<PAGE>
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 (S)240.14a-11(c) or (S)240.14a-12
DESKTOP DATA, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Board of Directors of Desktop Data, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
DESKTOP DATA, INC.
80 BLANCHARD ROAD
BURLINGTON, MASSACHUSETTS 01803
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To the Stockholders of Desktop Data,
Inc.:
The Annual Meeting of Stockholders of Desktop Data, Inc. (the
"Corporation"), a Delaware corporation, will be held on Thursday, May 30, 1996
at 10:00 a.m., local time, at The Marriott located at 1 Mall Road, Burlington,
Massachusetts 01803, for the following purposes:
1. To elect two (2) Class I directors to serve for a three-year term or
until their successors are elected and qualified.
2. To consider and approve an amendment to the Corporation's 1995 Non-
Employee Director Stock Option Plan (the "Director Plan") to increase the
initial grant under the Director Plan from 5,000 to 20,000 shares of the
Corporation's Common Stock.
3. To ratify the selection of the firm of Arthur Andersen LLP as
independent auditors for the fiscal year ending December 31, 1996.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 16, 1996 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 mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
By Order of the Board of Directors
Lawrence S. Wittenberg
Secretary
Burlington, Massachusetts
April 26, 1996
<PAGE>
DESKTOP DATA, INC.
80 BLANCHARD ROAD
BURLINGTON, MASSACHUSETTS 01803
----------------
PROXY STATEMENT
----------------
APRIL 26, 1996
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Desktop Data, Inc., a Delaware corporation (the
"Corporation"), for use at the Annual Meeting of Stockholders to be held on
Thursday, May 30, 1996, at 10:00 a.m., local time, at The Marriott, 1 Mall
Road, Burlington, Massachusetts 01803.
Only stockholders of record at the close of business on April 16, 1996 (the
"Record Date") will be entitled to receive notice of and to vote at the
meeting and any adjournments thereof. As of that date, 8,543,325 shares of
common stock, $.01 par value per share (the "Common Stock"), of the
Corporation were issued and outstanding. The holders of Common Stock are
entitled to one vote per share on any proposal presented at the meeting.
Stockholders may vote in person or by proxy. Execution of a proxy will not in
any way affect a stockholder's right to attend the meeting and vote in person.
Any proxy may be revoked by a stockholder at any time before its exercise by:
(i) delivering written revocation or a later dated proxy to the Secretary of
the Corporation; or (ii) attending the Annual Meeting and voting in person.
The representation in person or by proxy of at least a majority of the
outstanding Common Stock entitled to vote at the meeting is necessary to
constitute a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker "non-votes" are counted as present or
represented for purposes of determining the presence or absence of a quorum
for the meeting. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the nominee does not have
discretionary voting power and has not received instructions from the
beneficial owner.
In the election of directors, the nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to vote at
the meeting shall be elected as directors. On all other matters being
submitted to stockholders, an affirmative vote of a majority of the shares
present or represented and voting on each such matter is required for
approval. An automated system administered by the Corporation's transfer agent
tabulates the votes. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter. Broker "non-votes" are not so
included.
The persons named as attorneys-in-fact in the proxies are officers and/or
directors of the Corporation. All properly executed proxies returned in time
to be counted at the meeting will be voted. In addition to the election of
directors, the stockholders will consider and vote upon a proposal to ratify
the selection of auditors and approve an amendment to the Corporation's 1995
Non-Employee Director Stock Option Plan, as further described in this proxy
statement. Where a choice has been specified on the proxy with respect to the
foregoing matters, the shares represented by the proxy will be voted in
accordance with the specifications and will be voted FOR if no specification
is indicated.
The Board of Directors knows of no other matters to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote properly may be taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as attorneys in the proxies.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended December 31, 1995, is being mailed together with this proxy
statement to all stockholders entitled to vote. This proxy statement and the
form of proxy were first mailed to stockholders on or about April 29, 1996.
<PAGE>
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of the Record Date: (i) the name of each
person who, to the knowledge of the Corporation, owned beneficially more than
5% of the Common Stock of the Corporation outstanding at such date; (ii) the
name of each director or nominee; and (iii) the name of each executive officer
identified in the Summary Compensation Table set forth below under
"Compensation and Other Information Concerning Directors and Officers," the
number of shares owned by each of such persons and the percentage of the
outstanding shares represented thereby, and also sets forth such information
for all officers, directors and nominees as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS(2)
------------------- ----------------- -----------
<S> <C> <C>
Donald L. McLagan(3).......................... 2,107,791 24.67%
c/o Desktop Data, Inc.
80 Blanchard Road
Burlington, MA 01803
A. Baron Cass, III(4)......................... 143,937 1.68%
Peter P. Homans............................... 27,242 *
Rory J. Cowan................................. -- *
Ellen Carnahan(5)............................. 374,620 4.38%
c/o William Blair Venture Partners III
222 West Adams Street
Chicago, IL 60606
Mitchell E. Kertzman.......................... -- *
Edward R. Siegfried........................... 157,110 1.84%
Daniel F. X. O'Reilly......................... 188,221 2.20%
Clifford M. Pollan............................ 153,332 1.79%
All officers, directors and nominees as a 3,152,253 36.90%
group
(nine persons)(3)(4)(5)......................
</TABLE>
- --------
* Less than 1%
(1) Except as otherwise noted, each person or entity named in the table has
sole voting and investment power with respect to the shares. The inclusion
herein of any shares of Common Stock deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares.
(2) Applicable percentage of ownership as of the Record Date is based upon
8,543,325 shares of Common Stock outstanding on such date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission"), and includes voting and investment
power with respect to shares. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of the Record Date are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person.
(3) Includes 414,442 shares held in trust for the benefit of Mr. McLagan's two
children, of which Mr. McLagan's wife is the sole trustee. Mr. McLagan
disclaims beneficial ownership of such shares.
(4) Includes 38,971 shares held by Prime Petroleum, Inc. Profit Sharing Trust,
of which Mr. Cass is the sole trustee, and of which he and his spouse are
the sole beneficiaries, and 25,000 shares held by Sands Partnership No. 1
Money Purchase Pension Plan, of which Mr. Cass is a co-trustee but not a
beneficiary. Mr. Cass disclaims beneficial ownership of shares held by
Sands Partnership No. 1 Money Purchase Pension Plan.
(5) Includes 374,620 shares held by William Blair Venture Partners III
("Blair"). The general partner of Blair is Blair Management. Ms. Carnahan
is general partner of Blair Management, and therefore may be deemed to
share voting and investment power with respect to the shares held by
Blair. Ms. Carnahan disclaims beneficial ownership of such shares, except
to the extent of her proportionate interest in Blair.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is currently fixed at six members. The Board of
Directors is divided into three classes, each of which consists of two
directors. Each director serves for a three-year term. However, each Class II
and Class III director will serve for an initial term ending at the Annual
Meeting of Stockholders to be held in 1997 and 1998, respectively. The Class I
directors' term will expire at this Meeting. All directors will hold office
until their successors have been duly elected and qualified or until their
earlier resignation or removal. Messrs. Mitchell E. Kertzman and A. Baron Cass
III are the Class I directors; Mr. Peter P. Homans and Ms. Ellen Carnahan are
the Class II directors; and Messrs. Donald L. McLagan and Rory J. Cowan are
the Class III directors.
The Board of Directors has nominated and recommended that Messrs. Kertzman
and Cass, who are currently members of the Board of Directors, be elected
Class I directors, to hold office until the 1999 Annual Meeting of
Stockholders or until their successors have been duly elected and qualified or
until their earlier resignation or removal. The Board of Directors knows of no
reason why the nominees should be unable or unwilling to serve, but if any
nominee should for any reason be unable or unwilling to serve, the proxies
will be voted for the election of such other person for the office of director
as the Board of Directors may recommend in the place of such nominee. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for nominees named below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE NOMINEES LISTED BELOW.
The following table sets forth the nominees to be elected at the meeting
and, for each director whose term of office will extend beyond the meeting,
the year such nominee or director was first elected a director, the positions
currently held by the nominees and each director with the Corporation, the
year the nominee's or director's term will expire and class of director of
each nominee and each director:
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S
NAME AND YEAR NOMINEE OR DIRECTOR POSITION(S) WITH YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR THE CORPORATION WILL EXPIRE DIRECTOR
- --------------------------------- ---------------- ----------- --------
<S> <C> <C> <C>
NOMINEES:
Mitchell E. Kertzman....... Director 1996 I
1996
A. Baron Cass III.......... Director 1996 I
1989
CONTINUING DIRECTORS:
Ellen Carnahan............. Director 1997 II
1991
Peter P. Homans............ Director 1997 II
1989
Donald L. McLagan.......... Chairman, President, Chief 1998 III
1988 Executive Officer and
Director
Rory J. Cowan.............. Director 1998 III
1993
</TABLE>
3
<PAGE>
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the director nominees to be elected at the
meeting, the directors and the executive officers of the Corporation, their
ages, and the positions currently held by each such person with the
Corporation.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Donald L. McLagan..................... 54 Chairman, President, Chief Executive
Officer and Director
Edward R. Siegfried................... 51 Vice President--Finance and
Operations, Treasurer and Assistant
Secretary
Clifford M. Pollan.................... 39 Vice President--Sales and Marketing
Daniel F.X. O'Reilly, Ph.D. .......... 49 Vice President--Development
A. Baron Cass, III(2)................. 52 Director
Mitchell E. Kertzman(1)............... 47 Director
Peter P. Homans(1).................... 44 Director
Ellen Carnahan(2)..................... 40 Director
Rory J. Cowan(1)(2)................... 43 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. McLagan is the founder of the Corporation and has been President and a
director since its inception in 1988. Mr. McLagan was elected Chairman and
Chief Executive Officer in June 1995. From 1985 to 1988, Mr. McLagan was Vice
President and General Manager of the Information Services Division of Lotus
Development Corporation, a computer software company. From 1969 to 1984, Mr.
McLagan was employed by Data Resources, Inc., an economic information service
company, most recently as Executive Vice President.
Mr. Siegfried joined the Corporation in 1989 as a Vice President, Treasurer
and Assistant Secretary and was elected Vice President--Finance and Operations
in May 1995. From 1985 to 1989, Mr. Siegfried served as the Vice President
responsible for finance, administration and operations at Softbridge
Microsystems, Inc., a computer software development company. From 1974 to
1985, Mr. Siegfried was the Senior Vice President--Finance and Administration
of Data Resources, Inc. Mr. Siegfried is a certified public accountant and
from 1967 to 1974 was employed by Arthur Andersen LLP, most recently as Audit
Manager.
Mr. Pollan joined the Corporation in 1989 as a Vice President and was
elected Vice President--Sales and Marketing in May 1995. From 1986 to 1989,
Mr. Pollan was a Director of Sales at Lotus Development Corporation. From 1985
to 1986, Mr. Pollan was the Vice President of Sales of Isys Corporation, a
financial information company, and from 1978 to 1985 was employed by Data
Resources, Inc., most recently as a Director of Consulting.
Dr. O'Reilly joined the Corporation in 1989 as a Vice President and was
elected Vice President--Development in May 1995. From 1979 to 1989, Dr.
O'Reilly was the Vice President of the Information System Development Group of
Data Resources, Inc. From 1975 through 1979, Dr. O'Reilly held various
teaching positions in the Mathematics Departments of Marquette University,
Simmons College and Boston College.
Mr. Cass has served on the Board of Directors of the Corporation since
November 1989. Mr. Cass has been a general partner of CCS & Associates, L.P.,
an investment general partnership, since 1983. Mr. Cass is also currently a
general partner of C3 Holdings, L.L.C., a private merchant banking firm, a
general partner of Equity Analysts,
4
<PAGE>
L.P., a real estate investment partnership, and a general partner of Sands
Partnership No. 1, L.P., an investment partnership. Previously, Mr. Cass was a
Vice President with the investment firms of Goldman, Sachs & Co. and Bear
Stearns & Co., Inc.
Mr. Kertzman has served as a director of the Corporation since January 1996.
Mr. Kertzman co-founded the Powersoft Division of Sybase, Inc., a publicly-
traded software company in 1974 and has been its Chief Executive Officer since
that date. Mr. Kertzman became the Executive Vice President and a director of
Sybase, Inc. in February, 1995. Mr. Kertzman is also a director of Shiva
Corporation, the Massachusetts Taxpayers Foundation, the New England Council
and the United Way of Massachusetts. He is also a member of the Massachusetts
Business Roundtable and the New England Advisory Council of the Federal
Reserve Bank of Boston.
Mr. Homans has served on the Board of Directors of the Corporation since
November 1989. Mr. Homans has been a general partner of Pangaea, L.P., an
investment fund, since 1993. From 1990 to 1993, Mr. Homans was the President
of Homans Research, Inc., a private investment research firm, which he
founded. Prior to that time, Mr. Homans was a broker with H.C. Wainwright &
Co., Inc., a brokerage firm with which he remains affiliated.
Ms. Carnahan has served on the Board of Directors of the Corporation since
March 1991. Ms. Carnahan has been a general partner of William Blair Venture
Partners III, a venture capital firm, since 1988. Prior to 1988, Ms. Carnahan
was Vice President of Marketing and Planning at SPSS, Inc., an applications
software company.
Mr. Cowan has served on the Board of Directors of the Corporation since May
1993. Mr. Cowan has been an Executive Vice President of R.R. Donnelley & Sons
Company, a supplier of commercial print and print-related services, since 1991
and was a Group President from 1989 to 1991. Mr. Cowan has also been the Chief
Executive Officer of Stream International Inc., a software services company,
since April 1995.
Executive officers of the Corporation are elected by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met 6 times during the fiscal year ended December 31,
1995. Each of the directors attended at least 75% of the aggregate of all
meetings of the Board of Directors during fiscal 1995. The Corporation
established an Audit Committee and a Compensation Committee during fiscal
1995. The Audit Committee of the Board of Directors, of which Messrs. Cass and
Cowan and Ms. Carnahan are currently members, is responsible for reviewing the
results and scope of audits and other services provided by the Corporation's
independent auditors. The Audit Committee did not meet during fiscal 1995. The
Compensation Committee, whose members currently are Messrs. Kertzman, Homans
and Cowan, makes recommendations concerning the salaries and incentive
compensation of employees and consultants to the Corporation and administers
the Corporation's stock plans. The Compensation Committee met once during
fiscal 1995. The Board of Directors does not currently have a standing
nominating committee.
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth summary information concerning the
compensation paid or earned for services rendered to the Corporation in all
capacities during the fiscal years ended December 31, 1995 and 1994
5
<PAGE>
to (i) the Corporation's Chief Executive Officer and (ii) each of the other
three most highly compensated executive officers of the Corporation who
received total annual salary and bonus in excess of $100,000 in fiscal 1995
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- --------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
Donald L. McLagan........................ 1995 $124,150 $ 739
Chairman, President, Chief Executive 1994 115,500 -- 289
Officer, and Director
Edward R. Siegfried...................... 1995 124,150 739
Vice President, Finance and Operations, 1994 115,500 -- 289
Treasurer and Assistant Secretary
Clifford M. Pollan....................... 1995 124,150 $28,504 739
Vice President--Sales and Marketing 1994 115,500 45,157 271
Daniel F.X. O'Reilly..................... 1995 124,150 1,490
Vice President--Development 1994 115,500 -- 289
</TABLE>
- --------
(1) Represents matching contributions made by the Corporation to the Named
Executive Officer under the Corporation's 401(k) plan.
No Named Executive Officers exercised stock options during the year ended
1995, and as of December 31, 1995, none of the Named Executive Officers held
any options to purchase Common Stock.
STOCK PLANS
The Corporation currently has four stock ownership plans: the 1989 Stock
Option Plan; the 1995 Stock Plan, the 1995 Employee Stock Purchase Plan and
the 1995 Non-Employee Director Stock Option Plan. Although there are no
proposed amendments to the 1989 Stock Option Plan, the 1995 Stock Plan or the
1995 Employee Stock Purchase, Rule 16b-3 under the Exchange Act, requires that
certain information regarding the plans be furnished to stockholders of the
Corporation. Following is a summary of the material features of the 1989 Stock
Option Plan, the 1995 Stock Plan and the 1995 Employee Stock Purchase Plan.
The 1995 Non-Employee Director Stock Option Plan is described in "Proposal 2,
Amendment to the 1995 Non-Employee Director Stock Option Plan".
1989 Stock Plan. The Corporation's 1989 Stock Plan (the "1989 Plan") was
adopted by the Corporation's Board of Directors on July 17, 1989 and approved
by the Corporation's stockholders on July 18, 1989. The Board of Directors
voted in June 1995 to terminate the 1989 Plan upon the effective date of the
Corporation's initial public offering on August 11, 1995. Therefore, no
further options have been granted under the 1989 Plan since such date. Under
the terms of the 1989 Plan, non-statutory stock options have been granted to
employees, consultants and directors of the Corporation. Options granted under
the 1989 Plan expire five years from the date of grant. Generally options
issued under the 1989 Plan vest at a rate of 25% after one year, with the
remainder vesting monthly over the next three years.
1995 Stock Plan. The Corporation's 1995 Stock Plan (the "1995 Plan") was
adopted by the Board of Directors on June 16, 1995 and approved by the
stockholders on June 26, 1995. The 1995 Plan provides for the grant of
incentive stock options to employees and the grant of non-statutory stock
options, stock awards and purchase rights to employees, consultants, directors
and officers of the Corporation. The 1995 Plan provides for the issuance of up
to 625,000 shares. Generally, under the 1995 Plan, an award is not
transferable by the awardholder except by will or by the laws of descent and
distribution. No incentive stock option may be exercised more than 90 days
following termination of employment unless the termination is due to death or
6
<PAGE>
disability, in which case the option is exercisable for a maximum of 180 days
after such termination. Options granted under the 1995 Plan expire ten years
from the date of grant or five years from the date of grant in the case of
incentive stock options issued to employees holding more than 10% of the total
combined voting power of the Corporation.
The 1995 Plan and the 1989 Plan are administered by the Compensation
Committee of the Board of Directors, which currently consists of disinterested
directors of the Corporation. Subject to the provisions of such plans, the
Compensation Committee has the authority to select the optionees and determine
the terms of the options granted, including: (i) the number of shares subject
to each option, (ii) when the option becomes exercisable, (iii) the exercise
price of the option (which in the case of an incentive stock option cannot be
less than the market price of the Common Stock as of the date of grant), (iv)
the duration of the option, and (v) the time, manner and form of payment upon
exercise of an option.
1995 Employee Stock Purchase Plan. The 1995 Employee Stock Purchase Plan
(the "1995 Purchase Plan") was adopted by the Board of Directors on June 16,
1995 and approved by the Corporation's Stockholders on June 26, 1995. The 1995
purchase plan provides for the issuance of up to 175,000 shares of Common
Stock pursuant to the exercise of nontransferable options granted to
participating employees.
The 1995 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Corporation, except employees who own
five percent or more of the Corporation's stock, whose customary employment is
20 hours or more per week and more than five months in any calendar year and
who have completed at least one year of employment are eligible to participate
in the 1995 Purchase Plan. Employees who own five percent or more of the
Corporation's Common Stock and directors who are not employees of the
Corporation may not participate in the 1995 Purchase Plan. To participate in
the 1995 Purchase Plan, an employee must authorize the Corporation to deduct
an amount (not less than one percent nor more than ten percent of a
participant's total cash compensation) from his or her pay during six-month
offering periods commencing on January 1 and July 1 of each year (each a "Plan
Period"). In no case may an employee purchase more than 250 shares in any Plan
Period. The exercise price for the option for each Plan Period is 85% of the
lesser of the market price of the Common Stock on the first or last business
day of the Plan Period. If an employee is not a participant on the last day of
the Plan Period, such employee is not entitled to exercise his or her option,
and the amount of his or her accumulated payroll deductions will be refunded.
An employee's rights under the 1995 Purchase Plan terminate upon his or her
voluntary withdrawal from the 1995 Purchase Plan at any time or upon
termination of employment.
EMPLOYMENT AGREEMENTS
Each of the Named Executive Officers has entered into a non-competition
agreement with the Corporation, which restricts him from competing with the
Corporation through June 28, 1996, unless his employment is terminated
involuntarily without cause or in connection with a change of control of the
Corporation.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Board of Directors of the Corporation, of
which Mr. McLagan, the Corporation's Chairman, President and Chief Executive
Officer, is a member. The Board of Directors administered the Corporation's
executive compensation program during the fiscal year ended December 31, 1995.
However, in August 1995, the Board of Directors established a Compensation
Committee which is currently comprised of Messrs. Kertzman, Homans and Cowan,
all of whom are non-employee directors. Pursuant to authority delegated by the
Board of Directors, the Compensation Committee is responsible for reviewing
and administering the Corporation's stock plans and reviewing and approving
compensation matters concerning the executive officers of the Corporation.
Cash Compensation. The Corporation's executive officers received identical
base salary of $124,150 in 1995. This reflects the Corporation's philosophy
that each executive officer performs a different but equally
7
<PAGE>
important function in the Corporation's performance. The Compensation
Committee followed this philosophy in setting base salary for each of the
Corporation's executive officers in 1996, but may change this practice in the
future if it ceases to be effective in attracting and retaining qualified
executives.
The Board of Directors attempts to keep the base salary for the
Corporation's executive officers competitive by comparing it with those of
other companies in the computer software industry and other companies with
similar market capitalizations. The Board of Directors determines any
increases in the base salary based on the Corporation's performance.
Mr. Pollan, the Company's Vice President, Sales and Marketing, received in
1995, in addition to his base salary, a bonus which was based on a formula
relating to the Corporation's new and renewal sales in 1995. In 1995, no other
executive officer received or was entitled to earn any bonus, based on sales
or otherwise.
Equity Compensation. The Corporation's equity compensation program is
designed to provide long-term incentives to executive officers to encourage
executive officers to remain with the Corporation and to provide executives
with the opportunity to obtain significant, long-term stock ownership. The
Board of Directors generally grants options that become exercisable over a
four-year period and only grants stock options with exercise prices equal to
the fair market value of the Common Stock on the date of grant. In 1995, the
Board of Directors did not grant any options to its executive officers due to
their stock ownership levels.
The Board of Directors' philosophy had been, in fiscal 1995 and the
Compensation Committee's philosophy has been in fiscal 1996, to grant options
to its executive officers in equal amounts, similar to the philosophy
underlying the cash compensation program for executive officers. Again, should
this practice cease to attract and retain qualified executives, the
Compensation Committee will reevaluate the practice.
Mr. McLagan's Compensation. As discussed above, it has been the philosophy
of the Board of Directors to compensate Mr. McLagan equally with other
executive officers. To date, Mr. McLagan has not received equity compensation
due to his level of stock ownership.
Other Benefits. The Corporation also has various broad-based employee
benefit plans. Executive officers participate in these plans on the same terms
as eligible, non-executive employees, subject to any legal limits on the
amounts that may be contributed or paid to executive officers under these
plans. The Corporation offers a stock purchase plan, under which employees may
purchase Common Stock at a discount. The Corporation also maintains insurance
and other benefit plans for its employees.
Tax Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), limits the tax deduction to $1
million for compensation paid to any of the executive officers unless certain
requirements are met. The Board of Directors has considered these requirements
and the proposed regulations. It is the Board of Directors' present intention
that, so long as it is consistent with its overall compensation objectives,
substantially all executive compensation be deductible for United States
federal income tax purposes by the Corporation. The Board of Directors
believes that the Corporation's 1995 Stock Plan currently qualifies for an
exception to the requirements of Section 162(m) and, subject to the prior
sentence, will take whatever further action is necessary to satisfy Section
162(m) requirements for compensation paid pursuant to the 1995 Stock Plan.
RESPECTFULLY SUBMITTED BY THE BOARD OF DIRECTORS
Mitchell E. Kertzman Donald L. McLagan
Peter P. Homans Ellen Carnahan
Rory J. Cowan A. Baron Cass, III
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation's Board of Directors has established a Compensation
Committee currently consisting of Messrs. Kertzman, Homans and Cowan. During
the fiscal year ended December 31, 1995, however, as has been disclosed above,
the Board of Directors performed the functions of the Compensation Committee.
During this period, Mr. McLagan, the Corporation's Chairman President, Chief
Executive Officer and Director, participated in deliberations of the
Corporation's Board of Directors concerning the compensation of executive
officers. No executive officer of the Corporation served as a member of the
compensation committee of another entity (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors), one of whose executive officers
served as a director of the Corporation.
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1995, employee Directors did not
receive cash compensation for their service as members of the Board of
Directors. Non-employee Directors were reimbursed for their reasonable out-of-
pocket expenses incurred in attending such meetings. Non-employee directors
are also eligible for participation in the 1995 Non-Employee Director Stock
Option Plan. See "Proposal 2, Amendment to the 1995 Non-Employee Director
Stock Option Plan."
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Corporation's Common Stock during the period from
the Corporation's initial public offering on August 11, 1995 through December
31, 1995, with the cumulative total return for the Nasdaq Stock Market (U.S.
companies) and the Nasdaq Computer and Data Processing Services Stock index
(the "Nasdaq Computer Index"). The comparison assumes $100 were invested on
August 11, 1995 in the Corporation's Common Stock at the $15.00 initial
offering price and in each of the foregoing indices and assumes reinvestment
of dividends, if any.
9
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
DESKTOP DATA, INC., NASDAQ STOCK MARKET INDEX
AND NASDAQ COMPUTER INDEX(1)(2)
[PERFORMANCE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
8/11/95 8/31/95 9/30/95 10/31/95 11/30/95 12/31/95
------- ------- ------- -------- -------- --------
Desktop Data, Inc. $100 $189 $232 $238 $178 $163
- -------------------------------------------------------------------------------
NASDAQ Stock Market $100 $102 $104 $103 $106 $105
NASDAQ Stock
Computer Index $100 $ 98 $102 $107 $108 $106
- -------------------------------------------------------------------------------
- --------
(1) Prior to August 11, 1995 the Corporation's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
This chart is not "soliciting material", is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filings of the Corporation under the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, as amended,
whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily
indicative of future price performance. Information used on this graph was
obtained from the Nasdaq Stock Market and the Nasdaq Stock Market and the
Nasdaq Computer indices were prepared for Nasdaq by the Center for
Research in Security Prices at the University of Chicago, a source
believed to be reliable, although the Corporation is not responsible for
any errors or omissions in such information
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
R.R. Donnelley & Sons Corporation ("Donnelley"), a customer of the
Corporation, was billed an aggregate of approximately $18,000 in NewsEDGE
subscriber fees in the year ended December 31, 1995. Mr. Cowan, Executive Vice
President of Donnelley, serves on the Board of Directors of the Corporation.
The Corporation retained R.R. Donnelley Financial International Printing
Services, a division of Donnelley, as its financial printer for the
Corporation's Prospectus in connection with its initial public offering.
Printing expenses for the Corporation's initial public offering were
approximately $130,000.
William Blair & Corporation, an affiliate of William Blair Venture Partners
III ("Blair"), is a customer of the Corporation and was billed an aggregate of
approximately $71,000 in NewsEDGE subscriber fees in the year ended December
31, 1995. Ms. Carnahan, a general partner of Blair, serves on the Board of
Directors of the Corporation.
Powersoft Corporation ("Powersoft") is a customer of the Corporation and was
billed an aggregate of approximately $80,000 in NewsEDGE subscriber fees in
the year ended December 31, 1995. Mr. Kertzman, Chief Executive Officer of
Powersoft, serves on the Board of Directors of the Corporation.
In connection with the Corporation's redemption of the Series B Redeemable
Preferred Stock on December 31, 1995, Messrs. Cass, McLagan and Mr. David
Semmel, a former director of the Corporation, together with their respective
affiliates, received $5,220, $6,412.50 and $2,250, respectively, in their
capacities as holders of Series B Redeemable Preferred Stock, and Blair
received $112,500.
PROPOSAL 2
AMENDMENT OF THE CORPORATION'S1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
PROPOSED AMENDMENT
The Corporation's 1995 Non-Employee Director Stock Option Plan (the
"Director Plan") was adopted by the Board of Directors on June 16, 1995 and
approved by the stockholders on June 26, 1995. The Director Plan provides for
the grant of options to purchase a maximum of 100,000 shares of Common Stock
of the Corporation to non-employee directors of the Corporation. Currently,
the Corporation's five non-employee directors participate in the Director
Plan.
After a review of equity compensation of non-employee directors of
comparable companies, the Board of Directors determined that the Corporation's
current equity compensation for its non-employee directors was inadequate to
award and retain existing non-employee directors and to attract new qualified
directors. Therefore, on January 23, 1996, subject to stockholder approval,
the Board of Directors voted to increase the initial grant under the Director
Plan from 5,000 to 20,000 shares of the Corporation's Common Stock.
DESCRIPTION OF DIRECTOR PLAN
Under the current Director Option Plan, each non-employee director would
receive, on the date such person is first elected to the Board, an option to
purchase 5,000 shares of the Corporation's Common Stock, vesting over four
years. Beginning at this Meeting and at each successive annual meeting, each
non-employee director who has attended at least 75% of the board meetings
during the previous fiscal year will receive an option to purchase 2,500
shares of Common Stock, vesting on the first anniversary of the date of such
grant. All options granted under the Director Option Plan will have an
exercise price equal to the fair market value of the Common Stock on the date
of grant. The term of each option will be for a period of ten years from the
date of grant. Options may not be assigned or transferred except by will or by
the laws of descent and distribution and are
11
<PAGE>
exercisable to the extent vested only while the optionee is serving as a
director of the Corporation or within 90 days after the optionee ceases to
serve as a director of the Corporation (except that if a director dies or
becomes disabled while he or she is serving as a director of the Corporation,
the option is exercisable for a one-year period thereafter). The Board of
Directors has voted to increase the 5,000 share initial grant of options to
20,000 shares, which will continue to vest over four years.
In connection with Mr. Kertzman's appointment to the Board of Directors in
January 1996, he was granted, pursuant to the Director Plan and subject to
shareholder approval of the proposed amendment, an option to purchase 20,000
shares of the Corporation's Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSAL TO
AMEND THE CORPORATION'S DIRECTOR PLAN.
PROPOSAL 3
APPOINTMENT OF AUDITORS
The Board of Directors proposes that the firm of Arthur Andersen LLP
("Arthur Andersen"), independent certified public accountants, be appointed to
serve as auditors for the fiscal year ending December 31, 1996. The
ratification of this selection is not required under the laws of the State of
Delaware, where the Corporation is incorporated, but the results of this vote
will be considered by the Board of Directors in selecting auditors for future
fiscal years. Arthur Andersen has served as the Corporation's accountants
since 1988. It is expected that a member of Arthur Andersen will be present at
the meeting with the opportunity to make a statement if so desired and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AVOTE "FOR" THE RATIFICATION OF
THIS SELECTION.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act, requires the Corporation's directors,
executive officers and holders of more than 10% of the Corporation's Common
Stock (collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of
the Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review
of the copies of such filings received by it with respect to the fiscal year
ended December 31, 1995 and written representations from certain Reporting
Persons, the Corporation believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended December 31, 1995;
except that Messrs. Cass, McLagan, and Semmel, and William Blair Venture
Partners III reported the Corporation's redemption of their Series B
Redeemable Preferred Stock which occurred on December 31, 1995 in February,
1996.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended for inclusion in the proxy statement to
be furnished to all Stockholders entitled to vote at the next Annual Meeting
of Stockholders of the Corporation must be received at the Corporation's
principal executive offices not later than January 1, 1997. In order to
curtail controversy as to the date on which a proposal was received by the
Corporation, it is suggested that proponents submit their proposals by
Certified Mail, Return Receipt Requested to Desktop Data, Inc., 80 Blanchard
Road, Burlington, Massachusetts 01803, attention: Secretary.
12
<PAGE>
INCORPORATION BY REFERENCE
To the extent that this proxy statement has been or will be specifically
incorporated by reference into any filing by the Corporation under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, the sections of the proxy statement entitled "Report of Compensation
Committee of Board of Directors on Executive Compensation" and "Stock
Performance Graph" shall not be deemed to be so incorporated, unless
specifically otherwise provided in any such filing.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and in
addition to soliciting Stockholders by mail through its regular employees, the
Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some Stockholders in person or by mail, telephone or
telegraph following the original solicitation.
The contents and the sending of this proxy statement has been approved by
the Board of Directors of the Corporation.
13
<PAGE>
DESKTOP DATA, INC.
Proxy for Annual Meeting of Stockholders, May 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald L. McLagan and Edward R. Siegfried,
and each of them with full power of substitution to vote all shares of stock of
DESKTOP DATA, INC. (the "Corporation") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Corporation to be held on Thursday,
May 30, 1996, at 10:00 a.m. local time at the Marriott located at 1 Mall Road,
Burlington, Massachusetts 01803, and at any adjournment thereof, upon matters
set forth in the Notice of Annual Meeting and Proxy Statement dated April 26,
1996, a copy of which has been received by the undersigned.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO CHOICE
IS SPECIFIED, THEN THIS PROXY WILL BE VOTED IN FAVOR OF ELECTING THE NOMINEES,
OR ANY NOMINEE FOR WHICH APPROVAL HAS NOT BEEN WITHHELD, IN FAVOR OF SELECTION
OF ARTHUR ANDERSEN LLP AS AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996
AND IN FAVOR OF THE AMENDMENT TO THE CORPORATION'S 1995 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN TO INCREASE THE INITIAL GRANT UNDER SUCH PLAN FROM 5,000 TO
20,000 SHARES OF THE CORPORATION'S COMMON STOCK. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
*********************
[_] PLEASE MARK
VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote for the following proposals:
1. To elect two (2) Class I directors to serve for a three-year term except as
marked to the contrary below:
NOMINEES: A. Baron Cass III, Mitchell E. Kertzman,
[_] FOR [_] WITHHELD [_] _____________________
ALL FROM ALL FOR ALL NOMINEES
NOMINEES NOMINEES EXCEPT AS NOTED ABOVE
2. To approve an amendment to the Corporation's 1995 Non-Employee Director
Stock Option Plan (the "Director Plan") to increase the initial grant under
the Director Plan from 5,000 to 20,000 shares of the Corporation's Common
Stock.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
3. To ratify the selection of the firm of Arthur Andersen LLP as auditors for
the Company for the fiscal year ending December 31, 1996.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To transact such other business as may properly come before the meeting and
any adjournments thereof.
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
Please sign your name exactly as it appears on your stock certificate(s),
write in the date and return this proxy as soon as possible in the enclosed
envelope. If the stock is registered in more than one name, each joint owner
should sign. If signing as attorney, executor, trustee, administrator or
guardian, please give full title as such. Only authorized officers should
sign for corporations.
Signature _______________________________ Date ______________________
Signature _______________________________ Date ______________________
<PAGE>
(As Amended January 23, 1996)
DESKTOP DATA, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the
-------
1995 Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is
intended to promote the interests of Desktop Data, Inc. (hereinafter, the
"Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par
----------------
value $.01 per share, of the Company (the "Common Stock") for which options may
be granted under this Plan shall not exceed 100,000 shares, subject to
adjustment in accordance with paragraph 10 of this Plan. Shares subject to this
Plan are authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Company. If any options granted under this Plan
are surrendered before exercise or lapse without exercise, in whole or in part,
the shares reserved therefor shall continue to be available under this Plan.
3. Administration. This Plan shall be administered by the Board or
--------------
by a committee appointed by the Board (the "Committee"). In the event the Board
fails to appoint or refrains from appointing a Committee, the Board shall have
all power and authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
option granted under it.
4. Automatic Grant of Options. Subject to the availability of shares
--------------------------
under this Plan, (a) each person who becomes a member of the Board and who is
not an employee or officer of the Company (a "Non-Employee Director") shall be
automatically granted, on the date such person is first elected to the Board,
without further action by the Board, an option to purchase 20,000 shares of the
Common Stock and (b) each Non-Employee Director, shall be automatically granted
on the date of each successive Annual Meeting of the Stockholders (beginning
with the Annual Meeting of the Stockholders to be held after the fiscal year
ended December 31, 1995), without further action by the Board, an option to
purchase 2,500 shares of the Common Stock, if such director has attended at
least seventy-five percent (75%) of the meetings of the Board during the past
fiscal year. The options to be granted under this paragraph 4 shall be the only
options ever to be granted at any time to such member under this Plan.
Notwithstanding anything to the contrary set forth herein, if this Plan is not
approved by a majority of the Company's stockholders present, or represented,
and voting on such matter, then the Plan and the
<PAGE>
-2-
options granted pursuant to this Section 4 shall terminate and become void, and
no further options shall be granted under this Plan. The number of shares
covered by options granted under this paragraph 4 shall be subject to adjustment
in accordance with the provisions of paragraph 10 of this Plan.
5. Option Price. The purchase price of the stock covered by an
------------
option granted pursuant to this Plan shall be 100% of the fair market value of
such shares on the day the option is granted. The option price will be subject
to adjustment in accordance with the provisions of paragraph 10 of this Plan.
For purposes of this Plan, if, at the time an option is granted under the Plan,
the Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on The Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for over-
the-counter securities, if the Common Stock is not reported on The Nasdaq
National Market. However, if the Common Stock is not publicly traded at the
time an option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
6. Period of Option. Unless sooner terminated in accordance with the
----------------
provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. (a) Vesting of Shares and Non-Transferability of Options.
----------------------------------------------------
Options granted under this Plan shall not be exercisable until they become
vested. Options granted under this Plan pursuant to clause (b) of Section 4
hereof shall vest in the optionee and thus become exercisable one year from the
date of grant, provided that the optionee has continuously served as a member of
the Board through such vesting date. Options granted under this Plan pursuant
to clause (a) of Section 4 hereof shall vest in the optionee and thus become
exercisable, in accordance with the following schedule, provided that the
optionee has continuously served as a member of the Board through such vesting
date:
Percentage of Option Shares for which
Option will be Exercisable Date of Vesting
-------------------------- ---------------
25% One year from the date of grant
50% Two years from the date of grant
<PAGE>
-3-
75% Three years from the date of grant
100% Four years from the date of grant
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) Non-transferability. Any option granted pursuant to this Plan
-------------------
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
----------------------------
(a) Except as otherwise specified in the agreement relating to an
option, in the event an optionee ceases to be a member of the Board for any
reason other than death or permanent disability, any then unexercised portion of
options granted to such optionee shall, to the extent not then vested,
immediately terminate and become void; any portion of an option which is then
vested but has not been exercised at the time the optionee so ceases to be a
member of the Board may be exercised, to the extent it is then vested, by the
optionee within 90 days of the date the optionee ceased to be a member of the
Board; and all options shall terminate after such 90 days have expired.
(b) In the event that an optionee cease to be a member of the Board by
reason of his or her death, any option owned by such optionee may be exercised,
to the extent otherwise exercisable on the date of death, by the estate,
personal representative or beneficiary who has acquired the option by will or by
the laws of descent and distribution, until the earlier of (i) the specified
expiration date of the option or (ii) 180 days from the date of the optionee's
death.
(c) In the event that an optionee cease to be a member of the Board by
reason of his or her disability, such optionee shall have the right to exercise
any option held by him or her on the date of termination from the Board, to the
extent otherwise exercisable on that date, until the earlier of (i) the
specified expiration date of the option or (ii) 180 days from the date of the
termination of the optionee's service on the Board. For the purposes of the
Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor statute.
9. Exercise of Option. Subject to the terms and conditions of this
------------------
Plan and the option agreements, an option granted hereunder shall, to the extent
then exercisable, be exercisable in whole or in part by giving written notice to
the Company by mail or in person addressed to Desktop Data, Inc., at its
principal executive offices, stating the number of shares with respect to which
the option is being exercised, accompanied by payment in full for such shares.
Payment may be (a) in United States dollars in cash or by check, (b) in whole or
in part
<PAGE>
-4-
in shares of the Common Stock of the Company already owned by the person or
persons exercising the option or shares subject to the option being exercised
(subject to such restrictions and guidelines as the Board may adopt from time to
time), valued at fair market value determined in accordance with the provisions
of paragraph 5 or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. The Company's
transfer agent shall, on behalf of the Company, prepare a certificate or
certificates representing such shares acquired pursuant to exercise of the
option, shall register the optionee as the owner of such shares on the books of
the Company and shall cause the fully executed certificate(s) representing such
shares to be delivered to the optionee as soon as practicable after payment of
the option price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events.
-----------------------------------------------------------
Upon the occurrence of any of the following events, an optionee's rights with
respect to options granted to him or her hereunder shall be adjusted as
hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
--------------------------------
shall be subdivided or combined into a greater or smaller number of shares or
if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
(b) Consolidations or Mergers. If the Company is to be consolidated
-------------------------
with or acquired by another entity in a merger, sale of all or substantially
all of the Company's assets or otherwise (an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either
(i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options either (a) the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition, (b) shares of
stock of the surviving corporation or (c) such other securities as the
Successor Board deems appropriate, the fair market value of which shall not
materially exceed the fair market value of the shares of Common Stock subject
to such Options immediately preceding the Acquisition; or (ii) upon written
notice to the optionees, provide that all Options must be exercised, to the
extent then exercisable, within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of
the fair market value of the shares subject to such Options (to the extent
then exercisable) over the exercise price thereof.
<PAGE>
-5-
(c) Recapitalization or Reorganization. In the event of a
----------------------------------
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph b above) pursuant to which securities of the
Company or of another corporation are issued with respect to the outstanding
shares of Common Stock, an optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised such
Option prior to such recapitalization or reorganization.
(d) Modification. Notwithstanding the foregoing, any adjustments made
------------
pursuant to subparagraphs (a), (b) or (c) shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" (as that term is defined
in Section 424 of the Code) or would cause any adverse tax consequences for
the holders of such options. If the Committee determines that such
adjustments made would constitute a modification of such options or would
cause adverse tax consequences to the holders, it may refrain from making
such adjustments.
(e) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by the
Committee.
(f) Issuances of Securities. 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 subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(g) Fractional Shares. No fractional shares shall be issued under the
-----------------
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(h) Adjustments. Upon the happening of any of the foregoing events,
-----------
the class and aggregate number of shares set forth in paragraphs 2 and 4 of
this Plan that are subject to options which previously have been or
subsequently may be granted under this Plan shall also be appropriately
adjusted to reflect such events. The Board shall determine the specific
adjustments to be made under this paragraph 10 and its determination shall be
conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the provisions of
----------------------------------
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively registered
under applicable Federal and state securities laws as now in force or
hereafter amended; or
<PAGE>
-6-
(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation all regulations required by any stock exchange
upon which the Company's outstanding Common Stock is then listed.
12. Legend on Certificates. The certificates representing shares issued
----------------------
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
13. Representation of Optionee. If requested by the Company, the optionee
--------------------------
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
14. Option Agreement. Each option granted under the provisions of this
----------------
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions
and conditions not inconsistent with this Plan as may be determined by the
officer executing it.
15. Termination and Amendment of Plan. Options may no longer be granted
---------------------------------
under this Plan after June 16, 2005 and this Plan shall terminate when all
options granted or to be granted hereunder are no longer outstanding. The Board
may at any time terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
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without approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and voting on such matter
at a meeting, (a) increase the maximum number of shares for which options may be
granted under this Plan (except by adjustment pursuant to Section 10), (b)
materially modify the requirements as to eligibility to participate in this
Plan, (c) materially increase benefits accruing to option holders under this
Plan or (d) amend this Plan in any manner which would cause Rule 16b-3 under the
Securities Exchange Act (or any successor or amended provision thereof) to
become inapplicable to this Plan; and provided further that the provisions of
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this Plan specified in Rule 16b-3(c)(2)(ii)(A) (or any successor or amended
provision thereof) under the Securities Exchange Act of 1934 (including without
limitation, provisions as to eligibility, amount, price and timing of awards)
may not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder. Termination or any modification or amendment of
this Plan shall not, without consent of a participant, affect his or her rights
under an option previously granted to him or her.
<PAGE>
-7-
16. Withholding of Income Taxes. Upon the exercise of an option, the
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Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includible in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the Plan
---------------------------
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended provision thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
18. Governing Law. The validity and construction of this Plan and the
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instruments evidencing options shall be governed by the laws of the Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.
Date Approved by Board of Directors of the Company: June 16, 1995
Date Approved by Stockholders of the Company: June 26, 1995
<PAGE>
-8-
Register of Amendments to Plan
Paragraph No. Date of Stockholder
and Change Board Approval Approval
- ---------------------------------------- ---------------- -------------------
(P)4. Increase to the initial grant January 23, 1996 May 30, 1996
under the Plan from 5,000 to 20,000
shares of Common Stock.
(P)4. Insert as the last sentence of January 23, 1996 N/A
paragraph 4 as follows: "The number
of shares covered by options granted
under this paragraph 4 shall be
subject to adjustment in accordance
with the provisions of paragraph 10 of
this Plan."
(P)10(c). Amend the first sentence of January 23, 1996 N/A
paragraph 10(h) to read in its
entirety as follows: "Upon the
happening of any of the foregoing
events, the class and aggregate number
of shares set forth in paragraphs 2
and 4 of this Plan that are subject to
options which previously have been or
subsequently may be granted under this
Plan shall also be appropriately
adjusted to reflect such events."
