Morningstar 2004 Stock Incentive Plan

              The Stock Incentive Plan provides for grants of options, stock appreciation rights, restricted stock, restricted stock units, and performance shares. All of our employees are eligible for awards under the Stock Incentive Plan. Joe Mansueto does not participate in the Stock Incentive Plan. Awards may also be made to our non-employee directors and consultants under the Stock Incentive Plan. A total of 5,628,843 shares of common stock may be granted under the Stock Incentive Plan from 2004 through 2008.

In December 2004, we granted options to purchase 1,622,539 shares of our common stock under the Stock Incentive Plan. As indicated in the 2004 column of the following table, 760,000 of these options were granted to our executive officers, all with an initial exercise price of $14.70, with the exercise price increasing over the term of the options at a rate equal to the 10-year Treasury yield rate as of the date of grant. These options will vest over four years. On May 2, 2005, we granted options to purchase 969,184 shares of our common stock under the Stock Incentive Plan. As indicated in the 2005 column of the following table, 355,000 of these options were granted to our executive officers, all with an initial exercise price equal to the initial public offering price, with the exercise price increasing over the term of the options at a rate equal to the 10-year Treasury yield rate as of the date of grant. These options will vest over four years.

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Number of Options

Executive Officer


 

2004


 

2005


Joe Mansueto

 

 

Tim Armour

 

25,000

 

25,000

Martha Dustin Boudos

 

80,000

 

40,000

Tao Huang

 

110,000

 

60,000

Don Phillips

 

40,000

 

40,000

David W. Williams

 

55,000

 

25,000

Named executive officers as a group

 

310,000

 

190,000

Executive officers as a group (13 persons)

 

760,000

 

355,000

Options to acquire an additional 130,816 shares of common stock have been approved for grant in 2005. An additional 2,906,304 underlying shares are available for issuance under our Stock Incentive Plan. Shares delivered pursuant to awards may consist of authorized but unissued common stock or authorized and issued common stock held in treasury. Any shares subject to an award under the Stock Incentive Plan that are forfeited, canceled, settled, or otherwise terminated without a distribution of shares, or withheld by us in connection with the exercise of an option or in payment of any required income tax withholding, will again be available for awards under this plan.

The compensation committee administers the Stock Incentive Plan. It has the authority to construe, interpret, and implement the Stock Incentive Plan; prescribe, amend, and rescind rules relating to the Stock Incentive Plan; and grant awards and determine who receives awards. The compensation committee may also modify, extend, or renew outstanding awards, as long as participants consent if their rights are impaired. It also has the authority to adjust the terms of any outstanding awards and the number of shares of the common stock issuable under the Stock Incentive Plan to prevent the enlargement or dilution of rights, or for any increase or decrease in the number of issued shares of our common stock (or the issuance of shares of stock other than shares of common stock) resulting from a recapitalization, stock split, reverse stock split, stock dividend, spin-off, combination, or reclassification or exchange of the shares of our common stock, merger, consolidation, rights offering, separation, reorganization, or any other change in corporate structure or event the compensation committee determines in its sole discretion affects our capitalization. The determination of the compensation committee on all matters relating to the Stock Incentive Plan or any award agreement is final, binding, and conclusive.

Except to the extent otherwise provided in the award agreement or approved by the compensation committee, no award or right granted to any person under the Stock Incentive Plan is assignable or transferable other than by will or by the laws of descent and distribution, or through a qualified domestic relations order. All awards and rights are exercisable during the life of the grantee only by the grantee or the grantee's legal representative.

The Stock Incentive Plan automatically terminates 10 years after its adoption by the board, or if earlier, when all reserved shares have been issued. Except as otherwise provided in an award agreement, the board of directors may from time to time suspend, discontinue, revise, or amend the Stock Incentive Plan provided that no amendment will materially adversely affect a grantee without that person's prior written consent.

In summary, under all of our stock option plans, options to acquire 10,951,931 shares of our common stock were outstanding as of December 31, 2004, of which 7,772,577 were exercisable at a weighted average exercise price

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of $9.81 per share and 3,179,354 were not exercisable and had a weighted average exercise price of $12.43 per share. On May 2, 2005, we granted options to acquire 969,184 shares of common stock at an initial exercise price equal to the initial public offering price. Options to acquire an additional 130,816 shares of common stock have been approved for grant in 2005. An additional 2,906,304 shares of common stock are available for issuance under our Stock Incentive Plan.

Morningstar 1999 Incentive Stock Option Plan

              We maintain the Morningstar 1999 Incentive Stock Option Plan (the 1999 Option Plan). A copy of the 1999 Plan is filed as an exhibit to this registration statement of which this prospectus is a part.

In February 1999, we granted options to purchase 1,500,000 shares of our common stock at an exercise price of $2.77 per share, representing the fair market value of our common stock as determined by our board. Of these options, 1,138,560 options were fully exercisable upon grant and 361,440 become exercisable in equal annual installments over 10 years. As of December 31, 2004, options to purchase 869,174 shares were outstanding under

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the terms of the 1999 Option Plan, of which options to purchase 724,598 shares of common stock were exercisable. No additional options may be granted under the 1999 Option Plan. All outstanding options under the 1999 Option Plan will continue to be governed by their existing terms.

Morningstar 1993, 2000, and 2001 Stock Option Plans

              Historically, we have maintained the Morningstar 1993 Stock Option Plan, the Morningstar 2000 Stock Option Plan, and the Morningstar 2001 Stock Option Plan (collectively, the Prior Plans), under which we have granted stock options to certain of our employees and non-employee directors. The Morningstar 2004 Stock Incentive Plan (Stock Incentive Plan) amended and restated the Prior Plans.

As of December 31, 2004, 8,460,218 shares were issuable upon exercise of outstanding options granted under the Prior Plans, of which options to purchase 7,047,979 shares of common stock were exercisable. We will not grant any additional options under any of the Prior Plans, and any shares subject to an award under any of the Prior Plans that are forfeited, canceled, settled or otherwise terminated without a distribution of shares, or withheld by us in connection with the exercise of an option or in payment of any required income tax withholding, will not be available for awards under the Stock Incentive Plan.