SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DATA TRANSMISSION NETWORK CORPORATION
(Name of Registrant as Specified in its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------
2) Form, Schedule or Registration Statement No.:
-----------
3) Filing Party:
------------------------------------------
4) Date Filed:
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<PAGE>
DATA TRANSMISSION NETWORK CORPORATION
9110 West Dodge Road, Suite 200
Omaha, Nebraska 68114
(402) 390-2328
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Data
Transmission Network Corporation, a Delaware corporation (the "Company"), will
be held at the Holiday Inn - Old Mill, 655 North 108th Avenue, Omaha, Nebraska
on Wednesday, April 26, 1995 at 10:00 A.M. Omaha time for the following
purposes, as more fully described in the accompanying Proxy Statement:
1. To elect seven directors to the Board of Directors.
2. To consider and vote upon a proposal to approve amendments to the
Company's Non-Employee Directors Stock Option Plan.
3. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as independent auditors for the Company for the
1995 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Any action may be taken on any one of the foregoing proposals at the
meeting on the date specified above, or on any date or dates to which the
meeting may be adjourned. The Board of Directors of the Company has fixed the
close of business on March 1, 1995, as the record date for determination of the
stockholders of the Company 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, please complete, date and
sign the enclosed proxy card and mail it promptly in the self-addressed envelope
provided. The giving of such proxy does not affect your right to vote in person
in the event you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Omaha, Nebraska Brian L. Larson
March 10, 1995 Secretary
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. AN ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE>
DATA TRANSMISSION NETWORK CORPORATION
Proxy Statement
Index Page
- --------------------------------------------------------------------------------
Proxy Statement ........................................................... 1
Proxies ................................................................... 1
Voting Securities ......................................................... 1
Election of Directors ..................................................... 2
Ownership By Certain Beneficial Owners .................................... 4
Executive Compensation .................................................... 6
Compensation Committee Report on Executive Compensation ................... 9
Proposed Amendments To Non-Emplyee Directors Stock Option Plan ............ 10
Transactions With Management .............................................. 11
Compensation Committee Interlocks and Insider Participation ............... 11
Approval of Appointment of Auditors ....................................... 12
Stockholder Proposals for 1996 Annual Meeting ............................. 12
Compliance With Section 16(a) of the Exchange Act ......................... 12
Other Matters ............................................................. 12
Miscellaneous ............................................................. 13
Exhibit A - Fourth Amendment to Non-Employee Directors Stock Option Plan .. 14
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Data Transmission Network Corporation, a
Delaware corporation (the "Company"), to be used at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Holiday Inn - Old Mill, 655 North
108th Avenue, Omaha, Nebraska on Wednesday, April 26, 1995, at 10:00 A.M. Omaha
time. Stockholders of record at the close of business on March 1, 1995 are
entitled to notice of and to vote at the Meeting. The Company's principal
executive offices are located at 9110 West Dodge Road, Suite 200, Omaha,
Nebraska 68114.
PROXIES
Proxies are being solicited by the Board of Directors of the Company with
all costs of the solicitation to be paid by the Company. If the accompanying
proxy is executed and returned, the shares represented by the proxy will be
voted as specified therein. A stockholder may revoke any proxy given pursuant to
this solicitation by delivering to the Company prior to the Annual Meeting a
written notice of revocation or by attending the Meeting and voting in person.
This notice of Annual Meeting of Stockholders, proxy statement and accompanying
proxy card are first being mailed to stockholders on or about March 15, 1995.
VOTING SECURITIES
At March 1, 1995, the Company had issued and outstanding 3,292,935 shares
of the Company's $.001 par value common stock. The Company has no other class of
voting securities outstanding. Each stockholder voting in the election of
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are entitled, or may distribute such
votes on the same principle among as many candidates as the stockholder chooses,
provided that votes cannot be cast for more than the total number of directors
to be elected at the Meeting. The seven nominees receiving the most votes at the
Meeting will be elected as directors. Each share has one vote on all other
matters. An affirmative vote of a majority of the shares present in person or by
proxy at the meeting is required for approval of all items being submitted to
the stockholders for their consideration.
In accordance with Delaware law, a shareholder entitled to vote for the
election of directors can withhold authority to vote for all nominees or for
certain nominees for directors. Abstentions from either or both of the proposals
to amend the Company's Non-Employee Directors Stock Option Plan or to ratify the
appointment of auditors are treated as votes against the particular proposal.
Broker non-votes on either or both of the proposals to amend the Non-Employee
Directors Stock Option Plan, or to ratify the appointment of auditors are
treated as shares as to which voting power has been withheld by the beneficial
holders of those shares and, therefore, as shares not entitled to vote on the
proposal as to which there is the broker non-vote.
1
<PAGE>
ELECTION OF DIRECTORS
At the Meeting, the stockholders will elect a board of seven directors for
a term extending until the 1996 annual meeting of stockholders of the Company
and until their respective successors have been elected and qualify. The Board
of Directors has nominated for election or re-election as directors: Roger R.
Brodersen, Robert S. Herman, David K. Karnes, J. Michael Parks, Jay E. Ricks,
Greg T. Sloma and Roger W. Wallace. All of the nominees (except Jay E. Ricks)
presently are serving as directors of the Company. Proxies may be voted for
seven directors.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the By-Laws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
Set forth below is certain information as of March 1, 1995, with respect to
the nominees for election as directors of the Company. The information relating
to their respective business experience was furnished to the Company by such
persons.
<TABLE>
<CAPTION>
Nominee Age Positions and Offices with the Company Director Since
- ------------------- --- -------------------------------------- --------------
<S> <C> <C> <C>
Roger R. Brodersen 49 Chairman of the Board, President,
Chief Executive Officer and Director 1984
Robert S. Herman 42 Senior Vice President and Director 1984
David K. Karnes 46 Director 1989
J. Michael Parks 44 Director 1990
Jay E. Ricks 62 Nominee --
Greg T. Sloma 43 Chief Operating Officer, Executive
Vice President and Director 1993
Roger W. Wallace 38 Senior Vice President and Director 1984
</TABLE>
Mr. Brodersen has served as Chairman of the Board, President, and Chief
Executive Officer of the Company since 1984.
Mr. Herman has served as Senior Vice President of the Company since 1989.
He served as Vice President of the Company from 1984 to 1989.
Mr. Karnes has served as President and Chief Executive Officer of The
Fairmont Group, Inc., a Financial Services and Consulting Firm, since 1989. He
also has served as Chairman of the Federal Home Loan Bank of Topeka since 1989.
Mr. Karnes served as a United States Senator from 1987 to 1988.
Mr. Parks served as President and Chief Operating Officer of First Data
Resources Inc. from November 1993 to December 1994 and President of the Merchant
Services Group of First Data Resources Inc. from December 1991 to November 1993.
He also served as President and Chief Executive Officer of Call Interactive, an
affiliate of First Data Resources Inc., from 1989 to 1991. From 1976 to 1989,
Mr. Parks served as President or Senior Vice President of various American
Express Information Services Companies or their subsidiaries.
2
<PAGE>
Mr. Ricks has served as Chairman of Douglas Communications Corporation, an
operator of cable television systems, since 1990. He was a partner in the law
firm of Hogan & Hartson in Washington, D.C., from 1970 to 1990. Mr. Ricks is a
director of Intelcom Group, Inc., a competitive access provider and operator of
several satellite teleports, since 1992.
Mr. Sloma has served as Chief Operating Officer and Executive Vice
President of the Company since January 1994. He served as Executive Vice
President and Chief Financial Officer of the Company from April 1993 to December
1993. From 1983 to 1993, Mr. Sloma was a Tax Partner at Deloitte & Touche.
Mr. Wallace has served as Senior Vice President of the Company since 1989.
He served as Vice President of the Company from 1984 to 1989.
Board Meetings and Committees
The Board of Directors met four times during the fiscal year ended December
31, 1994. During fiscal 1994, all directors attended all of the meetings of the
Board of Directors and related committees on which they served. The Company does
not have a Standing Nominating Committee.
The Audit Committee recommends the selection of the independent auditors,
reviews the scope of the audits performed by them and reviews their audit report
and any recommendations made by them relating to internal financial controls and
procedures. Members of the Audit Committee, which met twice during fiscal 1994,
are David Evans, David Karnes, J. Michael Parks and Greg T. Sloma.
The Compensation Committee reviews and makes recommendations to the Board
of Directors regarding officers' compensation and the Company's employee benefit
plans; provided, however, the Compensation Committee administers the Company's
Stock Option Plan of 1989 through its Stock Option Plan Subcommittee, consisting
of all members of the Compensation Committee other than Greg Sloma. Members of
the Compensation Committee, which met once during fiscal 1994, are David Evans,
David Karnes, J. Michael Parks and Greg Sloma.
Directors Compensation
During fiscal 1994, each member of the Board of Directors who was not an
employee of the Company received an annual retainer fee of $8,000 plus $700 for
each Board of Directors meeting attended and $400 for each Board committee
meeting attended. In 1994, each director who was not an employee of the company,
received options under the Non-Employee Directors Stock Option Plan to purchase
1,000 shares of the Company's common stock at an exercise price of $26.50 per
share.
3
<PAGE>
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of the Company's common stock by each person or group who, as of March 1, 1995,
to the knowledge of the Company, beneficially owned more than 5% of the
Company's common stock:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percent of
Beneficial Owner of Ownership Class
- -------------------------- ----------------- ----------
<S> <C> <C>
Roger R. Brodersen 569,978 (1) 17.3%
16705 Ontario Plaza
Omaha, NE 68130
Furman Selz Incorporated 321,800 (2) 9.8%
230 Park Avenue
New York, NY 10169
Peter H. Kamin and Peak Investment 223,500 (3) 6.8%
Limited Partnership as a group
One Financial Center, Suite 1600
Boston, MA 02111
Wellington Management Company 173,200 (4) 5.3%
75 State Street
Boston, MA 02109
<FN>
(1) This includes 13,050 shares held in a trust for the benefit of Mr.
Brodersen's children, 9,100 shares beneficially owned by Mr. Brodersen's
spouse, 23,435 shares subject to options that may be exercised within 60
days of March 1, 1995, and 5,139 shares allocated to Mr. Brodersen through
his participation in the Company's 401(k) Savings Plan.
(2) According to a Schedule 13G, amended through February 21, 1995, Furman Selz
Incorporated has sole voting and sole dispositive power over such shares.
(3) According to a Schedule 13D, amended through December 30, 1994, Peak
Investment Limited Partnership ("Peak") is the beneficial owner of 213,500
of these shares for which it has sole voting and sole dispositive power.
Peter H. Kamin is the sole general partner of Peak with sole voting and
sole dispositive power over the shares owned by Peak and therefore also may
be deemed to be the beneficial owner of such 213,500 shares. According to
the Schedule 13D, Mr. Kamin also is the beneficial owner of an additional
10,000 shares for which he has sole voting and sole dispositive power.
(4) According to a Schedule 13G, amended through February 3, 1995, Wellington
Management Company is the beneficial owner of 173,200 shares which are
owned by its investment advisory clients. In its capacity as investment
advisor to such clients, Wellington Management Company has shared voting
power over 52,200 shares and shared dispositive power over 173,200 shares.
</FN>
</TABLE>
4
<PAGE>
The following table sets forth information as to the shares of common stock
of the Company beneficially owned as of March 1, 1995, by each director of the
Company, by each nominee for election as a director of the Company, by each of
the executive officers named in the Summary Compensation Table beginning on page
6, and by all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent of
Beneficial Owner of Ownership (1) Class (2)
- ------------------------ -----------------
<S> <C> <C>
Roger R. Brodersen 569,978 (3) 17.3%
David L. Evans 6,733 (4) *
Robert S. Herman 141,274 (5) 4.3%
David K. Karnes 16,145 (6) *
James J. Marquiss 43,776 (7) 1.3%
J. Michael Parks 8,833 (8) *
Jay E. Ricks 1,000 *
Greg T. Sloma 24,228 (9) *
Roger W. Wallace 83,523 (10) 2.5%
All directors and executive officers
as a group (15 persons) 925,575 (11) 28.1%
<FN>
* Less than 1.0%
(1) The number of shares in the table include interests of the named persons,
or of members of the direc- tors and executive officers as a group, in
shares held by the trustee of the Company's 401(k) Savings Plan. The
beneficial owners have sole investment power over these shares but do not
have sole voting power.
(2) Shares subject to options exercisable within 60 days of March 1, 1995 are
deemed to be outstanding for the purpose of computing the percentage
ownership of persons beneficially owning such options but have not been
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Includes 13,050 shares which are held in trust for Mr. Brodersen's
children, 9,100 shares beneficially owned by Mr. Brodersen's spouse, 23,435
shares subject to options exercisable within 60 days of March 1, 1995, and
5,139 shares allocated to Mr. Brodersen through his participation in the
Company's 401(k) Savings Plan.
(4) Includes 6,333 shares subject to options exercisable within 60 days of
March 1, 1995.
(5) Includes 21,683 shares subject to options exercisable within 60 days of
March 1, 1995, 9,600 shares beneficially owned by Mr. Herman's spouse, and
4,097 shares allocated to Mr. Herman through his participation in the
Company's 401(k) Savings Plan.
5
<PAGE>
(6) Includes 6,333 shares subject to options exercisable within 60 days of
March 1, 1995.
(7) Includes 14,958 shares subject to options exercisable within 60 days of
March 1, 1995 and 3,818 shares allocated to Mr. Marquiss through his
participation in the Company's 401(k) Savings Plan.
(8) Includes 5,833 shares subject to options exercisable within 60 days of
March 1, 1995.
(9) Includes 17,000 shares subject to options exercisable within 60 days of
March 1, 1995 and 5,128 shares allocated to Mr. Sloma through his
participation in the Company's 401(k) Savings Plan.
(10) Includes 21,683 shares subject to options exercisable within 60 days of
March 1, 1995, 1,500 shares beneficially owned by Mr. Wallace's spouse, and
4,088 shares allocated to Mr. Wallace through his participation in the
Company's 401(k) Savings Plan.
(11) Includes 144,865 shares subject to options exercisable within 60 days of
March 1, 1995, 13,050 shares held in trust for the children of executive
officers and directors, 20,200 shares owned beneficially by spouses of
executive officers and directors, and 24,315 shares allocated to executive
officers through their participation in the Company's 401(k) Savings Plan.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer and the four remaining most highly compensated executive
officers of the Company for the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term
---------------------------------------- Compensation
----------------
(a) (b) (c) (d) (e) (f) (g)
- --------------------------------- ---- ------------ -------- ----------- ---------------- ---------------
Other Securities
Annual Underlying
Name and Principal Compen- Options All Other
Position Year Salary Bonus sation (1) (shares) Compensation(2)
- --------------------------------- ---- ------------ -------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen 1994 $165,000 $ 80,217 $0 10,000 $9,240
Chairman, President 1993 157,000 79,497 0 6,000 8,994
& Chief Executive Officer 1992 152,500 71,734 0 6,000 8,728
Greg T. Sloma 1994 135,000 65,712 0 6,000 2,464
Chief Operating Officer & 1993 93,462 35,360 0 30,000 0
Executive Vice President 1992 -- -- - -- --
Robert S. Herman 1994 110,000 71,304 0 5,000 6,160
Senior Vice President 1993 104,000 70,922 0 4,500 6,165
1992 100,000 64,560 0 4,500 6,530
Roger W. Wallace 1994 110,000 70,108 0 5,000 7,204
Senior Vice President 1993 104,000 70,970 0 4,500 6,998
1992 100,000 64,560 0 4,500 6,530
James J. Marquiss 1994 110,000 62,540 0 3,000 6,902
Vice President 1993 80,000 87,889 0 3,000 7,027
1992 69,000 79,112 0 2,250 5,900
6
<PAGE>
<FN>
(1) Excludes perquisites and other benefits because the aggregate of such
compensation was less than either $50,000 or 10% of the total of annual
salary and bonus reported for the named executive officer.
(2) The amounts included in the All Other Compensation column represent 401(k)
matching contributions made by the Company.
</FN>
</TABLE>
The following table shows, as to the Chief Executive Officer and the four
remaining most highly compensated executive officers of the Company,
information about stock option grants in fiscal 1994. The Company does not
grant any Stock Appreciation Rights.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
- -------------------------------------------------------------------------------------------------------
Individual Grants
- -------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
- ----------------------- ------------ ------------ ----------- -------- ---------------
Number of
Securities Percent of
Underlying Total Options
Options Granted to Exercise Grant Date
Granted Employees In Price Expiration Present
Name (shares) (1) Fiscal 1994 (Per share) Date Value (2)
- ----------------------- ------------ ------------ ----------- -------- --------------
<S> <C> <C> <C> <C> <C>
Roger R. Brodersen 10,000 11.3% $ 29.15 1-03-99 $35,500
Greg T. Sloma 6,000 6.8% 26.50 1-03-04 49,300
Robert S. Herman 5,000 5.7% 26.50 1-03-04 41,100
Roger W. Wallace 5,000 5.7% 26.50 1-03-04 41,100
James J. Marquiss 3,000 3.4% 26.50 1-03-04 24,700
<FN>
(1) The options listed above were granted on January 3, 1994 under the
Company's Stock Option Plan of 1989.
(2) As suggested by the Securities & Exchange Commission's rules on executive
compensation, the Company used the Black-Scholes model of option valuation
to determine grant date present value. The Company does not necessarily
agree that the Black-Scholes model can properly determine the value of an
option. The actual value, if any, an executive may realize will depend on
the excess of the stock price over the exercise price on the date the
option is exercised, so that there is no assurance that the value realized
will be at or near the value estimated by the Black-Scholes model.
</FN>
</TABLE>
7
<PAGE>
The following table provides information on option exercises in fiscal
1994 and the value of unexercised options at December 31, 1994 for the Chief
Executive Officer and the four remaining most highly compensated executive
officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year
and Fiscal Year End Option Values
- --------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal In-the-Money Options
Acquired Year End (shares) At Fiscal Year End(1)
On Value --------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- -------- -------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen 4,000 $48,680 16,102 16,000 $43,500 $11,000
Greg T. Sloma -- 0 7,500 28,500 18,800 56,300
Robert S. Herman -- 0 17,016 9,500 60,900 14,300
Roger W. Wallace -- 0 17,016 9,500 60,900 14,300
James J. Marquiss -- 0 12,208 5,750 42,600 8,400
<FN>
(1) The closing "bid" price of the Company's common stock as quoted by NASDAQ
on December 31, 1994 was $16.50. The values shown are computed based upon
the difference between this price and the exercise price of the underlying
options.
</FN>
</TABLE>
Performance Graph
The following performance graph compares the performance of the Company's
common stock to the Center for Research in Securities Prices (CRSP) Total Return
Index for the NASDAQ Stock Market (U.S. Companies) and to the CRSP Total Return
Industry Index for NASDAQ Telecommunications Stocks. The graph assumes that the
value of the investment in the Company's Common Stock and each index was $100 at
December 31, 1989.
Performance Graph in Tabular Form:
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
-----------------------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
DTN Common Stock 100 77 77 91 169 110
NASAQ Total Return Index 100 85 136 159 181 177
NASDAQ Telecommunications
Industry Index 100 67 93 114 176 146
</TABLE>
8
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Company strives to apply a consistent philosophy on compensation for
all employees, including senior management. The goals of the compensation
program are to directly link compensation with corporate profitability and the
enhancement of the underlying value of the Company's business. The following
objectives are used by the Company and the Compensation Committee as guidelines
for compensation decisions:
o Provide a competitive total compensation package that allows the Company
to attract and retain the best people possible.
o The Company pays for performance. Employees are rewarded based upon
corporate performance, business unit performance and individual
performance.
o Provide variable compensation programs that are linked with the
performance of the Company and that align executive compensation with the
interests of shareholders.
Compensation Program Components
The Committee annually reviews the Company's compensation program to ensure
that pay levels and incentive opportunities are competitive and reflect the
performance of the Company. The components of the compensation program for
executive officers, which are comparable to those used for all employees, are
outlined below.
Base Salary - Base pay levels are determined by reviewing competitive
positions in the market, including comparisons with companies of similar size,
complexity and growth rates. Modest increases in base salary were recommended by
senior management for fiscal 1994 for the Chief Executive Officer and the other
named executives in the compensation table, and the Committee acted in
accordance with this recommendation.
Annual Incentive Compensation - The large majority of the Company's
employees, including the executive officers, participate in an annual bonus
plan. For fiscal 1994, the bonus pool amounted to eight percent of the Company's
income before income taxes and depreciation expense. The five executive officers
named in the Summary Compensation Table received approximately thirty-five
percent of this bonus pool.
Stock Option Program - The purpose of this program, which is available to
the large majority of employees, is to provide additional incentives to
employees to work to maximize long-term shareholder value. It also uses vesting
periods to encourage key employees to continue in the employ of the Company. The
number of stock options granted to executive officers is based on competitive
practices.
Compensation Committee
of the Board of Directors
David L. Evans
David K. Karnes
J. Michael Parks
Greg T. Sloma
9
<PAGE>
PROPOSED AMENDMENTS TO NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company's Non-Employee Directors Stock Option Plan (the "Plan")
provides for the grant of options to purchase shares of the Company's common
stock to members of the Board of Directors who are not employed by the Company.
The Plan is administered by the Non-Employee Directors Stock Option Committee of
the Board of Directors, consisting of employee directors (the "Committee").
Options granted under the Plan are exercisable after one year from the date
of their grant and they terminate no later than ten years from the date of their
grant. No options shall be granted at an exercise price less than 100% of the
fair market value of the shares on the date of the grant. No cash consideration
is to be received by the Company for the granting of options pursuant to the
Plan.
The Plan currently provides for a total of 30,000 shares of the Company's
common stock, either newly issued or treasury shares, for which options may be
granted under the Plan. The Board of Directors proposes the adoption of the
Fifth Amendment to the Plan which accompanies this Proxy Statement as Exhibit
"A" (the "Fifth Amendment"). If approved by the stockholders, the Fifth
Amendment will amend the Plan by increasing from 30,000 to 70,000 the total
number of shares for which options may be granted under the Plan.
Subject to the express provisions of the Plan, the Committee has complete
authority, in its discretion, to interpret the Plan. The Plan provides a formula
for determining the award of stock options to non-employee directors of the
Company. The current formula provides for an initial option for 1,000 shares to
be awarded upon a non-employee first becoming a director of the Company. In
addition, in the month of January of each year each non-employee director who is
willing to continue as a director and who is to be nominated by the Board of
Directors for election as a director at the next annual meeting of stockholders,
shall be awarded an option for 1,000 shares. If approved by the stockholders,
the Fifth Amendment will amend the Plan, retroactive to January 4, 1995, by
changing the formula to provide for an option for 2,500 shares to be awarded
upon a non-employee being elected or re-elected as a director of the Company at
a meeting of stockholders of the Company and upon such person being appointed a
director of the Company to fill a vacancy on the Board of Directors of the
Company. In addition, upon approval of the Fifth Amendment by the stockholders,
the Board of Directors of the Company will terminate the annual retainer fee of
$8,000 currently paid to each non-employee director of the Company.
In the event of any change in the number of issued shares of common stock
of the Company through stock splits, dividends, or other change in
capitalization, the total number of shares for which options may be granted
under the Plan is to be adjusted so that the aggregate consideration due the
Company and the value of each benefit shall not change.
The Plan provides for the issuance of non-qualified options. There
generally are not federal income tax consequences either to the participant or
the Company upon the grant of an option under the Plan. Upon the exercise of a
stock option pursuant to the Plan, the amount by which the fair market value of
the common stock of the Company on the date of exercise exceeds the option
exercise price generally will be taxable to the participant as compensation
income and generally will be deductible for income tax purposes by the Company.
The disposition of shares of common stock of the Company acquired upon the
exercise of a stock option pursuant to the Plan generally will result in a
capital gain or loss for the participant but will have no tax consequences for
the Company.
10
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Of the persons nominated by the Board of Directors to serve as directors of
the Company, three are not employed by the Company. If such persons are elected
or re-elected as directors at the Meeting and the Fifth Amendment is approved by
the stockholders, then each of them would receive during fiscal year 1995 an
option for 2,500 shares of common stock on the Company. The value a participant
may realize from an option will depend on the excess of the stock price over the
exercise price on the date the option is exercised, if any. Since the number of
directors not employed by the Company may be increased or decreased, the number
of participants in the Plan is not presently determinable. The closing "bid"
price of the common stock of the Company on March 1, 1995, as reported in The
Wall Street Journal, was $ 21.75.
The Board of Directors has unanimously approved, and recommends to the
stockholders for their approval and adoption, the Fifth Amendment which will
increase from 30,000 to 70,000 the total number of shares for which options may
be granted under the Plan. In addition, the Fifth Amendment will increase from
1,000 to 2,500 the number of shares for which options are to be awarded to a
non- employee upon being elected, re-elected or appointed a director of the
Company and change the timing of the award of such options as described above.
The approval of the Fifth Amendment will cause the termination of the annual
retained fee of $8,000 currently paid to each non-employee director of the
Company.
The Board of Directors has determined that the ability of the Company to
continue to attract and retain highly qualified directors will be enhanced by
the continued grant of options under the Plan and, accordingly, recommends a
vote FOR adoption of the Fifth Amendment. The affirmative vote of a majority of
the shares of the Company's common stock present in person or by proxy at the
Meeting is required for the adoption of the Fifth Amendment.
The full text of the Plan, which is incorporated herein by reference, is
available without charge by oral or written request to the Company Secretary,
Data Transmission Network Corporation, 9110 West Dodge Road, Suite 200, Omaha,
Nebraska 68114, telephone (402) 390-2328. A copy of the Plan document will be
sent by first class mail to the requesting party promptly upon receipt of the
request by the Company Secretary.
TRANSACTIONS WITH MANAGEMENT
No reportable transactions occurred during fiscal 1994 between the Company
and its officers and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the Compensation Committee of the
Company's Board of Directors: David Evans, David Karnes, J. Michael Parks and
Greg Sloma. Mr. Sloma, because he is an officer and employee of the Company,
abstains from all votes dealing with officer compensation. Also, only Mr. Evans,
Mr. Karnes and Mr. Parks are members of the Stock Option Plan Subcommittee of
the Compensation Committee which administers the Company's Stock Option Plan of
1989.
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APPROVAL OF APPOINTMENT OF AUDITORS
The Board of Directors has, upon the recommendation of the Audit Committee,
appointed the firm of Deloitte & Touche LLP to audit the Company's financial
statements for the fiscal year ending December 31, 1995, subject to ratification
by the stockholders of the Company. Deloitte & Touche LLP served as the
Company's auditors for the 1994 fiscal year.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the shares of Common Stock present, in person
or by proxy, and voting at the Meeting. If the stockholders should not ratify
the appointment of Deloitte & Touche LLP, the Board of Directors will reconsider
the appointment.
A representative of Deloitte & Touche LLP is expected to be present at the
meeting, will have an opportunity to make a statement if desired, and will be
available to respond to appropriate stockholder questions.
The Board of Directors recommends a vote FOR the approval of the
appointment of Deloitte & Touche LLP as independent auditors for the Company.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of stockholders for which consideration is desired at the 1996
Annual Meeting of Stockholders must be received by the Company no later than
December 31, 1995, in order to be considered for inclusion in the Company's
proxy statement and form of proxy relating to such meeting. Any such proposals
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
The Company believes that during the fiscal year ended December 31, 1994, its
officers, directors and holders of more than 10% of the Company's common stock
complied with all Section 16(a) filing requirements. In making these statements,
the Company has relied solely upon a review of Forms 3 and 4 furnished to the
Company during its most recent fiscal year, Forms 5 furnished to the Company
with respect to its most recent fiscal year, and written representations from
reporting persons that no Form 5 was required.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in the Proxy Statement.
However, if any other matters should properly come before the meeting, the
persons named in the accompanying form of proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgement.
12
<PAGE>
MISCELLANEOUS
The cost of solicitation of proxies will be borne by the Company. The
Company will, upon request, reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy material to the beneficial owners of Common Stock. In addition to
solicitations by mail, directors, officers, and regular employees of the Company
may solicit proxies personally or by telegram or telephone without additional
compensation. The Company has retained First National Bank of Omaha, the
Company's stock transfer agent, to assist in the distribution and solicitation
of proxies at a cost of approximately $2,500, including the reimbursement of
certain expenses.
As stated in this proxy, the Company's amended Non-Employee Directors Stock
Option Plan is incorporated by reference into this proxy statement.
The Company's Annual Report to Stockholders, including financial
statements, has been mailed to all stockholders of record as of the close of
business on March 1, 1995. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing the Company. Such Annual Report is
not to be treated as a part of this proxy solicitation material nor as having
been incorporated herein by reference.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the Compensation Committee Report on page 9 and the
Performance Graph on page 8 shall not be incorporated by reference into any such
filings.
THE BOARD OF DIRECTORS
Omaha, Nebraska
March 10, 1995
A COPY OF THE FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCLUDING EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, DATA TRANSMISSION NETWORK
CORPORATION, 9110 WEST DODGE ROAD, SUITE 200, OMAHA, NEBRASKA 68114.
13
<PAGE>
Exhibit A
FIFTH AMENDMENT TO
DATA TRANSMISSION NETWORK CORPORATION
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
PREAMBLE
Data Transmission Network Corporation, a Delaware corporation (the
"Company"), adopted the Data Transmission Network Corporation Stock Option Plan
of 1989 (the "Plan") effective as of February 15, 1989. The Plan was previously
amended by a First Amendment effective as of January 15, 1990, a Second
Amendment effective as of January 2, 1991, a Third Amendment effective as of May
1, 1991, and a Fourth Amendment effective as of January 3, 1994. Section 1 of
Article III of the Plan permits the Board of Directors of the Company or any
authorized committee of the Board of Directors to amend the Plan from time to
time without shareholder approval being required under certain circumstances.
Except as modified by or specifically defined in this Fifth Amendment,
capitalized terms used in this Fifth Amendment shall have the meanings given to
such terms in the Plan.
AMENDMENT
Subject to ratification and approval by the shareholders of the Company at
their annual meeting to be held on April 26, 1995, the Plan is hereby amended,
effective as of January 4, 1995, as follows:
1. Subsection 4 of Article I and subsections (a) and (b) of Section 1 of
Article II of the Plan shall be amended by increasing from 30,000
Shares to 70,000 Shares the total number of Shares for which Options
may be granted under the Plan.
2. That portion of Section 3 of Article II of the Plan preceding
Subsection (a) thereof shall be amended in its entirety to read as
follows:
"Awards and Conditions of Options. An Option for 2,500 Shares shall be
awarded to each Non-Employee Director each time such person is elected or
re-elected a Director of the Company at a meeting of the shareholders of
the Company and upon such person being appointed a Director of the Company
to fill a vacancy on the Board of Directors of the Company. The Options to
be award ed shall be subject to the following terms and conditions:".
3. Except as specifically amended by this Fifth Amendment, the Plan, as
previously amended, shall remain in full force and effect and is
hereby ratified and confirmed.
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(Intentionally Left Blank)
15
<PAGE>
DATA TRANSMISSION NETWORK CORPORATION PROXY
Annual Meeting of Stockholders To Be Held April 26, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Roger R. Brodersen and Brian L. Larson, or
either of them, as proxies of the undersigned, with full power of substitution
to either of them, and hereby authorizes them to vote as designated below all
shares of common stock of Data Transmission Network Corporation held of record
by the undersigned on March 1, 1995 at the Annual Meeting of Stockholders to be
held on April 26, 1995 and at any adjournments thereof (a) on the following
matters and (b) on any other matters that properly may come before the meeting
or any adjournments thereof:
1. ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked)
-----
WITHHOLD AUTHORITY to vote for all nominees listed below
-----
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), draw
a line through the nominee's name below.)
Roger R. Brodersen Robert S. Herman David K. Karnes J. Michael Parks
Jay E. Ricks Greg T. Sloma Roger W. Wallace
2. PROPOSAL TO AMEND NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AGAINST ABSTAIN
---- ----
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors of the Corporation for fiscal year ending December 31, 1995
AGAINST ABSTAIN
---- ----
This proxy will be voted as specified. IF NO SPECIFICATION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE PROPOSALS SET FORTH ABOVE. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders of Data
Transmission Network Corporation to be held on April 26, 1995 and the Proxy
Statement for such meeting.
Dated , 1995
--------------------------- -----------------------------------
-----------------------------------
(Signature of Stockholder)
Note: Please sign exactly as name appears on stock certificate (as Indicated on
reverse side). All joint owners should sign. When signing as personal
representative, executor, administrator, attorney, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporation name
by president or other authorized person. If a partnership, please sign in
partnership name by a partner.
<PAGE>
APPENDIX TO
PROXY STATEMENT
A copy of the restated and amended Non-Employee Directors Stock Option Plan
of Data Transmission Network Corporation accompanies this appendix.
A-1
<PAGE>
[Restated to incorporate changes from first,
second, third, fourth, and fifth amendments]
DATA TRANSMISSION NETWORK CORPORATION
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE I. GENERAL PROVISIONS
Section 1. Purpose. The Data Transmission Network Corporation Non-Employee
Directors Stock Option Plan (the "Plan") is designed to attract and retain
Non-Employee Directors of exceptional ability and to solidify the common
interest of Directors and stockholders in enhancing the value of the Company's
shares.
Section 2. Definitions. Except where the context otherwise indicates, the
following definitions apply:
"Board" means Board of Directors of the Company.
"Committee" means the Non-Employee Directors Stock Option Committee of the
Board, which Committee shall consist of three or more members of the Board as
may be appointed by the Board to administer this Plan.
"Company" means Data Transmission Network Corporation, a Delaware
corporation.
"Director" means a member of the Board.
"Effective Date" means February 15, 1989.
"Fair Market Value" means, with respect to any given day, the closing "bid"
price of the Company's Shares as reported by the NASDAQ System for such day, or
if no quotation shall have been made for that day, for the next preceding day
for which there was a quotation, if within seven days thereof, or otherwise as
determined in good faith by the Committee.
"Non-Employee Director" means a member of the Board who is not employed by
the Company or any Subsidiary thereof.
"Participant" means a Non-Employee Director to whom a Stock Option has been
granted.
"Shares" means shares of $.001 par value common stock of the Company, and
any shares of stock or other securities received as a result of a Share
adjustment as set forth in Section 4 of this Article I.
"Stock Option" or "Option" means a stock option granted pursuant to this
Plan.
"Subsidiary" means any corporation (or partnership, joint venture, or other
enterprise) (i) of which the Company owns or controls, directly or indirectly,
50% or more of the outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting power) or
(ii) which the Company otherwise controls (by contract or any other means).
"Control" means the power to direct or cause the direction of the management and
policies of a corporation, partnership, joint venture, or other enterprise.
"Termination of Service" means the discontinuance of the service of any
Non-Employee Director as a member of the Board for any reason.
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<PAGE>
Section 3. Administration.
(a) This Plan shall be administered by the Committee. No member of the
Board who has previously been or is eligible to receive a Stock Option shall be
a member of the Committee.
(b) The Committee shall have the exclusive right to interpret this Plan.
All acts and decisions of the Committee with respect to any questions arising in
connection with the administration and interpretation of this Plan, including
the severability of any and all of the provisions hereof, shall be conclusive,
final and binding upon all Participants.
(c) The Committee may adopt and amend, from time to time, rules and
regulations of general application for the administration of this Plan,
including terms and conditions related to the receipt and exercise of Options.
Such rules and regulations may include, at the Committee's discretion, the
provision by the Company of loans for the purpose of financing the exercise of
Options, and the amount of taxes payable in connection therewith.
(d) Without limiting the foregoing Sections 3(a), (b) and (c) of this
Article I (and notwithstanding any other provisions of this Plan), the Committee
is authorized to take such action as it reasonably determines to be necessary or
advisable, and fair and equitable to Participants, with respect to Options in
the event of a merger of the Company with, consolidation of the Company into, or
the acquisition of the Company by another corporation, a sale or transfer of all
or substantially all of the assets of the Company to another corporation or any
other person or entity, a tender or exchange offer for Shares made by any
corporation, person or entity (other than the Company), or other reorganization
in which the Company will not survive as an independent, publicly owned
corporation. The Committee may take such actions pursuant to this Section 3(d)
by adopting rules and regulations of general applicability to all Participants.
The Committee may take such actions as part of the grants or before or after the
public announcement of any such merger, consolidation, acquisition, sale or
transfer of assets, tender or exchange offer or other reorganization.
Section 4. Share Adjustments. In the event that at any time or from time to
time a stock dividend, stock split, recapitalization, merger, consolidation, or
other change in capitalization, or a sale by the Company of all or part of its
assets, or any distribution to stockholders other than a cash dividend results
in (a) the outstanding Shares, or any securities exchanged therefor or received
in their place, being exchanged for a different number or class of shares of
stock or other securities of the Company, or for shares of stock or other
securities of any other corporation, or (b) new, different or additional shares
or other securities of the Company or of any other corporation being received by
the holders of outstanding Shares, then:
(i) the limitation of 70,000 Shares set forth in Section l(a) of Article
II of this Plan;
(ii) the number and class of Shares that may be subject to Stock Options
and which have not been issued or transferred under Stock Options; and
(iii) The purchase price to be paid per Share under unexercised Stock
Options; shall in each case be equitably adjusted as determined by the
Committee in its sole discretion.
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<PAGE>
ARTICLE II. PLAN
Section 1. Option Shares.
(a) The total number of Shares for which Options may be granted under this
Plan shall not exceed 70,000 Shares, subject to: (A) the adjustments provided
for in Section 4 of Article I of this Plan and (B) the provisions of Section 1
(b) of this Article II. Such Shares may be authorized but unissued Shares, or
treasury Shares, or both.
(b) In the event that any unexercised Stock Option granted hereunder lapses
or ceases to be exercisable for any reason other than a surrender of the Option
pursuant to Section I (c) of this Article II, the Shares subject to such Option
shall again be available for Option grants under this Plan without again being
charged against the limitation of 70,000 Shares set forth in Section l(a) of
this Article II. Any amendment of any Option by the Committee pursuant to
Section 3 of Article I of this Plan shall not be considered the grant of a new
Option.
(c) In the event of Termination of Service for death, disability, hardship
or unusual circumstances as determined by the Committee, the Committee may, with
the consent of the Participant or his or her legal representative, authorize
payment, in cash or in Shares, or partly in cash and partly in Shares, as the
Committee may direct, of an amount equal to the difference at the time between
the Fair Market Value of the Shares subject to an Option and the Option exercise
price in consideration of the surrender of the Option. In such an event the
Shares subject to the Option so surrendered shall be charged against the
limitations set forth in Section l(a) of this Article II.
Section 2. Incidents of Options.
(a) Each Stock Option shall be granted subject to such terms and
conditions, if any, not inconsistent with this Plan, as shall be determined by
the Committee, including any provisions as to continued service as a member of
the Board as consideration for the grant or exercise of such Option and any
provisions which may be advisable to comply with applicable laws, regulations or
rulings of any governmental authority. Unless otherwise provided at the time of
any Option grant and except as otherwise specifically provided in this Plan,
Options shall only be exercisable by a Participant as follows:
Percentage of Total
Shares Per Option
Grant Exercisable
-------------------
On and after twelve (12) months from
the Option grant date .... 100%
If the application of the foregoing vesting schedule would result in a
fractional Share being issuable upon the exercise of an Option, the number of
shares vested shall be rounded up to the next full Share, but not to exceed in
the aggregate the original grant total. Notwithstanding the foregoing, in the
event of a disposition of the majority of common stock of the Company, or all or
a substantial part of its assets, in one or a series of transactions involving
merger, consolidation, recapitalization, liquidation or dissolution, conveyance,
sale, transfer, assignment, or other method of disposition, the Options shall
then be immediately exercisable by a Participant.
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<PAGE>
(b) A Stock Option shall not be transferable by the Participant otherwise
than by will or by the laws of descent and distribution or pursuant to a
"qualified domestic relations order" (as defined by Title I of the Employee
Retirement Income Security Act), and shall be exercisable during the lifetime of
the Participant only by him or her or by his or her guardian or legal
representative.
Section 3. Awards and Conditions of Options. An Option for 2,500 Shares
shall be awarded to each Non-Employee Director each time such person is elected
or re-elected a Director of the Company at a meeting of the shareholders of the
Company and upon such person being appointed a Director of the Company to fill a
vacancy on the Board of Directors of the Company. The Options to be awarded
shall be subject to the following terms and conditions:
(a) The Option exercise price per Share shall be one hundred percent (100%)
of the Fair Market Value at the time of the grant of the Option. Notwithstanding
any contrary provision contained in this Plan, neither the Option nor the Shares
issued to a Participant upon the exercise of such Option may be sold or
transferred until at least six (6) months elapse from the date of the grant of
the Option.
(b) The Option may be exercised in full or in part from time to time
within the specified exercise period of the Option; provided, however, that upon
the Termination of Service of the Participant the Option may only be exercised
prior to the later of (i) the date six (6) months after the Termination of
Service or the date twelve (12) months after the Termination of Service if
service terminated as a result of the death or total and permanent disability of
the Participant as determined by the Committee or (ii) the date five (5) years
after the date of the grant; and, provided, further, that no such period
following the Termination of Service shall extend the specified exercise period
of the Option. The specified exercise period of the Option shall be ten (10)
years from the date of the grant or such shorter period as may be specified by
the Committee in the grant.
(c) In the event of Termination of Service due to death or total and
permanent disability (as determined by the Committee), all Options granted more
than twelve (12) months prior to such event shall, notwithstanding Section 2 of
this Article II, become immediately exercisable.
(d) The Option grant may include any other terms and conditions not
inconsistent with this Plan as determined by the Committee.
A-5
<PAGE>
ARTICLE III. AMENDMENTS
Section 1. Amendment or Termination of Plan. The Board, the Committee or
any other duly authorized committee of the Board may from time to time amend
this Plan, or discontinue this Plan or any provision thereof, provided that no
amendments to or modifications of this Plan shall, without the prior approval of
the stockholders normally entitled to vote for the election of directors of the
Company:
(a) change the number of Shares for which Stock Options may be granted, or
the percentage thereof which may be made subject to Options granted to any one
Non-Employee Director, as set forth in Section l(a) of Article II of this Plan;
(b) make any member of the Committee eligible for the grant
of a Stock Option;
(c) limit or restrict the powers of the Committee with respect to the
administration of this Plan except as may be required by any law, regulation or
governmental order;
(d) materially increase the benefits accruing to Participants under this
Plan;
(e) materially modify the requirements as to eligibility for participation
under this Plan; or
(f) change any of the provisions of this Article III. Notwithstanding the
foregoing provisions of this Section 1, the provisions of Section 3 of Article
II of this Plan shall not be amended more than once every six (6) months, unless
such amendment is required because of changes in the Internal Revenue Code or
the Employee Retirement Income Security Act.
Section 2. Effect on Options. No amendment or discontinuance of this Plan
or any provision thereof shall, without the written consent of the Participant,
adversely affect any Stock Option theretofore granted to such Participant under
this Plan.
ARTICLE IV. MISCELLANEOUS
Section 1. Transfer. No Stock Option shall be transferable except as
provided for herein in the case of death. If any Participant makes such a
transfer in violation hereof, any obligation of the Company with respect to such
Option shall forthwith terminate.
Section 2. Segregated Fund. Nothing contained herein shall require the
Company to segregate any monies from its general funds, or to create any trusts,
or to make any special deposits for any immediate or deferred amounts payable to
any Participant, nor require the Company to segregate any treasury Shares.
Section 3. Governing Law. This Plan and all actions taken hereunder shall
be governed by the laws of the State of Delaware.
Section 4. Withholding. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with any Stock Option or the exercise thereof.
A-6
<PAGE>
Section 5. Construction. The Plan is intended to be construed so that
participation in the Plan will be exempt from Section 16(b) of the Securities
Exchange Act of 1934 pursuant to regulations and interpretations issued from
time to time by the Securities and Exchange Commission.
Section 6. Misconduct. If the Committee determines that any Non-Employee
Director has (a) used for profit or disclosed to unauthorized persons
confidential information or trade secrets of the Company or (b) breached any
contract with or violated any fiduciary obligation to the Company, such
Non-Employee Director shall forfeit all rights hereunder to the receipt or
exercise of any Option.
A-7
<PAGE>
