow from operations, or if we require
additional equipment loans or equipment and working capital lines of credit to
service our debt, we may be required to sell assets, reduce capital
expenditures, refinance all or a portion of existing indebtedness or obtain
other sources of financing. We cannot assure you we would have access to
sources of refinancing on commercially reasonable terms, or at all.
In addition, the terms of debt financing will limit the amount of cash or
borrowings available to us in the future, and this could adversely affect our
future operations in various ways, including the following:
- - we could become increasingly vulnerable to general adverse economic and
industry conditions;
- - we will be required to dedicate a substantial portion of our cash flow
from operations to the payment of principal of, and interest on, our
indebtedness, which will reduce the availability of cash flow to fund
activities that might otherwise benefit us. These could include cash
acquisitions, significant additional investments in new business areas,
and significant capital expenditures. The Company does believe,
however, that excess cash flow at current levels should be sufficient
to fund the increased debt service requirements and the Company's
operating needs.
- - we will have reduced ability to obtain additional financing to fund
potentially beneficial future activities; and
- - we may be placed at a competitive disadvantage as compared to less
leveraged because of reduced ability to invest in our business.
WE WILL INCUR DEBT SERVICE OBLIGATIONS IN CONNECTION WITH THE RECAPITALIZATION
AND RELATED TRANSACTIONS THAT WE MAY NOT BE ABLE TO MEET
Our ability to make principal and interest payments on our outstanding debt will
depend on our future operating performance. Our future operating performance
itself depends on a number of factors, many of which are outside of our control.
These factors include prevailing economic conditions and financial, and
competitive and other factors affecting our business and operations. Although we
believe, based on current levels of operations, that our cash flow from
operations, together with other sources of liquidity, will be adequate to make
required payments of principal and interest on our debt, whether at or prior to
maturity, finance anticipated capital expenditures and fund working capital
requirements, we cannot assure you that our sources of cash will indeed be
sufficient for such purposes. If we are unable to generate sufficient cash flow
from operations, or if we require additional equipment loans or equipment and
working capital lines of credit in the future to service our debt, we may be
required to sell our assets, reduce our capital expenditures, refinance all or a
portion of our existing indebtedness or obtain other sources of financing. We
cannot assure you we would have access to sources of refinancing on commercially
reasonable terms, or at all.
WE WILL ASSUME POTENTIALLY LARGE TAX LIABILITIES UNDER THE DISTRIBUTION
AGREEMENT WITH IMS HEALTH
In connection with the recapitalization and related transactions with IMS
Health, we will enter into agreements with IMS Health governing the
transactions. A critical component of the transactions is the agreement by IMS
Health to distribute to its public stockholders, on a pro rata basis, the Class
B common stock that IMS Health receives from us in our recapitalization
described above. IMS Health has received a favorable ruling from the IRS that
the distribution by IMS Health to its public shareholders, on a pro-rata basis,
of all of Gartner Group's Class B common stock received in the recapitalization
will be tax-free to IMS Health and its stockholders. However, the IRS ruling and
the underlying tax laws provide that the distribution can become taxable to IMS
Health and its stockholders under certain circumstances, including certain share
transactions we might choose to undertake. Accordingly, we have agreed to
indemnify IMS Health for additional taxes that may become payable by IMS Health
or its stockholders, if attributable to such actions. As a result of this
indemnification obligation, we may be reluctant to undertake acquisitions and
other corporate opportunities that become available within the two year period
following the recapitalization and distribution, unless an additional IRS ruling
is obtained. These risks and restrictions may also make our company less
attractive to a potential acquiror.
-9-
<PAGE> 11
STOCK SALES FOLLOWING THE DISTRIBUTION MAY LOWER OUR STOCK PRICE
IMS Health currently holds approximately 46% of the outstanding shares of Class
A common stock of our company. Following the recapitalization, the exchange of
Class A common stock held by IMS Health for Class B common stock, the
distribution of the Class B common stock to IMS Health stockholders, and the
exercise of warrants to purchase an additional 599,400 shares of Class A common
stock, IMS Health will hold approximately 7% of the common stock outstanding.
The IRS Ruling requires IMS Health to dispose of the common stock retained after
distribution to its stockholders and upon the exercise of warrants to purchase
an additional 599,400 shares of Class A common stock in the company as quickly
as feasible following the distribution. IMS Health has agreed, however, that it
will not dispose of such securities for a period of 90 days following the
distribution, and thereafter will dispose of such shares in an agreed manner
intended to mitigate the market impact of such dispositions. Although we believe
that dispositions of shares in such manner should mitigate the impact on the
market for our common stock, such additional sales could also impact such market
adversely.
IMS stockholders will receive shares of our Class B common stock in the proposed
distribution from IMS Health. These stockholders may sell into the public market
all or a substantial portion of our shares that they receive in the distribution
by IMS Health. Sales of substantial amounts of our stock by IMS Health
stockholders could substantially increase the trading volume of our common stock
and could result in downward pressure on our stock price. Certain large
stockholders may be required to sell a significant amount of our shares if,
after the IMS Health distribution, by virtue of their holdings in our company
plus their holdings in IMS Health, they hold a larger amount of our stock than
they are permitted under their internal investment guidelines.
We have agreed to undertake the Dutch Auction as promptly as practicable
following the distribution, and to complete the open market repurchases within
the two-year period following the distribution. These transactions are intended
to mitigate the adverse impact on the market for our stock if there is a
significant amount of selling by new stockholders or by IMS Health after the
distribution. These repurchase programs may not be as effective as we intend,
particularly if our stock purchases do not provide liquidity at the same time or
times that stockholders desire to sell significant blocks of our shares. In
particular, the Dutch Auction represents a significant portion of the total
demand that we will create for our shares through our repurchase. The Dutch
Auction will be undertaken as promptly as practicable following the
recapitalization and distribution, and will provide immediate liquidity to
satisfy any immediate excess supply of our shares. However, we will only
purchase a limited amount of shares in open market purchases following the Dutch
Auction, and these open market transactions may not be sufficient to satisfy any
excess supply which might remain or arise following the Dutch Auction. We can
only repurchase a maximum of less than 20% of our outstanding shares without
potentially causing the distribution to become a taxable event.
THE CREATION OF A CLASSIFIED BOARD OF DIRECTORS MAY DELAY OR PREVENT A CHANGE OF
CONTROL
If our stockholders approve the proposal to create a classified Board of
Directors, our Board will be divided into three classes with one class of
directors to be elected each year. The creation of a classified Board of
Directors may discourage unsolicited takeover bids from third parties or
efforts to remove incumbent management, or make such offers more difficult to
accomplish. If the stockholders approve the proposal, a third party seeking to
replace a majority of our Board of Directors would not be able to do so at any
single meeting of stockholders. It would take two annual meetings for a third
party to obtain control of our company by replacing a majority of our Board of
Directors.
Additionally, the increase in the number of authorized shares of our common
stock and our preferred stock and any subsequent issuance of such shares could
have the effect of delaying or preventing a change in control without further
action by the stockholders. Shares of our authorized and unissued common stock
and/or preferred stock could (within the limits imposed by applicable law and
New York Stock Exchange rules) be issued in one or more transactions that would
make a change in control more difficult, and therefore less likely.
-10-
<PAGE> 12
USE OF PROCEEDS
Gartner Group will not receive any of the proceeds from the sale of the shares
listed below. All proceeds from the sale of the shares will be for the account
of the selling stockholders, as described below. See "Selling Stockholders" and
"Plan of Distribution."
SELLING STOCKHOLDERS
The following table sets forth, as of the date of this prospectus, the name of
each of the selling stockholders, the number of shares of Common Stock that each
selling stockholder owns, the number of shares of Common Stock owned by each
selling stockholder that may be offered for sale from time to time by this
prospectus, and the number of shares of Common Stock to be held by each selling
stockholder assuming the sale of all the Common Stock offered hereby.
The shares being offered by the selling stockholders were acquired from Gartner
Group in connection with our acquisition of G2R, Inc., a California corporation,
in January 1999, and our acquisition of The Research Board, Inc., a New York
corporation, in May 1998. We may amend or supplement this prospectus from time
to time to update the disclosure set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES SHARES BENEFICIALLY OWNED
NAME OF SELLING STOCKHOLDER PRIOR TO OFFERING(1) BEING AFTER OFFERING(1)
--------------------------- ------------------------------------------------------------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
James Grugan 353 (2) * 353 - *
The Graham and Nicole Kemp 357,980 (3) * 357,980 - *
Family Trust
Naomi Von Simson 32,618 * 32,618 - *
Ernest Von Simson 32,618 * 32,618 - *
Total 423,569 * 423,569 - *
</TABLE>
* Less than 1%
(1) Based upon 103,748,743 shares of Company Common Stock outstanding as of
the close of business on March 31, 1999 and including the shares to be
sold hereunder.
(2) 71 of these shares are held in escrow with U.S. Bank Trust.
(3) 71,596 of these shares are held in escrow with U.S. Bank Trust.
-11-
<PAGE> 13
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to time
by the selling stockholders. The selling stockholders will act independently of
Gartner Group in making decisions with respect to the timing, manner and size of
each sale. The selling stockholders may sell the shares being offered hereby on
the New York Stock Exchange, or otherwise, at prices and under terms then
prevailing or at prices related to the then current market price, at varying
prices or at negotiated prices. The shares offered hereby may be sold, without
limitation, by one or more of the following means of distribution: (a) a block
trade in which the broker-dealer so engaged will attempt to sell such shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this prospectus;
(c) an over-the-counter distribution in accordance with the rules of the New
York Stock Exchange; (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (e) privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented from
time to time to describe a specific plan of distribution.
In connection with distributions of the shares offered hereby, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, broker-dealers or
other financial institutions may engage in short sales of Gartner Group's common
stock in the course of hedging the positions they assume with selling
stockholders. The selling stockholders may also sell our common stock short and
deliver the shares offered hereby to close out such short positions. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of shares offered hereby,
which shares such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to reflect such
transaction). The selling stockholders may also pledge the shares offered hereby
to a broker-dealer or other financial institution, and, upon a default, such
broker-dealer or other financial institution, may effect sales of the pledged
shares pursuant to this prospectus (as supplemented or amended to reflect such
transaction). In addition, any shares offered hereby that qualify for sale
pursuant to Rule 144 may, at the option of the holder thereof, be sold under
Rule 144 rather than pursuant to this prospectus.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholder and/or purchasers of the shares offered
hereby (and, if it acts as agent for the purchaser of such shares, from such
purchaser). Usual and customary brokerage fees will be paid by the selling
stockholder. Broker-dealers may agree with the selling stockholder to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the selling
stockholder, it may purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to the selling stockholder.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve cross and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, in negotiated transactions or otherwise at market prices prevailing at
the time of sale or at negotiated prices, and in connection with such resales,
may pay to or receive from the purchasers of such shares commissions computed as
described above.
To comply with the securities laws of certain states, if applicable, the shares
offered hereby will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the shares offered
hereby may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
-12-
<PAGE> 14
We have advised the selling stockholders that the anti-manipulation rules of
Regulation M of the Exchange Act may apply to sales of the shares offered hereby
in the market and to the activities of the selling stockholders and their
affiliates. In addition, we will make copies of this prospectus available to the
selling stockholders and have informed them of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares offered hereby. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a prospectus
supplement will be distributed that will set forth the number of shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation limits the liability of our directors for
monetary damages to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be liable personally for
monetary damages for breach of their fiduciary duties as directors, except for
liability (i) for any breach of their duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not made in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit.
Our Bylaws provide that we must indemnify our directors and executive officers
and may indemnify our other officers, employees and agents to the fullest extent
permitted by law. Our Bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether the Bylaws would permit
indemnification.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in our Bylaws. These agreements,
among other things, indemnify our directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of Gartner Group, arising out of such person's services as a director or
officer of Gartner Group, or any subsidiary of Gartner Group or any other
company or enterprise to which the person provides services at our request.
We also maintain an insurance policy insuring our directors and officers against
liability for certain acts and omissions while acting in their official
capacities.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling Gartner
Group pursuant to the foregoing provisions, we have been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
-13-
<PAGE> 15
LEGAL MATTERS
Certain legal matters relating to the validity of the securities offered hereby
will be passed upon for Gartner Group by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of Gartner Group, Inc. and
subsidiaries as of September 30, 1998 and 1997, and for each of the years in the
three-year period ended September 30, 1998, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
-14-
<PAGE> 16
================================================================================
423,569 Shares
GARTNER GROUP, INC.
COMMON STOCK
PROSPECTUS
June 2, 1999
================================================================================
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The fees and expenses incurred by Gartner Group in connection with the
offering are payable by Gartner Group and, other than filing fees, are estimated
as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................. $ 3,062
Legal Fees and Expenses.............................................. $10,000
Accounting Fees...................................................... $ 6,000
Miscellaneous........................................................ $ 2,000
Total....................................................... $21,062
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Delaware General Corporation Law provides that directors of a corporation
will not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except for liability (i) for any breach of their duty of
loyalty to the corporation or its stockholders; (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law; (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law;
or (iv) for any transaction from which the director derived an improper personal
benefit. In accordance with Delaware law, the Company's Amended and Restated
Certificate of Incorporation (the "Restated Certificate") contains a provision
to limit the personal liability of directors for violations of their fiduciary
duty. This provision eliminates the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
The Restated Certificate and the Company's Amended and Restated Bylaws provide
that the Company shall indemnify its officers and directors to the fullest
extent permitted by law. [The Company has entered into indemnification
agreements with each of its directors and officers.] These agreements provide
indemnification under certain circumstances for acts or omissions that may not
be covered by directors' and officers' liability insurance
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
Exhibit
Number Description
- ------ -----------
4.1* Section 5.1 of the Agreement and Plan of Merger dated as of
December 23, 1998 by and among Gartner Group, Inc., G2R, Inc. and
Graham Kemp.
5.1* Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of KPMG LLP
<PAGE> 18
24.1* Power of Attorney (included on pg. II-4 of the Registration
Statement as originally filed, under the caption "Signatures").
*Previously filed.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that (i) and
(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective amendment
by (i) and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Undertaking Regarding Filings Incorporating Subsequent Exchange Act
Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking Regarding Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such
II-2
<PAGE> 19
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. Undertaking Regarding Registration Statement Permitted by Rule 430A.
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable cause to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, State of Connecticut on June 2, 1999.
GARTNER GROUP, INC.
By: /s/ Michael Fleisher
--------------------------------
Michael Fleisher
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William T. Clifford* Director, President and Chief Executive Officer June 2, 1999
- --------------------------------------------
William T. Clifford
/s/ Michael Fleisher Executive Vice President, Finance and June 2, 1999
- -------------------------------------------- Administration, and Chief Financial Officer
Michael Fleisher
/s/ Manual A. Fernandez* Director and Chairman of the Board June 2, 1999
- --------------------------------------------
Manual A. Fernandez
/s/ William O. Grabe* Director June 2, 1999
- --------------------------------------------
William O. Grabe
/s/ Max D. Hopper* Director June 2, 1999
- --------------------------------------------
Max D. Hopper
/s/ John P. Imley, Jr.* Director June 2, 1999
- --------------------------------------------
John P. Imley, Jr.
/s/ Stephen G. Pagliuca* Director June 2, 1999
- --------------------------------------------
Stephen G. Pagliuca
/s/ Dennis G. Sisco* Director June 2, 1999
- --------------------------------------------
Dennis G. Sisco
/s/ Director
- --------------------------------------------
Robert E. Weissman
By: /s/ Michael Fleisher
----------------------------------------
Attorney in Fact
</TABLE>
II-4
<PAGE> 21
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.1* Section 5.1 of the Agreement and Plan of Merger dated as of
December 23, 1998 by and among Gartner Group, Inc., G2R, Inc.
and Graham Kemp.
5.1* Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of KPMG LLP
24.1* Power of Attorney (included on pg. II-4 of the Registration
Statement as originally filed, under the caption
"Signatures").
* Previously filed.
II-5
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Gartner Group, Inc.
We consent to the use of our reports incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
St. Petersburg, Florida
June 2, 1999
