SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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Gartner Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant
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(1) Amount Previously Paid:
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 1, 2000
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Gartner
Group, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
February 1, 2000, at 10:00 A.M., local time, at the Company's headquarters at
56 Top Gallant Road, Stamford, Connecticut 06904, for the following purposes:
1. Election of Directors. To elect three directors to serve for the ensuing
three years or until their successors are duly elected and qualified.
2. Ratification of Auditors. To ratify the appointment of KPMG LLP as
independent auditors for the Company for the 2000 fiscal year.
3. Transaction of Other Business. To transact such other business as may
properly come before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on December 17, 1999
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign,
date and return the enclosed proxy as promptly as possible in the enclosed
postage-prepaid envelope. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy.
By Order of the Board of Directors
/s/ Cathy S. Satz
Cathy S. Satz
Corporate Secretary
Stamford, Connecticut
December 21, 1999
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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GARTNER GROUP, INC.
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To be held February 1, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Gartner Group, Inc. (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on Tuesday, February 1, 2000, at 10:00 A.M. local time, or at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at
the Company's headquarters at 56 Top Gallant Road, Stamford, Connecticut 06904.
It is anticipated that this Proxy Statement and the accompanying Notice
and form of Proxy will be mailed on or about December 21, 1999 to all
stockholders of record on December 17, 1999.
INFORMATION CONCERNING SOLICITATION AND VOTING
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering written notice of revocation
or a duly executed proxy bearing a later date to the Secretary, Gartner Group,
Inc., P.O. Box 10212, 56 Top Gallant Road, Stamford, Connecticut 06904, or by
attending the Annual Meeting and voting in person.
Record Date and Number of Shares Outstanding
Stockholders of record at the close of business on December 17, 1999 (the
"Record Date") are entitled to vote at the Annual Meeting. As of the Record
Date, there were approximately 76,316,018 shares of Class A Common Stock (the
"Class A Common Stock") and approximately 40,689,648 shares of Class B Common
Stock (the "Class B Common Stock") issued and outstanding.
Voting of Proxies
Provided they are not revoked, all properly executed proxies received by
the Company prior to the vote at the Annual Meeting will be voted in accordance
with the instructions indicated on the proxies. If no instructions are given,
such proxies will be voted as the management of the Company may propose. If any
matter not described in this Proxy Statement is properly presented for action
at the Annual Meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote according to their best judgment.
Quorum
A quorum of stockholders for the purpose of electing the three directors
is constituted by the presence, in person or by proxy, of holders of record of
Class B Common Stock representing a majority of the aggregate number of votes
entitled to be cast. A quorum of stockholders for all other purposes is
constituted by the presence, in person or by proxy, of holders of record of
Class A Common Stock and Class B Common Stock representing a majority of the
aggregate number of votes entitled to be cast. Abstentions and broker non-votes
will be considered present for purposes of determining the presence of a
quorum.
The Company's Amended and Restated Certificate of Incorporation provides
that the holders of Class B Common Stock are entitled to elect at least 80% of
the members of the Board. As a result, the holders of Class B Common Stock are
currently entitled to elect eight directors (the "Common B directors") and the
holders of Class A Common Stock are currently entitled to elect two directors
(the "Common A directors"). At the Annual Meeting, three Class I directors, all
of whom are designated Common B directors, are to be elected. Next year, three
Class II directors, one of whom is designated a Common A director and two of
whom are designated Common B directors are to be elected, and the year after,
four Class III directors, one of whom is designated a Common A director and
three of whom are designated Common B directors are to be elected.
Vote Required
Election of Directors. The election of directors will require the
affirmative vote of a plurality of the shares of Class B Common Stock present
in person or represented by proxy. Each share of Class B Common Stock is
entitled to one vote per share. However, the Company's Amended and Restated
Certificate of Incorporation provides
that in the election of directors, any Class B Common Stockholder who owns more
than 15% of the outstanding Class B Common Stock, will not be able to vote all
of his or her Class B Common Stock unless such holder owns an equivalent
percentage of Class A Common Stock.
For example, if a Class B Common Stockholder owns 17% of Class B Common
Stock and 5% of Class A Common Stock, the stockholder may only vote 5% of the
Class B Common Stock in the election of directors.
All Other Matters. Each share of Class A Common Stock and Class B Common
Stock is entitled to one vote per share and shall vote together as a single
class. The affirmative vote of a majority of the shares of Class A Common Stock
and Class B Common Stock present in person or represented by proxy is required
for the approval of any matters voted upon at the Annual Meeting or any
adjournment thereof, other than the election of directors. Abstentions will
have the effect of a negative vote and broker non-votes will have no effect on
the outcome of the vote.
Solicitation of Proxies
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of the mailing, will be borne by the Company. The Company
requests that brokerage houses and other custodians, nominees and fiduciaries
forward materials to the beneficial owners of shares of Class A Common Stock
and Class B Common Stock held of record by such persons and will reimburse such
brokers and other fiduciaries for their reasonable out-of-pocket expenses
incurred when the solicitation materials are forwarded.
The Company has retained Corporate Investor Communications, Inc., at an
estimated cost of $8,500, to assist it in the solicitation of proxies from
brokers, nominees, institutions and individuals.
Deadline for Receipt of Stockholder Proposals
Stockholder proposals submitted for inclusion in next year's proxy
materials must be received by the Company no later than August 28, 2000.
Stockholder proposals submitted for consideration at the 2001 Annual Meeting
without inclusion in next year's proxy materials must be received by the
Company at least 90 days prior to the 2001 Annual Meeting. However, if less
than 100 days notice of the date of the 2001 Annual Meeting is given to
stockholders, stockholder proposals must be received at least ten days after
such notice is given. If the Company is not notified of a stockholder proposal
by this time, then proxies held by management of the Company may provide the
discretion to vote against such stockholder proposal, even though such proposal
is not discussed in the proxy statement. Proposals should be addressed to the
Secretary, Gartner Group, Inc., P.O. Box 10212, 56 Top Gallant Road, Stamford,
Connecticut 06904.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Vote Required; Recommendation of Board of Directors
The Board currently consists of ten directors, and is divided into three
classes (Class I, Class II, and Class III), with each director serving a
three-year term. Approximately one-third of the directors, and all the
directors in one class, stand for election each year. Additionally, each
director is further designated as a Common A director or a Common B director,
since the Company's Amended and Restated Certificate of Incorporation provides
that the holders of Class B Common Stock are entitled to elect at least 80% of
the members of the Board. As a result, the holders of Class B Common Stock are
currently entitled to elect eight directors and the holders of Class A Common
Stock are currently entitled to elect two directors. At the Annual Meeting,
three Class I directors (all of whom are designated Common B) are to be
elected. Next year, three Class II directors, one of whom is designated a
Common A director and two of whom are designated Common B directors are to be
elected, and the year after, four Class III directors, one of whom is
designated a Common A director and three of whom are designated Common B
directors are to be elected.
Since all of the directors standing for election at the Annual Meeting are
Common B directors, the three directors shall be elected by a plurality of the
votes of the shares of Class B Common Stock present in person or represented by
proxy at the Annual Meeting entitled to vote in the election of directors.
The three nominees listed below are currently directors of the Company and
have indicated their willingness to serve. However, if any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, proxies will
be voted for the nominee designated by the present Board to fill the vacancy.
The term of office of each person elected as a director will continue until the
2003 Annual Meeting or until a successor has been elected and qualified.
2
The Board of Directors recommends that the stockholders vote "FOR" the
nominees listed below:
Name Age Principal Occupation
- ---- --- --------------------
John P. Imlay ................ 63 Chairman, Imlay Investments, Inc.
Charles B. McQuade ........... 58 President and CEO, Securities Industry Automation Corporation
Stephen G. Pagliuca .......... 44 Managing Director, Bain Capital Inc.
There is no arrangement or understanding between any nominee and any other
person pursuant to which the nominee was selected as a nominee. There is no
family relationship among any directors or executive officers of the Company.
Nominees for Election as Class I Directors:
Common B Directors:
John P. Imlay has served as a Director of the Company since April 1993. He
has served as Chairman of Imlay Investments, Inc., a private investment
company, since its inception in August 1990. Previously, Mr. Imlay was Chairman
of Dun & Bradstreet Software Services, Inc., a software company, from January
1990 until November 1996, and prior to that he was Chairman and Chief Executive
Officer of Management Science America, Inc., a predecessor of Dun & Bradstreet
Software Services, Inc. Mr. Imlay is on the board of IMS Health Incorporated,
the Atlanta Falcons, Metromedia International Group, Inc., World Access, Inc.,
and several other organizations. Mr. Imlay holds a bachelor's degree in
Industrial Management from Georgia Institute of Technology.
Charles B. McQuade has served as a Director of the Company since July
1999. He has served as President and Chief Executive Officer of Securities
Industry Automation Corporation ("SIAC"), which provides automated information
and communications systems that support the business activities of the New York
and American Stock Exchanges, the National Securities Clearing Corporation and
the securities industry nationwide, since 1981. Mr. McQuade joined SIAC at its
founding in 1972 and has held various positions within the company. Previously,
Mr. McQuade held various positions at the American Stock Exchange, and prior to
that served as an officer in the U.S. Navy. Mr. McQuade is on the board of
directors of Green Point Financial and on the boards of several charitable and
educational institutions. He holds a B.S. degree from Fordham University, and a
M.B.A. degree from Bernard M. Baruch College.
Stephen G. Pagliuca has served as a Director of the Company since July
1990. He is a founding partner of Information Partners Capital Fund, L.P. (the
"Fund"), a venture capital fund, and has served as its Managing Partner since
1989. He is also a Managing Director of Bain Capital, Inc., an investment firm
with which the Fund is associated. Prior to 1989, Mr. Pagliuca was a partner at
Bain & Company, where he managed client relationships in the information
services, software, credit services and health care industries. He is on the
board of directors of Vivra Corporation, Dade Behring, Inc., Epoch Senior
Living, Inc., Medical Specialties Group, Inc., Physio Wesley Jessen Visioncare,
Inc. and Physicians Quality Care, Inc. Mr. Pagliuca is a Certified Public
Accountant, holds a B.A. degree from Duke University and a M.B.A. degree from
Harvard Business School.
Common A Directors:
There are currently no Common A directors in Class I.
Current Class II Directors:
Common B Directors:
Anne Sutherland Fuchs, age 52, has served as a Director of the Company
since July 1999. She has served as a senior executive of Hearst Management
since September 1994, and is currently Senior Vice President and Group
Publishing Director of Hearst Magazines with primary responsibility for the
organization's Women's Group of Magazines. Prior to joining Hearst, Ms. Fuchs
was a senior executive at Conde Nast Publications Ltd., where she served as
Senior Vice President and Director of the International Division from March
1994 to September 1994 and as Publisher of Vogue Magazine from January 1991 to
March 1994. Prior to joining Conde Nast, Ms. Fuchs held executive and publisher
positions with a number of companies in the publishing industry, including The
New York Times Company and Hachette Publications (including predecessors
Diamandis Communications, Inc. and CBS Magazines). Ms. Fuchs is on the Board of
Trustees of the Whitney Museum and The Arts and Science Board of Overseers of
New York University, and is involved with numerous other civic and charitable
organizations and has received numerous awards for her activities. She holds an
undergraduate degree from New York University and honorary doctorate degrees
from Birmingham-Southern College and Centenary College.
3
Dennis G. Sisco, age 53, has served as a Director of the Company since
October 1990. Since January 1998, he has been a partner in Behrman Capital, a
private equity firm. From January 1997 through December 1997, he served as the
President of Storm Ridge Capital, a venture capital firm. From December 1988 to
February 1997, Dun & Bradstreet Corporation and Cognizant Corporation employed
him in various capacities, most recently as Executive Vice President of
Cognizant Corporation with responsibility for several operating units as well
as business development. Mr. Sisco is a member of the Board of Trustees of
Western Maryland College. Mr. Sisco also serves as a director of Aspect
Development, Inc., Oasis Healthcare Holdings, TSI International Software Ltd.,
and several private companies. Mr. Sisco holds a B.A. degree from Western
Maryland College.
Common A Director:
Manuel A. Fernandez, age 53, has served as Chairman of the Board since
April 1996 and as a Director since January 1991. Mr. Fernandez has served as
Managing Member of SI Venture Associates, a venture capital fund which is a
Gartner Group affiliate since January 1999. Previously, he served as Chief
Executive Officer of the Company from April 1991 through December 1998, and as
President from January 1991 through September 1997. Prior to joining the
Company, he was President and Chief Executive Officer of Dataquest,
Incorporated, then a wholly owned subsidiary of Dun & Bradstreet Corporation,
which provides clients with access to an international network of research,
information, custom consulting and analysis. Before joining Dataquest, Mr.
Fernandez was President and Chief Executive Officer of Gavilan Computer
Corporation, a laptop computer manufacturer, and Zilog, Incorporated, a
semiconductor manufacturing company. Mr. Fernandez holds a bachelor's degree in
electrical engineering from University of Florida, and completed post-graduate
work in solid state engineering at University of Florida and in business
administration at Florida Institute of Technology. Mr. Fernandez is also on the
board of directors of Black & Decker, Brunswick Corporation and U.S. West, Inc.
Current Class III Directors:
Common B Directors:
Michael D. Fleisher, age 34, has served as a Director, President and Chief
Executive Officer of the Company since October 1999. From February 1999 to
October 1999, he served as Chief Financial Officer and Executive Vice
President, Finance and Administration. From October 1996 to February 1999, Mr.
Fleisher was Executive Vice President and President, Emerging Businesses. From
October 1995 through October 1996, he was Senior Vice President, Emerging
Businesses; from October 1994 to October 1995, he was Vice President, Business
Development; and from April 1993 through October 1994, he was Director,
Strategic Planning. Prior to joining the Company, Mr. Fleisher worked at Bain
Capital, where he was involved in the buyout of the Company by management and
Bain Capital from Saatchi and Saatchi in October 1993. Prior to Bain Capital,
Mr. Fleisher was a consultant with Bain and Company. Mr. Fleisher is on the
board of directors of TEN-TV.com. He holds a bachelor's degree in economics
from Wharton School of Business.
Max D. Hopper, age 64, has served as a Director of the Company since
January 1994. In 1995, he founded Max D. Hopper Associates, Inc., a consulting
firm specializing in creating benefits from the strategic use of advanced
information systems. He is the retired chairman of the SABRE Technology Group
and served as Senior Vice President for American Airlines, both units of AMR
Corporation. Mr. Hopper is on the board of directors of Metrocall, Inc.,
Payless Cashways Inc., VTEL Corporation, USDATA Corporation, Inc., Exodus
Communications, Inc., United Stationers Inc., ACCRUESoftware, Inc., and
Worldtalk Corporation. Mr. Hopper holds a bachelor's degree in mathematics from
University of Houston.
Kenneth Roman, age 69, has served as a Director of the Company since July
1999. Mr. Roman has been an independent consultant since 1991. He is the former
Chairman and Chief Executive Officer of The Ogilvy Group (and Ogilvy & Mather
Worldwide), where he worked for 26 years, and a former Executive Vice President
of American Express Company. Mr. Roman is currently on the board of directors
of Brunswick Corporation, Compaq Computer Corporation, Coty Inc. and PennCorp
Financial Group. He is also Vice Chairman of The New York Botanical Garden and
serves on the boards of Memorial Sloan-Kettering Cancer Center, the National
Organization on Disability and Sheltering Arms Children's Services. He holds an
A.B. degree from Dartmouth College.
Common A Director:
William O. Grabe, age 61, has served as a Director of the Company since
April 1993. He has been with General Atlantic Partners, an investment firm,
since April 1992 and he has been a General Partner since January 1994 and he
was a Special Partner from April 1993 until January 1994. From February 1984
until March 1992, Mr. Grabe
4
was a corporate officer at IBM Corporation. Mr. Grabe is also a director of
Compuware Corporation, LHS Group, Inc., TDS Informationstechnologie AG, Exact
Holding N.V., Meta4 N.V., and BAAN Company N.V. He is also on the board of
directors of several privately held companies in the computer software and
services industry. Mr. Grabe holds a B.S. degree in engineering from New York
University and a M.B.A. degree from University of California at Los Angeles.
Board Meetings and Committees
The Board held ten meetings during fiscal 1999.
The Audit Committee held two meetings during fiscal 1999. The Audit
Committee consisted of Messrs. Hopper, Pagliuca and Sisco through July 1999 and
currently consists of Messrs. Hopper, McQuade and Pagliuca. The Audit Committee
assists the Board in fulfilling its oversight responsibilities by meeting
regularly with the Company's independent auditors and operating and financial
management personnel. The Audit Committee reviews the audit performed by the
Company's independent auditors and reports the results of such audit to the
Board. The Audit Committee reviews the Company's annual financial statements
and all material financial reports provided to the stockholders; reviews the
Company's internal auditing, accounting and financial controls; and reviews the
Company's policies governing compliance with laws, regulations, rules of ethics
and conflicts of interest.
The Compensation Committee held five meetings during fiscal 1999. The
Compensation Committee consisted of Messrs. Grabe, Imlay and Robert E. Weissman
through July 1999 and currently consists of Messrs. Grabe and Imlay and Ms.
Fuchs. The Compensation Committee makes recommendations to the Board regarding
the Company's executive compensation policies, establishes and approves
salaries paid to the executive officers of the Company and administers the
Company's Employee Stock Purchase Plan and Stock Option Plans. As part of this
administration function, the Compensation Committee reviews and approves all
stock option grants to employees.
The Corporate Governance Committee held three meetings during fiscal 1999.
The Corporate Governance Committee consisted of Messrs. Grabe, Hopper and
Pagliuca through July 1999 and currently consists of Messrs. Hopper, Roman and
Sisco. The Corporate Governance Committee reviews issues regarding the
governance of the Company.
The Board currently has no nominating committee or committee performing a
similar function.
Each director attended at least 75 percent of the aggregate of (i) the
total number of meetings of the Board held during fiscal 1999, while such
director served as a director of the Company, and (ii) the total number of
meetings of all committees of the Board held during fiscal 1999 while such
director served on such committee.
Compensation of Directors
Through December 31, 1998, each outside director of the Company (each
director who is not an employee of the Company or a beneficial owner of or
representative of a beneficial owner of more than 5% of the Company's
outstanding stock) received an annual retainer of $10,000 plus $1,000 for each
meeting of the Board attended in person. In addition, each outside director
received an additional annual retainer fee of $3,000 for each standing
committee of the Board of which such director was a member, plus $350 for each
committee meeting attended.
Commencing in January 1999, the Company increased the compensation to its
outside directors to $40,000 per year, or $41,500 per year to any director who
is chairman of a committee of the Board. Such compensation is payable in shares
of Class A Common Stock of the Company. The shares awarded to each outside
director are credited to an account for the benefit of such director on a
quarterly basis, and payment of the shares to each director is deferred until
such time as the respective director shall cease to serve as a director of the
Company, at which time the shares shall be paid from the director's account to
the director. The stock credited to the account of each outside director is
valued based on the fair market value of the Company's stock on the first
market trading day of each quarter.
Outside directors also receive options under the Company's 1993 Director
Stock Option Plan. Pursuant to this plan, each outside director is granted an
option to purchase 15,000 shares of Class A Common Stock on the date the
individual first becomes a director and is granted an option to purchase 7,000
shares of Class A Common Stock on March 1 of each year, if the individual has
been an outside director for at least six months. Options are granted at 100%
of the fair market value of the Class A Common Stock on the date of the grant.
Each option becomes exercisable in three equal installments on each of the
first three anniversaries of the date of grant. Each option has a term of five
years and will terminate 90 days after the optionee ceases to be an outside
director, unless such cessation is due to permanent disability or death in
which case, the option will expire 180 or 365 days, respectively, after the
optionee ceases to be an outside director.
5
EXECUTIVE OFFICERS
Listed below are the executive officers of the Company as of November 30,
1999:
Names Age Title
- ----- --- -----
Manuel A. Fernandez ........... 53 Chairman of the Board
Michael D. Fleisher ........... 34 President and Chief Executive Officer
Regina M. Paolillo ............ 41 Executive Vice President, Finance and Administration and Chief
Financial Officer
Richard E. Eldh, Jr. .......... 41 Executive Vice President, Worldwide Sales, Events and
Marketing
Patricia L. Higgins ........... 49 Executive Vice President, Chairman and Chief Executive
Officer, The Research Board
Mr. Fernandez has served as Chairman of the Board since April 1996. For
more information on Mr. Fernandez' business experience, see the description
provided above under "Election of Directors."
Mr. Fleisher has served as President and Chief Executive Officer of the
Company since October 1999. For more information on Mr. Fleisher's experience,
see the description provided above under "Election of Directors."
Ms. Paolillo has served as Executive Vice President, Finance and
Administration and Chief Financial Officer since October 1999. From February
1999 to October 1999, she served as Executive Vice President and General
Manager of the Company's Technology Management Group. From November 1996 to
January 1999, she served as President and Chief Operating Officer of Gartner
Group Measurement; from April 1995 to October 1996, she served as Senior Vice
President and Controller; from October 1993 to March 1995, she was Vice
President, Product Delivery and Administration; and from April 1993 to
September 1993, she was Director of Operations. Prior to joining the Company,
Ms. Paolillo served as Chief Operating Officer and Chief Financial Officer at
Productivity, Inc. and held numerous executive and management positions at
Citibank, Page America, Bristol-Myers and Price Waterhouse. Ms. Paolillo has a
bachelor's degree from the University of New Haven and is a Certified Public
Accountant.
Mr. Eldh has served as Executive Vice President Worldwide Sales, Events
and Marketing since October 1999. From February 1999 to October 1999, he was
Executive Vice President, Worldwide Sales. From October 1997 to February 1999,
he was based in the United Kingdom and served as Senior Vice President for the
Company's European sales team. From October 1994 to October 1997, he was Senior
Vice President for the Company's North American sales team, and also had
responsibility for sales in Central and South America. Prior to joining the
Company, Mr. Eldh held sales and marketing positions at Four-Phase Systems,
Motorola, and Hewlett-Packard. Mr. Eldh has a bachelor's degree in finance from
the University of Connecticut.
Ms. Higgins has served as Executive Vice President of the Company and
Chairman and Chief Executive Officer, The Research Board, a wholly owned
subsidiary of the Company, since April 1999. From 1997 to April 1999, Ms.
Higgins was Chief Information Officer and Corporate Vice President of Alcoa
Corporation. Before joining Alcoa, Ms. Higgins was President of the
Communications Business Unit at Unisys Corporation from 1995 to 1997. Prior to
that she held executive business unit positions with Bell Atlantic, AT&T and
Lucent. Ms. Higgins is on the board of directors of the Williams Companies and
Fleet Bank N.A. She is also a director of Up with People. Ms. Higgins holds a
bachelor's degree in economics from Montclair State University.
6
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table shows, for each person who served as Chief Executive
Officer during fiscal 1999 and each of the four other most highly compensated
executive officers during fiscal 1999 (collectively, the "Named Executive
Officers"), information concerning compensation paid for services to the
Company in all capacities during the fiscal year ended September 30, 1999, as
well as total compensation paid to the Named Executive Officers for the
Company's previous two fiscal years:
Summary Compensation Table
Long Term Compensation
-------------------------
Awards
-------------------------
Annual
Compensation(1) Restricted Securities All
Fiscal ---------------------- Stock Underlying Other
Name and Principal Position Year Salary Bonus(2) Awards(3) Options Compensation(4)
- --------------------------------------- -------- ----------- ---------- ------------ ------------ ----------------
Current Executive Officers:
Manuel A. Fernandez (5) ............... 1999 $400,000 $100,000 $2,175,000 79,000 $ 105,325
Chairman of the Board and 1998 $400,000 $320,000 60,000 $ 42,277
Former Chief Executive Officer 1997 $350,000 $700,000 108,800 $ 42,339
Michael Fleisher (6) .................. 1999 $250,000 $ 45,000 $1,212,500 522,000 $ 60,714
Executive Vice President, Finance 1998 $230,000 $130,000 60,000 $ 9,785
and Administration and Chief 1997 $200,000 $180,000 77,500 $ 9,489
Financial Officer
Regina M. Paolillo (7) ................ 1999 $250,000 $ 31,250 $ 606,250 55,000 $ 63,465
Executive Vice President and
General Manager, Technology
Management Group
Richard E. Eldh, Jr. (8) .............. 1999 $250,000 $ 37,500 $ 525,000 49,000 $ 55,158
Executive Vice President,
Worldwide Sales
Former Executive Officers:
William T. Clifford (9) ............... 1999 $375,000 $ 81,250 $1,212,500 60,000 $1,565,512
Former President and Chief 1998 $300,000 $150,000 120,000 $ 26,518
Executive Officer 1997 $250,000 $300,000 77,500 $ 22,688
E. Follett Carter (10) ................ 1999 $235,000 $ 55,000 30,000 $ 957,875
Former Executive Vice President, 1998 $235,000 $ 75,000 30,000 $ 32,359
President, Distribution Services 1997 $220,000 $240,000 77,500 $ 32,222
and Chief Marketing Officer
- ------------
(1) Excludes certain perquisites and other personal benefits, such as car
allowances. These amounts, in the aggregate, did not exceed the lesser of
$50,000 or 10 percent of the total annual salary and bonus for such
executive officer.
(2) Includes bonus awards earned for performance in the fiscal year noted even
though such amounts are payable in the subsequent year. Excludes bonus
awards paid in the fiscal year noted but earned in prior years. For Messrs.
Fernandez, Fleisher, and Eldh and Ms. Paolillo, excludes 75% of the
retention bonus approved in the fiscal year but not earned until the next
fiscal year.
(3) The amounts shown represent the value of the restricted stock award
calculated by multiplying the fair market value of the Company's Class A
Common Stock on the date of grant by the number of shares awarded. Other
than the award to Mr. Clifford, the restricted stock awards will vest in
six equal installments with the first installment vesting two years after
the grant and then annually thereafter. Mr. Clifford's award will vest in
two equal annual installments on October 26, 2000 and 2001. Other than the
award to Mr. Clifford, restricted stock awards are subject to forfeiture
upon termination of employment. Recipients have the right to vote the
shares and to receive dividends paid with respect to such shares.
Restricted stock holdings as of September 30, 1999, and their value on such
date, based on an equivalent number of unrestricted shares were: Mr.
Fernandez, 100,000 shares ($1,600,000); Mr. Fleisher, 50,000 shares
($800,000); Ms. Paolillo, 25,000 shares ($400,000); Mr. Eldh, 25,000 shares
($400,000); and Mr. Clifford, 50,000 shares ($800,000).
(4) For fiscal 1999, represents (i) Company paid premiums for life insurance on
each of the Named Executive Officers as follows: Mr. Fernandez--$37,726;
Mr. Fleisher--$4,449; Ms. Paolillo--$6,104; Mr. Eldh--
7
$6,229; Mr. Clifford--$21,631; and Mr. Carter--$27,695; (ii) matching
contributions made by the Company in accordance with the Company's 401(k)
plan for each of the Named Executive Officers as follows: Mr.
Fernandez--$5,600; Mr. Fleisher--$3,600; Ms. Paolillo--$5,600; Mr.
Eldh--$5,600; Mr. Clifford--$5,600; and Mr. Carter--$5,600; (iii) cash
payments made by the Company in lieu of reducing the exercise price of
in-the-money stock options at the time of the special nonrecurring cash
dividend in July 1999 to each of the Named Executive Officers as follows:
Mr. Fernandez--$61,999; Mr. Fleisher--$52,665; Ms. Paolillo--$51,761; Mr.
Eldh--$43,329; Mr. Clifford--$138,281; and Mr. Carter--$109,580; and (iv)
severance payments to Mr. Clifford and Mr. Carter totaling $1,400,000 and
$815,000, respectively, to be paid in fiscal 2000 and 2001.
(5) Mr. Fernandez resigned as Chief Executive Officer of the Company in
December 1998.
(6) Mr. Fleisher was appointed President and Chief Executive Officer of the
Company in October 1999.
(7) Ms. Paolillo was appointed Executive Vice President, Finance and
Administration and Chief Financial Officer in October 1999.
(8) Mr. Eldh was appointed Executive Vice President Worldwide Sales, Events and
Marketing in October 1999.
(9) Mr. Clifford resigned as President and Chief Executive Officer of the
Company in October 1999.
(10) Mr. Carter resigned as Executive Vice President, Distribution Services and
Chief Marketing Officer in September 1999.
Options Granted and Options Exercised in the Last Fiscal Year
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during the last fiscal year,
as well as options held by such officers as of September 30, 1999, the last day
of the Company's 1999 fiscal year.
Options Grants in Last Fiscal Year
Individual Grants Potential Realizable
------------------------------------------------------------ Value at Annual Rates
of Stock Price
Number of Appreciation
Securities % of Total Options Exercise for Option Term(5)
Underlying Granted to Employees Price Expiration ---------------------------
Name Options In Fiscal Year Per Share Date 5% 10%
- ---------------------- ------------ ---------------------- ----------- ------------ ------------- -------------
Manuel A. Fernandez (1) 40,000 0.34% $ 19.74 10/13/08 $ 434,732 $1,159,873
(2) 39,000 0.34% $ 22.71 1/28/09 $ 556,883 $1,411,251
Michael D. Fleisher (1) 22,000 0.19% $ 19.74 10/13/08 $ 239,103 $ 637,930
(3) 395,006 3.35% $ 16.96 9/30/09 $3,594,229 $9,692,067
(4) 105,000 0.89% $ 16.96 9/30/09 $ 955,428 $2,576,372
Regina M. Paolillo (1) 15,000 0.13% $ 20.46 12/15/08 $ 122,718 $ 248,285
(2) 25,000 0.21% $ 22.71 1/28/09 $ 356,976 $ 904,648
Richard E. Eldh, Jr. (1) 12,000 0.10% $ 20.46 12/15/08 $ 98,174 $ 198,628
(2) 25,000 0.21% $ 22.71 1/28/09 $ 356,976 $ 904,648
William T. Clifford (1) 60,000 0.51% $ 19.74 10/13/08 $ 652,098 $1,739,810
E. Follett Carter (1) 30,000 0.25% $ 19.74 10/13/08 $ 326,049 $ 869,905
(1) 22,000 0.19% $ 22.71 1/28/09 $ 314,139 $ 796,090
- ------------
(1) Each of these options was granted pursuant to the Company's 1991 Stock
Option Plan and is subject to the terms of such plan. The options become
exercisable in three equal installments on each of the first three
anniversaries of the date of grant.
(2) Each of these options was granted pursuant to the Company's 1998 Long Term
Stock Option Plan and is subject to the terms of such plan. The options
become exercisable six years from the date of grant subject to
acceleration of vesting and exercisability upon achievement of certain
annual and cumulative performance targets for fiscal years 1999, 2000 and
2001.
(3) Each of these options was granted pursuant to the Company's 1991 Stock
Option Plan and is subject to the terms of the plan. On the first
anniversary of the date of grant, 25% of the options become exercisable
and 1/36th of the options become exercisable monthly thereafter.
8
(4) Each of these options was granted pursuant to the Company's 1998 Long Term
Stock Option Plan and is subject to the terms of the plan. On the first
anniversary of the date of grant, 25% of the options become exercisable
and 1/36th of the options become exercisable monthly thereafter.
(5) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or option spreads that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option term. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Commission
and do not represent the Company's estimate or projection of future
increases in the price of its Class A Common Stock.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End at Fiscal Year End(1)
Acquired Value ----------------------------- -----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ------------- ------------- ------------- --------------- ------------- --------------
Manuel A. Fernandez .......... 125,000 $1,528,841 69,245 218,255 $ 0 $352,480
Michael D. Fleisher .......... 0 $ 0 111,775 129,325 $ 717,775 $132,180
Regina M. Paolillo ........... 0 $ 0 140,880 65,220 $ 540,181 $132,180
Richard E. Eldh, Jr. ......... 0 $ 0 53,400 66,500 $ 458,224 $132,180
William T. Clifford .......... 0 $ 0 237,695 232,325 $1,924,311 $264,360
E. Follett Carter ............ 65,000 $1,278,461 162,175 144,325 $ 793,080 $264,360
- ------------
(1) The values for "in-the-money" options represent the difference between the
exercise price of the options and the closing price of the Company's Class
A Common Stock on September 30, 1999, which was $16.00 per share.
Option Repricings
In order to continue to adequately encourage, motivate and retain the
Company's key employees, on December 15, 1998, the Company adopted an option
exchange program that allowed the exchange of certain stock options held by
non-executive officers that were granted from April 1997 through July 1998 for
options with an exercise price of the current fair market value of the stock on
December 15, 1998. In total, options to purchase 4,737,400 shares of common
stock were exchanged under this program. The original vesting schedules and
expiration dates associated with these stock options were also amended to
commence with the stock option exchange program date.
In addition, as a result of the special, nonrecurring cash dividend paid
in July 1999, the Board approved a reduction in the exercise price of
substantially all stock options with an exercise price below the fair market
value of the stock in order to maintain the ratio of the exercise price to the
fair market value of the stock prior to the special, nonrecurring cash
dividend, which was $1.1945 per share. The exercise prices of options with an
exercise price equal to or greater than the fair market value of the stock,
other than such options held by executive officers, were reduced by an amount
equal to the dividend per share paid by the Company. In lieu of an exercise
price reduction, executive officers who held such options received cash
payments totalling the product of the number of such options held by each
executive officer times the dividend per share paid by the Company. No changes
were made in either the number of shares of common stock covered or in the
vesting schedules of the options.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Anne Sutherland Fuchs
William O. Grabe
John P. Imlay
9
The following table sets forth certain information concerning the effect
of the December 1998 option exchange program and the July 16, 1999 repricing on
options held by executive officers. Ms. Paolillo and Mr. Eldh became executive
officers of the Company subsequent to the December 1998 option exchange
program.
Length of
Original
Number of Option Term
Securities Market Price Exercise Remaining at
Underlying of Stock at Price at New Date of
Options Time of Time of Exercise Repricing
Name Date Repriced Repricing Repricing Price (Years)
- ---------------------- ---------- ------------ -------------- ----------- ------------ -------------
Manuel A. Fernandez 7/16/99 35,000 $ 20.750 $ 35.250 $ 34.056 7
7/16/99 38,500 $ 20.750 $ 25.150 $ 23.956 8
7/16/99 60,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 39,000 $ 20.750 $ 23.899 $ 22.705 10
7/16/99 35,000 $ 20.750 $ 20.860 $ 19.666 8
Michael Fleisher 7/16/99 27,500 $ 20.750 $ 25.150 $ 23.956 8
7/16/99 30,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 25,000 $ 20.750 $ 35.250 $ 34.056 7
7/16/99 30,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 25,000 $ 20.750 $ 20.860 $ 19.666 8
Regina M. Paolillo 7/16/99 2,000 $ 20.750 $ 21.090 $ 19.896 8
7/16/99 20,000 $ 20.750 $ 20.860 $ 19.666 17
7/16/99 25,000 $ 20.750 $ 23.899 $ 22.705 10
12/15/98 15,000 $ 19.563 $ 32.750 $ 20.463 9
Richard E. Eldh, Jr. 7/16/99 14,500 $ 20.750 $ 20.860 $ 19.666 8
7/16/99 25,000 $ 20.750 $ 23.899 $ 20.705 10
12/15/98 12,000 $ 19.563 $ 32.750 $ 20.463 9
William T. Clifford 7/16/99 25,000 $ 20.750 $ 35.250 $ 34.056 7
7/16/99 27,500 $ 20.750 $ 25.150 $ 23.956 8
7/16/99 60,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 60,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 25,000 $ 20.750 $ 20.860 $ 19.666 8
E. Follett Carter 7/16/99 22,000 $ 20.750 $ 23.899 $ 22.705 10
7/16/99 25,000 $ 20.750 $ 35.250 $ 34.056 8
7/16/99 27,500 $ 20.750 $ 25.150 $ 23.956 8
7/16/99 30,000 $ 20.750 $ 31.663 $ 30.469 8
7/16/99 25,000 $ 20.750 $ 20.860 $ 19.666 8
Employee Benefit Plans
1991 Stock Option Plan. Each Named Executive Officer is entitled to
participate in the Company's 1991 Stock Option Plan (the "1991 Option Plan").
The 1991 Option Plan was initially adopted by the Board in March 1991, approved
by the stockholders in April 1991 and has been amended from time to time. A
total of 32,800,000 shares of Class A Common Stock have been reserved for
issuance under the 1991 Option Plan.
Long Term Stock Option Plan. Each Named Executive Officer is entitled to
participate in the Company's Long Term Stock Option Plan (the "1994 Long Term
Plan"). The 1994 Long Term Plan was adopted by the Board and approved by the
stockholders in October 1994. A total of 6,560,000 shares of Class A Common
Stock have been reserved for issuance under the 1994 Long Term Plan.
1996 Long Term Stock Option Plan. Each Named Executive Officer is entitled
to participate in the Company's 1996 Long Term Stock Option Plan (the "1996
Long Term Plan"). The 1996 Long Term Plan was adopted by the Board in October
1996 and approved by the stockholders in January 1997. A total of 1,800,000
shares of Class A Common Stock have been reserved for issuance under the 1996
Long Term Plan.
1998 Long Term Stock Option Plan. Each Named Executive Officer is entitled
to participate in the Company's 1998 Long Term Stock Option Plan (the "1998
Long Term Plan"). The 1998 Long Term Plan was adopted by the Board in October
1998 and was approved by the stockholders in January 1999. A total of 2,500,000
shares of Class A Common Stock have been reserved for issuance under the 1998
Long Term Plan.
10
Employee Stock Purchase Plan. Each Named Executive Officer is entitled to
participate in the Company's Employee Stock Purchase Plan (the "Purchase
Plan"). The stockholders adopted the Purchase Plan in February 1993. A total of
4,000,000 shares of Class A Common Stock have been reserved for issuance under
the Purchase Plan.
Employment Agreements
Mr. Fernandez entered into an employment agreement with the Company
effective November 12, 1998 (the "Fernandez Agreement"). Under the Fernandez
Agreement, Mr. Fernandez served as Chairman and Chief Executive Officer of the
Company through December 31, 1998 and is serving as Chairman from January 1,
1999 through October 1, 2000 (or later if the term of the Fernandez Agreement
is extended by the parties). During the term of the Fernandez Agreement, Mr.
Fernandez will be included on the Company's slate of nominees to be elected to
the Board.
The Fernandez Agreement provided for a base salary of $400,000 for fiscal
1999 and thereafter it is subject to annual adjustments by the Board or the
Compensation Committee, in their sole discretion. Mr. Fernandez is entitled to
participate in the Company's executive bonus program and the annual target
bonus will be established by the Board or the Compensation Committee in their
discretion and shall be payable based on achievement of specified Company and
individual objectives. The target bonus of $400,000 for fiscal 1999 had been
set prior to entering into the Fernandez Agreement.
Mr. Fernandez' employment is at will and may be terminated by him or the
Company upon sixty days' notice. If, during the term of the Fernandez
Agreement, the Company terminates the employment of Mr. Fernandez involuntarily
without Business Reasons (as defined in the Fernandez Agreement) or if a
Constructive Termination (as defined in the Fernandez Agreement) occurs, he
will be entitled to receive his salary and vacation accrued through the
Termination Date (as defined in the Fernandez Agreement), salary for three
years (one year in case of termination within one year following a Change in
Control (as defined in the Fernandez Agreement)), 100% of his target bonus for
the fiscal year in which the termination occurs, a pro rata share (based on the
proportion of the year during which he was employed) of the bonus that would
have been payable in excess of the target bonus for the year in which the
termination occurs, 100% of the target bonus for the fiscal year following
termination, acceleration of vesting of all outstanding stock options,
restricted stock and other equity arrangements subject to vesting, group health
benefits until age 55, and auto benefits for one year. Payments of salary and
bonus will cease if Mr. Fernandez violates the terms of the non-competition
provisions contained in the Fernandez Agreement. If a Change of Control occurs
during the term of the Fernandez Agreement, Mr. Fernandez will be entitled to
receive immediately salary and vacation accrued through the Termination Date,
plus three years' salary then in effect, three times maximum target bonus for
the fiscal year in which the Change in Control occurs, acceleration in full of
vesting of all outstanding stock options, restricted stock and other equity
arrangements subject to vesting, group health benefits until age 55, auto
benefits for one year, forgiveness of all outstanding principal and interest
due to the Company under indebtedness incurred to purchase shares of Company
stock, except that if he violates the terms of the non-competition provisions
contained in the Fernandez Agreement, he will be required to repay to the
Company any amounts received as salary or bonus with respect to any period
following the termination of his employment. If Mr. Fernandez voluntarily
terminates his employment, or if the Company terminates it for Business
Reasons, he will not receive any salary or bonus thereafter.
Mr. Clifford entered into an employment agreement with the Company
effective November 12, 1998 (the "Clifford Agreement"). The Clifford Agreement
provided for a base salary of $375,000 and a target bonus of $325,000 for
fiscal year 1999. The Company entered into a Mutual Separation Agreement with
Mr. Clifford as of September 30, 1999. Pursuant to this Agreement, Mr. Clifford
agreed to resign as a director of the Company and as its President and Chief
Executive Officer as of October 7, 1999, and the Company agreed to (i) pay Mr.
Clifford his base salary of $375,000 for two years (the "Severance Period");
(ii) pay Mr. Clifford his full target bonus of $325,000 for fiscal 1999 and an
additional bonus of $325,000 in fiscal 2000; (iii) permit Mr. Clifford to
continue to vest in his stock options through the Severance Period; (iv) permit
Mr. Clifford to vest in 25,000 shares of his restricted stock on October 26,
2000 and an additional 25,000 shares on October 26, 2001, provided that Mr.
Clifford does not violate any of his non-competition, non-solicitation and
confidentiality obligations to the Company; and (v) permit Mr. Clifford to
continue to participate in the Company's group medical and dental programs and
life and disability insurance programs in accordance with the terms of such
plans as applicable to employees generally, until the sooner of the conclusion
of the Severance Period or his eligibility for such benefit at a new employer.
If at any time prior to the expiration of the Severance Period, the Company
shall be subject to a Change in Control (as defined in the Separation
Agreement), then all of Mr. Clifford's options shall accelerate and vest in
full (and in this regard all such options shall remain exercisable for not less
than ninety (90) days following the Change in Control).
11
Mr. Carter entered into an employment agreement with the Company effective
November 12, 1998 (the "Carter Agreement"). The Carter Agreement provided for a
base salary of $250,000 and a target bonus of $220,000 for fiscal year 1999.
The Company entered into a Mutual Separation Agreement with Mr. Carter as of
September 30, 1999. Pursuant to this Agreement, Mr. Carter agreed to resign as
an employee of the Company as of September 30, 1999, and the Company agreed to
(i) pay Mr. Carter his base salary of $250,000 for eighteen months (the
"Severance Period"); (ii) pay Mr. Carter his full target bonus of $220,000 for
fiscal 1999 and an additional bonus of $220,000 in fiscal 2000; (iii) permit
Mr. Carter to continue to vest in his stock options through the Severance
Period; and (iv) permit Mr. Carter to continue to participate in the Company's
group medical and dental programs and life and disability insurance programs in
accordance with the terms of such plans as applicable to employees generally,
until the sooner of the conclusion of the Severance Period or his eligibility
for such benefit at a new employer. In the event that Mr. Carter violates his
non-competition, non-solicitation and confidentiality obligations to the
Company, his right to receive the benefits listed in (i) and (ii) shall
terminate and he shall be required to repay any amounts received under (i) and
(ii) during the Severance Period.
Mr. Fleisher (collectively with Mr. Eldh and Ms. Paolillo, the "Additional
Executive Officers") also entered into an employment agreement with the Company
effective November 12, 1998. Mr. Eldh and Ms. Paolillo entered into employment
agreements with the Company effective February 8, 1999 (with Mr. Fleisher's
agreement, the "Additional Executive Officer Agreements"). Under the Additional
Executive Officer Agreements, each of the Additional Executive Officers will
continue to serve the Company in their current capacities through October 1,
1999, and each Additional Executive Officer Agreement shall automatically renew
for subsequent one year periods unless the Additional Executive Officer or the
Company provides written notice of its termination of the Additional Executive
Officer Agreements.
The Additional Executive Officer Agreements provided for base salaries of
$250,000 for Messrs. Fleisher and Eldh and Ms. Paolillo for fiscal 1999, and
thereafter the base salaries are subject to annual adjustments by the Board or
the Compensation Committee, in their sole discretion. Each Additional Executive
Officer is entitled to participate in the Company's executive bonus program and
the annual target bonus will be established by the Board or the Compensation
Committee in their discretion and shall be payable based on achievement of
specified Company and individual objectives. The target bonuses of $180,000,
$150,000 and $125,000 for Messrs. Fleisher and Eldh and Ms. Paolillo,
respectively, for fiscal 1999 had been set prior to entering into the
Additional Executive Officer Agreements.
Each of the Additional Executive Officer's employment is at will and may
be terminated by him or her or the Company upon fourteen days' notice. If,
during the term of the Additional Executive Officer Agreements, the Company
terminates the employment of the Additional Executive Officer involuntarily
without Business Reasons (as defined in the Additional Executive Officer
Agreement) or if a Constructive Termination (as defined in the Additional
Executive Officer Agreements) occurs, the officer will be entitled to receive
his or her base salary and vacation accrued through the Termination Date (as
defined by the Additional Executive Officer Agreements), plus base salary for
one year, and bonus payment previously fixed and declared by the Board or
Compensation Committee and not previously paid, and group health benefits for
18 months. If, during the term of the Additional Executive Officer Agreement, a
Change in Control occurs, the officer will be entitled to receive immediately
his or her base salary and vacation accrued through the Termination Date (as
defined in the Additional Executive Officer Agreements), plus base salary for
two years at the current rate, an amount equal to two times his or her maximum
target bonus for the fiscal year in which the Change in Control occurs,
acceleration in full of vesting of all outstanding stock options, restricted
stock and other equity arrangements subject to vesting, forgiveness of all
outstanding principal and interest due to the Company under indebtedness
incurred to purchase shares of capital stock of the Company, group health
benefits for 18 months, and if employment is terminated within 12 months of
Change in Control, outplacement services. Payments of salary and bonus will
cease if the Additional Executive Officer violates the terms of the
non-competition provisions contained in the Additional Executive Officer
Agreement and the officer will be required to repay to the Company any amounts
received as salary or bonus with respect to any period following the
termination of his or her employment. If an Additional Executive Officer
voluntarily terminates his or her employment, or if the Company terminates it
for Business Reasons, the officer will not receive any salary or bonus
thereafter.
12
Board Compensation Committee Report on Executive Compensation
The Board has delegated to the Compensation Committee the responsibility
for establishing and administering the Company's executive compensation plans,
subject to Board approval of major new compensation programs and the Chief
Executive Officer's compensation. In discharging these responsibilities, the
Committee consults with outside compensation consultants, attorneys and other
specialists.
The Company's compensation philosophy is that cash compensation should be
substantially linked to the short-term performance of the Company and that
longer-term incentives, such as stock options and stock ownership, should be
aligned with the Company's objective to enhance stockholder value over the long
term. The Company believes that the use of stock options and stock ownership
links the interest of officers and employees of the Company to the interest of
the stockholders. In addition, the Compensation Committee believes that the
total compensation package must be competitive with other companies in the
industry to ensure that the Company can continue to attract, retain and
motivate key executives who are critical to the long-term success of the
Company.
Compensation for the Company's executive officers consists of three
principal components: base salary, cash bonuses and stock options.
Base Salary. The base salaries of executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience and performance of the individual, with reference to the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions based on the Compensation Committee's periodic surveys of
the industry.
Cash Bonuses. The Company's executive cash bonus plan is designed to
reward executive officers for the financial performance of the Company during
the year. Under the plan, cash bonuses are determined based upon the Company's
achievement against specified financial performance objectives, as well as the
executive officer's achievement of individual performance objectives. This plan
emphasizes the Compensation Committee's belief that, when the Company is
successful, the executives should be appropriately compensated. Conversely, if
the Company is not profitable, no bonuses are paid absent extraordinary
circumstances. Each individual executive officer's portion of the total bonus
pool is determined by a formula that is specified at the start of the fiscal
year based on the executive's base salary and the Committee's assessment of the
executive's contribution to the Company. In addition to cash bonuses, the
Company has a Profit Sharing Plan under which a specified percentage of
operating profit is set aside for equal distribution among all employees,
including executives.
Stock Options. The principal equity compensation components of executive
compensation are options granted under the Company's stock option programs.
Stock options are generally granted when an executive joins the Company, with
additional options granted from time to time for promotions and performance.
The Compensation Committee believes that the stock option participation
provides a method of retention and motivation for the senior level executives
of the Company and also aligns senior management's objectives with long-term
stock price appreciation. Executives are also eligible to participate in a
payroll deduction employee stock purchase plan pursuant to which stock may be
purchased at 85 percent of the lower of the closing sale price for the Class A
Common Stock reported on a national market system at the beginning or end of
each six-month offering (up to a maximum stock value of $25,000 per calendar
year or 10 percent of salary, whichever is less).
In addition, the Company's executive officers are eligible to receive
restricted stock awards under two of the Company's stock option programs.
Recipients are not required to provide consideration to the Company other than
rendering service and have the right to vote the shares and receive dividends.
The restricted stock may not be sold until fully vested as set forth in the
plan.
CEO Compensation. The Compensation Committee, subject to Board approval,
determines compensation of the Company's Chief Executive Officer. Each of
Messrs. Fernandez and Clifford's compensation packages for 1999 consisted of
the same benefits program as other executive officers, as itemized above,
including base salary, cash bonus, restricted stock, stock options and other
executive and employee benefit programs. Each of Mr. Fernandez' and Mr.
Clifford's base salaries during the portion of fiscal 1999 that each served as
the Company's Chief Executive Officer were established by their respective
employment agreements with the Company. Messrs. Fernandez and Clifford received
no material compensation or benefits in 1999 not provided to all executive
officers. Messrs. Fernandez' and Clifford's compensation packages were
designed, however, to provide for a higher proportion of their compensation to
be dependent on Company performance as compared to other executive officers.
The Board approved a special one-time retention incentive plan benefiting key
employees, for which the CEO is eligible, to be earned and paid in three
installments and designed to enhance retention of key personnel. Approximately
25% of the special one-time retention incentive was vested in 1999. The Company
anticipates that Mr. Fernandez will
13
earn the remaining 75% of his retention bonus in fiscal 2000. Mr. Clifford will
not earn the remainder of his retention bonus. The Committee has also sought to
provide to each of its chief executive officers incentive to promote long-term
stockholder value through their participation in the Company's stock option
programs.
Other elements of executive compensation include participation in a
Company-wide life insurance program, including a supplemental life insurance
program and long-term disability insurance program. Executives are also
eligible for Company-wide medical benefits and participation in a 401(k) plan
under which the Company provides matching contributions to all employees.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Anne Sutherland Fuchs
William O. Grabe
John P. Imlay
Compensation Committee Interlocks and Insider Participation
John Imlay, a member of the Company's Compensation Committee, serves on
the board of directors of and is a member of the Compensation Committee of IMS
Health Incorporated. See CERTAIN RELATIONSHIPS AND TRANSACTIONS--Relationship
with IMS Health Incorporated. Until July 1999, Mr. Imlay was a designee of IMS
Health to the Company's Board. Since July 1999, Mr. Imlay has been an
independent director.
Comparison of Total Cumulative Stockholder Return
The following graph sets forth the Company's total cumulative stockholder
return as compared to the S&P 500 Index, The S&P 400 MidCap Index and the
Hambrecht & Quist Technology Index ("H&Q Technology Index") for the fiscal year
ended September 30, 1999. Total stockholder return assumes $100 invested on
September 30, 1994 with all dividends reinvested.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
COMPARISON OF 5 YEARS CUMULATIVE TOTAL RETURN*
AMONG GARTNER GROUP, INC., THE S&P 500 INDEX,
THE S&P MIDCAP 400 INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[GRAPHIC OMITTED]
1994 1995 1996 1997 1998 1999
Gartner Group, Inc. $100 $230 $477 $421 $293 $248
Hambrecht & Quist Technology $100 $175 $192 $287 $267 $514
S&P MidCap 4000 $100 $126 $143 $199 $180 $225
S&P 500 $100 $130 $156 $219 $239 $306
14
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected KPMG LLP, independent auditors, to audit the
financial statements of the Company for the 2000 fiscal year. This nomination
is being presented to the stockholders for ratification at the Annual Meeting.
KPMG LLP has audited the Company's financial statements since September 1996. A
representative of KPMG LLP is expected to be present at the Annual Meeting,
will have the opportunity to make a statement, and is expected to be available
to respond to appropriate questions.
Vote Required; Recommendation of Board of Directors
The affirmative vote of a majority of the shares represented, in person or
by proxy, and voting at the Annual Meeting (at which a quorum is present) is
required to ratify the Board's selection of KPMG LLP. If the stockholders
reject the nomination, the Board will reconsider its selection.
The Board of Directors has unanimously approved the appointment of KPMG
LLP as the Company's independent auditors for fiscal year 2000 and recommends
that the stockholders vote "FOR" this proposal.
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, based on review of
information on file with the Commission and Company stock records, with respect
to beneficial ownership of the Class A Common Stock and Class B Common Stock as
of November 30, 1999, (i) by each person (or group of affiliated persons) which
is known by the Company to own beneficially more than five percent of the Class
A Common Stock and Class B Common Stock, (ii) by each of the Company's
directors, (iii) by each executive officer named in the Summary Compensation
Table, and (iv) by all directors and current executive officers as a group.
Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where
applicable.
Number of Percent Number of Percent
Class A Of Class B Of
Beneficial Owner Shares Class A Shares Class B
- ----------------------------------------------- ----------- --------- ------------ ----------
IMS Health Incorporated (1) ................... 7,508,857 9.8%
200 Nyala Farms Road
Westport, CT 06880
FMR Corp (2) .................................. 11,076,954 27.2%
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc. (3) ............ 6,032,500 7.9
100 East Pratt Street
Baltimore, MD 21202
Manuel A. Fernandez (4) ....................... 945,531 1.2
William T. Clifford (5) ....................... 398,479 *
Michael D. Fleisher (6) ....................... 305,913 *
E. Follett Carter (7) ......................... 374,703 *
Regina M. Paolillo (8) ........................ 108,882 *
Richard E. Eldh, Jr. (9) ...................... 131,706 *
William O. Grabe (10) ......................... 83,000 *
John P. Imlay (11) ............................ 78,000 * 2,604 *
Max D. Hopper (12) ............................ 25,000 *
Stephen G. Pagliuca (13) ...................... 58,000 *
Dennis G. Sisco (14) .......................... 16,000 * 1,089 *
Anne Sutherland Fuchs ......................... -- *
Charles B. McQuade ............................ -- *
Kenneth Roman ................................. 5,000 *
All directors and current executive
officers as a group (13 persons)(15) ......... 1,762,032 2.3 *
- ------------
* Less than 1%
15
(1) Includes 6,792,081 shares of Class A Common Stock held by IMS Health
and 117,376 shares of Class A Common Stock held by IMS Health Licensing
Associates, L.P., in which IMS Health has a majority interest. Also
includes warrants to purchase 599,400 shares of Class A Common Stock.
(2) The shares shown as beneficially owned by FMR Corp. were those
reported as beneficially owned by it as of October 31, 1999 in its
Schedule 13G filed with the Commission on November 10, 1999. Such
schedule indicates that FMR Corp. has sole voting power with respect to
418,855 shares and sole dispositive power with respect to all 11,076,954
shares.
(3) The shares shown as beneficially owned by T. Rowe Price Associates,
Inc. were those reported as beneficially owned by it in Amendment No. 3
to its Schedule 13G filed with the Commission on November 10, 1999. Such
schedule indicates that T. Rowe Price Associates has sole voting power
with respect to 694,500 shares and sole dispositive power with respect
to all 6,032,500 shares.
(4) Includes 167,129 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(5) Includes 315,945 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(6) Includes 152,359 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999. Also includes
1 share held by a member of Mr. Fleisher's family, as to which he
disclaims beneficial ownership.
(7) Includes 227,759 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999. Also includes
4,000 shares held by a member of Mr. Carter's family, as to which he
disclaims beneficial ownership.
(8) Includes 80,220 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(9) Includes 68,400 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999. Also includes
4,000 shares held by a member of Mr. Eldh's family, as to which he
disclaims beneficial ownership.
(10) Includes 33,000 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(11) Includes 9,000 shares issuable upon the exercise of stock options that
are exercisable within 60 days of November 30, 1999.
(12) Includes 20,000 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(13) Includes 33,000 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(14) Includes 11,000 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
(15) Includes 1,117,812 shares issuable upon the exercise of stock options
that are exercisable within 60 days of November 30, 1999.
16
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationship with IMS Health Incorporated
On July 16, 1999, the Company effected a recapitalization of its Common
Stock into two classes of Common Stock, consisting of Class A Common Stock and
Class B Common Stock in order to facilitate a tax free spin-off by IMS Health
of its equity position in the Company to its stockholders. Prior to the
recapitalization, IMS Health owned approximately 47.6 million shares of the
Company's Class A Common Stock. As part of the recapitalization, the Company
issued 40,689,648 shares of Class B Common Stock to IMS Health in exchange for
a like number of shares of Class A Common Stock held by IMS Health. On July 26,
1999, IMS Health distributed such shares of Class B Common Stock pro rata to
its stockholders of record as of July 17, 1999. IMS Health intends to liquidate
its remaining interest in the Company's securities as soon as feasible, subject
to certain restrictions agreed to between the Company and IMS Health. In
connection with the recapitalization, on July 22, 1999, the Company paid a
special nonrecurring cash dividend of $1.1945 per share (representing a total
dividend of approximately $125 million) to all Company stockholders of record
as of the close of business on July 16, 1999 (including IMS Health).
Section 16(a) Beneficial Ownership Reporting Compliance
All reports required to be filed during fiscal year 1999 pursuant to
Section 16(a) of the Securities Exchange Act of 1934 by directors, executive
officers and 10% beneficial owners were filed on timely basis, except as
follows: Ms. Fuchs, Mr. McQuade, Mr. Roman, Ms. Higgins, Ms. Paolillo, and Mr.
Eldh each filed one late report on Form 3; and Mr. McQuade, Mr. Imlay, Mr.
Roman, and Mr. Pagliuca each filed one late report on Form 5 reporting one,
fourteen, one and thirteen transactions, respectively.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the enclosed proxy card to vote the
shares they represent as the Board may recommend.
MISCELLANEOUS
The Company's Annual Report for the fiscal year ended September 30, 1999
is being mailed to the stockholders of record concurrently with this Proxy
Statement. The Company's Annual Report is not part of this Proxy Statement.
Upon written request of any person solicited hereunder, the Company's
Report on Form 10-K for the fiscal year ended September 30, 1999 as filed with
the Commission may be obtained, without charge, by writing to Investor
Relations, Gartner Group, Inc., P.O. Box 10212, 56 Top Gallant Road, Stamford,
Connecticut 06904.
THE BOARD OF DIRECTORS
GARTNER GROUP, INC.
Stamford, Connecticut
December 21, 1999
17
GRT63R
DETACH HERE
PROXY
GARTNER GROUP, INC.
PROXY For Annual Meeting of Stockholders
To be Held February 1, 2000
CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GARTNER GROUP, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated December 21, 1999, and hereby appoints Manuel A.
Fernandez and Michael D. Fleisher, and each of them, Proxies and attorneys-in-
fact, with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Stockholders
of GARTNER GROUP, INC. to be held at 56 Top Gallant Road, Stamford, Connecticut
on Tuesday, February 1, 2000, at 10:00 a.m. local time, and at any adjournment
or adjournments thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE PERSONS AND THE PROPOSALS ON THE
REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
|--------------| |--------------|
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
|--------------| |--------------|
GRT63A
DETACH HERE
|----| Please mark ------
| X | votes as in |
|----| this example. |
1. Election of Directors
Nominees: John P. Imlay, Charles B. McQuade, Stephen G. Pagiluca
FOR |----| |----| WITHHELD
ALL | | | | FROM ALL
NOMINEES |----| |----| NOMINEES
|----|
| |
|----| ___________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To ratify the appointment of KPMG |----| |----| |----|
LLP as independent auditors for the | | | | | |
Company for the 2000 fiscal year. |----| |----| |----|
3. To vote or otherwise represent the shares on any and all other
business which may properly come before the meeting or any
adjournment or adjournments thereof, according to their
discretion and in their discretion.
|----|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
|----|
NOTE: Please sign exactly as your name appears on your stock certificate. If
shares are held jointly, each holder should sign. Executors, administrators,
trustees, guardians, attorneys and agents should sign their full title. If
stockholder is a corporation, sign in full corporate name by the authorized
officer.
Signature:________________ Date:________ Signature:______________ Date:________
GK2G4B
DETACH HERE
PROXY
GARTNER GROUP, INC.
PROXY For Annual Meeting of Stockholders
To be Held February 1, 2000
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GARTNER GROUP, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated December 21, 1999, and hereby appoints Manuel A.
Fernandez and Michael D. Fleisher, and each of them, Proxies and attorneys-in-
fact, with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Stockholders
of GARTNER GROUP, INC. to be held at 56 Top Gallant Road, Stamford, Connecticut
on Tuesday, February 1, 2000, at 10:00 a.m. local time, and at any adjournment
or adjournments thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR THE PROPOSAL ON THE REVERSE SIDE HEREOF AND FOR
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS
DEEM ADVISABLE.
|--------------| |--------------|
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
|--------------| |--------------|
GR264A
DETACH HERE
|----| Please mark ------
| X | votes as in |
|----| this example. |
FOR AGAINST ABSTAIN
1. To ratify the appointment of KPMG |----| |----| |----|
LLP as independent auditors for the | | | | | |
Company for the 2000 fiscal year. |----| |----| |----|
2. To vote or otherwise represent the shares on any and all other
business which may properly come before the meeting or any
adjournment or adjournments thereof, according to their
discretion and in their discretion.
|----|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
|----|
NOTE: Please sign exactly as your name appears on your stock certificate. If
shares are held jointly, each holder should sign. Executors, administrators,
trustees, guardians, attorneys and agents should sign their full title. If
stockholder is a corporation, sign in full corporate name by the authorized
officer.
Signature:________________ Date:________ Signature:______________ Date:________