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:
[ ] 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 ss.240.14a-11(c) or ss.240.14a-12
Giga Information Group, Inc.
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________
(Name of Person)s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.:
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3) Filing Party:
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4) Date Filed:
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`<PAGE>
GIGA INFORMATION GROUP, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 10, 1999
------------------------
TO THE STOCKHOLDERS OF GIGA INFORMATION GROUP, INC.
The Annual Meeting of Stockholders of Giga Information Group, Inc., a
Delaware corporation, will be held at the offices of Weil, Gotshal & Manges LLP,
767 Fifth Avenue, 25th Floor, New York, New York, on Monday, May 10, 1999, at
10:00 a.m., local time, for the following purposes:
1. To elect two Directors to serve until the 2002 Annual Meeting of
Stockholders;
2. To approve the Giga 1999 Share Incentive Plan;
3. To approve the Giga 1999 Employee Stock Purchase Plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as Giga's
independent auditors for the 1999 fiscal year; and
5. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 15, 1999,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and at any adjournment thereof and only holders of
record of Common Stock at the close of business on such date will be entitled to
notice of, and to vote at, the meeting.
By Order of the Board of Directors
DANIEL M. CLARKE
Secretary
Norwell, Massachusetts
April 12, 1999
Each stockholder is urged to execute the enclosed Proxy promptly. In the
event a stockholder decides to attend the meeting, he or she may, if so desired,
revoke the Proxy and vote the shares in person.
<PAGE>
GIGA INFORMATION GROUP, INC.
One Longwater Circle
Norwell, Massachusetts 02061
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
May 10, 1999
------------------
This Proxy Statement is furnished to the holders of Common Stock, par
value $0.001 per share, of Giga Information Group, Inc. in connection with the
solicitation of proxies on behalf of the Board of Directors to be voted at the
Annual Meeting of Stockholders to be held at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, 25th Floor, New York, NY, on May 10, 1999, at
10:00 a.m., local time, and at any adjournments or postponements thereof. This
Proxy Statement and the accompanying form of proxy are first being sent to
stockholders on or about April 12, 1999.
VOTING
Record Date
Only owners of record of shares of Common Stock at the close of business
on March 15, 1999, are entitled to vote at the meeting or adjournments or
postponements thereof. Each owner of record of Common Stock is entitled to one
vote for each share of Giga Common Stock so held. On March 15, 1999, there were
9,963,523 shares of Common Stock issued and outstanding.
Matters to Be Considered
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the Annual
Meeting of Stockholders in 2002, stockholders may vote in favor of all nominees
or withhold their votes as to all or specific nominees. With respect to the
other proposals to be voted upon, stockholders may vote in favor of a proposal,
against a proposal or may abstain from voting. Stockholders should specify their
choices on the enclosed form of proxy. If no specific instructions are given
with respect to the matters to be acted upon, the shares represented by a signed
proxy will be voted:
1. FOR the election of all nominees as director;
2. FOR the proposal to approve the 1999 Share Incentive Plan;
3. FOR the proposal to approve the 1999 Employee Stock Purchase Plan;
and
4. FOR the proposal to ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors for the 1999 fiscal year.
Required Votes
Directors will be elected by a plurality of the votes cast by the holders
of the shares of Common Stock voting in person or by proxy at the Annual
Meeting. In accordance with Giga's Amended and Restated Bylaws, each of the
other proposals will be approved by the affirmative vote of a majority of the
votes cast "For" or "Against" the proposals by holders of Common Stock voting on
the proposal in person or by proxy at the Annual Meeting. Accordingly,
abstentions and broker non-votes, while not included in calculating vote totals,
will have the practical effect of reducing the number of votes "For" needed to
approve each of the proposals.
<PAGE>
Voting and Revocation of Proxies
Stockholders are requested to execute their proxy by mail or telephone or
electronically through the Internet, all as described on the enclosed proxy
card. All proxies delivered pursuant to this solicitation are revocable at any
time before they are exercised at the option of the persons executing them by
giving written notice to the Secretary of Giga, by delivering a later dated
proxy or by voting in person at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 15, 1999 by (1) each person
known by Giga to own beneficially more than 5% of the outstanding shares of
Common Stock, (2) each of Giga's directors and director nominees, (3) each of
the executive officers whose names appear in the summary compensation table and
(4) all directors, director nominees and executive officers as a group.
% of Shares
Number of Beneficially
Beneficial Owner Shares (1) Owned (2)
- ---------------- ---------- ------------
Gideon I. Gartner............................. 2,302,780(3) 22.9%
c/o Giga Information Group, Inc.
One Longwater Circle
Norwell, MA 02061
Friedman, Billings, Ramsey Group, Inc......... 1,262,783(4) 12.5%
1001 19th Street North
Arlington, VA 22209-1710l
Pequot Capital Management, Inc. .............. 1,173,337(5) 11.3%
500 Nyala Farm Road
Westport, CT 06880
Irwin Lieber.................................. 835,738(6) 8.4%
Geo Capital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
21st Century Communications Partners, L.P..... 571,429(7) 5.7%
767 Fifth Avenue, 45th floor
New York, NY 10153
A.G.W. Biddle, III............................ 388,424(8) 3.9%
Neill H. Brownstein........................... 157,166(9) 1.6%
David L. Gilmour.............................. 135,000(10) 1.4%
Richard L. Crandall........................... 108,458(11) 1.1%
Bernard Goldstein............................. 42,334(12) *
James C. R. Graham............................ 21,083(13) *
Michael R. Mooradian.......................... 13,523(14) *
Daniel M. Clarke.............................. 10,666(15) *
All directors, director nominees and
executive officers as a group (10 persons).. 4,015,172(16) 33.7%
2
<PAGE>
- ------------
* Less than 1%.
(1) Each stockholder possesses sole voting and investment power with respect
to the shares listed, except as otherwise noted. Amounts shown include
shares issuable within the 60-day period following March 15, 1999 pursuant
to the exercise of options or warrants.
(2) On March 15, 1999, there were 9,963,523 shares of Common Stock
outstanding.
(3) Includes options to purchase 220,000 shares of Common Stock and warrants
to purchase 12,857 shares of Common Stock. Also includes 220,335 shares of
Common Stock, which are held of record by members of Mr. Gartner's family.
Mr. Gartner disclaims beneficial ownership of shares held by members of
his family.
(4) Friedman, Billings, Ramsey Group, Inc. and its affiliates directly or
indirectly beneficially own 1,262,783 shares of Common Stock (as reported
in a Schedule 13G filed with the Securities and Exchange Commission on
February 16, 1999). Friedman, Billings, Ramsey & Co., Inc., a subsidiary
of Friedman, Billings, Ramsey Group, Inc., was the co-lead underwriter of
Giga's initial public offering in July, 1998.
(5) Includes 1,041,474 shares of Common Stock held by Pequot Private Equity
Fund, L.P. (365,193 shares of which are subject to the exercise of
warrants) and 131,863 shares of Common Stock held by Pequot Offshore
Private Equity Fund, L.P. (46,238 shares of which are subject to the
exercise of warrants). Pequot Capital Management, Inc. serves as the
investment manager to each of these entities and possesses investment and
voting power with respect to each such entity but disclaims beneficial
ownership. Previously, the beneficial owner of these shares was
Dawson-Samberg Capital Management, Inc. A portion of that business,
including the beneficial ownership of these shares, was transferred to
Pequot Capital Management, Inc. effective January 1, 1999. Pequot Capital
Management, Inc. exercises investment and voting power over the shares.
The executive officers of Pequot Capital Management are Arthur J. Samberg,
Daniel C. Benton and Emil M. Peretz. These executive officers disclaim
beneficial ownership of the shares.
(6) Includes 387,443 shares of Common Stock held by 21-CCP, 131,853 shares of
Common Stock held by 21-CCTEP, 52,133 shares of Common Stock held by
21-CCFP, 246,646 shares of Common Stock held by Wheatley Partners, L.P.
("Wheatley") and 17,163 shares of Common Stock held by Wheatley Foreign
Partners, L.P. ("Wheatley Foreign"). Mr. Lieber, a director of the
Company, is a corporate officer of InfoMedia Associates Ltd., a General
Partner of 21-CCP, 21-CCTEP, 21-CCFP and a General Partner of Wheatley
LLC, a General Partner of Wheatley and Wheatley Foreign. Mr. Lieber
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest in such shares. Mr. Lieber shares dispositive and
voting power of such shares with the General Partners of the General
Partner of Wheatley and Wheatley Foreign and with the other officers of
the General Partner of 21-CCP, 21-CCTEP and 21-CCFP.
(7) Includes 387,443 shares of Common Stock held by 21-CCP, 131,853 shares of
Common Stock held by 21-CCTEP and 52,133 shares of Common Stock held by
21-CCFP.
(8) Includes 320,000 shares of Common Stock held by Novak Biddle Venture
Partners, LP (77,143 shares of which are subject to the exercise of
warrants), 1,167 shares of Common Stock held by Southgate Partners I and
1,167 shares of Common Stock held by Southgate Partners II. Mr. Biddle
disclaims beneficial ownership except to the extent of his pecuniary
interest in the Novak Biddle shares, and he disclaims beneficial ownership
of the Southgate Partner shares which are held in a trust of which he is
trustee for his minor children. Mr. Biddle beneficially owns directly
66,090 shares of Common Stock.
(9) Includes 8,000 shares of Common Stock held by Mr. Brownstein's children,
5,333 shares of Common Stock held by Mr. Brownstein and his spouse jointly
and 12,857 shares which are subject to the exercise of warrants. Mr.
Brownstein disclaims beneficial ownership of the 6,000 shares of Common
Stock held by his adult children, Adam J. and Todd D. Brownstein, and Will
Gordon, the adult child of his spouse. Mr. Brownstein disclaims beneficial
ownership of the 2,000 shares of Common Stock held by his minor child,
Emily Hamilton; however, Mr. Brownstein exercises investment and voting
power over these shares.
(10) Includes options to purchase 28,333 shares of Common Stock.
(11) Includes 38,334 shares of Common Stock held by R. Crandall Trust, of which
Mr. Crandall serves as trustee (6,429 shares of which are subject to the
exercise of warrants). Also includes options to purchase 13,457 shares of
Common Stock.
(12) Includes warrants to purchase 5,143 shares of Common Stock and options to
purchase 1,000 shares of Common Stock.
(13) Includes options to purchase 21,083 shares of Common Stock.
(14) Includes options to purchase 13,523 shares of Common Stock.
(15) Includes options to purchase 10,666 shares of Common Stock.
(16) Includes 309,062 shares of Common Stock issuable upon exercise of options
and 114,429 shares of Common Stock issuable upon exercise of warrants held
by all directors, director nominees and executive officers as a group.
3
<PAGE>
ELECTION OF DIRECTORS
(Item 1)
Board of Directors
The Board of Directors presently consists of six members. The Directors
are divided into three classes, each serving for a period of three years, except
that at the time of Giga's initial public offering, Class I and Class II
initially were elected for terms of one and two years ending in 1999 and 2000,
respectively.
One-third of the members of the Board of Directors are elected by the
stockholders annually. The Directors whose terms will expire at the Annual
Meeting are Neill H. Brownstein and Irwin Lieber. Mr. Lieber has decided not to
stand for reelection. Mr. Brownstein has been nominated to stand for reelection
as a Director at the Annual Meeting and A.G.W. Biddle, III has been nominated to
stand for election as a Director at the Annual Meeting, each to hold office
until the 2002 Annual Meeting of Stockholders and until their successors are
elected and qualify.
Should any one or more of these nominees become unable to serve for any
reason, or for good cause will not serve, which is not anticipated, the Board of
Directors may, unless the Board by resolution provides for a lesser number of
Directors, designate substitute nominees, in which event the persons named in
the enclosed proxy will vote proxies that would otherwise be voted for all named
nominees for the election of such substitute nominee or nominees.
The Board recommends a vote FOR each nominee as a Director to hold office
until the 2002 Annual Meeting. Proxies received by the Board will be so voted
unless stockholders specify in their proxy a contrary choice.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2002 (Class I)
A.G.W. ("Jack") Biddle, III, 38, has been nominated by the Board of
Directors to serve as a Director of Giga. He co-founded Novak Biddle Venture
Partners in 1996 and serves as one of its General Partners. In 1995, Mr. Biddle
was an independent consultant and investor. During that period, he was a
consultant to Giga on Giga's acquisition of BIS Strategic Decisions, Inc. From
1990 to 1995, Mr. Biddle was CEO of InterCap Graphics Systems. From 1987 to
1990, Mr. Biddle was with Vanguard Atlantic, Ltd., a merchant banking group
focused on software and telecommunications. While at Vanguard, he served as CEO
and COO of two of their portfolio companies, Decision Technology and Information
Science. From 1985 to 1987, Mr. Biddle was with Gartner Group, Inc. as Executive
Assistant to the then CEO, Gideon I. Gartner. During that period, Mr. Biddle was
Secretary of Gartner Group's Executive Committee and published original research
on global issues in IT with emphasis on telecommunications. He has been a member
of the Computer & Communications Industry Association since 1983 and a member of
its Board since 1990. Mr. Biddle is Vice Chairman of Meridian Emerging Markets,
a Director of Tantivy Communications and Paratek Microwave, and a Board observer
at Telogy Networks, Entevo, LifeMinders.com and Blackboard, Inc. He received a
B.A. degree in Economics from the University of Virginia.
Neill H. Brownstein, 54, has served as a Director of Giga since July 1995.
Since January 1995, he has been a private investor. From 1970 to January 1995,
Mr. Brownstein was associated with Bessemer Securities Corporation and was a
Founder and General Partner of three affiliated venture capital funds: Bessemer
Venture Partners L.P., Bessemer Venture Partners II L.P., and Bessemer Venture
Partners III L.P., for which he currently serves as a Special General Partner.
Since 1970, he has been president of Neill H. Brownstein Corporation, an
investment management counseling enterprise. He also serves as a Director of DSP
Communications, Inc. Mr. Brownstein received an A.B. from Columbia College of
Columbia University and an M.B.A. from the Kellogg School of Management at
Northwestern University. Between 1979 and 1988, Mr. Brownstein also served as a
director of Gartner Group, Inc.
4
<PAGE>
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 2000 (Class II)
Richard L. Crandall, 55, has served as a Director of and consultant to
Giga since August 1995. He was founder of Comshare, Inc., a decision support
software company, serving as its Chief Executive Officer from 1970 until 1994
and Chairman until April 1997. Mr. Crandall chairs the Enterprise Software
Roundtable, consisting of the CEO's and COO's of the twenty-five largest
enterprise software companies. He currently serves on the Board of Directors of
Comshare, Computer Task Group and Diebold and several privately held technology
companies. He serves on the National Advisory Board to the College of
Engineering of the University of Michigan. Mr. Crandall received a B.S. in
electrical engineering, a B.S. in mathematics and an M.S.E. in industrial
engineering from the University of Michigan.
David L. Gilmour, 41, is Chairman and CEO of Tacit Knowledge Systems,
Inc., an enterprise software company in Los Altos, California, and a co-founder
of Giga with Mr. Gartner. He served as Senior Vice President and Chief Research
Officer of Giga from April 1996 to February 1998 and has served as a Director of
Giga since July 1995. Until October 1, 1998, Mr. Gilmour served as a special
advisor to Giga on Research and Technology. From July 1995 to April 1996, he
served as Senior Vice President of Technology of Giga. From July 1993 to July
1995, he served as Chief Executive Officer and a director of ExperNet
Corporation, an information technology company that he founded with Mr. Gartner.
From October 1992 to April 1993, Mr. Gilmour served as acting President and
Chief Executive Officer, and from April 1991 to October 1992 and from April 1993
to July 1993, he served as Executive Vice President, Marketing, of Versant
Object Technology Corporation, a computer software company. From 1989 to 1991,
he served as Vice President--Database Systems Division, from 1986 to 1989, he
served as General Manager--Advanced Products Division, and from 1984 to 1986, he
served as Director of Product Planning at Lotus Development Corporation, a
software company. Mr. Gilmour received a B.A. in Applied Physics, and an M.S. in
engineering, both from Harvard University, and an M.B.A., with distinction, from
Harvard Business School.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 2001 (Class III)
Gideon I. Gartner, 63, has served as Chairman of the Board of Directors
and Chief Executive Officer of Giga since its inception in March 1995. In
October 1997, he was also elected President. From 1993 to 1994, he was a private
investor. From 1991 to 1992, he served as Chairman, and from 1979 to 1991 he
served as President, Chairman and Chief Executive Officer of Gartner Group,
Inc., an information technology company which he founded. In 1984, Mr. Gartner
founded Gartner Securities Corp., which changed its name to Soundview Financial
Group; Mr. Gartner served as chairman of this company through 1991. From 1972 to
1979, he served as a technology analyst and subsequently as a partner at
Oppenheimer & Co. Inc., an entity engaged in the financial services business.
Mr. Gartner received his B.S. in engineering from Massachusetts Institute of
Technology and received an M.S. in management from MIT's Sloan School of
Management.
Bernard Goldstein, 68, has served as a Director of Giga since April 1997.
He is a Director of Broadview Int'l Associates, LLC, which he joined in 1979. He
is a past President of the Information Technology Association of America, the
industry trade association of the computer service industry, and past Chairman
of the Information Technology Foundation. Mr. Goldstein was a Director of Apple
Computer Inc. until August 1997, and is currently a Director of Franklin
Electronic Publishers, Inc., Sungard Data Systems, Inc., SPSS, Inc. and several
privately held companies. Mr. Goldstein received a B.S. from the Wharton School
at the University of Pennsylvania and an M.S. from Columbia University.
Additional Information Regarding the Board of Directors
Board Committees. The Board of Directors has established two
committees--the Audit Committee and the Compensation Committee.
The Audit Committee members are Neill H. Brownstein, Richard L. Crandall
and Bernard Goldstein. Mr. Brownstein is the Chairman of the Committee. The
Committee, among other things, makes recommendations to the Board of Directors
regarding the independent auditors to be nominated for ratification by the
stockholders, reviews the independence of such auditors, approves the scope of
the annual audit activities of the independent auditors and reviews audit
results.
5
<PAGE>
The Compensation Committee members are Neill H. Brownstein and Irwin
Lieber. The Committee, among other things, has the authority to establish and
approve compensation plans and arrangements with respect to Giga's executive
officers and administers certain employee benefit plans, including the stock
option and stock issuance plans.
Board and Board Committee Meetings. In fiscal 1998, the Board of Directors
met fifteen times, the Compensation Committee met eight times and the Audit
Committee met once (following Giga's initial public offering in August 1998).
During such year, each Director attended at least 75% of the aggregate number of
meetings of the Board of Directors and committees on which he served while a
member thereof.
Compensation of Directors. Each Director of Giga who is not a full-time
employee of Giga or any subsidiary (the "Non-Employee Directors") is reimbursed
for expenses incurred in connection with attendance at the meetings of the Board
of Directors and committees thereof and is entitled to receive stock options
under Giga's 1997 Director Option Plan (the "Director Plan"). Directors who are
employees of Giga currently receive no compensation for serving as Directors.
The Director Plan, adopted in June 1997, provides for the grant of stock
options to Non-Employee Directors. Only non-statutory options not entitled to
special tax treatment under Section 422 of the Internal Revenue Code of 1986, as
amended, may be granted under the Director Plan. The maximum number of shares of
Common Stock as to which options may be granted under the Plan is 50,000.
Options are automatically granted to Non-Employee Directors as follows: (i)
options to purchase 2,000 shares of Common Stock on July 1st of each year,
commencing July 1, 1997, and (ii) options to purchase 2,000 shares of Common
Stock upon such Director's initial election as a Director after adoption of the
Director Plan.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of all compensation awarded or
paid to or earned by the Chief Executive Officer, and the other executive
officers of Giga whose total salary and bonus in fiscal 1998 exceeded $100,000
(sometimes collectively referred to herein as the "Named Executive Officers")
for services rendered in all capacities to Giga (including its subsidiaries) for
the fiscal years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------- ------------
Awards
------------
Securities All Other
Other Annual Underlying Compen-
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options (#) sation($)
- -------------------------- ------ ---------- --------- --------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Gideon I. Gartner .......... 1998 160,000(1) 30,000 -- 100,000 --
Chairman, President and .... 1997 160,000(1) 30,000 -- -- --
Chief Executive Officer .. 1996 53,334(2) -- 47,786(3) -- --
James C. R. Graham ......... 1998 200,000 5,000 -- 8,000 --
Executive Vice President ... 1997 36,073 67,500 -- 50,000 --
and Chief Research Officer 1996 -- -- -- -- --
Daniel M. Clarke ........... 1998 154,956 30,000 -- 28,000(4) --
Sr. Vice President, CFO, ... 1997 50,650 20,000 -- 20,000 --
Treasurer, Secretary, .... 1996 -- -- -- -- --
Acting Chief Operating
Officer
Michael R. Mooradian ....... 1998 125,000 -- -- -- 75,318(5)
Sr. Vice President, ........ 1997 90,625 15,103 -- 25,833(6) 56,025
North American Field ..... 1996 32,250 -- -- 3,333 16,828(5)
Operations
</TABLE>
- ------------
(1) Includes amounts payable in either the listed or subsequent year for
services rendered by Mr. Gartner in the listed year.
(footnotes continued on next page)
6
<PAGE>
(2) On March 26, 1997 Mr. Gartner was issued 17,778 shares of Common Stock
valued at $3.00 per share (the value of Giga's Common Stock as determined
by Giga's Board of Directors on that date) in lieu of payment in cash for
services rendered by him as Chief Executive Officer of Giga in 1996.
(3) Includes a payment in cash of $44,016.96 sufficient to cover payroll and
withholding tax relating the issuance of 17,778 shares of Common Stock
(see Note 2 above).
(4) On December 7, 1998 Mr. Clarke was granted options to purchase 20,000
shares of Common Stock in connection with his appointment as Acting Chief
Operating Officer (see "Employment Related Agreements").
(5) Represents commissions paid to Mr. Mooradian.
(6) Mr. Mooradian's stock option grants reflect the total number of options
granted in fiscal 1997. Options to purchase 3,333 shares of Common Stock
were subsequently cancelled at the end of 1997.
Option Grants in 1998
The following table shows all grants of options to the Named Executive
Officers for the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term(6)
------------------------------------------------ -------------------------------
% of Total
Number Options
of Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration 5% 10%
Name Granted(#) Year(3) ($/Sh) Date ($) ($)
------------- ------------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gideon I. Gartner .... 100,000(1) 9.49 3.300(4) 3/17/06 $158,000 $377,000
James C. R. Graham ... 8,000(2) 0.76 3.000(4) 3/17/08 $ 15,120 $ 38,240
Daniel M. Clarke ..... 8,000(2) 0.76 3.000(4) 3/17/08 $ 15,120 $ 38,240
20,000(2) 1.90 3.688(5) 12/7/08 $ 46,440 $117,640
Michael R. Mooradian .. -- -- -- -- -- --
</TABLE>
- ------------
(1) These options were granted pursuant to Giga's 1995 Stock Option/Stock
Issuance Plan. The vesting schedule for the options was dependent upon
Giga's performance in fiscal 1998. Based on Giga's fiscal 1998
performance, the options will vest on March 17, 2005, the seventh
anniversary of the date of grant. The options will terminate ninety (90)
days following Mr. Gartner's termination of employment, except that in the
case of termination for cause, the options will terminate immediately.
(2) These options were granted pursuant to Giga's 1996 Stock Option Plan. The
options vest over four years, with twenty-five percent (25%) of the
options vesting after one year and l/48th of the options vesting monthly
thereafter. The options will terminate ninety (90) days following the
Named Executive Officer's termination of employment, except that in the
case of death or disability, the options may be exercised for certain
periods of time thereafter as set forth in the 1996 Stock Option Plan.
(3) Based on an aggregate of 1,054,060 options granted to employees in fiscal
1998, including options granted to Named Executive Officers.
(4) The Board of Directors of Giga had concluded that the exercise price of
these options was equal to the fair market value of the underlying Common
Stock on the date of grant. In connection with Giga's initial public
offering, it was subsequently determined that the exercise price of these
options was actually less than the fair market value of the underlying
Common Stock on the date of grant. As a result, it was no longer possible
to treat the options granted on March 17, 1998 to Mr. Graham and Mr.
Clarke as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended. The options granted to Mr.
Gartner were granted as nonqualified options.
(5) The exercise price of these options was equal to the fair market value of
the underlying Common Stock on the date of grant. These options are
intended to be incentive stock options within the meaning of Section 422
of the Internal Revenue Service Code of 1986, as amended.
(6) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, computed annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholders' continued employment through the option period and the date
on which the options are exercised.
7
<PAGE>
Option Values at December 31, 1998
No options were exercised by any of the Named Executive Officers during
the fiscal year ended December 31, 1998. The following table provides
information as to the value of options held by the Named Executive Officers as
of December 31, 1998.
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End($) (1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------- ----------- ------------- ----------- -------------
Gideon I. Gartner ... 220,000 100,000 715,000 145,000
James C. R. Graham .. 14,583 43,417 25,520 75,980
Daniel M. Clarke .... 6,250 41,750 10,938 59,303
Michael Mooradian ... 10,831 15,002 19,537 26,670
- ------------
(1) Represents the total gain which would be realized if all in-the-money
options held at December 31, 1998 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between $4.75 (the closing price of the Common Stock on December 31, 1998)
and the per share option exercise price. An option is in-the-money if the
fair market value of the underlying shares exceeds the exercise price of
the options.
Employment-Related Agreements
Gideon I. Gartner. Giga entered into a non-competition agreement with Mr.
Gartner, dated November 13, 1995, pursuant to which Mr. Gartner has agreed not
to compete with Giga, solicit any employee or take away any customer of Giga
either during his employment with Giga or for so long thereafter as the Giga
continues to pay Mr. Gartner annual compensation of at least $120,000 (whether
as an employee, consultant or in the form of severance or post-employment
benefits).
Effective as of January 1, 1999, Giga entered into an agreement with Mr.
Gartner pursuant to which he has agreed to continue as Chairman of the Board of
Directors for so long as he is a director of Giga and to continue to act as
President and Chief Executive Officer of Giga until the Board of Directors hires
a new Chief Executive Officer. During the transition period, Daniel M. Clarke,
currently Senior Vice President and Chief Financial Officer of Giga, has assumed
additional operating responsibilities as Acting Chief Operating Officer. Mr.
Gartner has agreed to make himself available to Giga, as requested, for up to 80
business days during the first year of the agreement, which amount of time will
be reduced by up to 15% in each year thereafter as determined by Giga after
consultation with Mr. Gartner. As compensation for his services as an employee,
Mr. Gartner will receive a salary at the rate of $260,000 per annum for the
first year. This rate of compensation will decrease by up to 15% each year
thereafter commensurate with his level of availability in the relevant year,
provided that Giga and Mr. Gartner may mutually agree to an increase in the
level of Mr. Gartner's service in any year with a commensurate increase in his
compensation. The agreement will continue unless and until terminated by either
Giga or Mr. Gartner upon not less than 90 days' prior written notice to the
other, with or without cause.
For a discussion of certain current consulting arrangements between Giga
and Messrs. Crandall and Gilmour, see "Certain Relationships and Related
Transactions--Consulting Agreements."
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COMPENSATION COMMITTEE REPORT
The Board of Directors has established a Compensation Committee which
presently consists of Messrs. Brownstein and Lieber, neither of whom is an
employee of Giga. Upon his election as a Director, it is contemplated that Mr.
Biddle will join the Compensation Committee and replace Mr. Lieber. The Board
has delegated to the Compensation Committee the responsibility for establishing
and administering Giga'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, as
appropriate, with outside advisors.
Overall Policy. Giga's executive compensation program is designed to be
linked closely to corporate performance and returns to stockholders. To this
end, Giga has developed an overall compensation strategy and specific
compensation plans that tie a significant portion of executive compensation to
Giga's success in meeting specified performance goals. In addition, through the
use of stock options, Giga ensures that a part of the executive's compensation
is closely tied to appreciation in Giga's stock price. The overall objectives of
this strategy are to attract and retain the best possible executive talent, to
motivate these executives to achieve the goals inherent in Giga's business
strategy, to link executive and stockholder interests through equity based plans
and to provide a compensation package that recognizes individual contributions
as well as overall business results.
The Compensation Committee takes into account the views of Mr. Gartner,
Giga's Chief Executive Officer, in reviewing the individual performance of the
executives (other than Mr. Gartner) whose compensation is detailed in this Proxy
Statement.
The key elements of Giga's executive compensation consist of base salary,
annual bonus and stock options. Other elements of executive compensation include
participation in a company-wide life insurance program, including a supplemental
life insurance program and a long-term disability insurance program. Executives
are also eligible for company-wide medical benefits and participation in a
401(k) plan.
The Compensation Committee's policies with respect to each of these
elements, including the bases for the compensation awarded to Mr. Gartner, are
discussed below. In addition, while the elements of compensation described below
are considered separately, the Compensation Committee takes into account the
full compensation package afforded by the Giga to the individual, including
insurance and other benefits.
Base Salary. Base salaries for new executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience of the individual. In making determinations regarding base salaries,
the Compensation Committee considers generally available information regarding
salaries prevailing in the industry, but does not utilize any particular indices
or peer groups.
Annual salary adjustments are determined by evaluating the performance of
Giga and of each executive officer, and also taking into account new
responsibilities. Corporate performance that is taken into account includes the
achievement of predefined financial and non-financial objectives on a
company-wide and individual basis.
Annual Bonuses. Giga's executive officers are eligible for an annual cash
corporate bonus which is based on the achievement of Giga's performance
objectives that are established at the beginning of each year. Giga's
performance measure for bonus payments is based primarily on: (i) the increase
in the Annualized Value of its contracts over the prior year and (ii) operating
income. Corporate performance bonuses were not paid out to the executive
officers for the year ended December 31, 1998 because the performance
measurements were below targeted amounts.
In addition, Giga's executive officers are eligible for personal bonuses
or incentives based on their achievement of individual performance objectives
that are established at the beginning of the year. The performance objectives
for each individual are based on the functional responsibilities of that
individual and are designed to be consistent with Giga's overall performance
objectives.
Stock Options. Stock options are granted when an executive joins Giga,
with additional options granted from time to time for promotions and
performance. The Compensation Committee believes that stock option participation
provides a method of retention and motivation for the senior level executives of
Giga and also
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aligns senior management's objectives with long-term stock price appreciation.
In determining the amount of grants, the Compensation Committee evaluates the
job level of the executive, responsibilities to be assumed in the upcoming year,
and responsibilities in the prior year, and also takes into account the size of
the officer's awards in the past.
CEO Compensation. The Compensation Committee, subject to Board approval,
determines compensation of Giga's Chief Executive Officer. Mr. Gartner's
compensation package in 1998 consisted of the same benefits program as other
executive officers including base salary, the opportunity to achieve a cash
bonus, stock options and other employee benefit programs. Mr. Gartner received
no material benefits in 1998 not provided to all executive officers. Mr.
Gartner's compensation package was designed to provide for a higher proportion
of his compensation to be dependent on long-term appreciation of Giga's Common
Stock as compared to other executive officers.
The determination of Mr. Gartner's bonus for 1998 was primarily based on
his leading Giga's Initial Public Offering, his activities in the area of
business development and his leadership in planning for CEO succession. Mr.
Gartner was granted a bonus of $30,000 for 1998 which is the same as the bonus
granted for 1997.
Members of the Compensation Committee:*
Neill H. Brownstein
Irwin Lieber
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Compensation Committee currently are Neill H.
Brownstein and Irwin Lieber, neither of whom is or has been an officer or
employee of Giga. Josh Weston also served as a member of the Compensation
Committee along with Messrs. Brownstein and Lieber during the 1998 fiscal year
until his resignation from the Board of Directors effective February 1, 1999.
Mr. Weston has never been an officer or employee of Giga.
- ------------
* Josh Weston served as a member of the Compensation Committee from August
1998 until his resignation from the Board of Directors effective February
1, 1999.
10
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PERFORMANCE GRAPH
The following graph compares the five (5) month cumulative total
stockholder return (stock price appreciation plus dividends) on Giga's Common
Stock with (1) the NASDAQ Stock Market (U.S.) Index, a broad market index
covering shares of common stock of domestic companies that are listed on NASDAQ,
and (2) the Hambrecht & Quist Information Services Index, an index of technology
companies providing information services. The returns are calculated by assuming
an investment of $100 in the Common Stock and each index on July 30, 1998 (the
date the Common Stock commenced trading activity).
[The following information was depicted as a line graph in the printed material]
7/30/98 7/98 8/98 9/98 10/98 11/98 12/98
------- ---- ---- ---- ----- ----- -----
Giga Information Group, Inc. 100 101 50 32 27 32 38
NASDAQ Stock Market (U.S.) 100 98 78 89 93 102 116
Hambrecht & Quist
Information Services 100 98 76 87 91 104 137
11
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ADDITIONAL INFORMATION
Certain Relationships and Related Transactions
ExperNet Acquisition
In July 1995, Giga acquired all of the ExperNet Corporation shares owned
by Mr. Gartner and a majority of the ExperNet shares owned by Mr. Gilmour,
aggregating 77.8% of ExperNet outstanding common stock, in exchange for (1)
160,000 shares of Series A Preferred Stock (213,333 shares of Common Stock on an
as-converted basis) of Giga, 80,000 shares (106,667 shares of Common Stock on an
as-converted basis) of which were issued to Mr. Gartner and 80,000 shares
(106,667 shares of Common Stock on an as-converted basis) of which were issued
to Mr. Gilmour, and (2) the issuance to Mr. Gartner of a fully-vested option to
purchase 53,333 shares of Common Stock at an exercise price of $1.50 per share.
In December 1995, Giga acquired Mr. Gilmour's remaining 22.2% interest in
ExperNet in exchange for a $400,000 6% Convertible Note due December 31, 2005.
The Gilmour note was repaid in full, together with interest thereon, by Giga,
one-half in February 1998 and the remainder in April 1998. In addition, Mr.
Gilmour made loans totalling $101,000 to ExperNet which loans were repaid in
full, together with interest thereon, by ExperNet in December 1995.
Consulting Agreements
Crandall Consulting Agreement
Effective as of July 1, 1998, Giga entered into a consulting agreement
with Mr. Crandall for a two-year period ending on June 30, 2000. The agreement
provides for the payment to Mr. Crandall of a fee of $8,333 per month for the
first four months of the agreement and a fee of $13,333 per month for each month
thereafter, with Mr. Crandall devoting an average of 15 hours per week of his
time to Giga in connection with his consulting duties. In addition, Giga granted
to Mr. Crandall an option to purchase 100,000 shares of Common Stock at an
exercise price of $3.625 per share. The option provides for vesting as follows:
28,000 shares will vest on June 30, 1999, and 2,000 shares will vest monthly
thereafter through June 30, 2002; provided, however, that vesting will
accelerate (i) upon a "change of control" of Giga or (ii) if Mr. Crandall fails
to be nominated or re-elected as a Director of Giga without his prior consent.
The option will terminate if (1) Mr. Crandall terminates the consulting
agreement prior to June 30, 2000, (2) Giga terminates the consulting agreement
prior to June 30, 2000 or (3) the consulting agreement expires by its terms and
Mr. Crandall no longer serves as a consultant or as a Director of Giga.
Gilmour Agreement
In February 1998, Giga entered into an agreement with Mr. Gilmour, a
Director and co-founder of Giga, relating to Mr. Gilmour's continuing
relationship with Giga in light of Mr. Gilmour's desire to establish Tacit
Knowledge Systems, Inc., a company engaged in the development and
commercialization of various forms of software related to the automatic capture
of knowledge through messaging systems. This agreement with Mr. Gilmour
superseded Mr. Gilmour's employment agreement, dated July 6, 1995, pursuant to
which Mr. Gilmour served as Senior Vice President, Research, was elected a
Director and received a salary at the rate of $160,000 per annum commencing
September 1, 1995. The new agreement provided that Mr. Gilmour would remain a
director of Giga and, for at least six months, would serve as a consultant to
Giga, acting as Chief Research Officer and devoting approximately 25% of his
time to such duties. Mr. Gilmour was compensated at the rate of $50,000 per
annum for such services. Mr. Gilmour ended his consulting arrangement with Giga
on October 1, 1998 and now serves solely as a Director.
Under the Gilmour agreement, Giga received, upon completion of the initial
funding, a 7.5% equity interest in Tacit, was entitled to participate in future
Tacit financings, and was granted an irrevocable, royalty-free, worldwide
license to use any and all software, products and technologies that Tacit
develops through January 2001. Giga has the option of extending the license for
two additional one-year periods for a fee of $50,000 per annum. Giga also agreed
that the software will not constitute "Development" or "Proprietary Information"
as such terms are defined in the Invention and Non-Disclosure Agreement, dated
July 6, 1995, between Giga and Mr. Gilmour. In addition, the Gilmour agreement
contains non-competition and no-raid provisions, which are to survive for one
year following the termination by Mr. Gilmour of his consulting relationship
with Giga. As provided for under the terms of the agreement, on December 18,
1998, Giga purchased from Tacit 71,716 shares of Tacit's Series A Preferred
Stock for a purchase price of $25,000, the same price per share paid by the
other participants in the Financing.
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<PAGE>
The Gilmour agreement also resolved the status of certain of Giga's
securities held by Mr. Gilmour. Giga agreed not to exercise its rights to
repurchase the Series A Preferred Stock that was issued to Mr. Gilmour in
connection with the acquisition of ExperNet. As of the date of the Gilmour
agreement, of the options that had been granted to Mr. Gilmour to purchase
40,000 shares of Common Stock at an exercise price of $1.50 per share, options
to purchase 15,000 shares remained unvested. It was agreed that these unvested
options would vest at a revised rate of one ninety-sixth of the original total
number of options per month thereafter as long as Mr. Gilmour continued as a
consultant. Vesting of these options ceased on October 1, 1998. Furthermore,
Giga agreed to redeem the Gilmour Note, including accrued interest thereon,
one-half in February 1998 and the remainder in April 1998 (see "ExperNet
Acquisition").
Stockholder Rights
Registration Rights Agreement
In connection with its preferred stock financings, Giga entered into a
Registration Rights Agreement, dated November 13, 1995, as amended, with its
preferred stockholders (the "Investors") and Messrs. Gartner and Gilmour (the
"Management Persons"). The Registration Rights Agreement provides that,
following June 30, 1998, the holders of at least 30% of the Registrable
Securities (as defined in the Agreement) then outstanding, excluding shares held
by Management Persons, shall have two demand registration requests (no more than
one within a twelve-month period). At such time as Giga becomes eligible to file
a registration statement under the Securities Act on Form S-3, the holders of at
least 20% of the Registrable Securities then outstanding may make six additional
demand registration requests (no more than one within a six-month period). The
Registration Rights Agreement also provides the holders of Registrable
Securities with unlimited piggyback registration rights in the event Giga
proposes to register its Common Stock under the Securities Act in connection
with a public offering.
Pursuant to the Registration Rights Agreement, Giga will pay all expenses
(other than underwriting discounts and commissions) incurred in connection with
demand registrations and piggyback registrations. In addition, Giga has agreed
to indemnify each holder of Registrable Securities and any underwriter for such
holder against certain liabilities, including liabilities under federal and
state securities laws. The Registration Rights Agreement terminates with respect
to each holder of Registrable Securities upon the later of (1) three years
following the consummation of a qualified public offering or (2) such time
following an initial public offering of Giga as such holder is entitled under
Rule 144 to dispose of all Registrable Securities held by such holder during any
90-day period.
Co-Sale Agreement
In connection with its preferred stock financings, Giga also entered into
a Co-Sale and Stock Restriction Agreement, dated November 13, 1995, as amended,
with Mr. Gartner and the then holders of Giga's Series B and Series C Preferred
Stock (collectively, the "Stockholders"). The holders of Series B Preferred
Stock included, but were not limited to, Neill H. Brownstein, Linda Brownstein,
Adam J. Brownstein, Todd D. Brownstein, Will P. Gordon, Emily G. Hamilton, and
21st Century Communications Partners, L.P. The holders of Series C Preferred
Stock included, but were not limited to, Neill H. Brownstein, R. Crandall Trust,
Gideon I. Gartner, Bernard Goldstein, Pequot Private Equity Fund L.P., Wheatley
Partners, L.P., and Wheatley Foreign Partners L.P. The Co-Sale Agreement
provides that, except for certain limited sales and sales to Giga, if Mr.
Gartner proposes to sell or transfer shares of Common Stock (including shares of
Common Stock issuable upon conversion or exercise of any warrants, options or
preferred stock held by Mr. Gartner) ("Stock") in one or more transactions, Mr.
Gartner will promptly give written notice to Giga and the Stockholders, and each
Stockholder will have the right to participate pro-rata in such sale on the same
terms and conditions. In addition, the Co-Sale Agreement provides that each
Stockholder has the right of first offer to purchase such Stockholder's pro-rata
share of all (or any part) of any Stock that Mr. Gartner may from time to time
propose to sell. The Co-Sale Agreement terminates upon the earlier of (1) two
years following the closing of a qualified public offering or (2) the closing of
Giga's sale of all or substantially all of its assets or the acquisition of Giga
by another entity by means of merger or consolidation resulting in the exchange
of the outstanding shares of the Giga's capital stock for securities or
consideration issued by the acquiring entity or its subsidiary.
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Transactions with FBR
In April 1998, Giga engaged Friedman, Billings, Ramsey & Co., Inc. ("FBR")
to act as its financial advisor and lead underwriter in connection with Giga's
initial public offering and to provide certain other investment banking services
to Giga for customary fees. This engagement will terminate on December 31, 1999.
In connection with Giga's public offering, which was completed in August 1998,
FBR purchased 1,212,500 shares of Common Stock for an aggregate purchase price
of $14,095,312.50 ($11.625 per share), as to which it was entitled to receive
underwriting compensation of up to approximately $1,060,937.50 ($0.875 per
share) plus reimbursement of certain expenses of approximately $50,000.
In April 1998, Giga also entered into a Loan and Warrant Purchase
Agreement with certain affiliates (the "Lenders") of FBR, pursuant to which Giga
borrowed $10.0 million from the Lenders (the "Bridge Financing") (on which the
Lenders received a $200,000 origination fee) and issued the Lenders convertible
promissory notes with a face value of $10.0 million (the "Bridge Notes") and
warrants (the "Bridge Warrants") to purchase an aggregate of 166,666 shares of
Common Stock at an exercise price of $3.00 per share. In August 1998, upon
completion of Giga's initial public offering, and in accordance with the terms
of the Bridge Notes, a portion of the net proceeds of the offering was used to
repay in full the Bridge Notes. In addition, in August 1998, certain of the
Lenders exercised Bridge Warrants to purchase 47,999 shares of Common Stock at
an exercise price of $3.00 per share. These Lenders have agreed that they will
not, directly or indirectly, offer, pledge, sell, offer to sell, contract to
sell, grant any option to purchase or otherwise sell, dispose of, make any short
sale of, loan or grant any rights with respect to any such shares of Common
Stock for the period ending one year after the consummation of Giga's initial
public offering on August 4, 1998. Such shares were deemed to be compensation
received by the underwriters in connection with the offering.
In January 1999, certain of the Lenders exercised Bridge Warrants to
purchase 10,000 shares of Common Stock at an exercise price of $3.00 per share.
In addition, in March 1999, certain of the Lenders exercised Bridge Warrants to
purchase 2,666 shares of Common Stock at an exercise price of $3.00 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Giga's
officers and directors, and any persons who own more than ten-percent of the
Common Stock, to file forms reporting their initial beneficial ownership of
common stock and subsequent changes in that ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten-percent beneficial
owners are also required to furnish Giga with copies of all such Section 16(a)
forms they file. Based solely upon a review of the copies of the forms furnished
to Giga, or written representations from certain reporting persons that no Forms
5 were required, Giga believes that during the 1998 fiscal year all Section
16(a) filing requirements were complied with, except that one report for one
transaction was filed late on behalf of each of Richard L. Crandall and Daniel
M. Clarke.
APPROVAL OF THE GIGA INFORMATION GROUP, INC.
1999 SHARE INCENTIVE PLAN
(Item 2)
Background
The Board of Directors has approved and is proposing for stockholder
approval the Giga Information Group, Inc. 1999 Share Incentive Plan (the "1999
Share Plan"). For the last several years Giga has used its 1995 Stock
Option/Stock Issuance Plan and 1996 Stock Option Plan as one means for
attracting, retaining and motivating highly competent key employees and further
aligning their interests with those of Giga's other stockholders. As of March
15, 1999, there were fewer than 280,000 shares of Common Stock remaining
available for grant under the 1995 and 1996 Plans combined. This number is
expected to be exhausted within the next twelve months. The 1999 Share Plan is
similar to the 1995 and 1996 Plans with respect to option grants but it also
enables Giga to have greater flexibility to offer additional benefits to its
officers, key employees and consultants. The Board of Directors is proposing the
1999 Share Plan in order to provide this important compensation element.
The 1999 Share Plan is intended to provide incentives which will attract,
retain and motivate highly competent persons as officers, and key employees of,
and consultants to, Giga and its subsidiaries and affiliates, by providing them
with opportunities to acquire shares of Common Stock or to receive monetary
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payments based on the value of such shares pursuant to the Benefits described
herein. In addition, the 1999 Share Plan is intended to assist in further
aligning the interests of Giga's officers, key employees and consultants with
those of its other stockholders. On March 31, 1999, the Compensation Committee
adopted, and the Board of Directors ratified, subject to stockholder approval,
the 1999 Share Plan. In structuring the 1999 Share Plan, the Committee sought to
provide for a variety of awards that could be flexibly administered to carry out
the purposes of the 1999 Share Plan. This authority will permit Giga to keep
pace with changing developments in management compensation and make Giga
competitive with those companies that offer creative incentives to attract and
retain officers, key employees and consultants. Many other companies have
addressed these same issues in recent years and adopted an "omnibus" type of
plan. The 1999 Share Plan grants the Compensation Committee discretion in
establishing the terms and restrictions deemed appropriate for particular awards
as circumstances warrant.
The following summary of the 1999 Share Plan is not intended to be
complete and is qualified in its entirety by reference to the copy of the 1999
Share Plan which is attached as Annex A to this Proxy Statement.
Shares Available
The maximum number of shares of Common Stock that may be delivered to
participants under the 1999 Share Plan, subject to certain adjustments, is an
aggregate of 1,000,000 shares plus up to 1,500,000 shares of Common Stock that
are represented by awards granted or to be granted under any prior plan of Giga
(e.g., the 1995 and 1996 Plans), or under any employment agreement with Giga,
which are forfeited, expire or are cancelled without the delivery of shares or
which result in the forfeiture of shares back to Giga. In addition, any shares
of Common Stock subject to a stock option or stock appreciation right under
which for any reason is cancelled or terminated without having been exercised
and, subject to limited exceptions, any shares subject to stock awards,
performance awards or stock units which are forfeited, any shares subject to
performance awards settled in cash or any shares delivered to Giga as part or
full payment for the exercise of a stock option or stock appreciation right,
shall again be available for Benefits (as defined below) under the 1999 Share
Plan.
Administration
The 1999 Share Plan provides for administration by the Board of Directors
of Giga or by a committee of the Board of Directors of Giga appointed from among
its members (the "Committee"), which is comprised, unless otherwise determined
by the Board of Directors, solely of not less than two members who shall be (1)
"Non-Employee Directors" within the meaning of Rule 16b-3(b)(3) (or any
successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (2) "outside directors" within the meaning of
Treasury Regulation section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Board of Directors of Giga
administers the 1999 Share Plan rather than a committee of the Board of
Directors, then all references to "Committee" in the Plan will be deemed to mean
a reference to the Board of Directors of Giga. The Committee is authorized,
subject to the provisions of the 1999 Share Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the 1999
Share Plan and to make such determinations and interpretations and to take such
action in connection with the 1999 Share Plan and any Benefits granted as it
deems necessary or advisable. Thus, among the Committee's powers are the
authority to select officers and other key employees of Giga and its
subsidiaries to receive Benefits, and to determine the form, amount and other
terms and conditions of Benefits. The Committee also has the power to modify or
waive restrictions on Benefits, to amend Benefits and to grant extensions and
accelerations of Benefits.
Eligibility for Participation
Officers and key employees of, and consultants to, Giga or any of its
subsidiaries and affiliates are eligible to participate in the 1999 Share Plan.
The selection of participants from eligible persons is within the discretion of
the Committee. The currently estimated number of officers and key employees who
are eligible to participate in the 1999 Share Plan is approximately 350, and an
estimate of the number of consultants who are eligible to participate in the
1999 Share Plan has not been made.
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Types of Benefits
The 1999 Share Plan provides for the grant of any or all of the following
types of benefits: (1) stock options, including incentive stock options and
non-qualified stock options; (2) stock appreciation rights; (3) stock awards;
(4) performance awards; and (5) stock units (collectively, "Benefits"). Benefits
may be granted singly, in combination, or in tandem as determined by the
Committee. Stock awards, performance awards and stock units may, as determined
by the Committee in its discretion, constitute Performance-Based Awards, as
described below.
Stock Options
Under the 1999 Share Plan, the Committee may grant awards in the form of
options to purchase shares of Common Stock. Options may either be incentive
stock options, qualifying for special tax treatment, or non-qualified options;
however, no incentive stock option shall be issued to a participant in tandem
with a nonqualified stock option. The Committee will, with regard to each stock
option, determine the number of shares subject to the option, the manner and
time of the option's exercise and vesting, and the exercise price per share of
stock subject to the option. The exercise price will not be less than 100% of
the fair market value of the Common Stock on the date the stock option is
granted (the "Fair Market Value"). The exercise price may be paid in cash or, in
the discretion of the Committee, by the delivery of shares of Common Stock then
owned by the participant, by the withholding of shares of Common Stock for which
a stock option is exercisable, or by a combination of these methods. In the
discretion of the Committee, payment may also be made by delivering a properly
executed exercise notice to Giga together with a copy of irrevocable
instructions to a broker to deliver promptly to Giga the amount of sale or loan
proceeds to pay the exercise price. The Committee may prescribe any other method
of paying the exercise price that it determines to be consistent with applicable
law and the purpose of the 1999 Share Plan. In determining which methods a
participant may utilize to pay the exercise price, the Committee may consider
such factors as it determines are appropriate. No stock option is exercisable
later than ten years after the date it is granted except in the event of a
participant's death, in which case, the exercise period may be extended but no
later than one year after the participant's death. The exercise of any option
which remains exercisable after termination of employment will be subject to
satisfaction of the conditions precedent that the holder thereof neither (1)
competes with or takes other employment with or renders services to a competitor
of Giga, its subsidiaries or affiliates without the consent of Giga nor (2)
conducts himself or herself in a manner adversely affecting Giga.
Stock Appreciation Rights (SARs)
The 1999 Share Plan authorizes the Committee to grant an SAR either in
tandem with a stock option or independent of a stock option. An SAR is a right
to receive a payment, in cash, Common Stock, or a combination thereof, equal to
the excess of (x) the Fair Market Value, or other specified valuation, of a
specified number of shares of Common Stock on the date the right is exercised
over (y) the Fair Market Value, or other specified valuation (which shall not be
less than Fair Market Value), of such shares of Common Stock on the date the
right is granted, all as determined by the Committee. SARs granted under the
1999 Share Plan are subject to terms and conditions relating to exercisability
that are similar to those imposed on stock options, and each SAR is subject to
such terms and conditions as the Committee shall impose from time to time.
Stock Awards
The Committee may, in its discretion, grant Stock Awards (which may
include mandatory payment of bonus incentive compensation in stock) consisting
of Common Stock issued or transferred to participants with or without other
payments therefor. Stock Awards may be subject to such terms and conditions as
the Committee determines appropriate, including, without limitation,
restrictions on the sale or other disposition of such shares, the right of Giga
to reacquire such shares for no consideration upon termination of the
participant's employment within specified periods, and may constitute
Performance-Based Awards, as described below. The Stock Award will specify
whether the participant will have, with respect to the shares of Common Stock
subject to a Stock Award, all of the rights of a holder of shares of Common
Stock, including the right to receive dividends and to vote the shares.
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Performance Awards
The 1999 Share Plan allows for the grant of performance awards which may
take the form of shares of Common Stock or stock units, or any combination
thereof and which may constitute Performance-Based Awards. Such awards will be
contingent upon the attainment, over a period to be determined by the Committee,
of certain performance goals. The length of the performance period, the
performance goals to be achieved and the measure of whether and to what degree
such goals have been achieved will be determined by the Committee. Payment of
earned performance awards will be made in accordance with terms and conditions
prescribed or authorized by the Committee. The participant may elect to defer,
or the Committee may require the deferral of, the receipt of performance awards
upon such terms as the Committee deems appropriate.
Stock Units
The Committee may, in its discretion, grant Stock Units to participants,
which may constitute Performance-Based Awards. A "Stock Unit" means a notional
account representing one share of Common Stock. The Committee determines the
criteria for the vesting of Stock Units and whether a participant granted a
Stock Unit shall be entitled to Dividend Equivalent Rights (as defined in the
1999 Share Plan). Upon vesting of a Stock Unit, unless the Committee has
determined to defer payment with respect to such unit or a participant has
elected to defer payment, shares of Common Stock representing the Stock Units
will be distributed to the participant (unless the Committee, with the consent
of the participant, provides for the payment of the Stock Units in cash, or
partly in cash and partly in shares of Common Stock, equal to the value of the
shares of Common Stock which would otherwise be distributed to the participant).
Stock Units may constitute Performance-Based Awards.
Performance-Based Awards
Certain Benefits granted under the 1999 Share Plan may be granted in a
manner such that the Benefit qualifies for the performance-based compensation
exemption to Section 162(m) of the Code ("Performance-Based Awards"). As
determined by the Committee in its sole discretion, either the vesting or the
exercise of such Performance-Based Awards will be based upon achievement of
hurdle rates and/or growth in one or more of the following business criteria:
(1) net sales; (2) pretax income before allocation of corporate overhead and
bonus; (3) budget; (4) earnings per share; (5) net income; (6) division, group
or corporate financial goals; (7) return on stockholders' equity; (8) return on
assets; (9) attainment of strategic and operational initiatives; (10)
appreciation in and/or maintenance of the price of the Common Stock or any other
publicly-traded securities of the Company; (11) market share; (12) gross
profits; (13) earnings before interest and taxes; (14) earnings before interest,
taxes, dividends and amortization; (15) economic value-added models and
comparisons with various stock market indices; (16) reductions in costs; or (17)
any combination of the foregoing. In addition, Performance-Based Awards may
include comparisons to the performance of other companies, such performance to
be measured by one or more of the foregoing criteria. With respect to
Performance-Based Awards, the Committee shall establish in writing (x) the
performance goals applicable to a given period, and such performance goals shall
state, in terms of an objective formula or standard, the method for computing
the amount of compensation payable to the participant if such performance goals
are obtained and (y) the individual employees or class of employees to which
such performance goals apply no later than 90 days after the commencement of
such period (but in no event after 25% of such period has elapsed). No
Performance-Based Award shall be payable to, or vest with respect to, as the
case may be, any participant for a given fiscal period until the Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied.
Other Terms
The 1999 Share Plan provides that Benefits may be transferred by will or
the laws of descent and distribution. The Committee determines the treatment to
be afforded to a participant in the event of termination of employment for any
reason including death, disability or retirement. In addition to the foregoing,
other than with respect to incentive stock options, the Committee may permit the
transferability of a Benefit by a participant to certain members of the
participant's immediate family or trusts for the benefit of such persons or
other entities owned by such person.
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Upon the grant of any Benefit under the 1999 Share Plan, the Committee
may, by way of an agreement with the participant, establish such other terms,
conditions, restrictions and/or limitations covering the grant of the Benefit as
are not inconsistent with the 1999 Share Plan. The 1999 Share Plan terminates on
March 30, 2009, and no Benefit may be granted after March 30, 2009. The
Committee reserves the right to amend, suspend or terminate the 1999 Share Plan
at any time. However, no amendment may be made without approval of the
stockholders of Giga if the amendment will: (1) disqualify any incentive stock
options granted under the Plan; (2) increase the aggregate number of shares of
Common Stock that may be delivered through Stock Options under the Plan; (3)
increase either of the maximum amounts which can be paid to an individual
participant under the Plan; (4) change the types of business criteria on which
Performance-Based Awards are to be based under the Plan; or (5) modify the
requirements as to eligibility for participation in the Plan.
The 1999 Share Plan contains provisions for equitable adjustment of
Benefits in the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split, split up,
spinoff, combination of shares, exchange of shares, dividend in kind or other
like change in capital structure or distribution (other than normal cash
dividends) to stockholders of Giga. In addition, if there is a Change in Control
(as defined in the 1999 Share Plan) of Giga, Benefits that have not vested or
became exercisable at the time of such Change in Control will immediately vest
and become exercisable and all performance targets relating to such Benefits
will be deemed to have been satisfied as of the time of such Change of Control.
Furthermore, in the discretion of the Committee, the excess of the Fair Market
Value of shares of Common Stock subject to Stock Options or SARs over the
exercise price thereof will be paid out in cash, and the Fair Market Value of
shares of Common Stock subject to a Stock Award or Stock Unit will be paid out
in cash.
The Committee may grant Benefits to participants who are subject to the
tax laws of nations other than the United States, which Benefits may have terms
and conditions as determined by the Committee as necessary to comply with
applicable foreign laws. The Committee may take any action which it deems
advisable to obtain approval of such Benefits by the appropriate foreign
governmental entity; provided, however, that no such Benefits may be granted,
and no action may be taken which would violate the Exchange Act, the Code or any
other applicable law.
Certain Federal Income Tax Consequences
The statements in the following paragraphs of the principal U.S. federal
income tax consequences of Benefits under the 1999 Share Plan are based on
statutory authority and judicial and administrative interpretations, as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect). The law is technical and complex, and the discussion
below represents only a general summary.
Incentive Stock Options. Incentive stock options ("ISOs") granted under
the 1999 Share Plan are intended to meet the definitional requirements of
Section 422(b) of the Code for "incentive stock options." An employee who
receives an ISO does not recognize any taxable income upon the grant of such
ISO. Similarly, the exercise of an ISO generally does not give rise to federal
income tax to the employee, provided that (1) the federal "alternative minimum
tax," which depends on the employee's particular tax situation, does not apply
and (2) the employee is employed by Giga from the date of grant of the option
until three months prior to the exercise thereof, except where such employment
terminates by reason of disability (where the three month period is extended to
one year) or death (where this requirement does not apply). If an employee
exercises an ISO after the requisite periods referred to in clause (2) above,
the ISO will be treated as an NSO (as defined below) and will be subject to the
rules set forth below under the caption "Non-Qualified Stock Options and Stock
Appreciation Rights." Further, if after exercising an ISO, an employee disposes
of the Common Stock so acquired more than two years from the date of grant and
more than one year from the date of transfer of the Common Stock pursuant to the
exercise of such ISO (the "applicable holding period"), the employee will
generally recognize capital gain or loss equal to the difference, if any,
between the amount received for the shares and the exercise price. If, however,
an employee does not hold the shares so acquired for the applicable holding
period--thereby making a "disqualifying disposition"--the employee would
recognize ordinary income equal to the excess of the fair market value of the
shares at the time the ISO was exercised over the exercise price and the
balance, if any, would generally be treated as capital gain. If the
disqualifying disposition is a sale or exchange that would permit a loss to be
recognized under the Code (were a loss in fact
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to be realized), and the sales proceeds are less than the fair market value of
the shares on the date of exercise, the employee's ordinary income therefrom
would be limited to the gain (if any) realized on the sale. An employee who
exercises an ISO by delivering Common Stock previously acquired pursuant to the
exercise of another ISO is treated as making a "disqualifying disposition" of
such Common Stock if such shares are delivered before the expiration of their
applicable holding period. Upon the exercise of an ISO with previously acquired
shares as to which no disqualifying disposition occurs, despite some
uncertainty, it appears that the employee would not recognize gain or loss with
respect to such previously acquired shares. Giga will not be allowed a federal
income tax deduction upon the grant or exercise of an ISO or the disposition,
after the applicable holding period, of the Common Stock acquired upon exercise
of an ISO. In the event of a disqualifying disposition, Giga generally will be
entitled to a deduction in an amount equal to the ordinary income included by
the employee, provided that such amount constitutes an ordinary and necessary
business expense to Giga and is reasonable and the limitations of Sections 280G
and 162(m) of the Code (discussed below) do not apply.
Non-Qualified Stock Options and Stock Appreciation Rights. Non-qualified
stock options ("NSOs") granted under the 1999 Share Plan are options that do not
qualify as ISOs. An employee who receives an NSO or an SAR will not recognize
any taxable income upon the grant of such NSO or SAR. However, the employee
generally will recognize ordinary income upon exercise of an NSO in an amount
equal to the excess of the fair market value of the shares of Common Stock at
the time of exercise over the exercise price. Similarly, upon the receipt of
cash or shares pursuant to the exercise of an SAR, the individual generally will
recognize ordinary income in an amount equal to the sum of the cash and the fair
market value of the shares received. As a result of Section 16(b) of the
Exchange Act, under certain circumstances, the timing of income recognition may
be deferred (generally for up to six months following the exercise of an NSO or
SAR (the "Deferral Period")) for any individual who is an executive officer or
director of Giga or a beneficial owner of more than ten percent (10%) of any
class of equity securities of Giga. Absent a Section 83(b) election (as
described below under "Other Awards"), recognition of income by the individual
will be deferred until the expiration of the Deferral Period, if any. The
ordinary income recognized with respect to the receipt of shares or cash upon
exercise of an NSO or an SAR will be subject to both wage withholding and other
employment taxes. In addition to the customary methods of satisfying the
withholding tax liabilities that arise upon the exercise of an SAR for shares or
upon the exercise of an NSO, Giga may satisfy the liability in whole or in part
by withholding shares of Common Stock from those that otherwise would be
issuable to the individual or by the employee tendering other shares owned by
him or her, valued at their fair market value as of the date that the tax
withholding obligation arises. A federal income tax deduction generally will be
allowed to Giga in an amount equal to the ordinary income included by the
individual with respect to his or her NSO or SAR, provided that such amount
constitutes an ordinary and necessary business expense to Giga and is reasonable
and the limitations of Sections 280G and 162(m) of the Code do not apply. If an
individual exercises an NSO by delivering shares of Common Stock, other than
shares previously acquired pursuant to the exercise of an ISO which is treated
as a "disqualifying disposition" as described above, the individual will not
recognize gain or loss with respect to the exchange of such shares, even if
their then fair market value is different from the individual's tax basis. The
individual, however, will be taxed as described above with respect to the
exercise of the NSO as if he or she had paid the exercise price in cash, and
Giga likewise generally will be entitled to an equivalent tax deduction.
Other Awards. With respect to other Benefits under the 1999 Share Plan
that are settled either in cash or in shares of Common Stock that are either
transferable or not subject to a substantial risk of forfeiture (as defined in
the Code and the regulations thereunder), employees generally will recognize
ordinary income equal to the amount of cash or the fair market value of the
Common Stock received. With respect to Benefits under the 1999 Share Plan that
are settled in shares of Common Stock that are restricted to transferability or
subject to a substantial risk of forfeiture--absent a written election pursuant
to Section 83(b) of the Code filed with the Internal Revenue Service within 30
days after the date of transfer of such shares pursuant to the award (a "Section
83(b) election")--an individual will recognize ordinary income at the earlier of
the time at which (i) the shares become transferable or (ii) the restrictions
that impose a substantial risk of forfeiture of such shares lapse, in an amount
equal to the excess of the fair market value (on such date) of such shares over
the price paid for the award, if any. If a Section 83(b) election is made, the
individual will recognize ordinary income, as of the transfer date, in an amount
equal to the excess of the fair market value of the Common Stock
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as of that date over the price paid for such award, if any. The ordinary income
recognized with respect to the receipt of cash, shares of Common Stock or other
property under the 1999 Share Plan will be subject to both wage withholding and
other employment taxes. Giga generally will be allowed a deduction for federal
income tax purposes in an amount equal to the ordinary income recognized by the
employee, provided that such amount constitutes an ordinary and necessary
business expense and is reasonable and the limitations of Sections 280G and
162(m) of the Code do not apply.
Dividends and Dividend Equivalents. To the extent Benefits under the 1999
Share Plan earn dividends or dividend equivalents, whether paid currently or
credited to an account established under the 1999 Share Plan, an individual
generally will recognize ordinary income with respect to such dividends or
dividend equivalents.
Change in Control. In general, if the total amount of payments to an
individual that are contingent upon a "change in control" of Giga (as defined in
Section 280G of the Code), including payments under the 1999 Share Plan that
vest upon a "change in control," equals or exceeds three times the individual's
"base amount" (generally, such individual's average annual compensation for the
five calendar years preceding the change in control), then, subject to certain
exceptions, the payments may be treated as "parachute payments" under the Code,
in which case a portion of such payments would be non-deductible to Giga and the
individual would be subject to a 20% excise tax on such portion of the payments.
Certain Limitations on Deductibility of Executive Compensation. With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in excess
of $1 million per executive per taxable year (including any deduction with
respect to the exercise of an NSO or SAR or the disqualifying disposition of
stock purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation provided that such compensation has been approved
by stockholders in a separate vote and certain other requirements are met. If
approved by its stockholders, Giga believes that Stock Options, SARs and
Performance-Based Awards granted under the 1999 Share Plan should qualify for
the performance-based compensation exception to Section 162(m) of the Code.
Other Information
Approval of the 1999 Share Plan requires the affirmative vote of a
majority of the votes cast by the holders of the shares of Giga Common Stock
voting in person or by proxy at the Annual Meeting. If the 1999 Share Plan is
not approved by stockholders, Giga will reconsider the alternatives available
with respect to the compensation of officers and key employees of, and
consultants to, Giga.
The Board believes that the 1999 Share Plan is in the best interest of
Giga and its stockholders and therefore recommends that the stockholders vote
FOR the approval of the 1999 Share Plan. Proxies received by the Board will be
so voted unless stockholders specify in their proxies a contrary choice.
APPROVAL OF THE GIGA INFORMATION GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(Item 3)
Background
The Board of Directors has approved and is proposing for stockholder
approval the Giga Information Group, Inc. 1999 Employee Stock Purchase Plan (the
"1999 Purchase Plan"). The purpose of the 1999 Purchase Plan is to enable
eligible employees of Giga and participating subsidiaries, through payroll
deductions, to purchase shares of Common Stock and thus to encourage stock
ownership by, and the continued employment of, employees.
Summary of Plan
The following summary of the 1999 Purchase Plan is not intended to be
complete and is qualified in its entirety by reference to the copy of the 1999
Purchase Plan which is attached as Annex B to this Proxy Statement.
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Under the 1999 Purchase Plan, 750,000 shares of Common Stock have been
reserved for issuance, plus annual increases equal to the lesser of (1) 750,000
shares, (2) 1% of the outstanding shares on such date, or (3) such lesser amount
as may be determined by the Board of Directors. As of the date of this Proxy
Statement no shares have been issued under the 1999 Purchase Plan.
The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Code, contains consecutive, overlapping, twenty-four month offering periods.
Each offering period includes two twelve-month purchase periods. The offering
periods generally start on the first trading day on or after January 1 and July
1 of each year with the first offering period commencing on July 1, 1999.
Employees are eligible to participate if they are customarily employed by
Giga or any participating subsidiary for at least 20 hours per week and more
than five months in any calendar year. However, any employee who (1) immediately
after grant owns stock possessing 5% or more of the total combined voting power
or value of all classes of the capital stock of Giga or (2) whose rights to
purchase stock under all employee stock purchase plans of Giga accrues at a rate
which exceeds $25,000 worth of stock for each calendar year may not be granted a
right to purchase stock under the 1999 Purchase Plan. The 1999 Purchase Plan
permits participants to purchase Common Stock through payroll deductions of up
to 10% of the participant's "compensation." Compensation is defined as the
participant's base straight time gross earnings and commissions, including
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses and other compensation. The maximum number of shares a
participant may purchase during a single purchase period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each purchase period. The price of stock
purchased under the 1999 Purchase Plan is generally 85% of the lower of the fair
market value of the Common Stock (1) at the beginning of the offering period or
(2) at the end of the purchase period. In the event the fair market value at the
end of a purchase period is less than the fair market value at the beginning of
the offering period, the participants will be withdrawn from the current
offering period following exercise and automatically re-enrolled in a new
offering period. The new offering period will use the lower fair market value as
of the first date of the new offering period to determine the purchase price for
future purchase periods. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with Giga.
Rights granted under the 1999 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides
that, in the event of a merger of Giga with or into another corporation or a
sale of substantially all of Giga's assets, each outstanding right to purchase
stock may be assumed or substituted for by the successor corporation. If the
successor corporation refuses to assume or substitute for the outstanding rights
to purchase stock, the offering period then in progress will be shortened and a
new exercise date will be set.
The 1999 Purchase Plan will be administered by the Board of Directors or
the Compensation Committee of the Board of Directors. Either the Board of
Directors or the Compensation Committee, as the case may be, has the authority
to amend or terminate the 1999 Purchase Plan, except that no such action may
adversely affect any outstanding rights to purchase stock under the 1999
Purchase Plan, provided that the Board of Directors or the Compensation
Committee, as the case may be, may terminate an offering period on any exercise
date if the Board or the Compensation Committee, as the case may be, determines
that the termination of the 1999 Purchase Plan is in the best interests of Giga
and its stockholders. Notwithstanding anything to the contrary, the Board of
Directors or the Compensation Committee, as the case may be, may in its sole
discretion amend the 1999 Purchase Plan to the extent necessary and desirable to
avoid unfavorable financial accounting consequences by altering the purchase
price for any offering period, shortening any offering period or allocating
remaining shares among the participants. The 1999 Purchase Plan will terminate
on March 30, 2009, unless sooner terminated by the Board of Directors.
Federal Income Tax Consequences of the 1999 Purchase Plan
If a participant acquires stock under the 1999 Purchase Plan, no income
will result to such participant, and Giga will be allowed no deduction as a
result of such purchase, if certain conditions are met. The principal condition
which must be satisfied is that the participant does not dispose of the stock
within two years after
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the first day of the applicable offering period or one year after purchase of
the stock. If the employee disposes of the stock acquired pursuant to the 1999
Purchase Plan after the statutory holding period has expired, gain on the sale
is capital gain except to the extent of ordinary (compensation) income
determined as described below. If the employee disposes of the stock before the
expiration of the statutory holding period, the employee must recognize as
ordinary (compensation) income the difference between the stock's fair market
value and the purchase price.
An employee disposing of stock after expiration of the statutory holding
period (or who dies) must include in ordinary (compensation) income at the time
of sale or other taxable disposition of the stock acquired under the 1999
Purchase Plan, or upon the employee's death while still holding the stock, the
lesser of:
(1) the purchase price discount from the fair market value of the stock
at the beginning of the offering period; or
(2) the amount, if any, by which the stock's fair market value at the
time of such disposition or death exceeds the purchase price paid.
The basis of the stock will be increased by the amount of the compensation
income recognized.
Other Information
Approval of the 1999 Purchase Plan requires the affirmative vote of a
majority of votes cast by the holders of the shares of Giga Common Stock voting
in person or by proxy at the Annual Meeting. If the 1999 Purchase Plan is not
approved by stockholders, Giga will reconsider the alternatives available with
respect to providing its employees with opportunities to purchase Common Stock.
The Board believes that the 1999 Purchase Plan is in the best interest of
Giga and its stockholders and therefore recommends that the stockholders vote
FOR the approval of the 1999 Purchase Plan. Proxies received by the Board will
be so voted unless stockholders specify in their proxies a contrary choice.
NEW PLAN BENEFITS
No new plan benefit table for the 1999 Share Plan or the 1999 Purchase
Plan is included in this Proxy Statement because (1) the benefits or amounts
that will be received or allocated under the plans to the persons for which
disclosure is required by SEC regulations are not determinable and (2) the
benefits or amounts which would have been received by or allocated to such
persons for fiscal 1998 if the plans had been in effect cannot be determined
completely.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Item 4)
The Board of Directors of Giga, upon recommendation of the Audit
Committee, has appointed the firm of PricewaterhouseCoopers LLP to serve as
independent auditors of Giga for the fiscal year ending December 31, 1999,
subject to ratification of this appointment by the stockholders of Giga.
PricewaterhouseCoopers LLP has served as independent auditors of Giga for
several years and is considered by management of Giga to be well qualified. Giga
has been advised by that firm that neither it nor any member thereof have any
direct or material indirect financial interest in Giga.
One or more representatives of PricewaterhouseCoopers LLP will be present
at the 1999 Annual Meeting of Stockholders, will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast by the holders of the shares of
Giga Common Stock voting in person or by proxy at the 1999 Annual Meeting of
Stockholders. If the stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Board of Directors will reconsider the
appointment.
The Board recommends a vote FOR the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors of Giga for the fiscal year
ending December 31, 1999. Proxies received by the Board will be so voted unless
stockholders specify in their proxies a contrary choice.
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PROXY PROCEDURE AND EXPENSES OF SOLICITATION
All expenses incurred in connection with the solicitation of proxies will
be borne by Giga. Giga will reimburse brokers, fiduciaries and custodians for
their costs in forwarding proxy materials to beneficial owners of Common Stock
held in their names.
Solicitation may be undertaken by mail, telephone and personal contact by
Directors, officers and employees of Giga without additional compensation.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Year 2000 Annual
Meeting of Stockholders must be received by the Secretary of Giga, One Longwater
Circle, Norwell, Massachusetts 02061, on or before December 13, 1999, to be
eligible for inclusion in Giga's Proxy Statement and proxy relating to that
meeting.
In addition, in accordance with the Amended and Restated Bylaws of Giga,
in order to be properly brought before the next annual meeting, a matter must
have been (1) specified in a written notice of such meeting (or any supplement
thereto) given to the stockholders by or at the direction of the Board of
Directors (which would be accomplished if a stockholder proposal were received
by the Secretary of Giga as set forth in the preceding paragraph), (2) brought
before such meeting at the direction of the Board of Directors of the Chairman
of the meeting, or (3) specified in a written notice given by or on behalf of a
stockholder of record on the record date for such meeting, or a duly authorized
proxy for such stockholder, which conforms to the requirements of the Amended
and Restated Bylaws of Giga and is delivered personally to, or mailed to and
received by, the Secretary of Giga at the address set forth in the preceding
paragraph not less than 45 days prior to the anniversary of the date of the
notice accompanying this Proxy Statement; provided however, that such notice
need not be given more than 75 days prior to the next annual meeting.
OTHER MATTERS
Management of Giga does not know of any matters other than those referred
to in the accompanying Notice of Annual Meeting of Stockholders which may
properly come before the meeting or other matters incident to the conduct of the
meeting. As to any other matter or proposal that may properly come before the
meeting, including voting for the election of any person as a director in place
of a nominee named herein who becomes unable to serve or for good cause will not
serve and voting on a proposal omitted from this Proxy Statement pursuant to the
rules of the Securities and Exchange Commission, it is intended that proxies
received will be voted in accordance with the discretion of the proxy holders.
The form of proxy and the Proxy Statement have been approved by the Board
of Directors and are being mailed and delivered to stockholders by its
authority.
Daniel M. Clarke
Secretary
Norwell, Massachusetts
April 12, 1999
------------------
The Annual Report to the Stockholders of Giga for the fiscal year ended
December 31, 1998, which includes financial statements, has been mailed to
stockholders of Giga. The Annual Report does not form any part of the material
for the solicitations of proxies.
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Annex A
GIGA INFORMATION GROUP, INC.
1999 SHARE INCENTIVE PLAN
1. Purpose. Giga Information Group, Inc. 1999 Share Incentive Plan (the
"Plan") is intended to provide incentives which will attract, retain and
motivate highly competent persons as officers, and key employees of, and
consultants to, Giga Information Group, Inc. (the "Company") and its
subsidiaries and affiliates, by providing them opportunities to acquire shares
of the Common Stock, par value $.001 per share, of the Company ("Common Stock")
or to receive monetary payments based on the value of such shares pursuant to
the Benefits (as defined below) described herein. Additionally, the Plan is
intended to assist in further aligning the interests of the Company's officers,
key employees and consultants to those of its other stockholders.
2. Administration.
(a) The Plan will be administered by the Board of Directors of the Company
or by a committee (the "Committee") appointed by the Board of Directors of the
Company from among its members (which may be the Compensation Committee) and
shall be comprised, unless otherwise determined by the Board of Directors,
solely of not less than two members who shall be (i) "Non-Employee Directors"
within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii)
"outside directors" within the meaning of Treasury Regulation Section
1.162-27(e)(3) under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Board of Directors of the Company administers the
Plan rather than a committee of the Board of Directors, then all references to
"Committee" in the Plan shall be deemed to mean a reference to the Board of
Directors of the Company. The Committee is authorized, subject to the provisions
of the Plan, to establish such rules and regulations as it deems necessary for
the proper administration of the Plan and to make such determinations and
interpretations and to take such action in connection with the Plan and any
Benefits granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all participants and their legal representatives. No member of the
Committee and no employee of the Company shall be liable for any act or failure
to act hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act hereunder by
any other member or employee or by any agent to whom duties in connection with
the administration of this Plan have been delegated. The Company shall indemnify
members of the Committee and any agent of the Committee who is an employee of
the Company, a subsidiary or an affiliate against any and all liabilities or
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances
involving such person's bad faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefited
from the Plan, as determined by the Committee.
3. Participants. Participants will consist of such officers and key
employees of, and such consultants to, the Company and its subsidiaries and
affiliates as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Benefits under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive a Benefit in any other
year or, once designated, to receive the same type or amount of Benefit as
granted to the participant in any other year. The Committee shall consider such
factors as it deems pertinent in selecting participants and in determining the
type and amount of their respective Benefits.
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4. Type of Benefits. Benefits under the Plan may be granted in any one or
a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Awards and (e) Stock Units (each as described below, and
collectively, the "Benefits"). Stock Awards, Performance Awards, and Stock Units
may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 below. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve; provided, however, that in the event of
any conflict between the provisions of the Plan and any such agreements, the
provisions of the Plan shall prevail.
5. Common Stock Available Under the Plan.
(a) Subject to the provisions of this Section 5 and any adjustments made
in accordance with Section 13 hereof, the maximum number of shares of Common
Stock that may be delivered to participants (including permitted assignees) and
their beneficiaries under this Plan shall be equal to the sum of: (i) 1,000,000
shares of Common Stock, which may be authorized and unissued or treasury shares;
and (ii) up to 1,500,000 shares of Common Stock that are represented by awards
granted or to be granted under any prior plan of the Company, which are
forfeited, expire or are cancelled without the delivery of shares of Common
Stock or which result in the forfeiture of shares of Common Stock back to the
Company. Any shares of Common Stock covered by a Benefit (or portion of a
Benefit) granted under the Plan, which is forfeited or canceled, expires or, in
the case of a Benefit other than a Stock Option, is settled in cash, shall be
deemed not to have been delivered for purposes of determining the maximum number
of shares of Common Stock available for delivery under the Plan. The preceding
sentence shall apply only for the purposes of determining the aggregate number
of shares of Common Stock subject to Benefits, but shall not apply for purposes
of determining the maximum number of shares of Common Stock with respect to
which Benefits (including the maximum number of shares of Common Stock subject
to Stock Options and Stock Appreciation Rights) may be granted to an individual
participant under the Plan.
(b) If any shares of Common Stock are tendered to the Company, either
actually or by attestation or withholding, as full, or partial payment of the
exercise price or any tax withholding in connection with the exercise of a Stock
Option or Stock Appreciation Right or the vesting of any other Benefit granted
under this Plan or any prior plan of the Company, only the number of shares of
Common Stock issued net of the shares of Common Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan. Further, shares of Common Stock
delivered under the Plan in settlement, assumption or substitution of
outstanding awards (or obligations to grant future awards) under the plans or
arrangements of another entity shall not reduce the maximum number of shares of
Common Stock available for delivery under the Plan, to the extent that such
settlement, assumption or substitution as a result of the Company or its
subsidiaries or affiliates acquiring another entity (or an interest in another
entity). This Section 5(b) shall apply only for purposes of determining the
aggregate number of shares of Common Stock subject to Benefits, but shall not
apply for purposes of determining (x) the maximum number of shares of Common
Stock with respect to which Benefits (including the maximum number of shares of
Common Stock subject to Stock Options and Stock Appreciation Rights) may be
granted to an individual participant under the Plan or (y) the maximum number of
shares of Common Stock that may be delivered through Stock Options under the
Plan.
6. Stock Options. Stock Options will consist of awards from the Company
that will enable the holder to purchase a number of shares of Common Stock, at
set terms. Stock Options may be "incentive stock options" ("Incentive Stock
Options"), within the meaning of Section 422 of the Code, or Stock Options which
do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan as
the Committee may impose from time to time, subject to the following
limitations:
(a) Exercise Price. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of grant;
provided, however, subject to subsection (d) below, that the per-share exercise
price shall not be less than 100% of the Fair Market Value (as defined below) of
the Common Stock on the date the Stock Option is granted.
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(b) Payment of Exercise Price. The option exercise price may be paid in
cash or, in the discretion of the Committee, by the delivery of shares of Common
Stock of the Company then owned by the participant, by the withholding of shares
of Common Stock for which a Stock Option is exercisable or by a combination of
these methods. In the discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms. The Committee may prescribe any other method of
paying the exercise price that it determines to be consistent with applicable
law and the purpose of the Plan, including, without limitation, in lieu of the
exercise of a Stock Option by delivery of shares of Common Stock of the Company
then owned by a participant, providing the Company with a notarized statement
attesting to the number of shares owned, where upon verification by the Company,
the Company would issue to the participant only the number of incremental shares
to which the participant is entitled upon exercise of the Stock Option. In
determining which methods a participant may utilize to pay the exercise price,
the Committee may consider such factors as it determines are appropriate.
(c) Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock Option
shall be exercisable later than ten years after the date it is granted except in
the event of a participant's death, in which case, the exercise period of such
participant's Stock Options may be extended beyond such period but no later than
one year after the participant's death. All Stock Options shall terminate at
such earlier times and upon such conditions or circumstances as the Committee
shall in its discretion set forth in such option agreement at the date of grant.
(d) Limitations on Incentive Stock Options. Incentive Stock Options may be
granted only to participants who are employees of the Company or one of its
subsidiaries (within the meaning of Section 424(f) of the Code) at the date of
grant. The aggregate Fair Market Value (determined as of the time the Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any calendar
year (under all option plans of the Company and of any parent corporation or
subsidiary corporation (as defined in Sections 424(e) and (f) of the Code,
respectively)) shall not exceed $100,000. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of grant, and no Incentive Stock Option may be exercised later than
ten years after the date it is granted; provided, however, Incentive Stock
Options may not be granted to any participant who, at the time of grant, owns
stock possessing (after the application of the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company, unless the exercise price is fixed at not less than 110% of the Fair
Market Value of the Common Stock on the date of grant and the exercise of such
option is prohibited by its terms after the expiration of five years from the
date of grant of such option. In addition, no Incentive Stock Option may be
issued to a participant in tandem with a Nonqualified Stock Option.
(e) Post-Employment Exercises. In addition to any other conditions to
which the participant is subject, the exercise of any Stock Option after
termination of employment shall be subject to satisfaction of the conditions
precedent that the participant neither (i) competes with, or takes other
employment with or renders services to a competitor of, the Company, its
subsidiaries or affiliates without the written consent of the Company, nor (ii)
conducts himself or herself in a manner adversely affecting the Company.
7. Stock Appreciation Rights.
(a) The Committee may, in its discretion, grant Stock Appreciation Rights
to the holders of any Stock Options granted hereunder. In addition, Stock
Appreciation Rights may be granted independently of, and without relation to,
Stock Options. A Stock Appreciation Right means a right to receive a payment, in
cash, Common Stock or a combination thereof, in an amount equal to the excess of
(x) the Fair Market Value, or other specified valuation, of a specified number
of shares of Common Stock on the date the right is exercised over (y) the Fair
Market Value, or other specified valuation (which shall be no less than the Fair
Market
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Value) of such shares of Common Stock on the date the right is granted, all as
determined by the Committee; provided, however, that if a Stock Appreciation
Right is granted in tandem with or in substitution for a Stock Option, the
designated Fair Market Value in the award agreement may be the Fair Market Value
on the date such Stock Option was granted. Each Stock Appreciation Right shall
be subject to such terms and conditions as the Committee shall impose from time
to time.
(b) Stock Appreciation Rights granted under the Plan shall be exercisable
at such time or times and subject to such terms and conditions as shall be
determined by the Committee; provided, however, that no Stock Appreciation
Rights shall be exercisable later than ten years after the date it is granted
except in the event of a participant's death, in which case, the exercise period
of such participant's Stock Appreciation Rights may be extended beyond such
period but no later than one year after the participant's death. All Stock
Appreciation Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set forth
in such right at the date of grant.
(c) The exercise of any Stock Appreciation Right after termination of
employment shall be subject to satisfaction of the conditions precedent that the
participant neither (i) competes with, or takes other employment with or renders
services to a competitor of, the Company, its subsidiaries or affiliates without
the written consent of the Company, nor (ii) conducts himself or herself in a
manner adversely affecting the Company.
8. Stock Awards. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Common Stock issued or transferred to participants with or without
other payments therefor. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described below. The Committee may
require the participant to deliver a duly signed stock power, endorsed in blank,
relating to the Common Stock covered by such an Award. The Committee may also
require that the stock certificates evidencing such shares be held in custody or
bear restrictive legends until the restrictions thereon shall have lapsed. The
Stock Award shall specify whether the participant shall have, with respect to
the shares of Common Stock subject to a Stock Award, all of the rights of a
holder of shares of Common Stock of the Company, including the right to receive
dividends and to vote the shares.
9. Performance Awards.
(a) Performance Awards may be granted to participants at any time and from
time to time, as shall be determined by the Committee. Performance Awards may,
as determined by the Committee in its sole discretion, constitute
Performance-Based Awards. The Committee shall have complete discretion in
determining the number, amount and timing of awards granted to each participant.
Such Performance Awards may be in the form of shares of Common Stock or Stock
Units. Performance Awards may be awarded as short-term or long-term incentives.
With respect to those Performance Awards that are intended to constitute
Performance-Based Awards, the Committee shall set performance targets at its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Awards that will be paid out to the
participants, and may attach to such Performance Awards one or more
restrictions. Performance targets may be based upon, without limitation,
Company-wide, divisional and/or individual performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority at
any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless at
the time of establishment of goals the Committee shall have precluded its
authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance with
terms and conditions prescribed or authorized by the Committee. The participant
may elect to defer, or the Committee may require or permit the deferral of, the
receipt of Performance Awards upon such terms as the Committee deems
appropriate.
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10. Stock Units.
(a) The Committee may, in its discretion, grant Stock Units to
participants hereunder. The Committee shall determine the criteria for the
vesting of Stock Units and may provide for payment in shares of Common Stock, in
cash or in any combination of shares of Common Stock and cash, at such time as
the award agreement shall specify. Stock Units may constitute Performance-Based
Awards. Shares of Common Stock issued pursuant to this Section 10 may be issued
with or without other payments therefor as may be required by applicable law or
such other consideration as may be determined by the Committee. The Committee
shall determine whether a participant granted a Stock Unit shall be entitled to
a Dividend Equivalent Right (as defined below).
(b) Upon vesting of a Stock Unit, unless the Committee has determined to
defer payment with respect to such Stock Unit or a participant has elected to
defer payment under subsection (c) below, shares of Common Stock representing
the Stock Units shall be distributed to the participant unless the Committee,
with the consent of the participant, provides for the payment of the Stock Units
in cash or partly in cash and partly in shares of Common Stock equal to the
value of the shares of Common Stock which would otherwise be distributed to the
participant.
(c) Prior to the year with respect to which a Stock Unit may vest, the
Committee may, in its discretion, permit a participant to elect not to receive
shares of Common Stock and/or cash, as applicable, upon the vesting of such
Stock Unit and for the Company to continue to maintain the Stock Unit on its
books of account. In such event, the value of a Stock Unit shall be payable in
shares of Common Stock and/or cash, as applicable, pursuant to the agreement of
deferral.
(d) A "Stock Unit" means a notional account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units at
the time or times specified by the Committee or as the award agreement shall
specify.
11. Performance-Based Awards. Certain Benefits granted under the Plan may
be granted in a manner such that the Benefits qualify for the performance-based
compensation exemption of Section 162(m) of the Code ("Performance-Based
Awards"). As determined by the Committee in its sole discretion, either the
vesting or the exercise of such Performance-Based Awards shall be based on one
or more business criteria that apply to the individual participant, one or more
business units of the Company as a whole. The business criteria shall be as
follows, individually or in combination, adjusted in such manner as the
Committee shall determine: (i) net sales; (ii) pretax income before allocation
of corporate overhead and bonus; (iii) budget; (iv) earnings per share; (v) net
income; (vi) division, group or corporate financial goals; (vii) return on
stockholders' equity; (viii) return on assets; (ix) attainment of strategic and
operational initiatives; (x) appreciation in and/or maintenance of the price of
the Common Stock or any other publicly-traded securities of the Company; (xi)
market share; (xii) gross profits; (xiii) earnings before interest and taxes;
(xix) earnings before interest, taxes, dividends and amortization; (xv) economic
value-added models and comparisons with various stock market indices; (xvi)
reductions in costs; or (xvii) any combination of the foregoing. In addition,
Performance-Based Awards may include comparisons to the performance of other
companies, such performance to be measured by one or more of the foregoing
business criteria. With respect to Performance-Based Awards, (i) the Committee
shall establish in writing (x) the performance goals applicable to a given
period, and such performance goals shall state, in terms of an objective formula
or standard, the method for computing the amount of compensation payable to the
participant if such performance goals are obtained and (y) the individual
employees or class of employees to which such performance goals apply no later
than 90 days after the commencement of such period (but in no event after 25% of
such period has elapsed) and (ii) no Performance-Based Awards shall be payable
to or vest with respect to, as the case may be, any participant for a given
period until the Committee certifies in writing that the objective performance
goals (and any other material terms) applicable to such period have been
satisfied. With respect to any Benefits intended to qualify as Performance-Based
Awards, after establishment of a performance goal, the Committee shall not
revise such performance goal or increase the amount of compensation payable
thereunder (as determined in
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accordance with Section 162(m) of the Code) upon the attainment of such
performance goal. Notwithstanding the preceding sentence, the Committee may
reduce or eliminate the number of shares of Common Stock or cash granted or the
number of shares of Common Stock vested upon the attainment of such performance
goal.
12. Foreign Laws. The Committee may grant Benefits to individual
participants who are subject to the tax laws of nations other than the United
States, which Benefits may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action which it deems advisable to obtain approval of such Benefits by
the appropriate foreign governmental entity; provided, however, that no such
Benefits may be granted pursuant to this Section 12 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.
13. Adjustment Provisions; Change in Control.
(a) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such Stock
Option or Stock Appreciation Right had such Stock Option or Stock Appreciation
Right been exercised in full immediately prior to such change or distribution,
and such an adjustment shall be made successively each time any such change
shall occur. In addition, in the event of any such change or distribution, in
order to prevent dilution or enlargement of participants' rights under the Plan,
the Committee will have authority to adjust, in an equitable manner, the number
and kind of shares that may be issued under the Plan, the number and kind of
shares subject to outstanding Benefits, the exercise price applicable to
outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits. Appropriate adjustments
may also be made by the Committee in the terms of any Benefits under the Plan to
reflect such changes or distributions and to modify any other terms of
outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods. In
addition, other than with respect to Stock Options, Stock Appreciation Rights,
and other awards intended to constitute Performance-Based Awards, the Committee
is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder other than an incentive stock option
for purposes of Section 422 of the Code.
(b) Notwithstanding any other provision of this Plan, if there is a Change
in Control of the Company, all then outstanding Benefits that have not vested or
become exercisable at the time of such Change in Control shall immediately vest
and become exercisable and all performance targets relating to such Benefits
shall be deemed to have been satisfied as of the time of such Change in Control.
For purposes of this Section 13(b), a "Change in Control" of the Company shall
be deemed to have occurred upon any of the following events:
(i) A change in control of the direction and administration of the
Company's business of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act; or
(ii) During any period of two (2) consecutive years, the individuals
who at the beginning of such period constitute the Company's Board of
Directors or any individuals who would be "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a
majority thereof; or
(iii) The Company's Common Stock shall cease to be publicly traded;
or
(iv) The Company's Board of Directors shall approve a sale of all or
substantially all of the assets of the Company, and such transaction shall
have been consummated; or
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(v) The Company's Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of any
event described in Section 13(b)(ii) or (iii) above, and such transaction
shall have been consummated.
Notwithstanding the foregoing, (A) any spin-off of a division or subsidiary of
the Company to its stockholders and (B) any event listed in (i) through (v)
above that the Board of Directors determines not to be a Change in Control of
the Company, shall not constitute a Change in Control of the Company.
For purposes of this Section 13(b), "Continuing Directors" shall mean (x)
the directors of the Company in office on the Effective Date (as defined below)
and (y) any successor to any such director and any additional director who after
the Effective Date was nominated or selected by a majority of the Continuing
Directors in office at the time of his or her nomination or selection.
The Committee, in its discretion, may determine that, upon the occurrence
of a Change in Control of the Company, each Benefit outstanding hereunder shall
terminate within a specified number of days after notice to the holder, and such
holder shall receive (i) with respect to each share of Common Stock that is
subject to a Stock Option or a Stock Appreciation Right, an amount equal to the
excess of the Fair Market Value of such shares of Common Stock immediately prior
to the occurrence of such Change in Control over the exercise price per share of
such Stock Option or Stock Appreciation Right (as the case may be) and (ii) with
respect to each share of Common Stock that is subject to a Stock Award or Stock
Unit, the Fair Market Value of such shares of Common Stock immediately prior to
the occurrence of such Change in Control; such amount to be payable in cash, in
one or more kinds of property (including the property, if any, payable in the
transaction) or in a combination thereof, as the Committee, in its discretion,
shall determine. The provisions contained in the preceding sentence shall be
inapplicable to a Stock Option or Stock Appreciation Right granted within six
(6) months before the occurrence of a Change in Control if the holder of such
Stock Option or Stock Appreciation Right is subject to the reporting
requirements of Section 16 of the Exchange Act and no exception from liability
under Section 16 of the Exchange Act is otherwise available to such holder.
14. Nontransferability. Each Benefit granted under the Plan to a
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of grant
and then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive Stock
Option may permit the transferability of a Benefit by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the
Benefit.
15. Other Provisions. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including, without limitation, for the installment purchase of Common Stock
under Stock Options, for the installment exercise of Stock Appreciation Rights,
to assist the participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common Stock
acquired under any form of Benefit, for the termination of any Benefit and the
forfeiture of any gain realized in respect of a Benefit upon the occurrence of
certain activity by the participant that is harmful to the Company, for the
acceleration of exercisability or vesting of Benefits or the payment of the
value of Benefits in the event that the control of the Company changes
(including, without limitation, a Change in Control), or to comply with federal
and state securities laws, or understandings or conditions as to the
participant's employment (including, without limitation, any restrictions on the
ability of the participant to engage in activities that are competitive with the
Company) in addition to those specifically provided for under the Plan.
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16. Fair Market Value. For purposes of this Plan and any Benefits awarded
hereunder, Fair Market Value shall be the closing price of the Company's Common
Stock on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date) if the Company's Common Stock is
readily tradeable on a national securities exchange or other market system, and
if the Company's Common Stock is not readily tradeable, Fair Market Value shall
mean the amount determined in good faith by the Committee as the fair market
value of the Common Stock of the Company.
17. Withholding. All payments or distributions of Benefits made pursuant
to the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the Company
proposes or is required to distribute Common Stock pursuant to the Plan, it may
require the recipient to remit to it or to the corporation that employs such
recipient an amount sufficient to satisfy such tax withholding requirements
prior to the delivery of any certificates for such Common Stock. In lieu
thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates required
by statute or regulation.
18. Tenure. A participant's right, if any, to continue to serve the
Company or any of its subsidiaries or affiliates as an officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her designation
as a participant under the Plan.
19. Unfunded Plan. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
20. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, or Benefits, or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
21. Duration, Amendment and Termination. No Benefit shall be granted more
than ten years after the Effective Date. The Committee may amend the Plan from
time to time or suspend or terminate the Plan at any time. No amendment of the
Plan may be made without approval of the stockholders of the Company if the
amendment will: (i) disqualify any Incentive Stock Options granted under the
Plan; (ii) increase the aggregate number of shares of Common Stock that may be
delivered through Stock Options under the Plan; (iii) increase the maximum
amounts which can be paid to an individual under the Plan; (iv) change the types
of business criteria on which Performance-Based Awards are to be based under the
Plan; or (iv) modify the requirements as to eligibility for participation in the
Plan.
22. Cancellation and New Grant of Options, Etc. The Board of Directors
shall have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding Stock Options under the Plan and the grant in substitution therefor
of new Stock Options under the Plan covering the same or different numbers of
shares of Common Stock and having an option exercise price per share which may
be lower or higher than the exercise price per share of the cancelled Stock
Options or (ii) the amendment of the terms of any and all outstanding Stock
Options under the Plan to provide an option exercise price per share which is
higher or lower than the then current exercise price per share of such
outstanding Stock Options.
A-8
<PAGE>
23. Governing Law. This Plan, Benefits granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with the
internal laws of the State of Delaware, without giving effect to its
choice-of-law provisions.
24. Effective Date.
(a) The Plan shall be effective as of March 31, 1999, the date on which
the Plan was adopted by the Committee (the "Effective Date"), provided that the
Plan is approved by the stockholders of the Company at an annual meeting or any
special meeting of stockholders of the Company within 12 months of the Effective
Date, and such approval of stockholders shall be a condition to the right of
each participant to receive any Benefits hereunder. Any Benefits granted under
the Plan prior to such approval of stockholders shall be effective as of the
date of grant (unless, with respect to any Benefit, the Committee specifies
otherwise at the time of grant), but no such Benefit may be exercised or settled
and no restrictions relating to any Benefit may lapse prior to such stockholder
approval, and if stockholders fail to approve the Plan as specified hereunder,
any such Benefit shall be cancelled.
(b) This Plan shall terminate on March 30, 2009 (unless sooner terminated
by the Committee).
A-9
<PAGE>
Annex B
GIGA INFORMATION GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Giga Information Group, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Giga Information Group, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
commissions, overtime, shift premium, incentive compensation, incentive
payments, bonuses, but exclusive of any other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship shall be deemed to have terminated on the 91st day of
such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each Offering
Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day on the date of such determination,
as reported in The Wall Street Journal or such other source as the Board
deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the Common
Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
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<PAGE>
(k) "Offering Periods" shall mean the periods of approximately twenty-four
(24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after January 1 and July 1
of each year and terminating on the last Trading Day in the periods ending
twenty-four months later, with the first Offering Period commencing on July 1,
1999. The duration and timing Periods may be changed pursuant to Section 4 of
this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately twelve month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date. The first Purchase
Period under the Plan shall commence on July 1, 1999.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a share of
Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower;
provided however, that the Purchase Price may be adjusted by the Board pursuant
to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after January 1 and July 1 of each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof. The first Offering Period under the Plan
shall commence on July 1, 1999. The Board shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without stockholder approval if such change is
announced prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing an enrollment agreement authorizing payroll deductions in the form of
Exhibit A to this Plan and filing it with the Company's payroll office prior to
the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE>
6. Payroll Deductions.
(a) At the time a participant files his or her enrollment agreement, he or
she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and shall be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new enrollment agreement authorizing a change in payroll deduction
rate. The Board may, in its discretion, limit the number of participation rate
changes during any Offering Period. The change in rate shall be effective with
the first full payroll period following five (5) business days after the
Company's receipt of the new enrollment agreement unless the Company elects to
process a given change in participation more quickly. A participant's enrollment
agreement shall remain in effect for successive Offering Periods unless
terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during a Purchase
Period. Payroll deductions shall recommence at the rate provided in such
participant's enrollment agreement at the beginning of the first Purchase Period
which is scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the Offering
Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in Section 10
hereof, his or her option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of full shares
subject to option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her account. No
fractional shares shall be purchased; any payroll deductions accumulated in a
participant's account which are not sufficient to purchase a full share shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
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<PAGE>
(b) If the Board determines that, on a given Exercise Date, the number of
shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner a shall be practicable and as it shall determine in its sole discretion
to be equitable among all participants exercising options to purchase Common
Stock on such Exercise Date, and terminate any or all Offering Periods then in
effect pursuant to Section 20 hereof. The Company may make pro rata allocation
of the shares available on the Enrollment Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company's stockholders
subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new enrollment agreement.
(b) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee, for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the Company as
provided in Section 19 hereof, the maximum number of shares of the Company's
Common Stock which shall be made available for sale under the Plan shall be
Seven Hundred and Fifty Thousand (750,000) shares, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2000 equal to
the lesser of (i) Seven Hundred and Fifty Thousand (750,000) shares, (ii) one
percent (1%) of the outstanding shares on such date, or (iii) a lesser amount
determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
B-4
<PAGE>
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or the
Compensation Committee of the Board. If the Compensation Committee administers
the Plan then all references to "Board" in the Plan shall be deemed to mean a
reference to the Compensation Committee. The Board or the Compensation Committee
shall have full and exclusive discretionary authority to construe, interpret and
apply the terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan. Every finding, decision and determination
made by the Board or the Compensation Committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Death of Participant. In the event of the death of a participant, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
lease annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised 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 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.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date"), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The New Exercise Date shall
be before the date of the Company's proposed dissolution or liquidation. The
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.
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<PAGE>
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board shall be entitled to change the Offering Periods, limit the frequency
and/or number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount designated
by a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
compensation, and establish such other limitations or procedures as the Board
determines in its sole discretion are advisable and which are consistent with
the Plan.
(c) In the event the Board determines that the ongoing operation of the
Plan may result in unfavorable financial accounting consequences, the Board may,
in its discretion and, to the extent necessary or desirable, modify or amend the
Plan to reduce or eliminate such accounting consequence including, but not
limited to:
(1) altering the Purchase Price for any Offering Period including an
Offering Period underway at the time of the change in Purchase Price;
(2) shortening any Offering Period so that Offering Period ends on a
new Exercise Date, including an Offering Period underway at the time of
the Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall be effective as of March 31, 1999, the
date on which the Plan was adopted by the Board of Directors (the "Effective
Date"), provided that the Plan is approved by the stockholders of the Company at
an annual meeting or any special meeting of stockholders of the Company within
12 months of the Effective Date. This Plan shall terminate on March 30, 2009
unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, than all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
GIGA INFORMATION GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
ENROLLMENT AGREEMENT
_______________ Original Application Enrollment Date:_________________
_______________ Change in Payroll Deduction Rate
_______________ Change of Beneficiary(ies)
1. ___________________ hereby elects to participate in the Giga Information
Group, Inc. 1999 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Enrollment Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (not to exceed ten percent (10%))
during the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Enrollment Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
_________________________________________________
_________________________________________________
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions
or benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time of
such disposition, and that such income will be taxed as ordinary income
only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over
the purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Enrollment Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
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8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)____________________________________________________________
(First) (Middle) (Last)
______________________________ ______________________________
Relationship
______________________________
Address
Employee's Social
Security Number: ______________________________________
Employee's Address: ______________________________________
______________________________________
______________________________________
I UNDERSTAND THAT THIS ENROLLMENT AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_______________ _______________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other than
spouse)
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EXHIBIT B
GIGA INFORMATION GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Giga Information
Group, Inc. 1999 Employee Stock Purchase Plan which began on _____________,
________ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Enrollment Agreement.
Name and Address of Participant:
______________________________________
______________________________________
______________________________________
Signature:
______________________________________
Date: ________________________________
B-10
<PAGE>
PROXY
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GIGA INFORMATION GROUP, INC.
Annual Meeting of Stockholders - May 10, 1999
THE UNDERSIGNED stockholder of Giga Information Group, Inc., a Delaware
corporation (the "Company"), hereby appoints Gideon I. Gartner and Daniel M.
Clarke, or either of them, with full power of substitution, as the proxy or
proxies of the undersigned at the Annual Meeting of Stockholders of the Company
to be held at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, 25th
Floor, New York, New York, on May 10, 1999 at 10:00 a.m., and any adjournment(s)
thereof, and to vote thereat all shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present in accordance with
the instructions on the reverse side of this Proxy.
The shares represented by this Proxy will be voted as specified on the
reverse side hereof, but if no specification is made, the proxies intend to vote
FOR the election of all nominees as directors, FOR the proposal to approve the
1999 Share Incentive Plan, FORthe proposal to approve the 1999 Employee Stock
Purchase Plan, FOR the ratification of the selection of auditors and, in the
discretion of such proxies, for or against such other matters as may properly
come before said meeting or an adjournment(s) thereof.
(continued - to be dated and signed on reverse side)
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS of
GIGA INFORMATION GROUP, INC.
May 10, 1999
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS [________________]
Please Detach and Mail in the Envelope Provided
Please mark your
votes as indicated
in this example.
FOR all nominees Withhold
listed to the right AUTHORITY
(except for any to vote for all nominees
nominee listed below) listed to the right
--------------------- -------------------
1. ELECTION [ ] [ ]
OF
DIRECTORS
Nominees: A.G.W. Biddle, III
Neill H. Brownstein
(Instruction: To withhold authority to vote for any individual
nominee, mark FOR and write that nominee's name below.)
_______________________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of the 1999 Share Incentive Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Approval of the 1999 Employee Stock Purchase [ ] [ ] [ ]
Plan.
FOR AGAINST ABSTAIN
4. RATIFICATION OF THE SELECTION OF [ ] [ ] [ ]
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
FOR AGAINST ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED [ ] [ ] [ ]
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S)
THEREOF.
Receipt is acknowledged of Notice of said Meeting, Proxy Statement and Annual
Report for the fiscal year ended December 31, 1998.
Please date, sign and return this Proxy Card using the enclosed envelope.
_______________________(Seal)___________________(Seal)_________dated:____, 1999
NOTE: Please sign here exactly as your name appears above. When signing as
attorney, executor, administrator, trustee or guardian, please give your
title, as such. Each joint owner or trustee should sign the proxy.
