<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 Section 240.14a-11(c) or Section 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] No fee required.
[_] $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 Tuesday, June 3, 1997
at 10:00 a.m., local time, at The Sheraton Tara Lexington Inn located at 727
Marrett Road, Lexington, Massachusetts 02173, for the following purposes:
1. To elect two (2) Class II 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 Stock
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder from 625,000 shares to 1,625,000 shares.
3. To ratify the selection of the firm of Arthur Andersen LLP as
independent auditors for the fiscal year ending December 31, 1997.
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, 1997 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 24, 1997
<PAGE>
DESKTOP DATA, INC.
80 BLANCHARD ROAD
BURLINGTON, MASSACHUSETTS 01803
PROXY STATEMENT
APRIL 24, 1997
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
Tuesday, June 3, 1997, at 10:00 a.m., local time, at The Sheraton Tara
Lexington Inn, 727 Marrett Road, Lexington, Massachusetts 02173.
Only stockholders of record at the close of business on April 16, 1997 (the
"Record Date") will be entitled to receive notice of and to vote at the
meeting and any adjournments thereof. As of that date, 8,636,705 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 shares of Common Stock entitled to vote at the meeting is
necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee for director, 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 broker or
other 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 broker does not have discretionary voting power and has not received
instructions from the beneficial owner.
Directors are elected by a plurality of the votes cast, in person or by
proxy, at the meeting. The two nominees for director receiving the highest
number of affirmative votes of the shares present or represented and voting on
the election of directors at the meeting shall be elected as Class II
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 a proposal to approve an amendment to the
Corporation's 1995 Stock 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 as specified. Where
no choice is specified, the proxy will be voted FOR the applicable proposal.
The Board of Directors knows of no other matter 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, 1996, 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 24, 1997.
<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; (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;" and
(iv) the number of shares owned by each of such persons and all officers,
directors and nominees as a group and the percentage of the outstanding shares
represented thereby.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS(2)
- ------------------------------------ ----------------- -----------
<S> <C> <C>
FMR Corp.(3)..................................... 973,000 11.27%
82 Devonshire Street
Boston, MA 02109
Funds related to William Blair Venture Partners
III(4).......................................... 909,053 10.53%
222 West Adams Street
Chicago, IL 60606
Donald L. McLagan(5)............................. 2,058,791 23.84%
c/o Desktop Data, Inc.
80 Blanchard Road
Burlington, MA 01803
Edward R. Siegfried(6)........................... 120,505 1.39%
Daniel F.X. O'Reilly(7).......................... 170,588 1.97%
Clifford M. Pollan(8)............................ 130,727 1.51%
A. Baron Cass(9)................................. 96,437 1.12%
June Rokoff...................................... 500 *
Rory J. Cowan(10)................................ 7,500 *
Ellen Carnahan(11)............................... 911,553 10.55%
All officers, directors and nominees as a group
(eight persons)(5)(6)(7)(8)(10)(11)(12)......... 3,496,601 40.28%
</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
8,636,705 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 513,300 shares held by Fidelity Management & Research Company
("Fidelity Research") and 459,700 shares held by Fidelity Management
Trust Company ("Fidelity Trust"). Fidelity Research and Fidelity Trust
are both wholly-owned subsidiaries of FMR Corp., Edward C. Johnson 3d.,
Chairman of FMR Corp., and Abigail P. Johnson, a Director of FMR Corp.,
own 12% and 24.5%, respectively, of the outstanding voting common stock
of FMR Corp. Various Johnson family members and trusts for their benefit
are the predominant owners of the FMR Corp. voting common stock. These
Johnson family members, through the ownership of voting common stock and
the execution of a shareholders' voting
2
<PAGE>
agreement, may be deemed to form a controlling group with respect to FMR
Corp. Neither FMR Corp. nor Mr. Johnson has the sole power to vote or
direct the voting of the shares owned directly by Fidelity Research, which
power resides with Fidelity Research's Board of Trustees. Fidelity Research
carries out the voting of the shares under written guidelines established
by Fidelity Research's Board of Trustees. Mr. Johnson and FMR Corp.,
through their control of Fidelity Trust, have sole voting and dispositive
power over the shares owned by Fidelity Trust.
(4) Includes 213,120 shares of Common Stock held by William Blair Venture
Partners III ("WBVP") and 695,933 shares of Common Stock held by William
Blair & Company, L.L.C. William Blair & Company, L.L.C. is a general
partner of William Blair Venture Management Co. ("Blair Management"),
which is a general partner of WBVP.
(5) 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.
(6) Includes 12,395 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(7) Includes 12,395 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(8) Includes 12,395 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(9) 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. Also includes 2,500 shares of Common Stock
issuable pursuant to outstanding stock options exercisable within 60 days
of the Record Date.
(10) Includes 2,500 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(11) Includes 213,120 shares of Common Stock held by William Blair Venture
Partners III ("WBVP") and 695,933 shares of Common Stock held by William
Blair & Company, L.L.C. William Blair & Co., L.L.C. is a general partner
of William Blair Venture Management Co. ("Blair Management"), which is a
general partner of WBVP. Ms. Carnahan is a general partner of Blair
Management and may be deemed to share voting and investment power with
respect to the shares held by WBVP. Ms. Carnahan disclaims beneficial
ownership of such shares, except to the extent of her proportionate
interests in WBVP. Ms. Carnahan is also a principal of William Blair &
Company, L.L.C. Also includes 2,500 shares of Common Stock issuable
pursuant to outstanding stock options exercisable within 60 days of the
Record Date by Ms. Carnahan.
(12) Includes 44,685 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is set at six members. There is currently one vacancy
on the Board of Directors due to the resignation of Mr. Mitchell Kertzman in
December 1996. The Board of Directors is divided into three classes, which
consist of two directors each. Each director serves for a three-year term. The
Class II 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. Mr. A. Baron Cass, III is the sole Class
I director; Ms. June Rokoff 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 Ms. Rokoff and Ms.
Carnahan, who are currently members of the Board of Directors, be elected
Class II directors, to hold office until the 2000 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 for 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:
Ellen Carnahan............ Director 1997 II
1991
June Rokoff............... Director 1997 II
1996
CONTINUING DIRECTORS:
Donald L. McLagan......... Chairman, President, Chief 1998 III
1988 Executive Officer and Director
Rory J. Cowan............. Director 1998 III
1993
A. Baron Cass, III........ Director 1999 I
1989
</TABLE>
4
<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...................... 55 Chairman, President, Chief Executive
Officer and Director
Edward R. Siegfried.................... 52 Vice President--Finance and
Operations, Treasurer and Assistant
Secretary
Clifford M. Pollan..................... 40 Vice President--Sales and Marketing
Daniel F.X. O'Reilly, Ph.D............. 50 Vice President and Chief Technology
Officer
John L. Moss........................... 45 Vice President--Development
A. Baron Cass, III(2).................. 53 Director
June Rokoff(1)......................... 47 Director
Ellen Carnahan(2)...................... 41 Director
Rory J. Cowan(1)(2).................... 44 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 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 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 Anderson 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. In July 1996, Mr. O'Reilly
was promoted to Vice President and Chief Technology Officer. From 1979 to
1989, Dr. O'Reilly was the Vice President of the Information System
Development Group of Data Resources, Inc. From 1975 to 1979, Dr. O'Reilly held
various teaching positions in the Mathematics Departments of Marquette
University, Simmons College and Boston College.
Mr. Moss joined the Corporation in 1997 as Vice President--Development. From
1992 to 1996, Mr. Moss was President and Chief Executive Officer of Software
House, Inc., a company specializing in real-time security
5
<PAGE>
control applications. Prior to that, he was a unit president for JWP, Inc., a
public company specializing in construction and building management products
and services. Mr. Moss is also an instructor of Computer Science at Tufts
University.
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, 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.
Ms. Rokoff has served on the Board of Directors of the Corporation since
July 1996. Until December 1995, Ms. Rokoff was a Senior Vice President,
Worldwide Services Group, at Lotus Development Corporation where she spent ten
years in management. Previous management positions at Lotus included Senior
Vice President- Development, Vice President-Graphics and Information
Management, and General Manager, Lotus 1-2-3 Release 3. Prior to Lotus, Ms.
Rokoff was the Chief Operating Officer of Isys Corporation, and spent thirteen
years at Data Resources, Inc., where she managed their software development.
Ms. Rokoff is also a director of Mathsoft, Inc.
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. Since December 1996, Mr. Cowan has been Chairman and Chief Executive
Officer of LioNBRIDGE Technologies, an international software services
company. From 1991 to 1996, Mr. Cowan was an executive vice president of R.R
Donnelley & Sons Company, a supplier of commercial print and print-related
services. During 1995 and 1996, Mr. Cowan was also the Chief Executive Officer
of Stream International, Inc., a software services company. Mr. Cowan also
serves as a director of Interleaf, Inc.
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.
6
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four times during the fiscal year ended December
31, 1996. Each of the directors attended at least 75% of the meetings of the
Board of Directors during fiscal 1996. The Corporation established an Audit
Committee and 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 met once during fiscal 1996. The Compensation Committee,
whose members currently are Ms. Rokoff and Mr. Cowan, makes recommendations
concerning the salaries and incentive compensation of executive officers,
employees and consultants to the Corporation and administers the Corporation's
stock plans. The Compensation Committee met four times during fiscal 1996. The
Board of Directors does not have a standing nominating committee.
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
COMPENSATION OF DIRECTORS
On January 23, 1996, the Compensation Committee of the Board of Directors
approved the Director Compensation Plan. Under the Director Compensation Plan,
each non-employee director receives both an annual retainer of $5,000 and a
fee of $1,000 for each Board meeting physically attended. A "non-employee
director," for purposes of the Director Compensation Plan, is a director who
is not an employee of the Corporation and not an officer, director, general
partner or employee of a securities firm, venture capital firm or other
institution or corporation which, together with its affiliates, holds more
than 5% of the issued and outstanding Common Stock. Directors who are
employees, or who are affiliated with a person who holds more than 5% of the
Common Stock, receive no remuneration under the Director Compensation Plan,
for serving as members of the Board or as members of Committees of the Board.
Under the Director Compensation Plan, non-employee directors are also
reimbursed for their reasonable out-of-pocket travel expenses associated with
their attendance at Board meetings. During the fiscal year ended December 31,
1996, Messrs. Cass and Cowan and Ms. Rokoff earned $7,000, $8,000, and $3,500,
respectively under the Director Compensation Plan.
In addition, in order to provide an incentive to non-employee directors,
options are granted to non-employee directors pursuant to the 1995 Non-
Employee Director Stock Option Plan, as amended, (the "Director Plan"). Under
the Director Plan, each non-employee director, including non-employee
directors who are affiliated with a peron who holds more than 5% of the Common
Stock, receives, on the date such person is first elected to the Board, an
option to purchase 20,000 shares (the "Initial Option") of the Corporation's
Common Stock, vesting over four years. Subsequent to the grant of the Initial
Option, 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 per year, vesting on the first anniversary of the
date of such grant. All options granted under the Director Plan will have an
exercise price equal to the fair market value of the Common Stock on the date
of grant. Each option granted under the Director Plan will expire ten years
from the date of grant.
During the fiscal year ended December 31, 1996, Messrs. Cass and Cowan and
Ms. Carnahan received options to purchase 2,500 shares at an exercise price of
$34.00 per share pursuant to the Director Plan. In addition, Ms. Rokoff
received an option to purchase 20,000 shares at an exercise price of $26.25
per share as an Initial Option.
7
<PAGE>
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, 1996, 1995, and 1994 to
(i) the Corporation's Chief Executive Officer and (ii) each of the other four
most highly compensated executive officers of the Corporation who received
total annual salary and bonus in excess of $100,000 in fiscal 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
---------------------
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION(2)
--------------------------- ---- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Donald L. McLagan....... 1996 $135,300 $16,500 -- $ 760
Chairman, President,
Chief 1995 124,150 -- -- 739
Executive Officer and
Director 1994 115,500 -- -- 289
Edward R. Siegfried..... 1996 135,300 16,500 35,000 760
Vice President-Finance
and 1995 124,150 -- -- 739
Operations, Treasurer
and 1994 115,500 -- -- 289
Assistant Secretary
Clifford M. Pollan...... 1996 135,300 40,571 35,000 760
Vice President-Sales
and 1995 124,150 23,661(3) -- 739
Marketing 1994 115,500 45,157 -- 271
Daniel F.X. O'Reilly.... 1996 135,300 16,500 35,000 1,624
Vice President and
Chief 1995 124,150 -- -- 1,490
Technology Officer 1994 115,500 -- -- 289
</TABLE>
- --------
(1) Includes bonuses earned with respect to services rendered in the fiscal
year indicated, whether or not such bonus was actually paid during such
fiscal year.
(2) Represents matching contributions made by the Corporation to the Named
Executive Officer under the Corporation's 401(k) plan.
(3) Amount disclosed is $4,843 lower than the amount disclosed in the
Corporation's 1996 Proxy Statement for fiscal 1995. The difference is due
to an adjustment from an estimate to an actual payout.
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information concerning grants of
options to purchase the Corporation's Common Stock made during the year ended
December, 31, 1996 to each of the Named Executive Officers. No stock
appreciation rights ("SARs") were granted during the fiscal year ended
December 31, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS GRANT DATE
UNDERLYING GRANTED EXERCISE OR PRESENT
OPTIONS/SARS TO EMPLOYEES BASE PRICE EXPIRATION VALUE(1)
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE ($)
- ---- ------------ ---------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Donald L. McLagan....... -- -- -- -- --
Edward R. Siegfried..... 35,000 6.10% $24.00 1/23/06 $455,999
Daniel F.X. O'Reilly.... 35,000 6.10% 24.00 1/23/06 455,999
Clifford M. Pollan...... 35,000 6.10% 24.00 1/23/06 455,999
</TABLE>
- --------
(1) In accordance with Securities and Exchange Commission rules, the Black-
Scholes option pricing model was chosen to estimate the grant date present
value of the options set forth in this table. The Corporation's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including the Black-
Scholes model, require a prediction about the future movement of the stock
price. The following assumptions were made for purposes of calculating the
Grant Date Present Value: an option term of 3-6 years, volatility at 63%,
interest rate at 5.34%. The real value of the options in this table
depends upon the actual performance of the Corporation's stock during the
applicable period.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information as to options exercised in 1996 by
the Named Executive Officers, the value realized upon such exercises and the
value of options held by such officers at year-end based on the closing price
of the Corporation's Common Stock on December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS
ACQUIRED FISCAL YEAR-END AT FISCAL YEAR-END
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. McLagan....... -- -- -- -- -- --
Edward R. Siegfried..... -- -- -- 35,000 -- --
Daniel F.X. O'Reilly.... -- -- -- 35,000 -- --
Clifford M. Pollan...... -- -- -- 35,000 -- --
</TABLE>
9
<PAGE>
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Compensation Committee of the Board of
Directors of the Corporation (the "Compensation Committee"). The Compensation
Committee is currently comprised of Ms. Rokoff and Mr. Cowan, both 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, employees and
consultants to the Corporation.
Cash Compensation. Mr. McLagan, Mr. Siegfried, Mr. Pollan and Dr. O'Reilly
each received identical base salaries of $135,300 in 1996. This reflects the
Corporation's philosophy that each executive officer performs a different but
equally important function in the Corporation's performance. The Compensation
Committee followed this philosophy in setting base salary for each of the
Corporation's above-named executive officers in 1997, but may change this
practice in the future if it ceases to be effective in attracting and
retaining qualified executives.
The Compensation Committee 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 Compensation Committee determines any
increases in the base salary based on the Corporation's performance.
On January 23, 1996, the Compensation Committee of the Board of Directors
approved a short-term cash incentive compensation plan (the "Incentive Plan"),
which provides that the executive officers, along with other designated
members of senior management, would receive bonuses based upon the
Corporation's financial performance in the current fiscal year. Each executive
officer's bonus may range from zero to a maximum amount determined by
reference to the final audited financial statements of the Corporation. During
the fiscal year ended December 31, 1996, Mr. McLagan, Mr. Siegfried, Mr.
Pollan and Dr. O'Reilly each earned a bonus of $16,500 pursuant to the
Incentive Plan. Mr. Pollan received in 1996, in addition to his base salary
and bonus, a commission which was based on a formula relating to the
Corporation's new and renewal sales in that year.
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
Compensation Committee 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 1996,
pursuant to the 1995 Stock Plan, the Compensation Committee granted 35,000
non-qualified stock options to each of Mr. Pollan, Mr. Siegfried and Dr.
O'Reilly.
The Compensation Committee's philosophy has been 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 Equity Compensation. As discussed above, it has been the
philosophy of the Compensation Committee to compensate Mr. McLagan equally
with other executive officers. However, Mr. McLagan has not received equity
compensation to date 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.
10
<PAGE>
Tax Deductibility of Executive Compensation. Under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Corporation cannot
deduct compensation in excess of $1 million paid to any of the Named Executive
Officers, unless certain requirements are met. The Compensation Committee has
considered these requirements and the related regulations. The Compensation
Committee believes that compensation deductions attributable to options
granted under the Corporation's 1995 Stock Plan currently qualify for an
exception to the requirements of Section 162(m). It is the Compensation
Committee's present intention that, so long as it is consistent with its
overall compensation objectives, substantially all executive compensation be
deductible by the Corporation for United States federal income tax purposes.
RESPECTFULLY SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
June Rokoff
Rory J. Cowan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation's Compensation Committee of the Board of Directors currently
consists of Ms. Rokoff and Mr. Cowan. 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) of which either
Ms. Rokoff or Mr. Cowan is an executive officer.
11
<PAGE>
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, 1996, 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.
[GRAPH APPEARS HERE]
COMPARISION OF CUMULATIVE TOTAL RETURN AMONG
DESKTOP DATA, INC., NASDAQ STOCK MARKET INDEX
AND NASDAQ COMPUTER INDEX(1)(2)
<TABLE>
<CAPTION>
8/11/95 9/29/95 12/29/95 3/29/96 6/28/96 9/30/96 12/31/96
------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Desktop Data, Inc. $100 $232 $163 $245 $222 $193 $128
- ---------------------------------------------------------------------------------------------------------
Nasdaq Stock Market $100 $104 $105 $110 $119 $124 $130
Nasdaq Computer Index $100 $102 $106 $111 $124 $126 $131
</TABLE>
- --------
(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 "solicited 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. 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.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
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 $69,000 in NewsEDGE subscriber fees in the year ended December
31, 1996. Ms. Carnahan, a general partner of Blair, serves on the Board of
Directors of the Corporation.
PROPOSAL 2
AMENDMENT OF THE CORPORATION'S
1995 STOCK PLAN
PROPOSED AMENDMENT
The 1995 Stock Plan (the "1995 Plan") was adopted by the Corporation's Board
of Directors on June 16, 1995 and approved by the Corporation's stockholders
on June 26, 1995. A maximum of 625,000 shares of Common Stock are currently
reserved for issuance under the 1995 Plan upon the exercise of options or in
connection with awards of stock of the Corporation ("Awards") or the
opportunity to make direct stock purchases of shares of the Corporation
("Purchases"). On February 13, 1997, the Board of Directors approved, and
recommends to the stockholders that they approve, an amendment to increase the
number of shares authorized for issuance under the 1995 Plan from 625,000
shares to 1,625,000 shares.
Since December 1995, the number of employees at the Corporation has
increased from approximately 130 to approximately 170 in January 1997. The
Corporation's management relies on stock options as an essential part of the
compensation packages necessary for the Corporation to attract and retain
experienced officers and employees. The Board of Directors of the Corporation
believes that the proposed increase in the number of shares available under
the 1995 Plan is essential to permit the Corporation's management to continue
to provide long-term, equity-based incentives to present and future key
employees.
As of April 16, 1997, only 85,888 shares remained authorized for issuance
under the 1995 Plan. If the increase in the number of shares authorized for
issuance under the 1995 Plan is not approved, the Corporation believes it may
be unable to provide suitable long-term equity based incentives to present and
future employees. The Corporation has not at the present time determined who
will receive the remaining shares of Common Stock that will be authorized for
issuance under the 1995 Plan if the proposed amendment to the 1995 Plan is
approved.
At December 31, 1996, the total number of options available for future grant
plus unexercised options outstanding under the 1995 Stock Plan and the
Corporation's 1989 Stock Plan (collectively referred to as the "overhang") was
766,958 shares (9% of the total shares outstanding). Based upon information
obtained from industry surveys, high-tech and computer companies currently
average an overhang of approximately 19%-24% of total shares outstanding. With
the proposed 1,000,000 share increase, the Corporation's overhang will
increase to 20%, which will bring it in line with the industry average.
DESCRIPTION OF THE 1995 STOCK PLAN
The purpose of the 1995 Plan is to provide incentives to officers and other
employees of the Corporation by providing them with opportunities to purchase
stock of the Corporation pursuant to options which qualify as incentive stock
options ("ISO" or "ISOs") as defined in Section 422 of the Code. The 1995 Plan
also provides for the issuance to consultants, employees, officers and
directors of the Corporation of options which do not qualify as ISOs ("Non-
Qualified Option" or "Non-Qualified Options"). Awards and Purchases may also
be granted to consultants, employees, officers and directors of the
Corporation. ISOs, Non-Qualified Options, Awards and Purchases are sometimes
referred to collectively as "Stock Rights," and ISOs and Non-Qualified Options
are sometimes referred to collectively as "Options."
13
<PAGE>
Administration. The 1995 Plan is administered by the Compensation Committee
of the Board of Directors, which consists of two directors. Subject to the
terms of the 1995 Plan, 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, (iv) the duration of the
Option, and (v) the time, manner and form of payment upon exercise of an
Option. The interpretation and construction by the Committee of any provision
of the 1995 Plan or of any Stock Right granted under the 1995 Plan shall be
final unless otherwise determined by the Board of Directors.
Eligible Participants. Subject to certain limitations, ISOs under the 1995
Plan may be granted to any employee of the Corporation other than members of
the Committee. For any ISO optionee, the aggregate fair market value
(determined on the date of grant of an ISO) of Common Stock to be received by
such optionee (under all stock option plans of the Corporation) pursuant to an
ISO if such optionee exercises his or her ISOs at the earliest possible date
cannot exceed $100,000 in any calendar year; any portion of an ISO grant that
exceeds such $100,000 limit will be treated for tax purposes as a Non-
Qualified Option. Non-Qualified Options, Awards and Purchases may be granted
to any director (other than a member of the Committee), officer, employee or
consultant of the Corporation. As of April 16, 1997, there were approximately
177 officers and employees of the Corporations that were eligible to
participate in the 1995 Plan.
Granting of Stock Rights, Prices and Duration. Stock Rights may be granted
under the 1995 Plan at any time prior to June 16, 2005. Pursuant to the 1995
Plan, ISOs cannot be granted with exercise prices less than the fair market
value of the Common Stock on the date of grant as determined in good faith by
the Board of Directors (or less than 110% of the fair market value in the case
of ISOs granted to an employee or officer holding 10% or more of the voting
stock of the Corporation). The exercise price per share of Non-Qualified
Options granted under the 1995 Plan cannot be less than the minimum legal
consideration required under applicable state law. On April 16, 1997, the
closing price of the Corporation's Common Stock on the Nasdaq National Market
was $13.00.
The 1995 Plan provides that each Option shall expire on the date specified
by the Committee, but not more than ten years from its date of grant in the
case of ISOs and ten years and one day in the case of Non-Qualified Options.
However, in the case of an ISO granted to an employee owning more than 10% of
the total combined voting power of all classes of stock of the Corporation or
any Related Corporation, such ISO shall expire five years from the date of
grant.
Exercise of Options. Each Option granted under the 1995 Plan shall either be
fully exercisable at the time of grant or shall become exercisable in such
installments as the Committee may specify. Each Option may be exercised from
time to time, in whole or in part, up to the total number of shares with
respect to which it is then exercisable. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option (subject to
the $100,000 per year limit on the fair market value of stock subject to ISOs
granted to any employee which may become exercisable in any calendar year).
Payment for exercise of an Option under the 1995 Plan may be made in cash or
by check or, if authorized by the Committee in its discretion, in full or in
part by a personal recourse, interest bearing note, by tendering shares of
Common Stock of the Corporation or by an assignment to the Corporation 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 the amount
to the Corporation.
Effect of Termination of Employment, Disability or Death. Options granted
under the 1995 Plan are not transferable by the option holder except by will
or by the laws of descent and distribution. If an ISO optionee ceases to be
employed by the Corporation or any Related Corporation other than by reason of
death or disability, no further installment of his or her ISOs will become
exercisable, and the ISOs shall terminate after the passage of 90 days from
the date of termination of employment (but not later than their specified
expiration dates), except to the extent that such ISOs shall have been
converted into Non-Qualified Options.
14
<PAGE>
If an optionee dies, any ISO held by the optionee may be exercised, to the
extent exercisable on the date of death, by the optionee's estate, personal
representative or beneficiary who acquires the option by will or by the laws
of descent and distribution, at any time within 180 days from the date of the
optionee's death (but not later than the specified expiration date of the
ISO). If an ISO optionee ceases to be employed by the Corporation by reason of
his or her disability (as defined in Section 22(e)(3) of the Code), the
optionee may exercise any ISO held by him or her on the date of termination of
employment, to the extent exercisable on that date, at any time within 180
days from the date of termination of employment (but not later than the
specified expiration date of the ISO). Non-Qualified Options are subject to
the termination and cancellation provisions as may be determined by the
Committee.
Non-Assignability of Options. Only the optionee may exercise an Option. No
assignment or transfers are permitted except by will or by the laws of descent
and distribution.
Miscellaneous. Option holders are protected against dilution in the event of
a stock dividend, recapitalization, stock split, merger or similar
transaction. The Board of Directors may from time to time adopt amendments,
certain of which are subject to shareholder approval, and may terminate the
1995 Plan at any time (although such action shall not affect options
previously granted). Any shares subject to an Option which for any reason
expires or terminates unexercised may again be available for option grants
under the 1995 Plan. Unless terminated sooner, the 1995 Plan will terminate on
June 16, 2005.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the United States Federal income tax
consequences of the issuance and exercise of Stock Rights granted under the
1995 Plan is based upon the provisions of the Code as in effect on the date of
this Proxy Statement, current regulations thereunder, and existing
administrative rulings of the Internal Revenue Service. It is not intended to
be a complete discussion of all of the United States Federal income tax
consequences of the 1995 Plan or of the requirements that must be met in order
to qualify for the described tax treatment.
Incentive Stock Options. The following general rules are applicable under
current Federal income tax law to ISOs under the 1995 Plan:
1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and no tax deduction is allowed to the Corporation upon either
grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years following the date the option was granted or (ii) one year
following the date the shares are issued to the optionee pursuant to the
ISO exercise, the difference between the amount realized on any subsequent
disposition of the shares and the exercise price will generally be treated
as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of before the
expiration of one or both of the requisite holding periods (a
"Disqualifying Disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the ISO over the exercise price or (ii) the actual gain on disposition will
be treated as compensation to the optionee and will be taxed as ordinary
income in the year of such disposition.
4. In any year that an optionee recognizes compensation income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Corporation generally should be entitled to a corresponding deduction for
income tax purposes.
5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be
treated as capital gain.
15
<PAGE>
6. Capital gain or loss recognized on a disposition of shares will be long-
term capital gain or loss if the optionee's holding period for the
shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Corporation's Common Stock to the Corporation in payment of the
exercise price, if the optionee's ISO agreement so provides. If an
optionee exercises an ISO in such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
ISOs may result in a further "minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a rate of 26% or 28%)
will be applied against a taxable base which is equal to "alternative
minimum taxable income," reduced by a statutory exemption. In general,
the amount by which the value of the Common Stock received upon exercise
of the ISO exceeds the exercise price is included in the optionee's
alternative minimum taxable income. A taxpayer is required to pay the
higher of his or her regular tax liability or the alternative minimum
tax. A taxpayer who pays alternative minimum tax attributable to the
exercise of an ISO may be entitled to a tax credit against his or her
regular tax liability in later years.
Non-Qualified Options. The following general rules are applicable under
current Federal income tax law to Non-Qualified Options under the 1995 Plan:
1. The optionee generally does not realize any taxable income upon the
grant of a Non-Qualified Option, and the Corporation is not allowed a
business expense deduction by reason of such grant.
2. The optionee generally will recognize ordinary compensation income at
the time of exercise of a Non-Qualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. The Corporation may be required to
withhold income tax on this amount.
3. When the optionee sells the shares, he or she generally will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (generally, the exercise price plus the amount taxed to the
optionee as compensation income). If the optionee's holding period for
the shares exceeds one year, such gain or loss will be a long-term
capital gain or loss.
4. The Corporation generally should be entitled to a tax deduction when
compensation income is recognized by the optionee.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Corporation's Common Stock to the Corporation
in payment of the exercise price. If an optionee exercises a Non-
Qualified Option in such fashion, special rules will apply.
Awards and Purchases. The following general rules are applicable under
Federal income tax law to Awards and Purchases under the 1995 Plan. Under
current Federal income tax law, persons receiving Common Stock pursuant to an
Award or Purchase will generally recognize ordinary compensation income equal
to the fair market value of the shares received, reduced by any purchase price
paid. The Corporation should generally be entitled to a corresponding
deduction. When such Common Stock is sold, the seller generally will recognize
capital gain or loss. Special rules apply if the stock acquired is subject to
vesting, or is subject to certain restrictions on resale under Federal
securities laws applicable to directors, officers or 10% stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PROPOSAL TO AMEND THE CORPORATION'S 1995 STOCK PLAN
16
<PAGE>
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, 1997. 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 A
VOTE "FOR" THE RATIFICATION OF THIS SELECTION.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1996 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, 1996,
except that Mr. Peter Homans, who was a director of the Corporation until July
1996, filed one late Form 4, and Ms. Carnahan filed one late Form 4, which
disclosed four late transactions.
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 December 25, 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.
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 "Compensation
Committee's Report 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.
17
<PAGE>
DESKTOP DATA, INC.
1995 STOCK PLAN
---------------
1. Purpose. The purpose of the Desktop Data, Inc. 1995 Stock Plan (the
-------
"Plan") is to encourage key employees of Desktop Data, Inc. (the "Company") and
of any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in
the Company ("Awards"); and (d) opportunities to make direct purchases of stock
in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred
to hereafter individually as an "Option" and collectively as "Options."
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
---------------------------
A. Board or Committee Administration. The Plan shall be
---------------------------------
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); provided that the Plan
shall be administered: (i) to the extent required by applicable regulations
under Section 162(m) of the Code, by two or more "outside directors" (as
defined in applicable regulations thereunder) and (ii) to the extent required
by Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any
successor provision ("Rule 16b-3"), by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all references
in this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Stock Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the authority to
(i) determine to whom (from among the class of employees eligible under
paragraph 3 to receive ISOs) ISOs shall be granted, and to whom (from among
the class of individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options and Awards and to make Purchases) Non-Qualified
Options, Awards and authorizations to make Purchases may be granted; (ii)
determine the time or times at which Options or Awards shall be granted or
Purchases made; (iii) determine the purchase price of shares subject to each
Option or Purchase, which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option granted shall be
an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the
time or times when each Option shall become exercisable and the duration of
the exercise period; (vi) extend the period during which outstanding Options
<PAGE>
-2-
may be exercised; (vii) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options, Awards and Purchases
and the nature of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem advisable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. Committee Actions. The Committee may select one of its
-----------------
members as its chairman, and shall hold meetings at such time and places as
it may determine. A majority of the Committee shall constitute a quorum and
acts of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law), shall be
the valid acts of the Committee. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Subject to the
--------------------------------------
provisions of the first sentence of paragraph 2(A) above, if applicable,
Stock Rights may be granted to members of the Board. All grants of Stock
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Consistent with the provisions of the first sentence of Paragraph
2(A) above, members of the Board who either (i) are eligible to receive
grants of Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the Plan or
the grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Stock Rights, but
any such member may be counted in determining the existence of a quorum at
any meeting of the Board during which action is taken with respect to the
granting to such member of Stock Rights.
3. Eligible Employees and Others. ISOs may be granted only to
-----------------------------
employees of the Company or any Related Corporation. Non-Qualified Options,
Awards and authorizations to make Purchases may be granted to any employee,
officer or director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant a Stock
Right. The granting of any Stock Right to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Stock Rights.
<PAGE>
-3-
4. Stock. The stock subject to Stock Rights shall be authorized but
-----
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 625,000, subject to adjustment as provided in paragraph 13. If any Stock
Right granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares of Common
Stock subject to such Stock Right shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 624,999 of shares of Common
Stock under the Plan. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part or shall be repurchased by
the Company, the shares subject to such Option shall be included in the
determination of the aggregate number of shares of Common Stock deemed to have
been granted to such employee under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the
------------------------
Plan at any time on or after June 16, 1995 and prior to June 16, 2005. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. Options granted under the Plan are intended to qualify as performance-
based compensation to the extent required under Proposed Treasury Regulation
Section 1.162-27.
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. Price for Non-Qualified Options, Awards and Purchases. The
-----------------------------------------------------
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted, and the purchase price per share of stock granted
in any Award or authorized as a Purchase, under the Plan shall in no event be
less than the minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company or its successors in interest may be
organized. Non-Qualified Options granted under the Plan, with an exercise
price less than the fair market value per share of Common Stock on the date
of grant, are intended to qualify as performance-based compensation under
Section 162(m) of the Code and any applicable regulations thereunder. Any
such Non-Qualified Options granted under the Plan shall be exercisable only
upon the attainment of a pre-established, objective performance goal
established by the Committee. If the Committee grants Non-Qualified Options
with an exercise price less than the fair market value per share of Common
Stock on the date of grant, such grant will be submitted for, and will be
contingent upon shareholder approval.
B. Price for ISOs. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant.
In the case of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Related Corporation, the price
<PAGE>
-4-
per share specified in the agreement relating to such ISO shall not be less
than one hundred ten percent (110%) of the fair market value per share of
Common Stock on the date of grant. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of the Code shall
apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible
-----------------------------------------
employee may be granted Options treated as ISOs only to the extent that, in
the aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted) in
excess of $100,000. The Company intends to designate any Options granted in
excess of such limitation as Non-Qualified Options.
D. Determination of Fair Market Value. 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 date of grant or, if the prices
or quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date
of grant 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. If the Common Stock is
not publicly traded at the time an Option is granted under the Plan, "fair
market value" shall mean 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.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs
9 and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9
------------------
through 12, each Option granted under the Plan shall be exercisable as follows:
<PAGE>
-5-
A. Vesting. The Option shall either be fully exercisable on the
-------
date of grant or shall become exercisable thereafter in such installments as
the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
----------------------------
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised
----------------
at any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have the right
-----------------------
to accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the consent of an
optionee, accelerate the permitted exercise date of any installment of any
Option granted to any employee as an ISO (and not previously converted into a
Non-Qualified Option pursuant to paragraph 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the
Code, as described in paragraph 6(C).
9. Termination of Employment. Unless otherwise specified in the
-------------------------
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
ninety (90) days after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval
of the Committee shall not be considered an interruption of employment under
this paragraph 9, provided that such written approval contractually obligates
the Company or any Related Corporation to continue the employment of the
optionee after the approved period of absence. ISOs granted under the Plan
shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed to
give any grantee of any Stock Right the right to be retained in employment or
other service by the Company or any Related Corporation for any period of time.
10. Death; Disability.
-----------------
A. Death. If an ISO optionee ceases to be employed by the
-----
Company and all Related Corporations by reason of his or her death, any ISO
owned by such optionee may be
<PAGE>
-6-
exercised, to the extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has acquired the ISO by
will or by the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the
----------
Company and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, for the number of shares for which he or
she could have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee's employment. 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.
11. Assignability. No Stock Right shall be assignable or transferable
-------------
by the grantee except by will, by the laws of descent and distribution or, in
the case of Non-Qualified Options only, pursuant to a valid domestic relations
order. Except as set forth in the previous sentence, during the lifetime of a
grantee each Stock Right shall be exercisable only by such grantee.
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any Non-
Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
-----------
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
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.
<PAGE>
-7-
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.
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 of ISOs. Notwithstanding the foregoing, any
--------------------
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect to
ISOs would constitute a modification of such ISOs 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.
<PAGE>
-8-
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 events described
-----------
in subparagraphs A, B or C above, the class and aggregate number of shares
set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. Means of Exercising Options. An Option (or any part or installment
---------------------------
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied by
full payment of the purchase price therefor either (a) in United States dollars
in cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and 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, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board on
--------------------------
June 16, 1995, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the
approval of stockholders is not obtained prior to June 16, 1996, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on June 16, 2005 (except as to Options outstanding
on that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
<PAGE>
-9-
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the benefits
accruing to participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for participation in the Plan may not be
materially modified; (d) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (e) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13); (f) the
expiration date of the Plan may not be extended; and (g) the Board may not take
any action which would cause the Plan to fail to comply with Rule 16b-3. Except
as otherwise provided in this paragraph 15, in no event may action of the Board
or stockholders alter or impair the rights of a grantee, without such grantee's
consent, under any Option previously granted to such grantee.
16. Conversion of ISOs into Non-Qualified Options. The Committee, at
---------------------------------------------
the written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee (with the consent of the
optionee) may impose such conditions on the exercise of the resulting Non-
Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action.
17. Application Of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
----------------------------------------------
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a Non-
--------------------------------------
Qualified Option, the grant of an Award, the making of a purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the
<PAGE>
-10-
exercise of an Option, (ii) the grant of an Award, (iii) the making of a
Purchase of Common Stock for less than its fair market value, or (iv) the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the grantee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and
-----------------------
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing Options shall be governed by the laws of the Commonwealth
of Massachusetts.
<PAGE>
DESKTOP DATA, INC.
Proxy for Annual Meeting of Stockholders, June 3, 1997
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 Tuesday,
June 3, 1997, at 10:00 a.m. local time at The Sheraton Tara Lexington Inn
located at 727 Marrett Road, Lexington, Massachusetts 02173, and at any
adjournment thereof, upon matters set forth in the Notice of Annual Meeting and
Proxy Statement dated April 24, 1997, 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, 1997
AND IN FAVOR OF THE AMENDMENT TO THE CORPORATION'S 1995 STOCK PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER FROM
625,000 SHARES TO 1,625,000 SHARES. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
*********************
[X] Please mark
votes as in this
example
The Board of Directors recommends a vote for the following proposals:
1. To elect two (2) Class II directors to serve for a three-year term except
as marked to the contrary below:
Nominees: Ellen Carnahan, June Rokoff.
<TABLE>
<CAPTION>
<S> <C> <C>
[_] FOR [_] WITHHELD [_] ______________
ALL FROM ALL FOR ALL NOMINEES
NOMINEES NOMINEES EXCEPT AS NOTED ABOVE
</TABLE>
2. To approve an amendment to the Corporation's 1995 Stock Plan to increase
the number of shares of Common Stock reserved for issuance thereunder from
625,000 shares to 1,625,000 shares.
[_]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, 1997.
[_]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_________________________
