Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
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
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
GIGA Information Group, Inc.
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box:)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
GIGA INFORMATION GROUP, INC.
--------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 25, 2000
--------------------------------
TO THE STOCKHOLDERS OF GIGA INFORMATION GROUP, INC.
The Annual Meeting of Stockholders of Giga Information Group, Inc., a
Delaware corporation, will be held coincident with GigaWorld IT Forum, Giga's
principal annual customer meeting, at Boca Raton Resort & Club, 501 East Camino
Real, Boca Raton, Florida, on Thursday, May 25, 2000, at 2:00 p.m., local time,
for the following purposes:
1. To elect two Directors to serve until the 2003 Annual Meeting of
Stockholders;
2. To approve an amendment to the Giga 1999 Share Incentive Plan;
3 To approve amendments to the Giga 1997 Director Option Plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as Giga's
independent auditors for the fiscal year 2000; 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 April 5, 2000,
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 vote at, the meeting.
By Order of the Board of Directors
/s/ Daniel M. Clarke
Daniel M. Clarke
Secretary
Cambridge, Massachusetts
April 20, 2000
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.
139 Main Street
Cambridge, Massachusetts 02142
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
May 25, 2000
------------------
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 coincident with GigaWorld IT Forum,
Giga's principal annual customer meeting, at Boca Raton Resort & Club, 501 East
Camino Real, Boca Raton, Florida, on Thursday, May 25, 2000, at 2:00 p.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 20, 2000.
VOTING
Record Date
Only owners of record of shares of Common Stock at the close of business
on April 5, 2000, 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 April 5, 2000, there were
10,159,236 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 2003, 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 directors;
2. FOR the proposal to approve the amendment to the Giga 1999 Share
Incentive Plan increasing by 2,000,000 the maximum number of shares
of Common Stock in respect of which awards may be granted;
3. FOR the proposal to approve amendments to the Giga 1997 Director
Option Plan (i) increasing the number of shares of Common Stock in
respect of which options are to be granted to Non-Employee Directors
upon their initial election as a Director from 2,000 to 25,000, (ii)
increasing the number of shares of Common Stock in respect of which
options are to be granted to Non-Employee Directors annually from
2,000 to 10,000, (iii) increasing the maximum number of shares of
Common Stock in respect of which awards may be granted from 50,000
to 300,000 (of which 163,000 shares will be used for the "catch-up"
grants described in clause (iv) below, and 70,000 shares will be
used for the year 2000 annual grants), (iv) providing for a
"catch-up" grant for all current Non-
1
<PAGE>
Employee Directors as of the date of the adoption of the amendments
to the 1997 Director Option Plan and (v) deleting the reference to
"Investor Directors" since the term is no longer applicable; and
4. FOR the proposal to ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors for the fiscal year 2000.
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 the holders of shares 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.
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.
2
<PAGE>
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 April 5, 2000 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, (3) each of the executive officers
whose names appear in the summary compensation table and (4) all directors and
executive officers as a group.
% of Shares
Beneficially
Beneficial Owner Number of Shares(1) Owned(2)
- ---------------- ------------------- --------
Gideon I. Gartner............................. 2,302,780 (3) 22.7%
145 W. 57th Street
Apt. 72-A
New York, NY 10019
W.R. Hambrecht & Co., LLC..................... 1,553,500 (4) 15.3%
550 15th Street
San Francisco, CA 94103
Pequot Capital Management, Inc................ 1,173,337 (5) 11.5%
500 Nyala Farm Road
Westport, CT 06880
21st Century Communications Partners, L.P..... 571,429 (6) 5.6%
767 Fifth Avenue, 45th floor
New York, NY 10153
A.G.W. Biddle, III............................ 408,824 (7) 4.0%
Neill H. Brownstein........................... 257,666 (8) 2.5%
Richard L. Crandall........................... 165,688 (9) 1.6%
David L. Gilmour.............................. 135,000 (10) 1.3%
Bernard Goldstein............................. 43,834 (11) *
James C.R. Graham............................. 31,958 (12) *
Daniel M. Clarke.............................. 26,333 (13) *
John B. Landry................................ 21,809 (14) *
Robert K. Weiler.............................. 20,000 *
Charles Bacharach............................. 0 *
All directors and
executive officers as a group (12 persons).. 3,429,584 (15) 33.8%
- ---------------
* 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 April 5, 2000 pursuant
to the exercise of options or warrants.
(2) On April 5, 2000, there were 10,159,236 shares of Common Stock
outstanding.
(3) Includes options to purchase 220,000 shares of Common Stock which were
granted to Mr. Gartner other than pursuant to a formal stock option plan,
and warrants to purchase 12,857 shares of Common Stock. Also
3
<PAGE>
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) W.R. Hambrecht & Co., LLC beneficially owns 1,553,500 shares of Common
Stock (as reported in a Schedule 13D-A filed with the Securities and
Exchange Commission on April 12, 2000). The power to dispose of these
shares is held by William R. Hambrecht, the sole Manager of W.R. Hambrecht
& Co., LLC.
(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, Inc. (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.
(6) 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.
(7) 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,
1,167 shares of Common Stock held by Southgate Partners II, and 1,167
shares of Common Stock held by Southgate Partners III. Also includes
options to purchase 500 shares of Common Stock which were granted to Mr.
Biddle pursuant to the Giga 1997 Director Option Plan. 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
84,823 shares of Common Stock.
(8) Includes 6,000 shares of Common Stock held by Mr. Brownstein's children
and 5,333 shares of Common Stock held by Mr. Brownstein and his spouse
jointly. Also includes options to purchase 1,500 shares of Common Stock
which were granted to Mr. Brownstein pursuant to the Giga 1997 Director
Option Plan and warrants to purchase 12,857 shares. Mr. Brownstein
disclaims beneficial ownership of 2,000 shares of Common Stock held by his
adult child, Todd D. Brownstein, and 2,000 shares of Common Stock held by
Will Gordon, the adult child of his spouse. Mr. Brownstein also disclaims
beneficial ownership of 2,000 shares of Common Stock held by his minor
child, Emily Hamilton, over which Brownstein exercises investment and
voting power.
(9) 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 56,528 shares of
Common Stock which were granted to Mr. Crandall pursuant to the Giga 1995
Stock Option/Stock Issuance Plan, of which 50,000 were granted pursuant to
Mr. Crandall's current Consulting Agreement with Giga (see "Certain
Relationships and Related Transactions"); options to purchase 12,659
shares of Common Stock which were granted pursuant to the Giga 1996 Option
Plan; and options to purchase 1,500 shares of Common Stock which were
granted pursuant to the 1997 Director Option Plan.
(10) Includes options to purchase 28,333 shares of Common Stock which were
granted to Mr. Gilmour other than pursuant to a formal stock option plan.
(11) Includes warrants to purchase 5,143 shares of Common Stock, and options to
purchase 2,500 shares of Common Stock which were granted to Mr. Goldstein
pursuant to the Giga 1997 Director Option Plan.
(12) Includes options to purchase 31,958 shares of Common Stock which were
granted to Mr. Graham pursuant to the Giga 1996 Option Plan. All options
will be cancelled if not exercised by May 15, 2000.
(13) Includes options to purchase 25,333 shares of Common Stock which were
granted to Mr. Clarke pursuant to the 1996 Option Plan.
(14) Includes options to purchase 1,285 shares of Common Stock which were
granted to Mr. Landry pursuant to the Giga 1996 Option Plan, and options
to purchase 10,000 shares of Common Stock which were granted under Mr.
Landry's current Consulting Agreement with Giga (see "Certain
Relationships and Related Transactions") pursuant to the Giga 1999 Share
Incentive Plan.
(15) Includes 403,788 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 and executive officers as a group.
4
<PAGE>
ELECTION OF DIRECTORS
(Item 1)
Board of Directors
The Board of Directors presently consists of eight 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 in 1998, Class II initially
was elected for a term of two years ending in 2000.
The Directors whose terms will expire at the Annual Meeting are Richard L.
Crandall and David L. Gilmour. Messrs. Crandall and Gilmour have been nominated
to stand for reelection as Directors at the Annual Meeting, each to hold office
until the 2003 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 2003 Annual Meeting. Proxies received by the Board will be so voted
unless stockholders specify in their proxy a contrary choice.
NOMINEES FOR THE ELECTION TO TERMS EXPIRING IN 2003 (Class II)
Richard L. Crandall, 56, 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 thirty largest enterprise
software companies. He currently serves on the Board of Directors of several
publicly held companies and a number of Internet ventures. He is chairman of
SolidSpeed, Inc., an Internet Content Delivery Services firm, and is a general
partner in Arbor Partners, LLC, an eCommerce venture capital fund. 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, 42, is Chairman and CEO of Tacit Knowledge Systems,
Inc., an enterprise software company in Palo Alto, 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.
5
<PAGE>
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 2001 (Class III)
Gideon I. Gartner, 64, served as Chief Executive Officer of Giga from its
inception in March 1995 until August 1999 and as Chairman of the Board of
Directors from Giga's inception until October 1999. He served as President of
Giga from October 1997 until August 1999. He currently serves as a Director of
Giga. 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, 69, has served as a Director of Giga since April 1997.
He is a Director of Broadview International, 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 services 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 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 the Graduate School of Business at Columbia University.
John B. Landry, 52, has served as a Director of and consultant to Giga
since August 1999 and on the Board of Advisors since March 1996. Since 1995, Mr.
Landry has served as vice president of technology strategy for IBM. Mr. Landry
has also served as chairman of AnyDay.com, an Internet calendar and personal
information management company, since February 1999. From March 1996 to January
1999, he also served as chairman of Narrative Communications, an Internet-based
media advertising and direct marketing company. From December 1990 to June 1995,
Mr. Landry served as the senior vice president of development and chief
technology officer for Lotus Development Corporation, a provider of software
products and services. He also serves as a director of Lante Corporation, an
Internet services company; MCK Communications, Inc., a voice-over-IP
telecommunications company; Interliant, Inc., an applications service provider;
as well as several other private companies.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 2002 (Class I)
A.G.W. ("Jack") Biddle, III, 39, has served as a Director of Giga since
May 1999. 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 a Director of Paratek Microwave, Princeton Electronics,
Answerlogic and DiamondbackVision, and a Board observer at Blackboard, Inc.,
Woodwind Communications and Tantivy Communications. He received a B.A. degree in
economics from the University of Virginia.
Neill H. Brownstein, 56, 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
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H. Brownstein Corporation, an investment management counseling enterprise. He
also serves as a Director of VYYO, Inc. Mr. Brownstein received an B.A. from
Columbia College of Columbia University and an M.B.A. from the Kellogg School of
Management of Northwestern University. Between 1979 and 1988, Mr. Brownstein
also served as a director of Gartner Group, Inc.
Robert K. Weiler, 49, was elected President and Chief Executive Officer of
Giga in May 1999 and assumed full-time duties in August 1999. He was elected as
a Director in August 1999, and was elected Chairman of the Board of Directors in
October 1999. Prior to joining Giga, he was President and Chief Executive
Officer of Eastman Software (formerly Wang Software). From January 1991 to
December 1995 he served as Senior Vice President, Worldwide Sales & Marketing,
Service & Support for Lotus Development Corp. From October 1988 to January 1991
he was President and Chief Operating Officer of Interleaf, Inc., a hardware and
electronic publishing/document management software company. From August 1986 to
September 1987, Mr. Weiler served as Executive Vice President, Worldwide Sales &
Marketing for Cullinet Software. He was appointed President and Chief Executive
Officer in August 1987 and served in that capacity until September 1988. From
August 1985 to 1986 Mr. Weiler was CEO and President of Distribution Management
Systems, an application software company acquired by Cullient. From 1976 to 1985
Mr. Weiler served in a variety of management positions for McCormack and Dodge,
a privately held software company until purchased by Dunn & Bradstreet Software
in 1983. Mr. Weiler holds a B.A. degree from Saint Anselm College.
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.
The Compensation Committee members are Neill H. Brownstein and A.G.W.
Biddle, III. 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 1999, the Board of Directors
met five times, the Compensation Committee met ten times and the Audit Committee
met six times. 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
full-time 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 (the "Code"), may be granted under the Director Plan. For further
information with respect to the Director Plan and the proposed amendments
thereto, see "Approval of the Amendment to the Giga Information Group, Inc. 1997
Director Option Plan".
7
<PAGE>
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 1999 exceeded $100,000
(sometimes collectively referred to herein as the "Named Executive Officers")
for services rendered in all capacities to Giga (including its subsidiaries) for
the fiscal years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Awards
------------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options (#) Compensation($)
--------------------------- ---- --------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Robert K. Weiler.............. 1999 112,000 50,000(2) 650,000(3) --
Chairman, President and 1998 -- -- -- --
Chief Executive Officer(1) 1997 -- -- -- --
Daniel M. Clarke.............. 1999 200,000 30,000 52,000 --
Sr. Vice President, CFO, 1998 154,956 30,000 28,000(4) --
Treasurer, Secretary 1997 50,650 20,000 20,000 --
Gideon I. Gartner............. 1999 260,000(6) -- -- --
Former Chairman, President 1998 160,000(6) 30,000 100,000 --
and Chief Executive 1997 160,000(6) 30,000 -- --
Officer(5)
James C. R. Graham............ 1999 200,000 90,000 -- 74,000(8)
Former Executive Vice 1998 200,000 5,000 8,000 --
President and Chief 1997 36,073 67,500 50,000 --
Research Officer(7)
Charles Bacharach............. 1999 147,272 -- 11,000 --
Former Sr. Vice President, 1998 114,792 14,000 12,667 13,718(10)
Research(9) 1997 70,128 5,000 333 41,415(10)
</TABLE>
- ------------------
(1) Mr. Weiler was elected President and Chief Executive Officer of Giga on
May 13, 1999. He was elected Chairman of the Board effective as of October
26, 1999. Mr. Weiler did not commence serving as a full-time employee and
did not start receiving compensation, other than the grant to him on May
13, 1999 of options to purchase 600,000 shares of Common Stock, and the
receipt by him of a signing bonus of $50,000, until August 15, 1999.
(2) Mr. Weiler received a signing bonus of $50,000 pursuant to the terms of
his employment agreement dated May 13, 1999 (see "Employment Related
Agreements").
(3) Mr. Weiler was awarded 600,000 options at a price of $3.9375 per share
under his employment agreement (see "Employment Related Agreements"). On
October 26, 1999, he was granted an additional 50,000 options at a price
of $3.3125 per share.
(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.
(5) Effective as of August 15, 1999, Mr. Gartner ceased serving as President
and Chief Executive Officer of Giga. He resigned as Chairman of the Board
effective October 26, 1999.
(6) Includes amounts payable in either the listed or subsequent year for
services rendered by Mr. Gartner in the listed year.
8
<PAGE>
(7) Mr. Graham resigned from these positions with Giga and became a Research
Fellow effective August 15, 1999. Pursuant to the terms of the Agreement
and Release entered into between Mr. Graham and Giga, Mr. Graham continued
to receive his base salary through February 15, 2000 (see "Employment
Related Agreements").
(8) Represents $50,000 in payments for carrying out Chief Information Officer
Seminars and $24,000 in consulting fees paid to Mr. Graham pursuant to his
Agreement and Release (see "Employment Related Agreements").
(9) Mr. Bacharach resigned from his position with Giga effective November 12,
1999.
(10) Represents commissions paid to Mr. Bacharach.
Option Grants in 1999
The following table shows all grants of options to the Named Executive
Officers for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term(8)
----------------------------------------------------------- -------------------------------
% of Total
Number Options
of Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration 5% 10%
Name Granted(#) Year(7) ($/Sh) Date ($) ($)
- -------------------------- -------------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert K. Weiler ......... 500,000(1)(2) 34.93 3.9375 5/13/09 $1,238,150 $3,137,700
100,000(3) 6.99 3.9375 5/13/09 $247,630 $627,540
50,000(1)(4) 3.49 3.3125 10/26/09 $104,160 $263,965
Daniel M. Clarke ......... 52,000(1)(5) 3.63 5.0000 7/30/09 $163,514 $414,372
Gideon I. Gartner ........ -- -- -- -- -- --
James C. R. Graham ....... -- -- -- -- -- --
Charles Bacharach ........ 11,000(6) 0.77 5.0000 7/30/09 $34,590 $87,656
</TABLE>
- --------------------
(1) These options were granted pursuant to Giga's 1999 Share Incentive Plan.
The options will 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 in the
case of death or disability where the options can be exercised for certain
periods thereafter. Upon a change in control of Giga all previously
unvested options shall immediately vest and become exercisable.
(2) Of the 500,000 options granted to Mr. Weiler, 76,188 are incentive stock
options ("Incentive Stock Options"), within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and 423,812 do not
constitute Incentive Stock Options ("Nonqualified Stock Options").
(3) These options were granted pursuant to Giga's 1999 Share Incentive Plan.
The options will vest seven (7) years from the date of grant. The vesting
is subject to earlier acceleration if the closing sales price of Giga
Common Stock on The NASDAQ Stock Market (or any other national exchange on
which the stock is traded) equals or exceeds $12.50 per share for at least
fifty (50) consecutive trading days. All of these options are Nonqualified
Options.
(4) All of the 50,000 options granted to Mr. Weiler are Nonqualified Stock
Options.
9
<PAGE>
(5) Of the 52,000 options granted to Mr. Clarke, 46,895 are Incentive Stock
Options and 5,105 are Nonqualified Options.
(6) Mr. Bacharach's options were granted pursuant to the 1999 Share Incentive
Plan. The options were cancelled upon Mr. Bacharach's leaving Giga. All of
these options were Incentive Stock Options.
(7) Based on an aggregate of 1,431,401 options granted to employees in fiscal
year 1999, including options granted to Named Executive Officers.
(8) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, computed annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholders' continued employment through the option period and the date
on which the options are exercised.
Option Values at December 31, 1999
No options were exercised by any of the Named Executive Officers during
the fiscal year ended December 31, 1999. The following table provides
information as to the value of options held by the Named Executive Officers as
of December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Values of Unexercised
Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End($) (1)
-------------------------------------- ----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------- ---------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Robert K. Weiler................. -- 650,000 -- 153,125
Daniel M. Clarke................. 19,750 80,250 18,779 21,461
Gideon I. Gartner................ 220,000 100,000 577,500 82,500
James C. R. Graham............... 30,583 27,417 34,406 30,844
Charles Bacharach................ 19,145 -- 43,600 --
</TABLE>
- ----------------
(1) Represents the total gain which would be realized if all in-the-money
options held at December 31, 1999 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between $4.125 (the closing price of the Common Stock on December 31,
1999) 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 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 agreed to continue as Chairman of the Board of
Directors for so long as he was a Director of Giga and to continue to act as
President and Chief Executive Officer of Giga until the Board of Directors hired
a new Chief Executive Officer. Effective as of August 15, 1999 and concurrent
with Robert K. Weiler taking office as Giga's new President and Chief Executive
Officer, Mr. Gartner ceased serving as President and
10
<PAGE>
Chief Executive Officer and as of October 26, 1999 he resigned as Chairman of
the Board of Directors. Pursuant to his agreement, which is still in effect, Mr.
Gartner 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 received 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.
This 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.
Robert K. Weiler. Giga entered into an employment agreement with Mr.
Weiler, dated May 13, 1999, pursuant to which Mr. Weiler has agreed to serve as
the President and Chief Executive Officer of Giga. Mr. Weiler did not commence
serving as a full-time employee until August 15, 1999. As compensation for his
services as President and Chief Executive Officer, Giga agreed to pay Mr. Weiler
an annual salary at the rate of $300,000 per annum, subject to adjustment
annually, and an initial signing bonus of $50,000. Pursuant to the agreement,
Mr. Weiler also was awarded options to purchase 600,000 shares of Common Stock
under Giga's 1999 Share Incentive Plan at an exercise price of $3.938 per share.
In addition, Mr. Weiler is entitled to participate in Giga's annual bonus plan
for its executives, which plan provides that Mr. Weiler may receive a cash bonus
of up to 100% of his then base salary. Giga has the right to terminate Mr.
Weiler's employment, with or without cause, and Mr. Weiler has the right to
terminate his employment agreement with Giga for any reason whatsoever.
Effective as of October 26, 1999, Mr. Weiler agreed to defer receipt, without
interest, of his calendar year 2000 base salary and bonus until Giga's first pay
period in January 2001.
James C.R. Graham. Giga entered into an Agreement and Release with James
C.R. Graham effective as of August 15, 1999. Pursuant to the Agreement and
Release, Mr. Graham resigned as Executive Vice President and Chief Research
Officer and his title was changed to Research Fellow. Mr. Graham agreed that
during the period between August 15, 1999 and February 15, 2000 (the end of his
employment period), Mr. Graham would carry out 12 Chief Information Officer
Seminars, he would be available to Giga for up to 40 business days of service if
Giga called upon him in a special projects capacity, and he would try to make
himself available to Giga for up to an additional 20 business days. In
consideration for his continued service to Giga through February 15, 2000, Mr.
Graham (1) would continue to receive his then current level of base salary
through February 15, 2000, (2) would continue to receive insurance benefits
through February 29, 2000, (3) would continue to participate in Giga's 401K plan
through February 15, 2000, (4) would receive $50,000 for carrying out the Chief
Information Officer Seminars and (5) would receive $2,000 per day for the
optional 20 business days of service. Pursuant to the Agreement and Release, Mr.
Graham was permitted to continue to use the computer and communications
equipment Giga provided him for his home office through the end of his
employment on February 15, 2000. The vesting periods continued on his stock
options through February 15, 2000.
For a discussion of certain current consulting arrangements between Giga
and Messrs. Crandall, Gilmour and Landry, see "Certain Relationships and Related
Transactions--Consulting Agreements."
11
<PAGE>
COMPENSATION COMMITTEE REPORT
The Board of Directors has established a Compensation Committee which
presently consists of Messrs. Brownstein and Biddle, neither of whom is an
employee of Giga. 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. Weiler,
Giga's Chief Executive Officer, in reviewing the individual performance of the
executives (other than Mr. Weiler) 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. Weiler and Mr.
Gartner, Giga's former President and Chief Executive Officer, 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 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, 1999 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.
12
<PAGE>
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 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. Weiler's
compensation package in 1999 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. Weiler did not
commence serving as a full-time employee and did not start receiving
compensation, other than the grant to him on May 13, 1999 of options to purchase
600,000 shares of Common Stock, until August 15, 1999. Mr. Gartner's
compensation package in 1999 consisted of base salary and other employee benefit
programs. Neither Mr. Weiler nor Mr. Gartner received any material benefits in
1999 not provided to all executive officers. Mr. Weiler'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.
Mr. Weiler was granted a signing bonus of $50,000 pursuant to the terms of
his employment agreement with Giga. Mr. Gartner did not receive a bonus in 1999.
Executive Compensation Policies. The Compensation Committee believes that
ordinarily it is in the best interest of Giga to retain maximum flexibility in
its compensation programs to enable it to appropriately reward, retain and
attract executive talent necessary to Giga's success. To the extent such goals
can be met with compensation that is designed to be deductible under Section
162(m) of the Code, such as certain types of compensation payable under the Giga
1999 Share Incentive Plan described in this Proxy Statement, such compensation
plan will be used. However, the Compensation Committee recognizes that in
appropriate circumstances, compensation that is not deductible under Section
162(m) may be paid at the Committee's discretion.
Members of the Compensation Committee:*
Neill H. Brownstein
A.G.W. Biddle, III
- ----------------------
(*) 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. Irwin Lieber served as a member of the Compensation Committee until he was
replaced by A.G.W. Biddle, III after the 1999 Annual Meeting of Stockholders.
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Compensation Committee currently are Neill H.
Brownstein and A.G.W. Biddle, III, neither of whom is or has been an officer or
employee of Giga. Irwin Lieber also served as a member of the Compensation
Committee during the 1999 fiscal year until he was replaced by A.G.W. Biddle,
III after the 1999 Annual Meeting of Stockholders. Mr. Lieber was never an
officer or employee of Giga. Josh Weston also served as a member of the
Compensation Committee during the 1999 fiscal year until his resignation from
the Board of Directors effective February 1, 1999. Mr. Weston was never an
officer or employee of Giga.
PERFORMANCE GRAPH
The following graph compares the Seventeen (17) 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]
<TABLE>
<CAPTION>
07/30/1998 9/98 12/98 3/99 6/99 9/99 12/99
---------- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
GIGA INFORMATION GROUP, INC. 100 32 38 31 40 33 33
NASDAQ STOCK MARKET (U.S.) 100 89 116 129 142 145 209
HAMBRECHT & QUIST INFORMATION SERVICES 100 87 137 149 155 146 222
</TABLE>
14
<PAGE>
ADDITIONAL INFORMATION
Certain Relationships and Related Transactions
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 vested on June 30, 1999, and 2,000 shares vest monthly thereafter
through June 30, 2002; provided, however, that vesting will accelerate (i) upon
a "change in 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. 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 contained non-competition and
no-raid provisions, which terminated on October 1, 1999.
Landry Consulting Agreement
Effective as of August 23, 1999, Giga entered into a consulting agreement
with John Landry for a two-year period ending August 31, 2001, or until
completion of his project. The agreement provides that Mr. Landry will devote an
average minimum of 15 hours per month to Giga in connection with his consulting
duties. In consideration for his services, Giga granted to Mr. Landry an option
to purchase 25,000 shares of Common Stock at an exercise price of $5.75 per
share. The option provides for vesting as follows: 2,000 shares vested on
September 30, 1999 and 1,000 shares vest monthly thereafter through August 31,
2001; provided, however, that vesting will accelerate (1) upon a "change in
control" of Giga or (2) if Mr. Landry fails to be nominated or re-elected as a
Director of Giga without his prior consent. The option will terminate if either
Mr. Landry or Giga terminates the consulting agreement prior to August 31, 2001
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
15
<PAGE>
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 Trost,
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 Giga's capital stock for securities or
consideration issued by the acquiring entity or its subsidiary.
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 for late filings (other than a late Form 5 filing for W.R.
Hambrecht & Co., LLC for late Form 3 and Form 4 filings), Giga believes that
during the 1999 fiscal year all Section 16(a) filing requirements were complied
with.
16
<PAGE>
APPROVAL OF AMENDMENT TO THE GIGA INFORMATION GROUP, INC.
1999 SHARE INCENTIVE PLAN
(Item 2)
Background
Giga has used the Giga Information Group, Inc. 1999 Share Incentive Plan
(the "1999 Share 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. The 1999 Share Plan originally authorized the
granting of awards for up to 1,000,000 shares of Common Stock. As of April 5,
2000, there were fewer than 96,000 shares of Common Stock remaining available
for grant under the 1999 Share Plan (not including 1,110,141 shares represented
by awards granted under any prior plan that may be forfeited, expired or
cancelled). This number is expected to be exhausted within the next few months.
The Board of Directors has determined that additional shares of Common Stock
should be made available for awards under the 1999 Share Plan to Giga's officers
and other key employees and consultants who will be responsible for the
profitability and long-term future growth of Giga. Accordingly, the Board of
Directors has approved and is proposing for stockholder approval an amendment to
the 1999 Share Plan increasing by 2,000,000 the maximum number of shares of
Common Stock in respect of which awards may be granted under the Plan.
The following is a summary of the 1999 Share Plan, as amended.
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 3,000,000 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., Giga's 1995 Stock Option-Stock Issuance Plan and Giga's 1996 Stock Option
Plan) 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 covered by a Benefit (defined below) granted under
the 1999 Share Plan which for any reason is cancelled, forfeited or expires or,
in the case of a Benefit other than a stock option, is settled in cash, shall
again be available for Benefits 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 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.
17
<PAGE>
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 390, and an
estimate of the number of consultants who are eligible to participate in the
1999 Share Plan has not been made.
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 of 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 of a non-qualified stock option 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.
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<PAGE>
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.
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 (defined below), 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
19
<PAGE>
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.
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 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 in 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.
20
<PAGE>
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 (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 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, 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 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 (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
21
<PAGE>
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.
If the Committee permits an individual to transfer an NSO to a member or
members of the individual's immediate family or to a trust for the benefit of
such persons or other entity owned by such persons and such individual makes
such a transfer and such transfer constitutes a completed gift for gift tax
purposes (which determination may depend on a variety of factors including,
without limitation, whether the NSO or a portion thereof has vested) then such
transfer will be subject to federal gift tax except, generally, to the extent
protected by the individual's $10,000 per donee annual exclusion, by his or her
lifetime unified credit or by the marital deduction. The amount of the
individual's gift is the value of the NSO at the time of the gift. If the
transfer of the NSO constitutes a completed gift and the individual retains no
interest in or power over the NSO after the transfer, the NSO generally will not
be included in his or her gross estate for federal estate tax purposes. The
transfer of the NSO will not cause the transferee to recognize taxable income at
the time of the transfer. If the transferee exercises the NSO while the
transferor is alive, the transferor will recognize ordinary income as described
above as if the transferor had exercised the NSO. If the transferee exercises
the NSO after the death of the transferor, it is uncertain whether the
transferor's estate or the transferee will recognize ordinary income for federal
income tax purposes.
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 and
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 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
22
<PAGE>
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;
provided, however, that Performance-Based Awards granted after Giga's 2004
Annual Meeting of Stockholders will only qualify for such exception if the 1999
Share Plan is reapproved by Giga's stockholder at or prior to such meeting.
Other Information
Approval of the amendment to 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 amendment to
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 amendment to 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 amendment to 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 AMENDMENTS TO THE GIGA INFORMATION GROUP, INC.
1997 DIRECTOR OPTION PLAN
(Item 3)
Background
The Board of Directors has approved and is proposing for stockholder
approval several amendments to the Giga Information Group, Inc. 1997 Director
Option Plan (the "Director Plan"). These amendments include (i) increasing the
number of shares of Common Stock in respect of which options are to be granted
under the Director Plan to Directors of Giga who are not full-time employees of
Giga or any subsidiary (the "Non-Employee Directors") upon their initial
election as a Director from 2,000 to 25,000, (ii) increasing the number of
shares of Common Stock in respect of which options are to be granted under the
Director Plan to Non-Employee Directors annually commencing July 1, 2000 from
2,000 to 10,000 (subject to reduction on a pro rata basis to the extent there
are insufficient shares available under the Director Plan), (iii) increasing the
maximum number of shares of Common Stock in respect of which awards may be
granted under the Director Plan from 50,000 to 300,000 (of which 140,000 shares
will be used for the "catch-up" grants described in clause (iv) below and 70,000
shares will be used for the year 2000 annual grants), (iv) providing for a
"catch-up" grant for all current Non-Employee Directors as of the date of
adoption of the amendments to the 1997 Director Option Plan and (v) deleting the
reference to "Investor Directors" since the term is no longer applicable. The
purpose of the Director Plan is to encourage ownership in Giga by Non-Employee
Directors whose continued services are considered essential to Giga's future
progress and to provide them with a further incentive to remain as Directors of
Giga. Unless the Director Plan is further amended at the 2001 Annual Meeting of
Stockholders, it is anticipated that there will only be 64,000 shares of Common
Stock available under the Plan for future option grants after the issuance of
the options to be granted on July 1, 2000.
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<PAGE>
The following is a summary of the Director Plan, as amended.
Administration
The Director Plan is administered by Giga's Board of Directors (the
"Board"). Subject to the provisions of the Director Plan, the Board will be
authorized to interpret the Director Plan, to establish, amend and rescind any
rules and regulations relating to it and to make all other determinations
necessary or advisable for its administration; provided, however, that the
amount and nature of the awards to be granted will be automatic in accordance
with the terms of the Plan.
Eligibility
Options may be granted only to Non-Employee Directors. As of April 5,
2000, there were seven Non-Employee Directors.
Grants, Terms and Conditions of Options
Options are automatically granted to Non-Employee Directors as follows:
(i) options to purchase 25,000 shares of Common Stock upon such director's
initial election as a director and (ii) on July 1st of each year, commencing
July 1, 2000, options to purchase 10,000 shares of Common Stock (subject to
reduction on a pro rata basis to the extent there are insufficient shares
available under the Director Plan). In addition, on the date of the 2000 Annual
Meeting of Stockholders, (i) each Non-Employee Director at such time who was
granted options to purchase 2,000 shares of Common Stock upon his initial
election as a director will be granted options to purchase 23,000 shares of
Common Stock and (ii) each Non-Employee Director at such time who was not
granted any options to purchase shares of Common Stock upon his initial election
as a director will be granted options to purchase 25,000 shares of Common Stock.
Pursuant to the Director Plan, Giga may grant options exercisable to
purchase up to an aggregate of 300,000 shares of Common Stock, subject to
certain adjustments. Options granted pursuant to the Director Plan will be
options that do not qualify as incentive stock options ("NSOs") under Section
422(b) of the Code.
The exercise price for each share purchasable under any option granted
pursuant to the Director Plan is the fair market value of the Common Stock as of
the date of grant.
Options granted under the Director Plan will vest in four equal annual
installments beginning on the first anniversary of the date of grant provided
that the optionee continues to serve as a Director on such dates. Each option
will terminate on the earlier of (i) 10 years after the date of grant, and (ii)
60 days after the optionee ceases to serve as a Director of the Giga; provided,
that in the event an optionee ceases to serve due to his or her death or
disability, then the exercisable portion of the option may be exercised within
the period of 180 days following the date the optionee ceases to serve as a
director.
Except as the Board otherwise determines, options may not be transferred
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order.
If any option granted under the Director Plan will expire or terminate for
any reason without having been exercised, the shares of Common Stock subject to,
but not delivered under, such option shall be available for other options.
Change in Control
Each outstanding option granted under the Director Plan shall immediately
become exercisable in full in the event of a Change in Control (as defined in
the Plan).
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<PAGE>
Effect of Change in Common Stock
In the event of a merger, consolidation, reorganization, recapitalization,
reclassification, stock split, stock dividend, reverse stock split or other
similar transaction affecting the shares of Common Stock, the number of shares
of Common Stock authorized by the Director Plan will be increased or decreased
proportionately, as the case may be, with appropriate corresponding adjustment
in the purchase price per share thereunder.
Amendment or Termination
The Board may suspend, terminate or discontinue the Director Plan or amend
it in any respect whatsoever; provided, however, that without the approval of
the stockholders of Giga, no amendment may: (i) increase the number of shares of
Common Stock subject to the Director Plan; (ii) materially modify the
requirements as to eligibility to receive options under the Director Plan; or
(iii) materially increase the benefits accruing to participants in the Director
Plan.
The Board will have the power to modify or amend outstanding options;
provided, however, that no modification or amendment may (i) have the effect of
altering or impairing any rights or obligations of any option previously granted
without the consent of the optionee, or (ii) modify the number of shares of
Common Stock subject to the option.
Certain Federal Income Tax Consequences
The statements in the following paragraphs of the principal federal income
tax consequences of NSOs under the Director 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.
NSOs granted under the Director Plan are options that do not qualify as
incentive stock options. A Non-Employee Director who receives a NSO will not
recognize any taxable income upon the grant of such NSO. However, the
Non-Employee Director generally will recognize ordinary income upon exercise of
a NSO in an amount equal to the excess of (i) the fair market value of the
shares of Common Stock at the time of exercise over (ii) the exercise price.
A Non-Employee Director should consult his or her tax advisor as to
whether, as a result of Section 16(b) of the Securities Exchange Act, the timing
of income recognition is deferred following the exercise of a NSO (i.e., the
"Deferred Period"). If there is a Deferral Period, absent a written election
(pursuant to Section 83(b) of the Code) filed with the Internal Revenue Service
to include in income, as of the date of transfer, the excess (on such date) of
the fair market value of such shares over their exercise price, recognition of
income by the individual will be deferred until the expiration of the Deferral
Period.
The ordinary income recognized with respect to the receipt of shares or
cash upon exercise of a NSO will be subject to both wage withholding and
employment taxes. In addition to the customary methods of satisfying the
withholding tax liabilities that arise upon the exercise of a 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
participant 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, provided, that such amount constitutes an ordinary and necessary
business expense to Giga and is reasonable and the limitations of Sections 280G
of the Code do not apply.
In general, if the total amount of payments to a participant that are
contingent upon a "change of control" of Giga (as defined in Section 280G of the
Code), including payments under the Director Plan that
25
<PAGE>
vest upon a "change in control," equals or exceeds three times the individual's
"base amount" (generally, such participant'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
participant would be subject to a 20% excise tax on such portion of the
payments.
Other Information
Approval of the amendments to the Director 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 amendments to
the Director Plan are not approved by stockholders, Giga will reconsider the
alternatives available with respect to encouraging ownership in Giga by
Non-Employee Directors.
The Board believes that the amendments to the Director Plan are in the
best interest of Giga and its stockholders and therefore recommends that the
stockholders vote FOR the approval of the amendments to the Director 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 is included in this
Proxy Statement because (1) the benefits or amounts that will be received or
allocated under the plan, as amended, 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 1999
if the Share Plan, as amended, had been in effect cannot be determined
completely.
The following table shows the number of options to purchase shares of
Common Stock to be granted under the Director Plan, as amended, to the
individuals and groups set forth below during 2000, in each case subject to
stockholder approval at this Annual Meeting.
<TABLE>
<CAPTION>
Number of
Name and Position Units
----------------- -----
<S> <C>
Robert K. Weiler, ........................................................... ___
Chairman, President and Chief Executive Officer
Daniel M. Clarke,............................................................ ___
Sr. Vice President, CFO, Treasurer, Secretary, Chief Operating Officer
Gideon I. Gartner,........................................................... 35,000
Former Chairman, President and Chief Executive Officer
James C.R. Graham,........................................................... ___
Former Executive Vice President and Chief Research Officer
Charles Bacharach,........................................................... ___
Former Sr. Vice President, Research
Executive Officer Group...................................................... ___
Non-Executive Director Group (including Mr. Gartner)......................... 210,000
Non-Executive Officer Employee Group (including Mr. Gartner)................ 35,000
</TABLE>
26
<PAGE>
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, 2000,
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 Annual Meeting, 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 Annual Meeting. 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, 2000. Proxies received by the Board will be so voted unless
stockholders specify in their proxies a contrary choice.
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 2001 Annual
Meeting of Stockholders must be received by the Secretary of Giga, 139 Main
Street, Cambridge, Massachusetts 02142, on or before December 21, 2000, 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.
27
<PAGE>
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.
/s/ Daniel M. Clarke
Daniel M. Clarke
Secretary
Cambridge, Massachusetts
April 20, 2000
-----------------------
The Annual Report to the Stockholders of Giga for the fiscal year ended
December 31, 1999, 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.
-----------------------
28
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS of
GIGA INFORMATION GROUP, INC.
May 25, 2000
-------------------------------
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 whenyou access the web page.
YOUR CONTROL NUMBER IS ----------> |________________________|
Please Detach and Mail in the Envelope Provided
|X| Please mark your votes as indicated in this example
<TABLE>
<CAPTION>
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except for any to vote for all nominees
nominee listed below) listed to the right
<S> <C> <C> <C> <C>
1 ELECTION Nominees Richard L Crandall
OF |_| |_|
DIRECTORS David L Gilmour
(Instruction To withhold authority to vote for any individual nominee
mark FOR and write that nominee's name below)
- ---------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2 APPROVAL OF THE AMENDMENT TO THE |_| |_| |_|
1999 SHARE INCENTIVE PLAN
FOR AGAINST ABSTAIN
3 APPROVAL OF THE AMENDMENTS TO THE |_| |_| |_|
1997 DIRECTOR OPTION 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, 2000
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, 1999.
Please date, sign and return this Proxy Card using the enclosed envelope.
</TABLE>
___________________________(Seal) _____________________(Seal) Dated ______, 2000
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.
<PAGE>
PROXY
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GIGA INFORMATION GROUP, INC.
Annual Meeting of Stockholders - May 25, 2000
THE UNDERSIGNED stockholder of Giga Information Group, Inc., a Delaware
corporation (the "Company"), hereby appoints Robert K. Weiler 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 Boca Raton Resort & Club, 501 East Camino Real, Boca Raton,
Florida, on Thursday, May 25, 2000 at 2:00 pm., local time, 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
amendment to the 1999 Share Incentive Plan, FOR the proposal to approve the
amendments to the 1997 Director Option 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 any
adjournment(s) thereof.
(continued - to be dated and signed on reverse side)
