1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTER ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-015144
GARTNER GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3099750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 10212 06904-2212
56 Top Gallant Road (Zip Code)
Stamford, CT
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 964-0096
Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section_13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO___.
The number of shares outstanding of the Registrant's capital stock as of
June 30, 1997 was 95,721,586 shares of Common Stock, Class A.
1
2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS Page
Consolidated Balance Sheets at June 30, 1997 and
September 30, 1996 3
Consolidated Statements of Operations for the Three and
Nine Months ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 12
2
3
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
GARTNER GROUP, INC.
Consolidated Balance Sheets
(In thousands, except share data)
June 30, September 30,
1997 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 161,770 $ 96,755
Marketable securities 20,520 30,054
Fees receivable, net 162,635 143,762
Deferred commissions 13,989 17,539
Prepaid expenses and other current assets 24,250 22,040
--------- ---------
Total current assets 383,164 310,150
Long-term marketable securities 10,644 3,047
Property and equipment, net 38,964 32,818
Goodwill, net 97,125 93,144
Other assets 20,478 4,949
--------- ---------
Total assets $ 550,375 $ 444,108
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 66,787 $ 60,527
Commissions payable 8,443 15,148
Accrued bonuses payable 13,211 16,781
Deferred revenues 209,831 198,952
--------- ---------
Total current liabilities 298,272 291,408
--------- ---------
Deferred revenues 6,115 2,465
Commitments and contingencies
Stockholders' equity:
Preferred stock -- --
Common stock: $.0005 par value 53 52
Additional paid-in capital 174,415 134,711
Cumulative translation adjustment (2,790) (2,965)
Accumulated earnings 87,705 32,008
--------- ---------
259,383 163,806
Less: Treasury stock, at cost (13,395) (13,571)
--------- ---------
Total stockholders' equity 245,988 150,235
--------- ---------
Total liabilities and stockholders' equity $ 550,375 $ 444,108
========= =========
See accompanying notes.
3
4
GARTNER GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
For the three months ended For the nine months ended
June 30, June 30,
--------- --------- --------- ---------
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues:
Research, advisory and benchmarking services $ 98,480 $ 77,458 $ 286,618 $ 224,471
Other, principally conferences, consulting and training 27,869 19,948 84,223 60,244
--------- --------- --------- ---------
Total revenues 126,349 97,406 370,841 284,715
--------- --------- --------- ---------
Costs and expenses:
Cost of services and product development 48,451 38,967 144,256 110,192
Selling, general and administrative 44,491 34,124 123,785 103,581
Acquisition-related charges -- -- -- 1,665
Depreciation 3,060 2,202 8,312 6,451
Amortization of intangibles 1,505 910 4,507 2,565
--------- --------- --------- ---------
Total costs and expenses 97,507 76,203 280,860 224,454
--------- --------- --------- ---------
Operating income 28,842 21,203 89,981 60,261
Interest income, net 2,157 939 5,227 2,567
--------- --------- --------- ---------
Income before minority interest and income taxes 30,999 22,142 95,208 62,828
Minority interest -- -- -- (25)
--------- --------- --------- ---------
Income before income taxes 30,999 22,142 95,208 62,853
Provision for income taxes 12,544 9,521 39,511 27,027
--------- --------- --------- ---------
Net income $ 18,455 $ 12,621 $ 55,697 $ 35,826
========= ========= ========= =========
Net income per common share $ 0.18 $ 0.13 $ 0.55 $ 0.36
========= ========= ========= =========
Weighted average shares outstanding 102,653 100,094 102,124 98,896
========= ========= ========= =========
See accompanying notes.
4
5
GARTNER GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the nine months ended June 30,
--------- ---------
1997 1996
--------- ---------
Operating activities:
Cash provided by operating activities $ 62,880 $ 40,317
--------- ---------
Investing activities:
Payment for businesses acquired (excluding cash acquired) (8,308) (18,292)
Additions of property and equipment, net (14,267) (12,246)
Marketable securities sold, net 1,937 7,243
Investments in unconsolidated businesses (8,283) --
Loans to officers (7,163) --
Other investing (3) (25)
--------- ---------
Cash used for investing activities (36,087) (23,320)
--------- ---------
Financing activities:
Principal payments on long-term debt -- (4,450)
Issuance of common stock and warrants 13,558 7,487
Issuance of treasury stock 176 --
Distributions of capital between Dataquest and its former parent -- (1,687)
Tax benefits of stock transactions with employees 26,145 23,223
--------- ---------
Cash provided by financing activities 39,879 24,573
--------- ---------
Net increase in cash and cash equivalents 66,672 41,570
Effects of foreign exchange rates on cash and cash equivalents (1,657) (276)
Cash and cash equivalents, beginning of period 96,755 66,581
--------- ---------
Cash and cash equivalents, end of period $ 161,770 $ 107,875
========= =========
See accompanying notes.
5
6
GARTNER GROUP, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and should be read in conjunction with
the consolidated financial statements and related notes of Gartner Group, Inc.
(the "Company") on Form 10-K for the fiscal year ended September 30, 1996. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of financial position,
results of operations and cash flows at the dates and for the periods presented
have been included. The results of operations for the three and nine month
periods ended June 30, 1997 may not be indicative of the results of operations
for the remainder of fiscal 1997.
Note 2 - Loans to Officers
On June 4, 1997, with the Board of Directors approval, the Company provided
loans totaling $7.2 million to certain officers to facilitate the purchase of
common stock arising out of the exercise of stock options. The loan proceeds
were not used to fund the option exercise price of the common stock acquired.
The loans are full recourse obligations to the officers and are also secured
by shares of the Company's stock. The loans bear interest at an annual rate of
6.14% and mature on June 3, 1999. The loans are included in Other Assets on the
June 30, 1997 Balance Sheet.
Note 3 - Class B Common Stock Conversion
As of June 30, 1997, the Company recorded the conversion of all Class B Common
Stock into Class A Common Stock on a one for one basis, pursuant to a provision
of the Articles of Incorporation which requires conversion when the Class B
Common Stockholder's voting equity falls below a certain ownership percentage
after considering all exercisable options and warrants outstanding.
Note 4 - Subsequent Event, Acquisition of Datapro Information Services
On August 1, 1997, the Company acquired Datapro Information Services
("Datapro"), a unit of McGraw-Hill Companies for consideration of approximately
$25 million in cash. Datapro is a provider of information on product
specifications and pricing, product comparisons, technology reports, market
overviews, case studies and user ratings surveys. Datapro's subscription based
products provide feature and side-by-side comparisons of computer hardware,
software and communications products. The acquisition will be accounted for by
the purchase method.
6
7
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below under
"Quarterly Operating Income Trends," "Other Factors that May Affect Future
Performance" and elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth certain results of operations as a percentage of
total revenues:
For the three months ended For the nine months ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
------ ------ ------ ------
Revenues:
Research, advisory and benchmarking services 77.9% 79.5% 77.3% 78.8%
Other, principally conferences, consulting and training 22.1 20.5 22.7 21.2
------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0
------ ------ ------ ------
Costs and expenses:
Cost of services and product development 38.4 40.0 38.9 38.7
Selling, general and administrative 35.2 35.0 33.4 36.4
Acquisition-related charges -- -- -- 0.6
Depreciation 2.4 2.3 2.2 2.3
Amortization of intangibles 1.2 0.9 1.2 0.9
------ ------ ------ ------
Total costs and expenses 77.2 78.2 75.7 78.8
------ ------ ------ ------
Operating income 22.8 21.8 24.3 21.2
Interest income, net 1.7 1.0 1.4 0.9
------ ------ ------ ------
Income before minority interest and income taxes 24.5 22.8 25.7 22.1
Minority interest -- -- -- --
------ ------ ------ ------
Income before income taxes 24.5 22.8 25.7 22.1
Provision for income taxes 9.9 9.8 10.7 9.5
------ ------ ------ ------
Net income 14.6% 13.0% 15.0% 12.6%
====== ====== ====== ======
TOTAL REVENUES increased 30% to $126.3 million for the third quarter of fiscal
1997 from $97.4 million for the third quarter of fiscal 1996. For the nine
months ended June 30, 1997, total revenues were $370.8 million, up 30% from
$284.7 million for the same period last fiscal year. Revenues from research,
advisory and benchmarking services ("RABS") increased by 27% to $98.5 million
from $77.5 million for the third quarter of fiscal 1996. RABS revenues increased
28% to $286.6 million for the nine months ended June 30, 1997, compared with
$224.5 million for the same period last fiscal year. RABS encompass products
which, on an ongoing basis, highlight industry developments, review new products
and technologies, provide quantitative market research, analyze industry trends
within a particular
7
8
technology or market sector and provide comparative analysis of the information
technology operations of organizations. The Company enters into annually
renewable contracts for RABS. Revenues from RABS are recognized as products and
services are delivered, and as the Company's obligation to the client is
completed over the contract period. The increase in revenues from RABS reflects
primarily strong market acceptance of new services introduced in fiscal 1996 and
the first half of fiscal 1997, volume increases as a result of increased
geographic and client penetration, and expansion of electronic distribution
within client companies, all of which were offset partially by a volume pricing
strategy that provides more value for the same dollars each year.
Contract value increased 27% to $423.7 million at June 30, 1997 versus $334.5
million at June 30, 1996. The Company believes that contract value, which is
calculated as the annualized value of all RABS contracts in effect at a given
point in time, without regard to the duration of the RABS contracts outstanding
at such time, is a significant measure of the Company's volume of RABS business.
Historically, the Company has experienced that a substantial portion of client
companies renew contracts for an equal or higher level of total payments each
year, and annual RABS revenues in any fiscal year have approximated contract
value at the beginning of the fiscal year. As of June 30, 1997, 84% of the
Company's clients had renewed one or more RABS services in the last twelve
months. However, this renewal rate is not necessarily indicative of the rate of
retention of the Company's RABS revenue base, and contract value at any time may
not be indicative of future RABS revenues or cash flows if the rate of renewal
of contracts, or the timing of new business were to significantly change during
the following twelve months compared to historic patterns. Total deferred
revenues of $215.9 million and $201.4 million at June 30, 1997 and September 30,
1996, respectively, as presented in the Company's consolidated balance sheets,
represent unamortized revenues from RABS contracts plus unamortized revenues of
certain other products and services not included in RABS. Deferred revenues do
not directly correlate to contract value as of the same date, since contract
value represents an annualized value of all outstanding RABS contracts without
regard to the duration of such contracts, and deferred revenue represents
unamortized revenue remaining on all outstanding contracts including RABS and
certain other products and services not included in RABS.
Other revenues for the third quarter of fiscal 1997 increased 40% to $27.9
million compared to $19.9 million for the third quarter of fiscal 1996. For the
nine months ended June 30, 1997, other revenues were $84.2 million, up 40% from
$60.2 million for the same period last fiscal year. Other revenues consist
principally of revenues from conferences, consulting engagements and
technology-based training products and publications. The increase of $8.0
million in the third quarter of fiscal 1997 over the third quarter of fiscal
1996 was primarily due to increased revenues from the Company's consulting and
technology-based training businesses. Year to date, the increase in other
revenues over the prior fiscal year is primarily attributable to increased
revenues from the Company's Symposia conferences and ITxpo exhibition events
held annually during the first quarter of the fiscal year, and to increased
revenues in the consulting and technology-based training businesses.
OPERATING INCOME rose 36% to $28.8 million, or 23% of total revenues, for the
third quarter of fiscal 1997, from $21.2 million or 22% of total revenues in the
third quarter of fiscal 1996. Operating income was $90.0 million for the nine
months ended June 30, 1997, an increase of 49% over the $60.3 million for the
same period in fiscal 1996. Excluding acquisition-related charges of $1.7
million in the first quarter of fiscal 1996, operating income for the nine
months ended June 30, 1997 increased 45%. Operating income has increased as a
result of solid revenue growth coupled with controlled spending that has allowed
the Company to gain economies of scale through the leveraging of its resources
(additional revenues have been generated using essentially the same resources).
The Company's continued focus on margin improvement has favorably impacted
operating results.
While costs and expenses increased to $97.5 million in the third quarter of
fiscal 1997 from $76.2 million in the third quarter of fiscal 1996, such costs
decreased to 77% of total revenues from 78% in the third quarter of fiscal 1996.
Year to date total costs and expenses were $280.9 million, or 76% of total
revenues, compared to $224.5 million or 79% of total revenues for the same
period last fiscal year. Cost of services and product development expenses were
$48.5 million and $39.0 million for the third quarter of fiscal 1997 and 1996,
respectively, and $144.3 million and $110.2 million for the nine months ended
June 30, 1997 and 1996, respectively. This increase in expenses over the prior
fiscal year reflects the need to provide additional support to the growing
client base, including investment in strategic areas such as
8
9
electronic and Internet distribution, costs associated with the implementation
of the Company's new client inquiry process (QuickPath) and product development
costs (particularly for technology-based training products). Cost of services
and product development expenses, as a percentage of total revenues, decreased
slightly from 40% for the third quarter of fiscal 1996 to 38% for the third
quarter of fiscal 1997. The decrease was primarily attributable to improved
gross margins on conferences as compared to the comprable quarter of the prior
year and lower delivery cost per dollar of revenue generated due to increased
electronic delivery of products. Selling, general and administrative expenses,
which were $44.5 million and $34.1 million for the third quarter of fiscal 1997
and 1996, respectively, and $123.8 million and $103.6 million for the nine
months ended June 30, 1997 and 1996, respectively, increased as a result of the
Company's continuing expansion of worldwide distribution channels and resulting
commissions earned on the revenue generated. The increase in commission expense
was offset partially by the elimination and/or reduction of redundant general
and administrative expenses, including personnel reductions and facility
rationalization relating to the acquisition of Dataquest in December 1995, which
had a favorable impact on general and administrative expenses. Although the
Company has added general and administrative resources to support the growing
revenue base, it has benefited from economies of scale and leveraging of its
general and administrative staff and facilities. Consequently, selling, general
and administrative expenses were 35% of total revenues for the third quarter of
fiscal 1997 and 1996. For the nine months ended June 30, 1997, selling, general
and administrative expenses were 33% of total revenues as compared to 36% of
total revenues for the comprable period in the prior year.
Acquisition-related charges of $1.7 million in the first quarter of fiscal 1996
for the acquisition of Dataquest were not recurring in fiscal 1997.
Additionally, amortization of intangibles increased by $0.6 million in the third
quarter and $1.9 million year to date in fiscal 1997 as compared to the same
periods in fiscal 1996, reflecting primarily goodwill associated with fiscal
1996 and 1997 acquisitions.
INTEREST INCOME, NET was $2.2 million for the third quarter of fiscal 1997, up
from $0.9 million from the third quarter of fiscal 1996. For the nine months
ended June 30, 1997 and 1996, interest income, net was $5.2 million and $2.6
million, respectively. These net increases resulted from interest income
accumulating on the Company's cash, cash equivalents and marketable securities
($192.9 million at June 30, 1997, versus $118.7 million at June 30, 1996 and
$129.9 million at September 30, 1996) and from reduced interest expense after
remaining debt related to fiscal 1993 and 1994 acquisitions was paid during
fiscal 1996. Interest rates were not a significant factor in the increase in
interest income earned in the third quarter or first nine months of fiscal 1997
versus the same periods of fiscal 1996.
PROVISION FOR INCOME TAXES increased to $12.5 million in the third quarter of
fiscal 1997, compared to $9.5 million for the third quarter fiscal 1996. The
effective tax rate for the third quarter and year to date fiscal 1997 was 40.5%
and 41.5%, respectively, a decrease from 43% for the same periods last fiscal
year. The decrease in the effective tax rate is due to on-going tax planning
initiatives.
NET INCOME PER COMMON SHARE increased 38% to 18 cents per common share for the
third quarter of fiscal 1997, compared to 13 cents for the third quarter of
fiscal 1996. For the nine months ended June 30, 1997 and 1996, net income per
common share was 55 cents and 36 cents, respectively, a 53% increase year over
year.
QUARTERLY OPERATING INCOME TRENDS. Historically, the Company has realized
significant renewals and growth in contract value at the end of quarters. The
fourth quarter of the fiscal year typically is the fastest growth quarter for
contract value and the first quarter of the fiscal year typically represents the
slowest growth quarter as it is the quarter in which the largest amount of
contact renewals are due. As a result of the quarterly trends in contract value
and overall business volume, fees receivable, deferred revenues, deferred
commissions and commissions payable reflect this activity and typically show
substantial increases at quarter end, particularly at fiscal year end. All
contracts are billable upon signing, absent special terms granted on a limited
basis from time to time. All contracts are non-cancellable and non-refundable,
except for government contracts which have a 30-day cancellation clause, but
which have not produced material cancellations to date. The Company's policy is
to record at the time of signing of a RABS contract the entire amount of the
contract billable as deferred revenue and fees receivable. The Company also
records the related commission obligation upon the signing of the contract and
amortizes the corresponding deferred commission expense over the contract period
in which the related RABS revenues are earned and amortized to income.
9
10
Historically, RABS revenues have increased significantly in the first quarter of
the ensuing fiscal year over the immediately preceding quarter and other
revenues have increased similarly due to annual conferences and exhibition
events held in the first quarter. Additionally, operating income margin
(operating income as a percentage of total revenues) typically improves in the
first quarter of the fiscal year versus the immediately preceding quarter. The
operating income margin improvement in the first quarter of the fiscal year is
due to the increase in RABS revenue upon which the Company is able to further
leverage its selling, general and administrative expenses, plus operating income
generated on the first quarter Symposia and ITxpo exhibition events. While
favorable versus the prior fiscal year, operating income margin generally is not
as high in the second, third and fourth quarters of the fiscal year compared to
the first quarter of the fiscal year as the operating income margins on the
ITxpo conferences in the first fiscal quarter are higher than on conferences
held later in the fiscal year. Additionally, the Company historically does not
increase its level of spending until after the first quarter of the fiscal year,
when the rate of growth in contract value becomes known. As a result, growth in
operating expenses has typically lagged behind growth in revenues within a given
year, and operating income margin has generally been higher in the earlier
quarters of the fiscal year.
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE. The Company's future operating
results will depend upon the Company's ability to continue to compete
successfully in the market for information products and services. The Company
faces competition from a significant number of independent providers of similar
services, as well as the internal marketing and planning organizations of the
Company's clients. The Company also competes indirectly against other
information providers, including electronic and print media companies and
consulting firms. In addition, there are limited barriers to entry into the
Company's market and additional new competitors could readily emerge. There can
be no assurance that the Company will be able to continue to provide the
products and services that meet client needs as the Information Technology
("IT") market rapidly evolves, or that the Company can otherwise continue to
compete successfully. In this regard, the Company's ability to compete is
largely dependent upon the quality of its staff of IT analysts. Competition for
qualified analysts is intense. There can be no assurance that the Company will
be able to hire additional qualified IT analysts as may be required to support
the evolving needs of customers or any growth in the Company's business. Any
failure to maintain a premier staff of IT analysts could adversely affect the
quality of the Company's products and services, and therefore its future
business and operating results. Additionally, there may be increased business
risk as the Company expands product and service offerings to smaller domestic
companies. The Company's operating results are also subject to risks inherent in
international sales, including changes in market demand as a result of exchange
rate fluctuations, tariffs and other barriers, challenges in staffing and
managing foreign sales operations, and higher levels of taxation on foreign
income than domestic income. Further expansion would require additional
management attention and financial resources.
The Company has expanded its presence in the technology-based training industry
with the acquisition of J3 Learning Corporation in July 1996. The success of the
Company in the technology-based training industry will depend on its ability to
compete with vendors of IT products and services which include a range of
education and training specialists, hardware and system manufacturers, software
vendors, system integrators, dealers, value-added resellers and
network/communications vendors, certain of whom have significantly greater
product breadth and market presence in the technology-based training sector.
There can be no assurance that the Company will be able to provide products that
compare favorably with new competitive products or that competitive pressures
will not require the Company to reduce prices. Future success will also depend
on the Company's ability to develop new training products that are released
timely with the introductions of the underlying software products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily financed its operations to date through cash provided
by operating activities. The combination of revenue growth and operating income
margin improvements have contributed to positive cash provided by operating
activities for the nine months ended June 30, 1997. In addition, cash flow has
been enhanced by the Company's continuing management of working capital
requirements to support increased sales volumes from growth in the pre-existing
businesses and growth due to acquisitions.
10
11
The Company's cash and cash equivalents balance at June 30, 1997 and September
30, 1996 was $161.8 million and $96.8 million, respectively, while the
marketable securities balance (including both current and long-term maturities)
decreased to $31.2 million at June 30, 1997 from $33.1 million at September 30,
1996. Cash provided by operating activities totaled $62.9 million for the first
nine months of fiscal 1997 (compared to $40.3 million for the first nine months
of fiscal 1996) reflecting primarily the impact of increased revenues and
operating margins which are related to quarterly operating trends in the balance
sheet accounts, particularly fees receivable, deferred revenues, deferred
commissions, commissions payable and bonuses payable. Cash used for investing
activities was $36.1 million for the first nine months of fiscal 1997 (compared
to $23.3 million of cash used for the first nine months of fiscal 1996) and
consisted primarily of the addition of property and equipment for $14.3 million,
acquisition of businesses of $8.3 million, investments in unconsolidated
companies of approximately $8.3 million, and loans to officers of $7.2 million
offset partially by cash provided by net proceeds on the sale of marketable
securities of $1.9 million. Cash provided by financing activities totaled $39.9
million for the nine months ended June 30, 1997 (compared to $24.6 million of
cash provided for the nine months ended June 30, 1996) and resulted primarily
from $26.1 million in tax benefits from stock transactions with employees and
$13.6 million from the issuance of common stock upon the exercise of employee
stock options. The tax benefit of stock transactions with employees is due to a
reduction in the corporate income tax liability based on an imputed compensation
deduction equal to employees' gain upon the exercise of stock options at an
exercise price below fair market value. The effect of exchange rates reduced
cash and cash equivalents by $1.7 million through the nine months ended June 30,
1997, and was due to the strengthening of the U.S. dollar versus certain foreign
currencies. Through June 30, 1996, the foreign denominated cash balances were
significantly less and the exchange rate fluctuations were not as significant as
in the current fiscal year, thereby resulting in a reduction of $0.3 million in
cash.
The Company has available two unsecured credit lines, with The Bank of New York
and Chase Manhattan Bank for $5.0 million and $25.0 million, respectively. These
lines may be canceled by the banks at any time without prior notice or penalty.
Additionally, the Company issues letters of credit in the ordinary course of
business. The Company had outstanding letters of credit with Chase Manhattan
Bank of $5.5 million and $2.0 million with The Bank of New York at June 30,
1997. The Company currently has no material capital commitments. The Company
believes that its current cash balances and marketable securities, together with
cash anticipated to be provided by operating activities and borrowings available
under the existing lines of credit, will be sufficient for the expected
short-term and foreseeable long-term cash needs of the Company, including
possible acquisitions.
As of June 30, 1997, the Company recorded the conversion of all Class B Common
Stock into Class A Common Stock on a one for one basis, pursuant to a provision
of the Articles of Incorporation which requires conversion when the Class B
Common Stockholder's voting equity falls below a certain ownership percentage
after considering all exercisable options and warrants outstanding.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, Statement of Financial Accounting Standard No. 128, "Earnings
per Share" was issued. The statement sets forth guidance on the presentation of
earnings per share and requires dual presentation of basic and diluted earnings
per share on the face of the income statement. Basic earnings per share is
computed by dividing net income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if all common stock
equivalents were exercised (similar to fully diluted earnings per share under
APB Opinion No. 15). If the new standard was in effect during fiscal 1997, basic
net income per share for the three months and nine months ended June 30, 1997
would have been $0.19 and $0.59 per share, respectively. Diluted income per
share would have been $0.18 and $0.54 per share for the three months and nine
months ended June 30, 1997, respectively. The Company is required to adopt the
new standard in the first quarter of fiscal 1998.
In June 1997, Statement of Financial Accounting Standard ("SFAS") No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information" were issued. SFAS No. 130 establishes
standards for reporting and disclosure of
11
12
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders which is currently not required. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company is required to adopt both new
standards in the first quarter of 1999.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Description of Document
10.7 Gartner Group, Inc. 1991 Stock Option Plan as
amended and restated on February 24, 1997
10.10 Gartner Group, Inc. 1994 Long Term Stock Option
Plan as amended and restated on February 24, 1997
10.16 Gartner Group, Inc. 1996 Long Term Stock Option
Plan as amended and restated on February 24, 1997
11.1 Computation of Net Income per Common Share
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant during the
fiscal quarter ended June 30, 1997.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
12
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gartner Group, Inc.
------------------------------
Date August 14, 1997 /s/ John F. Halligan
--------------- ------------------------------
John F. Halligan
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
14
EXHIBIT INDEX
-------------
Exhibit Number Description of Document
-------------- -----------------------
10.7(a) Amendment effective February 24, 1997 to the 1991
Stock Option Plan
10.10(a) Amendment effective February 24, 1997 to the 1994
Long Term Stock Option Plan
10.16(a) Amendment effective February 24, 1997 to the 1996
Long Term Stock Option Plan
11.1 Computation of Net Income per Common Share
27.1 Financial Data Schedule
1
EXHIBIT 10.7 (a)
GARTNER GROUP, INC.
1991 STOCK OPTION PLAN
AS AMENDED AND RESTATED ON FEBRUARY 24, 1997
This 1991 Stock Option Plan is an amendment and restatement of the
Gartner Group, Inc. 1991 Stock Option and Appreciation Right Incentive
Compensation Plan.
1. Purpose of the Plan. The purpose of this Stock Option Plan is to
enable the Company to provide incentive to eligible employees, consultants and
officers whose present and potential contributions are important to the
continued success of the Company, to afford these individuals the opportunity to
acquire a proprietary interest in the Company, and to enable the Company to
enlist and retain in its employment qualified personnel for the successful
conduct of its business. It is intended that this purpose will be effected
through the granting of (a) stock options, (b) stock purchase rights, (c) stock
appreciation rights, and (d) long-term performance awards.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or such of its Committees
as shall be administering the Plan, in accordance with Section 8 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under applicable securities laws,
Delaware corporate law and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 8 of the Plan.
(f) "Common Stock" means the Common Stock, $.01 par value, of
the Company.
(g) "Company" means Gartner Group, Inc., a Delaware
corporation, previously known as GGI Holding Corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only
1
2
a director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship is not interrupted or terminated
by the Company, or any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Administrator, including sick leave, military leave, or
any other personal leave; provided, however, that for purposes of Continuous
Status as an Employee or Consultant, no such leave may exceed ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract
(including written Company policies) or statute or unless (in the case of
Options and Rights other than Incentive Stock Options) the Administrator has
expressly designated a longer leave period during which (for purposes of such
Options or Rights) Continuous Status as an Employee or Consultant shall
continue; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor; and provided further
that any vesting or lapsing of the Company's right to repurchase Shares at their
original purchase price shall cease on the ninety-first (91st) consecutive day
of any leave of absence approved by the Administrator and shall not recommence
until such date, if any, upon which the Consultant or Optionee resumes his or
her service with the Company.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national
market system, including without limitation
the Nasdaq National Market of the National
Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the
Fair Market Value of a share of Common Stock
shall be the average of the closing sales
prices for such stock (or the average of the
closing bids, if no sales were reported) as
quoted
2
3
on such system or exchange (or the exchange
with the greatest volume of trading in
Common Stock) on the five market trading
days immediately preceding the date of
determination, as reported in The Wall
Street Journal or such other source as the
Administrator of the Plan deems reliable;
provided, however, that in the event the
Fair Market Value as so determined is more
than 20% greater or more than 20% less than
the closing sales price for such stock (or
the closing bid, if no sales were reported)
as so quoted on the date of determination,
then the Administrator shall be entitled to
determine the Fair Market Value in good
faith, at a price within the range of prices
from the Fair Market Value as otherwise
determined above to the closing price (or
closing bid, as applicable) on the date of
determination;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National
Market thereof) or is regularly quoted by a
recognized securities dealer but selling
prices are not reported, the Fair Market
Value of a Share of Common Stock shall be
the average of the means between the high
bid and low asked prices for the Common
Stock on the five market trading days
immediately preceding the day of
determination, as reported in The Wall
Street Journal or such other source as the
Administrator deems reliable; provided,
however, that in the event the Fair Market
Value as so determined is more than 20%
greater or more than 20% less than the mean
between the high bid and low asked prices
for such stock as so quoted on the date of
determination, then the Administrator shall
be entitled to determine the Fair Market
Value in good faith, at a price within the
range of prices from the Fair Market Value
as otherwise determined above to the mean
between the high bid and low asked prices on
the date of determination;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value
shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(p) "Long-Term Performance Award" means an award under Section
7 below. A Long-Term Performance Award shall permit the recipient to receive a
cash or stock bonus (as determined by the Administrator) upon satisfaction of
such performance
3
4
factors as are set out in the recipient's individual grant. Long-term
Performance Awards will be based upon the achievement of Company, Subsidiary
and/or individual performance factors or upon such other criteria as the
Administrator may deem appropriate.
(q) "Long-Term Performance Award Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Long-Term Performance Award grant. The Long-Term
Performance Award Agreement is subject to the terms and conditions of the Plan.
(r) "Nonstatutory Stock Option" means any Option that is not
an Incentive Stock Option.
(s) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option, Stock Purchase Right, SAR
or Long-Term Performance Award grant. The Notice of Grant is part of the Option
Agreement, the SAR Agreement and the Long-Term Performance Award Agreement.
(t) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "Option" means a stock option granted pursuant to the
Plan.
(v) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(w) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(x) "Optioned Stock" means the Common Stock subject to an
Option or Right.
(y) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(aa) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(bb) "Plan" means this Stock Option Plan, formerly the 1991
Stock Option and Appreciation Right Incentive Compensation Plan.
4
5
(cc) "Restricted Stock" means shares of Common Stock subject
to a Restricted Stock Purchase Agreement acquired pursuant to a grant of Stock
Purchase Rights under Section 6 below.
(dd) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(ee) "Right" means and includes SARs, Long-Term Performance
Awards and Stock Purchase Rights granted pursuant to the Plan.
(ff) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(gg) "SAR" means a stock appreciation right granted pursuant
to Section 5 of the Plan.
(hh) "SAR Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual SAR
grant. The SAR Agreement is subject to the terms and conditions of the Plan.
(ii) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(jj) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 6 of the Plan, as evidenced by a Notice of Grant.
(kk) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Shares Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the total number of Shares reserved and available for distribution
under the Plan is 5,700,000 Shares. Subject to Section 10 of the Plan, if any
Shares that have been optioned under an Option cease to be subject to such
Option (other than through exercise of the Option), or if any Option or Right
granted hereunder is forfeited or any such award otherwise terminates prior to
the issuance of Common Stock to the participant, the shares that were subject to
such Option or Right shall again be available for distribution in connection
with future Option or right grants under the Plan; provided, however, that
Shares that have actually been issued under the Plan, whether upon exercise of
an Option or Right, shall not in any event be returned to the Plan and shall not
become available for future distribution under the Plan.
5
6
4. Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Right may be granted additional Options or Rights.
5. Options and SARs.
(a) Options. The Administrator, in its discretion, may grant
Options to eligible participants and shall determine whether such Options shall
be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a Notice of Grant which shall expressly identify the Options as
Incentive Stock Options or as Nonstatutory Stock Options, and be in such form
and contain such provisions as the Administrator shall from time to time deem
appropriate. Without limiting the foregoing, the Administrator may at any time
authorize the Company, with the consent of the respective recipients, to issue
new Options or Rights in exchange for the surrender and cancellation of
outstanding Options or Rights. Option agreements shall contain the following
terms and conditions:
(i) Exercise Price; Number of Shares. The per
Share exercise price for the Shares issuable
pursuant to an Option shall be such price as
is determined by the Administrator;
provided, however, that in the case of an
Incentive Stock Option, the price shall be
no less than 100% of the Fair Market Value
of the Common Stock on the date the Option
is granted, subject to any additional
conditions set out in Section 5(a)(iv)
below.
The Notice of Grant shall specify the number
of Shares to which it pertains.
(ii) Waiting Period and Exercise Dates. At the
time an Option is granted, the Administrator
will determine the terms and conditions to
be satisfied before Shares may be purchased,
including the dates on which Shares subject
to the Option may first be purchased. The
Administrator may specify that an Option may
not be exercised until the completion of the
service period specified at the time of
grant. (Any such period is referred to
herein as the "waiting period.") At the time
an Option is granted, the Administrator
shall fix the period within which the Option
may be exercised, which shall not be earlier
than the end of the waiting period, if any,
nor, in the case of an Incentive Stock
Option, later than ten (10) years, from the
date of grant.
6
7
(iii) Form of Payment. The consideration to be
paid for the Shares to be issued upon
exercise of an Option, including the method
of payment, shall be determined by the
Administrator (and, in the case of an
Incentive Stock Option, shall be determined
at the time of grant) and may consist
entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) in the case of
Shares acquired upon exercise of an option,
have been owned by the Optionee for more
than six months on the date of surrender,
and (2) have a Fair Market Value on the date
of surrender not greater than the aggregate
exercise price of the Shares as to which
said Option shall be exercised;
(5) delivery of a properly executed exercise
notice together with such other
documentation as the Administrator and any
broker approved by the Company, if
applicable, shall require to effect an
exercise of the Option and delivery to the
Company of the sale or loan proceeds
required to pay the exercise price;
(6) any combination of the foregoing methods
of payment; or
(7) such other consideration and method of
payment for the issuance of Shares to the
extent permitted by Applicable Laws.
(iv) Special Incentive Stock Option Provisions.
In addition to the foregoing, Options
granted under the Plan which are intended to
be Incentive Stock Options under Section 422
of the Code shall be subject to the
following terms and conditions:
(1) Dollar Limitation. To the extent that
the aggregate Fair Market Value of (a) the
Shares with respect to which Options
designated as Incentive Stock Options plus
(b) the shares of stock of the Company,
Parent and any Subsidiary with respect to
which other incentive stock options are
exercisable for the first time by an
Optionee during any calendar year under all
plans of the Company and any Parent and
Subsidiary exceeds $100,000, such Options
shall be treated as Nonstatutory Stock
7
8
Options. For purposes of the preceding
sentence, (a) Options shall be taken into
account in the order in which they were
granted, and (b) the Fair Market Value of
the Shares shall be determined as of the
time the Option or other incentive stock
option is granted.
(2) 10% Stockholder. If any Optionee to whom
an Incentive Stock Option is to be granted
pursuant to the provisions of the Plan is,
on the date of grant, the owner of Common
Stock (as determined under Section 424(d) of
the Code) possessing more than 10% of the
total combined voting power of all classes
of stock of the Company or any Parent or
Subsidiary of the Company, then the
following special provisions shall be
applicable to the Option granted to such
individual:
(a) The per Share Option price of
Shares subject to such Incentive
Stock Option shall not be less than
110% of the Fair Market Value of
Common Stock on the date of grant;
and
(b)The Option shall not have a term
in excess of five (5) years from the
date of grant.
Except as modified by the preceding
provisions of this subsection 5(a)(iv) and
except as otherwise limited by Section 422
of the Code, all of the provisions of the
Plan shall be applicable to the Incentive
Stock Options granted hereunder.
(v) Other Provisions. Each Option granted under
the Plan may contain such other terms,
provisions, and conditions not inconsistent
with the Plan as may be determined by the
Administrator.
(vi) Buyout Provisions. The Administrator may at
any time offer to buy out for a payment in
cash or Shares, an Option previously
granted, based on such terms and conditions
as the Administrator shall establish and
communicate to the Optionee at the time that
such offer is made.
(b) SARs.
(i) In Connection with Options. At the sole
discretion of the Administrator, SARs may be
granted in connection with all or any part
of an Option, either concurrently with the
grant of the
8
9
Option or at any time thereafter during the
term of the Option. The following provisions
apply to SARs that are granted in connection
with Options:
(1) The SAR shall entitle the Optionee to
exercise the SAR by surrendering to the
Company unexercised a portion of the related
Option. The Optionee shall receive in
Exchange from the Company an amount equal to
the excess of (1) the Fair Market Value on
the date of exercise of the SAR of the
Common Stock covered by the surrendered
portion of the related Option over (2) the
exercise price of the Common Stock covered
by the surrendered portion of the related
Option. Notwithstanding the foregoing, the
Administrator may place limits on the amount
that may be paid upon exercise of an SAR;
provided, however, that such limit shall not
restrict the exercisability of the related
Option.
(2) When an SAR is exercised, the related
Option, to the extent surrendered, shall
cease to be exercisable.
(3) An SAR shall be exercisable only when
and to the extent that the related Option is
exercisable and shall expire no later than
the date on which the related Option
expires.
(4) An SAR may only be exercised at a time
when the Fair Market Value of the Common
Stock covered by the related Option exceeds
the exercise price of the Common Stock
covered by the related Option.
(ii) Independent of Options. At the sole
discretion of the Administrator, SARs may be
granted without related Options. The
following provisions apply to SARs that are
not granted in connection with Options:
(1) The SAR shall entitle the Optionee, by
exercising the SAR, to receive from the
Company an amount equal to the excess of (1)
the Fair Market Value of the Common Stock
covered by the exercised portion of the SAR,
as of the date of such exercise, over (2)
the Fair Market Value of the Common Stock
covered by the exercised portion of the SAR,
as of the last market trading date prior to
the date on which the SAR was granted;
provided, however, that the Administrator
may place limits on the aggregate amount
that may be paid upon exercise of an SAR.
9
10
(2) SARs shall be exercisable, in whole or
in part, at such times as the Administrator
shall specify in the Optionee's SAR
agreement.
(iii) Form of Payment. The Company's obligation
arising upon the exercise of an SAR may be
paid in Common Stock or in cash, or in any
combination of Common Stock and cash, as the
Administrator, in its sole discretion, may
determine. Shares issued upon the exercise
of an SAR shall be valued at their Fair
Market Value as of the date of exercise.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a
Stockholder. Any Option or SAR granted
hereunder shall be exercisable at such times
and under such conditions as determined by
the Administrator and as shall be
permissible under the terms of the Plan.
An Option may not be exercised for a
fraction of a Share.
An Option or SAR shall be deemed to be
exercised when written notice of such
exercise has been given to the Company in
accordance with the terms of the Option or
SAR by the person entitled to exercise the
Option or SAR and full payment for the
Shares with respect to which the Option is
exercised has been received by the Company.
Full payment may, as authorized by the
Administrator (and, in the case of an
Incentive Stock Option, determined at the
time of grant) and permitted by the Option
Agreement consist of any consideration and
method of payment allowable under subsection
5(a)(iii) of the Plan. Until the issuance
(as evidenced by the appropriate entry on
the books of the Company or of a duly
authorized transfer agent of the Company) of
the stock certificate evidencing such
Shares, no right to vote or receive
dividends or any other rights as a
stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise
of the Option. No adjustment will be made
for a dividend or other right for which the
record date is prior to the date the stock
certificate is issued, except as provided in
Section 10 of the Plan.
10
11
Exercise of an Option in any manner shall
result in a decrease in the number of Shares
which thereafter shall be available, both
for purposes of the Plan and for sale under
the Option, by the number of Shares as to
which the Option is exercised. Exercise of
an SAR in any manner shall, to the extent
the SAR is exercised, result in a decrease
in the number of Shares which thereafter
shall be available for purposes of the Plan,
and the SAR shall cease to be exercisable to
the extent it has been exercised.
(ii) Rule 16b-3. Options and SARs granted to
individuals subject to Section 16 of the
Exchange Act ("Insiders") must comply with
the applicable provisions of Rule 16b-3 and
shall contain such additional conditions or
restrictions as may be required thereunder
to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect
to Plan transactions.
(iii) Termination of Employment or Consulting
Relationship. In the event an Optionee's
Continuous Status as an Employee or
Consultant terminates (other than upon the
Optionee's death or Disability), the
Optionee may exercise his or her Option or
SAR, but only within such period of time as
is determined by the Administrator at the
time of grant, not to exceed six (6) months
(three (3) months in the case of an
Incentive Stock Option) from the date of
such termination, and only to the extent
that the Optionee was entitled to exercise
it at the date of such termination (but in
no event later than the expiration of the
term of such Option or SAR as set forth in
the Option or SAR Agreement). To the extent
that Optionee was not entitled to exercise
an Option or SAR at the date of such
termination, and to the extent that the
Optionee does not exercise such Option or
SAR (to the extent otherwise so entitled)
within the time specified herein, the Option
or SAR shall terminate.
(iv) Disability of Optionee. In the event an
Optionee's Continuous Status as an Employee
or Consultant terminates as a result of the
Optionee's Disability, the Optionee may
exercise his or her Option or SAR, but only
within six (6) months from the date of such
termination, and only to the extent that the
Optionee was entitled to exercise it at the
date of such termination (but in no event
later than the expiration of the term of
such Option or SAR as set forth in the
Option or SAR
11
12
Agreement). To the extent that Optionee was
not entitled to exercise an Option or SAR at
the date of such termination, and to the
extent that the Optionee does not exercise
such Option or SAR (to the extent otherwise
so entitled) within the time specified
herein, the Option or SAR shall terminate.
(v) Death of Optionee. Notwithstanding Sections
5(c)(iii) and 5(c)(iv) above, in the event
of an Optionee's death during Optionee's
Continuous Status as an Employee or
Consultant, the Optionee's estate or a
person who acquired the right to exercise
the deceased Optionee's Option or SAR by
bequest or inheritance may exercise the
Option or SAR, but only within six (6)
months (or such lesser period as the Option
or SAR Agreement may provide, or such longer
period, not to exceed twelve (12) months, as
the Option or SAR Agreement may provide)
following the date of death, and only to the
extent that the Optionee was entitled to
exercise it at the date of death (but in no
event later than the expiration of the full
term of such Option or SAR as set forth in
the Option or SAR Agreement). To the extent
that Optionee was not entitled to exercise
an Option or SAR at the date of death, and
to the extent that the Optionee's estate or
a person who acquired the right to exercise
such Option does not exercise such Option or
SAR (to the extent otherwise so entitled)
within the time specified herein, the Option
or SAR shall terminate.
(d) The following limitations shall apply to grants of
Options to Employees:
(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 500,000 shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options to purchase up
to an additional 500,000 Shares which shall not count against
the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 10.
(iv) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in
connection with a transaction describe in Section 10), the
canceled Option will be counted against the limit set forth in
Section 5(d)(i). For this purpose, if the exercise price of an
Option is reduced,
12
13
the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that the offeree shall be entitled
to purchase, the price to be paid, and the time within which the offeree must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 10
of the Plan.
13
14
7. Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone or in addition to other
awards granted under the Plan. Such awards shall be granted for no cash
consideration. The Administrator shall determine the nature, length and starting
date of any performance period (the "Performance Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors, if
any, to be used in the determination of Long-Term Performance Awards and the
extent to which such Long-Term Performance Awards are valued or have been
earned. Long-Term Performance Awards may vary from participant to participant
and between groups of participants and shall be based upon the achievement of
Company, Subsidiary, Parent and/or individual performance factors or upon such
other criteria as the Administrator may deem appropriate. Performance Periods
may overlap and participants may participate simultaneously with respect to
Long-Term Performance Awards that are subject to different Performance Periods
and different performance factors and criteria. Long-Term Performance Awards
shall be confirmed by, and be subject to the terms of, a Long-Term Performance
Award agreement. The terms of such awards need not be the same with respect to
each participant.
At the beginning of each Performance Period, the Administrator
may determine for each Long-Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Common Stock to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Long-Term Performance
Award are met. Such dollar values or number of shares of Common Stock may be
fixed or may vary in accordance with such performance or other criteria as may
be determined by the Administrator.
(b) Adjustment of Awards. The Administrator may adjust the
performance factors applicable to the Long-Term Performance Awards to take into
account changes in legal, accounting and tax rules and to make such adjustments
as the Administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships.
8. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted
by Rule 16b-3 and Applicable Laws, the Plan
may (but need not) be administered by
different administrative bodies with respect
to (A) Directors who are employees, (B)
Officers who are not Directors and (C)
Employees who are neither Directors nor
Officers.
14
15
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options
and Rights to eligible participants who are
Officers or Directors of the Company, the
Plan shall be administered by (A) the Board,
if the Board may administer the Plan in
compliance with Rule 16b-3 as it applies to
a plan intended to qualify thereunder as a
discretionary grant or award plan, or (B) a
Committee designated by the Board to
administer the Plan, which Committee shall
be constituted (1) in such a manner as to
permit the Plan to comply with Rule 16b-3 as
it applies to a plan intended to qualify
thereunder as a discretionary grant or award
plan and (2) in such a manner as to satisfy
the Applicable Laws.
(iii) Administration with respect to Other
Persons. With respect to grants of Options
to eligible participants who are neither
Directors nor Officers of the Company, the
Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board,
which Committee shall be constituted in such
a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this
Section 8(a), such Committee shall continue
to serve in its designated capacity until
otherwise directed by the Board. From time
to time the Board may increase the size of
any Committee and appoint additional members
thereof, remove members (with or without
cause) and appoint new members in
substitution therefor, fill vacancies
(however caused) and remove all members of a
Committee and thereafter directly administer
the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a
Committee appointed under subsection (ii),
to the extent permitted by Rule 16b-3 as it
applies to a plan intended to qualify
thereunder as a discretionary grant or award
plan.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section
2(n) of the Plan;
15
16
(ii) to select the Consultants and Employees to
whom Options and Rights may be granted
hereunder;
(iii) to determine whether and to what extent
Options and Rights or any combination
thereof, are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each Option and Right
granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of
any award granted hereunder. Such terms and
conditions include, but are not limited to,
the exercise price, the time or times when
Options or Rights may be exercised (which
may be based on performance criteria), any
vesting acceleration or waiver of forfeiture
restrictions, and any restriction or
limitation regarding any Option or Right or
the shares of Common Stock relating thereto,
based in each case on such factors as the
Administrator, in its sole discretion, shall
determine;
(vii) to construe and interpret the terms of the
Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) to determine whether and under what
circumstances an Option or Right may be
settled in cash instead of Common Stock or
Common Stock instead of cash;
(x) to reduce the exercise price of any Option
or Right;
(xi) to modify or amend each Option or Right
(subject to Section 16 of the Plan);
(xii) to authorize any person to execute on behalf
of the Company any instrument required to
effect the grant of an Option or Right
previously granted by the Administrator;
16
17
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions
applicable to Options and Rights and any
Restricted Stock; and
(xv) to make all other determinations deemed
necessary or advisable for administering the
Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
9. Non-Transferability of Options. Options and Rights may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options or Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Right, as well as the price per
share of Common Stock covered by each such outstanding Option or Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Right
has not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option or Right shall terminate
as of a date fixed by the Board and give each Optionee
17
18
the right to exercise his or her Option or Right as to all or any part of the
Optioned Stock, including Shares as to which the Option or Right would not
otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Right shall be assumed or
an equivalent Option or Right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, the Administrator shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
or Right as to all or a portion of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If the Administrator makes an
Option or Right exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee that
the Option or Right shall be exercisable for a period of not less than fifteen
(15) days from the date of such notice, and the Option or Right will terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option or Right shall be considered assumed if, immediately following the merger
or sale of assets, the Option or Right confers the right to purchase, for each
Share of Optioned Stock subject to the Option or Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets was
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option or Right, for each Share of Optioned Stock subject to the Option or
Right, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
11. Date of Grant. The date of grant of an Option or Right shall be,
for all purposes, the date on which the Administrator makes the determination
granting such Option or Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
12. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Right unless the exercise of such Option or Right
and the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock
18
19
exchange or quotation system upon which the Shares may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the exercise
of an Option or Right, the Company may require the person exercising such Option
or Right to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.
13. Liability of Company.
(a) Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional stockholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 16(b) of the Plan.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such stockholder approval, if required, shall be
19
20
obtained in such a manner and to such a degree as is required by the applicable
law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
17. Taxation Upon Exercise of Option or Right. At the discretion of the
Administrator, Optionees may satisfy withholding obligations as provided in this
Section 17. When an Optionee incurs tax liability in connection with an Option
or Right, which tax liability is subject to withholding under applicable tax
laws, the Optionee may satisfy the tax withholding obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) by surrendering to the Company Shares
which (i) in the case of Shares previously acquired from the Company, have been
owned by the Optionee for more than six months on the date of surrender, and
(ii) have a fair market value on the date of surrender equal to or less than
Optionee's marginal tax rate times the ordinary income recognized, or (d) by
electing to have the Company withhold from the Shares to be issued upon exercise
of the Option or Right that number of Shares having a fair market value equal to
the amount required to be withheld. For this purpose, the fair market value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined (the "Tax Date").
If the Optionee is an Insider, any surrender of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is an Insider, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or
20
21
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
18. Term of the Plan. The Plan shall expire, and no further Options
shall be granted pursuant to the Plan, on April 25, 2001.
21
1
EXHIBIT 10.10 (a)
GARTNER GROUP, INC.
LONG TERM STOCK OPTION PLAN
AS AMENDED AND RESTATED ON FEBRUARY 24, 1997
1. Purposes of the Plan. The purposes of this Long Term Stock
Option Plan (the "Plan") are:
- to attract and retain quality personnel for positions of
substantial responsibility,
- to create additional incentive for senior personnel of the
Company by offering long term equity participation in the
Company, and
- to promote the long-term success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant and
subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall administer the Plan in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock, Class A of the
Company.
(g) "Company" means Gartner Group, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option
2
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
Common Stock shall be the average of the closing sales prices for such stock (or
the average of the closing bids, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest volume of trading in
Common Stock) on the five market trading days immediately preceding the date of
determination, as reported in The Wall Street Journal or such other source as
the Administrator of the Plan deems reliable; provided, however, that in the
event the Fair Market Value as so determined is more than 20% greater or more
than 20% less than the closing sales price for such stock (or the closing bid,
if no sales were reported) as so quoted on the date of determination, then the
Administrator shall be entitled to determine the Fair Market Value in good
faith, at a price within the range of prices from the Fair Market Value as
otherwise determined above to the closing price (or closing bid, as applicable)
on the date of determination;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the average of the means
between the high bid and low asked prices for the Common Stock on the five
market trading days immediately preceding the day of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; provided, however, that in the event the Fair Market Value as so
determined is more than 20% greater or more than 20% less than the mean between
the high bid and low asked prices for such stock as so quoted on the date of
determination, then the Administrator shall be entitled to determine the Fair
Market Value in good faith, at a price within the range of prices from the Fair
Market Value as otherwise determined above to the mean between the high bid and
low asked prices on the date of determination;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
2
3
(q) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Senior Manager" means an Employee who is an executive
officer, vice president, director-level employee or senior analyst of the
Company, or such other Employee as the Administrator shall deem eligible to
participate in the Plan.
(aa) "Share" means a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(ab) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 1,640,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
3
4
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Senior Managers who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and
Officers Subject to Section 16(b). With respect to Option grants made to Senior
Managers who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3, or (B) a committee designated
by the Board to administer the Plan, which committee shall be constituted to
comply with the rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3.
(iii) Administration With Respect to Other Persons.
With respect to Option grants made to Senior Managers who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted to
satisfy Applicable Laws. Once appointed, such Committee shall serve in its
designated capacity until otherwise directed by the Board. The Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Senior Managers to whom Options may
be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
4
5
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Options may be granted to Senior Managers. If otherwise
eligible, a Senior Manager who has been granted an Option may be granted
additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000
shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options to purchase up to
an additional 500,000 Shares which shall not count against the
limit set forth in subsection (i) above.
5
6
(iii) The foregoing limitations shall be
adjusted proportionately in connection with any change in the
Company's capitalization as described in Section 12.
(iv) If an Option is canceled in the same
fiscal year of the Company in which it was granted (other than
in connection with a transaction describe in Section 12), the
canceled Option will be counted against the limit set forth in
Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 18 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be ten (10)
years from the date of grant. However, in the case of an
Incentive Stock Option, the term shall be ten (10) years from
the date of grant or such shorter term as may be provided in
the Notice of Grant. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the term
of the Incentive Stock Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the
Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option
shall be determined by the Administrator, subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of
the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the
date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above,
the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share
on the date of grant.
(C) (ii) In the case of a Nonstatutory Stock
Option, the per Share exercise price shall be
determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any
conditions which must be satisfied before the Option may
be exercised. In so doing, the Administrator may specify
that an Option may not be exercised until the completion
of a service period.
6
7
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) in the case of a "cashless exercise" during the
trading window permitted by the Company's Insider Trading Policy, delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth
in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
7
8
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship.
(i) Upon termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may exercise
his or her Option to the extent that he or she was entitled to exercise it as of
the date of such termination. Such exercise may occur only before the end of the
period determined by the Administrator for exercise following termination. In
the case of an Incentive Stock Option, such period shall not exceed three (3)
months. In no event shall such period extend beyond the expiration date of the
term of the Option as set forth in the Option Agreement.
(ii) An Optionee's change of status from Employee to
Consultant shall not be treated as a termination of the Optionee's Continuous
Status as an Employee or Consultant, and any Option held by the Optionee shall
remain in effect, except as provided hereinbelow. Any Incentive Stock Option
held by such Optionee shall automatically cease to be treated for tax purposes
as an Incentive Stock Option and shall be treated as a Nonstatutory Stock Option
on the ninety-first (91st) day following such change of status. Notwithstanding
the above, within thirty (30) days after any such change of status, the
Administrator may in its discretion determine that this Section 10(b)(ii) shall
not apply to such change of status and that such change of status shall be
treated as a termination of the Optionee's Continuous Status as an Employee or
Consultant as provided in Section 10(b)(i).
(iii) To the extent that the Optionee is not entitled to
exercise his or her Option at the date of such termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Upon termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant),
only to the extent that the Optionee was entitled to exercise it at the date of
such termination. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. Upon the death of an Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the expiration of the term of such Option as
set forth in the Notice of Grant), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, only to the
extent that the Optionee was entitled to exercise the Option at the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
8
9
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option may be assumed or an equivalent option
may be substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. The Administrator may, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all or a portion of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If the Administrator makes an Option
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to purchase
or receive, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
9
10
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14(b)
of the Plan.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
10
11
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
11
1
EXHIBIT 10.16 (a)
GARTNER GROUP, INC.
1996 LONG TERM STOCK OPTION PLAN
AS AMENDED AND RESTATED FEBRUARY 24, 1997
1. Purposes of the Plan. The purposes of this 1996 Long Term
Stock Option Plan (the "Plan") are:
- to attract and retain quality personnel for positions of
substantial responsibility,
- to create additional incentive for senior personnel of the
Company by offering long term equity participation in the
Company, and
- to promote the long-term success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant and
subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees as
shall administer the Plan in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock, Class A of the
Company.
(g) "Company" means Gartner Group, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
2
(i) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
Common Stock shall be the average of the closing sales prices for such stock (or
the average of the closing bids, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest volume of trading in
Common Stock) on the five market trading days immediately preceding the date of
determination, as reported in The Wall Street Journal or such other source as
the Administrator of the Plan deems reliable; provided, however, that in the
event the Fair Market Value as so determined is more than 20% greater or more
than 20% less than the closing sales price for such stock (or the closing bid,
if no sales were reported) as so quoted on the date of determination, then the
Administrator shall be entitled to determine the Fair Market Value in good
faith, at a price within the range of prices from the Fair Market Value as
otherwise determined above to the closing price (or closing bid, as applicable)
on the date of determination;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the average of the means
between the high bid and low asked prices for the Common Stock on the five
market trading days immediately preceding the day of determination, as reported
in The Wall Street Journal
3
or such other source as the Administrator deems reliable; provided, however,
that in the event the Fair Market Value as so determined is more than 20%
greater or more than 20% less than the mean between the high bid and low asked
prices for such stock as so quoted on the date of determination, then the
Administrator shall be entitled to determine the Fair Market Value in good
faith, at a price within the range of prices from the Fair Market Value as
otherwise determined above to the mean between the high bid and low asked prices
on the date of determination;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Senior Manager" means an Employee who is an executive
officer, vice president, director-level employee or senior analyst of the
Company, or such other Employee as the Administrator shall deem eligible to
participate in the Plan.
-3-
4
(aa) "Share" means a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(bb) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 1,800,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to Directors, Officers who are
not Directors, and Senior Managers who are neither Directors nor Officers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
-4-
5
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Senior Managers to whom Options may
be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
-5-
6
5. Eligibility. Options may be granted to Senior Managers. If otherwise
eligible, a Senior Manager who has been granted an Option may be granted
additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 500,000 shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options to purchase up
to an additional 500,000 Shares which shall not count against
the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 12.
(iv) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in
connection with a transaction describe in Section 12), the
canceled Option will be counted against the limit set forth in
Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 18 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be ten (10) years from
the date of grant. However, in the case of an Incentive Stock Option, the term
shall be ten (10) years from the date of
-6-
7
grant or such shorter term as may be provided in the Notice of Grant. Moreover,
in the case of an Incentive Stock Option granted to an Optionee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
-7-
8
(ii) check;
(iii) promissory note (on such terms and conditions as
determined by the Administrator);
(iv) other Shares which have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) in the case of a "cashless exercise" during the
trading window permitted by the Company's Insider Trading Policy, delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
-8-
9
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship.
(i) Upon termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may exercise
his or her Option to the extent that he or she was entitled to exercise it as of
the date of such termination. Such exercise may occur only before the end of the
period determined by the Administrator for exercise following termination. In
the case of an Incentive Stock Option, such period shall not exceed three (3)
months. In no event shall such period extend beyond the expiration date of the
term of the Option as set forth in the Option Agreement.
(ii) An Optionee's change of status from Employee to
Consultant shall not be treated as a termination of the Optionee's Continuous
Status as an Employee or Consultant, and any Option held by the Optionee shall
remain in effect, except as provided hereinbelow. Any Incentive Stock Option
held by such Optionee shall automatically cease to be treated for tax purposes
as an Incentive Stock Option and shall be treated as a Nonstatutory Stock Option
on the ninety-first (91st) day following such change of status. Notwithstanding
the above, within thirty (30) days after any such change of status, the
Administrator may in its discretion determine that this Section 10(b)(ii) shall
not apply to such change of status and that such change of status shall be
treated as a termination of the Optionee's Continuous Status as an Employee or
Consultant as provided in Section 10(b)(i).
(iii) To the extent that the Optionee is not entitled to
exercise his or her Option at the date of such termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Upon termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant),
only to the extent that the Optionee was entitled to exercise it at the date of
such termination. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. Upon the death of an Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the expiration of the term of such Option as
set forth in the Notice of Grant), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, only to the
extent that the Optionee was entitled to exercise the Option at the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the
-9-
10
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
11. Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option may be assumed or an equivalent option
may be substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. The Administrator may, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all or a portion of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If the Administrator makes an Option
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the
-10-
11
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
shareholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-11-
12
(b) Investment Representations. As a condition to the exercise of
an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14(b)
of the Plan.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
-12-
13
GARTNER GROUP, INC.
1996 LONG TERM STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1996 Long Term
Stock Option Plan shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number ___________________
Date of Grant ___________________
Exercise Price per Share $ _________________
Total Number of Shares Granted ___________________
Total Exercise Price $ _________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ______________________, 200__
[10 years from date of grant]
Vesting Schedule:
This Option shall vest and become exercisable as to 100% of the Shares
subject to the Option six (6) years from the Date of Grant, subject to
acceleration of vesting and exercisability upon the achievement of certain
financial performance targets determined by the Board in its sole discretion, as
follows:
(i) If the Company's financial performance for fiscal
year [1997] meets the target set forth in Exhibit A hereto, then 25% of the
Shares subject to this Option shall first become exercisable 3 years from the
Date of Grant [(January 23, 2000)].
14
(ii) If the Company's cumulative financial performance
for fiscal years [1997] and [1998] exceeds the cumulative target for such years
set forth in Exhibit A hereto, then a total of 50% of the Shares subject to this
Option shall accelerate and first become exercisable 3 years from the Date of
Grant [(January 23, 2000)].
(iii) If the Company's cumulative financial performance
for fiscal years 1996, 1997 and 1998 exceeds the cumulative target for such
years set forth in Exhibit A, then (a) a total of 50% of the Shares subject to
this Option shall accelerate and first become exercisable 3 years from the Date
of Grant [(January 23, 2000)], (b) an additional 25% of the Shares subject to
this Option shall accelerate and first become exercisable 4 years form the Date
of Grant [(January 23, 2001)] and (c) the remaining 25% of the Shares subject to
this Option shall accelerate and first become exercisable 5 years for the Date
of Grant [(January 23, 2002)].
Failure to achieve the specified target or targets for any one year or
consecutive years can be remedied by achievement of the cumulative target in a
succeeding year or years.
The foregoing acceleration schedule is summarized below:
Year meet target vesting schedule
1 yes 25% 3 years
75% 6 years
2 yes 50% 3 years
50% 6 years
3 yes 50% 3 years
25% 4 years
25% 5 years
Termination Period:
This Option may not be exercised after termination of the Optionee's
Continuous Status as an Employee or Consultant with the Company, provided that
upon termination for death or Disability of the Optionee this Option may be
exercised for such longer period as provided in the Plan. In the event of the
Optionee's change in status from Employee to Consultant, this Option Agreement
shall remain in effect except as provided in the Plan. In no event shall this
Option be exercised later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions
-2-
15
of the Plan, which is incorporated herein by reference. Subject to Section 14(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit B (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with the Plan and all relevant
provisions of law and the requirements of any stock exchange or quotation
service upon which the Shares are then listed. Assuming such compliance, for
income tax purposes the Exercised Shares shall be considered transferred to the
Optionee on the date the Option is exercised with respect to such Exercised
Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) in the case of a "cashless exercise" during the trading
window permitted by the Company's Insider Trading Policy, delivery of a properly
executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price; or
-3-
16
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax and state income tax liability upon exercise of a
NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies
as an ISO, the Optionee will have no regular federal income tax or state income
tax liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status.
(b) Disposition of Shares.
-4-
17
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at
least one year after exercise AND two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the LESSER OF (A) the
difference between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF
EXERCISE and the aggregate Exercise Price, or (B) the difference between the
SALE PRICE of such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Non-Competition. In consideration of the grant by the Company of this
Option, you (i) reconfirm your obligations set forth in the Confidentiality
Agreement or Agreement Regarding Certain Conditions of Employment previously
executed by you, and (ii) agree that for a period of one (1) year following
termination of your Continuous Status as an Employee or Consultant, for any
reason, you will not work for any entity, whether as a consultant, analyst,
sales person, independent contractor, independent business venturer, owner,
partner, employee or otherwise, that provides research, analysis, advisory or
consulting services for the computer, communication or information technology
industries or for the purchasers and vendors of information technology products
and services, if the products or services offered, or planned to be offered
within one year after your termination of employment, by such company are
competitive with the products or services then offered by the Company or under
development by the Company, and are products or services which you worked with
or had supervisory responsibility over at any time during the year prior to the
termination of your employment.
8. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by Delaware law except for that body of law
pertaining to conflict of laws, and except for paragraph 7 (which shall be
governed by Connecticut law).
-5-
18
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: GARTNER GROUP, INC.
- -------------------------------- ------------------------------------
Print Name By
- -------------------------------- ------------------------------------
Residence Address Name
------------------------------------
Title
-6-
19
EXHIBIT A
PERFORMANCE OBJECTIVES
[Intentionally Left Blank]
20
EXHIBIT B
GARTNER GROUP, INC.
1996 LONG TERM STOCK OPTION PLAN
EXERCISE NOTICE
Gartner Group, Inc.
56 Top Gallant Road
P.O. Box 10212
Stamford, CT 06904-2212
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Gartner Group, Inc. (the "Company") under
and pursuant to the Company's Long Term Stock Option Plan (the "Plan") and the
Stock Option Agreement dated ________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $____, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
21
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by Delaware law except for that body of law pertaining to conflict of
laws.
Submitted by: Accepted by:
PURCHASER: GARTNER GROUP, INC.
__________________________________ By:________________________________
Signature
__________________________________ Its:_______________________________
Print Name
Address: Address:
_________________________________ 56 Top Gallant Road
_________________________________ P.O. Box 10212
_________________________________ Stamford, CT 06904-2212
___________________________________
Date Received
1
Exhibit 11.1
Gartner Group, Inc.
Computation of Income per Common Share
(In thousands, except per share amounts)
For the three months ended, For the nine months ended,
June 30, June 30,
----------------------- -----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net income $ 18,455 $ 12,621 $ 55,697 $ 35,826
======== ======== ======== ========
Shares:
Weighted average number of common shares outstanding 95,326 90,968 94,277 89,903
Weighted average number of common shares under warrant
outstanding 245 331 278 331
Weighted average number of option shares outstanding 7,082 8,795 7,569 8,662
-------- -------- -------- --------
Weighted average number of common shares outstanding as adjusted 102,653 100,094 102,124 98,896
======== ======== ======== ========
Net income per common share (1) $ 0.18 $ 0.13 $ 0.55 $ 0.36
======== ======== ======== ========
(1) Fully diluted income per common share has not been presented because the
effects are not material.
5
1,000
3-MOS
SEP-30-1997
OCT-01-1996
JUN-30-1997
161,770
20,520
166,803
4,168
0
383,164
82,026
43,062
550,375
298,272
0
0
0
53
245,935
550,375
370,841
370,841
144,256
144,256
136,604
2,111
22
95,208
39,511
55,697
0
0
0
55,697
0.55
0.55
