SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ x ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Addditional 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 computer
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:
------------------------------------------------
2
<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 23, 1997
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 23, 1997 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 an amendment
to the Company's Stock Option Plan of 1989.
3. To consider and vote upon a proposal to ratify the appointment
of Deloitte & Touche LLP independent auditors for the Company
for the 1997 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 5, 1997, 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
/s/ Brian L. Larson
------------------------------
Omaha, Nebraska Brian L. Larson
March 10, 1997 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.
3
<PAGE>
<TABLE>
<CAPTION>
DATA TRANSMISSION NETWORK CORPORATION
Proxy Statement
Index Page
- -------------------------------------------------------------------------------
<S> <C>
Proxy Statement ........................................................... 1
Proxies ................................................................... 1
Voting Securities ......................................................... 1
Election of Directors ..................................................... 2
Ownership By Certain Beneficial Owners and Management ..................... 4
Executive Compensation .................................................... 6
Compensation Committee Report of Executive Compensation ................... 10
Amendment to Employee Stock Option Plan ................................... 12
Approval of Appointment of Auditors ....................................... 14
Transactions with Management .............................................. 14
Compensation Committee Interlocks and Insider Participation ............... 14
Stockholder Proposals for 1998 Annual Meeting ............................. 14
Section 16(a) Beneficial Ownership Reporting Compliance ................... 14
Other Matters ............................................................. 15
Miscellaneous ............................................................. 15
Exhibit A - Fifth Amendment to Stock Option Plan of 1989 .................. 16
</TABLE>
4
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1997
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 23, 1997, at 10:00 A.M. Omaha
time. Stockholders of record at the close of business on March 5, 1997 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 14, 1997.
VOTING SECURITIES
At March 5, 1997, the Company had issued and outstanding 11,063,020 shares
of the Company's $.001 par value common stock. The Company effected a three for
one stock split on June 28, 1996, for shareholders of record on June 14, 1996.
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 and entitled to vote 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 Employee 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 Company's Employee
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>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, the stockholders will elect a board of seven directors for
a term extending until the 1998 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 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 5, 1997, 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 51 Chairman of the Board, 1984
Chief Executive Officer and Director
Robert S. Herman 44 Senior Vice President and Director 1984
David K. Karnes 48 Director 1989
J. Michael Parks 46 Director 1990
Jay E. Ricks 64 Director 1995
Greg T. Sloma 45 President, Chief Operating Officer 1993
and Director
Roger W. Wallace 40 Senior Vice President and Director 1984
</TABLE>
Mr. Brodersen has served as Chairman of the Board and Chief Executive
Officer of the Company since 1984. Mr. Brodersen served as President of the
Company from 1984 to 1995.
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
is currently a Director of the Federal Home Loan Bank of Topeka and served as
its Chairman from 1989 to 1996. Mr. Karnes also served as a United States
Senator from 1987 to 1989.
2
<PAGE>
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.
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 President of the Company since January 1996. He has
served as Chief Operating Officer of the Company since January 1994. Mr. Sloma
served as Executive Vice President of the Company from January 1994 to December
1995 and as Chief Financial Officer 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, 1996. During fiscal 1996, with the exception of Mr. Karnes who was not
present at one meeting of the Board of Directors, 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 1996,
are David K. Karnes, J. Michael Parks and Jay E. Ricks.
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 T. Sloma. Members
of the Compensation Committee, which met once during fiscal 1996, are David K.
Karnes, J. Michael Parks, Jay E. Ricks and Greg T. Sloma.
Directors Compensation
- ----------------------
During fiscal 1996, each member of the Board of Directors who was not an
employee of the Company received $1,000 for each Board of Directors meeting
attended, $400 for each Audit Committee meeting attended and $1,000 for the
Compensation Committee meeting attended. Non-employee members of the Board of
Directors also receive awards under the Company's Non-Employee Directors Stock
Option Plan (the "Non-Employee Directors Plan"). Stock option grants under the
Non-Employee Directors Plan are automatic and occur each time a non-employee
director is elected, re-elected or appointed a director of the Company. In 1996,
David K. Karnes, J. Michael Parks and Jay E. Ricks each received an option to
purchase 6,000 shares of the Company's common stock at an exercise price of
$17.33 per share. The Non-Employee Directors Plan has been amended for fiscal
year 1997 to reduce from 6,000 to 4,500 the number of shares for which options
are to be awarded to each non-employee director. The exercise price of options
granted under the Non-Employee Directors Plan is the fair market value of the
common stock on the date of the option grant.
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 5, 1997,
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 1,648,355(1) 14.9%
16705 Ontario Plaza
Omaha, NE 68130
Furman Selz Incorporated 1,090,110(2) 9.9%
230 Park Avenue
New York, NY 10169
Wanger Asset Management, L.P., 1,053,800(3) 9.5%
Wanger Asset Management Ltd.,
and Ralph Wanger
227 West Monroe, Suite 3000
Chicago, IL 60606
Acorn Investment Trust, 750,000(4) 6.8%
Series Designated Acorn Fund
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Peter H. Kamin and Peak Investment 620,400(5) 5.6%
Limited Partnership as a group
One Financial Center, Suite 1600
Boston, MA 02111
- ----------------------------------
<FN>
(1) This includes 80,000 shares subject to options exercisable within 60
days of March 5, 1997, 39,150 shares held in a trust for the benefit of Mr.
Brodersen's children, 36,999 shares beneficially owned by Mr. Brodersen's
spouse, and 19,137 shares allocated to Mr. Brodersen through his
participation in the Company's 401(k) Savings Plan.
(2) According to a Schedule 13G dated February 14, 1997, Furman Selz
Incorporated has sole voting and sole dispositive power over such shares.
(3) According to a Schedule 13G dated February 14, 1997, Wanger Asset
Management, L.P., Wanger Asset Management Ltd., and Ralph Wanger have
shared voting and shared dispositive power over such shares. Such shares
include 750,000 shares also shown in this table as beneficially owned by
Acorn Investment Trust, Series Designated Acorn Fund. Wanger Asset
Management, L.P. serves as investment adviser to such trust. Wanger Asset
Management Ltd. is the general partner of Wanger Asset Management, L.P.
Ralph Wanger is the principal stockholder of Wanger Asset Management Ltd.
(4) According to a Schedule 13G dated February 14, 1997, Acorn Investment
Trust has shared voting and shared dispositive power over such shares. Such
shares also are shown in this table as beneficially owned by Wanger Asset
Management, L.P. which is the investment advisor of Acorn Fund.
4
<PAGE>
(5) According to a Schedule 13D, amended through December 30, 1994, and a
telephone conversation by the Secretary of the Company with Peter H. Kamin
on January 31, 1997, Peak Investment Limited Partnership ("Peak") is the
beneficial owner of 585,400 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
585,400 shares. According to the Schedule 13D, as modified by such
telephone conversation, Mr. Kamin also is the beneficial owner of an
additional 35,000 shares for which he has sole voting and sole dispositive
power.
</FN>
</TABLE>
The following table sets forth information as to the shares of common stock of
the Company beneficially owned as of March 5, 1997, 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 1,648,355 ( 3) 14.9%
Robert S. Herman 432,154 ( 4) 3.9%
David K. Karnes 61,935 ( 5) *
James J. Marquiss 138,586 ( 6) 1.3%
J. Michael Parks 44,999 ( 7) *
Jay E. Ricks 16,500 ( 8) *
Greg T. Sloma 152,349 ( 9) 1.4%
Roger W. Wallace 277,230 (10) 2.5%
All directors and executive officers
as a group (15 persons) 2,911,304 (11) 26.3%
* Less than 1.0%
- ------------------------------------
<FN>
( 1) The number of shares in the table include interests of the named
persons, or of members of the directors 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 5, 1997
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 80,000 shares subject to options exercisable within 60 days of
March 5, 1997, 39,150 shares which are held in trust for Mr. Brodersen's
children, 36,999 shares beneficially owned by Mr. Brodersen's spouse, and
19,137 shares allocated to Mr. Brodersen through his participation in the
Company's 401(k) Savings Plan.
5
<PAGE>
( 4) Includes 92,048 shares subject to options exercisable within 60 days
of March 5, 1997, 6,645 shares beneficially owned by Mr. Herman's spouse,
and 15,779 shares allocated to Mr. Herman through his participation in
the Company's 401(k) Savings Plan.
( 5) Includes 32,499 shares subject to options exercisable within 60 days of
March 5, 1997.
( 6) Includes 63,874 shares subject to options exercisable within 60 days of
March 5, 1997 and 14,712 shares allocated to Mr. Marquiss through his
participation in the Company's 401(k) Savings Plan.
( 7) Includes 30,999 shares subject to options exercisable within 60 days of
March 5, 1997.
( 8) Includes 13,500 shares subject to options exercisable within 60 days of
March 5, 1997.
( 9) Includes 123,000 shares subject to options exercisable within 60 days
of March 5, 1997, 4,212 shares beneficially owned by Mr. Sloma's children
and 22,687 shares allocated to Mr. Sloma through his participation in the
Company's 401(k) Savings Plan.
(10) Includes 92,048 shares subject to options exercisable within 60 days
of March 5, 1997, 4,500 shares beneficially owned by Mr. Wallace's spouse,
and 15,832 shares allocated to Mr. Wallace through his participation in the
Company's 401(k) Savings Plan.
(11) Includes 654,370 shares subject to options exercisable within 60 days
of March 5, 1997, 39,150 shares held in trust for the children of executive
officers and directors, 52,356 shares owned beneficially by spouses or
children of executive officers and directors, and 96,666 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, 1996.
<TABLE>
Summary Compensation Table
- ------------------------------------------------------------------------------------------
Long Term
Annual Compensation 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 1996 $179,172 $112,178 $0 240,000(3) $9,500
Chairman, & 1995 172,000 147,897 0 30,000 9,240
Chief Executive Officer 1994 165,000 80,217 0 30,000 9,240
Greg T. Sloma 1996 145,996 147,707(4) 0 16,500(5) 9,500
President & 1995 140,000 131,466 0 18,000 9,240
Chief Operating Officer 1994 135,000 65,712 0 18,000 2,464
Robert S. Herman 1996 120,865 97,707 0 7,500 9,500
Senior Vice President 1995 115,000 131,466 0 15,000 9,240
1994 110,000 71,304 0 15,000 6,160
Roger W. Wallace 1996 120,858 108,390 0 7,500 9,170
Senior Vice President 1995 115,000 126,227 0 15,000 9,240
1994 110,000 70,108 0 15,000 7,204
James J. Marquiss 1996 120,858 108,390 0 6,000 9,170
Senior Vice President 1995 115,000 125,843 0 12,000 9,240
1994 110,000 62,540 0 9,000 6,902
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.
(3) This amount includes 225,000 shares underlying a replacement option
issued to Mr. Brodersen in exchange for the surrender of outstanding,
unexpired and unexercised options to acquire an aggregate of 117,999 shares
previously awarded to Mr. Brodersen under the Company's Stock Option Plan
of 1989. See Footnote 2 to the table captioned Option Grants In Last Fiscal
Year for additional information concerning such replacement option.
(4) This amount includes a $50,000 bonus awarded to Mr. Sloma for his
performance related to the acquisition of Broadcast Partners by the
Company.
(5) This amount includes 7,500 shares subject to an option awarded to Mr.
Sloma for his performance related to the acquisition of Broadcast Partners
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 1995. 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 1995 (Per share) Date Value (4)
- ------------------ ----------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Roger R. Brodersen 240,000(2) 46.1% $15.50 1-05-06 $1,974,900
Greg T. Sloma 9,000 1.7% 15.50 1-05-06 74,100
7,500(3) 1.4% 20.83 5-13-06 82,900
Robert S. Herman 7,500 1.4% 15.50 1-05-06 61,700
Roger W. Wallace 7,500 1.4% 15.50 1-05-06 34,100
James J. Marquiss 6,000 1.2% 15.50 1-05-06 27,300
<FN>
(1) Except as indicated in the footnotes to this table, the options
referred to in this table were granted by the Stock Option Plan Committee
on January 5, 1996 under the Company's Stock Option Plan of 1989.
7
<PAGE>
(2) This amount includes 225,000 shares underlying a replacement option
issued to Mr. Brodersen in exchange for the surrender of outstanding,
unexpired and unexercised options to acquire an aggregate of 117,999 shares
of common stock of this corporation previously awarded to Mr. Brodersen
under the Company's Stock Option Plan of 1989. The surrendered options
exercisable for 117,999 shares were considered for tax purposes as
Incentive Stock Options (ISO's), whereas, the replacement option for
225,000 shares is considered for tax purposes as a Non-Qualified Stock
Option. The weighted average exercise price per share of the surrendered
options was $6.28, while the exercise price of the replacement option was
the fair market value of the common stock on January 5, 1996 or $15.50 per
share.
(3) This amount represents shares underlying an option awarded to Mr. Sloma
on May 13, 1996 for his performance related to the acquisition of Broadcast
Partners by the Company.
(4) 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>
<TABLE>
<CAPTION>
The following table provides information on option exercises in fiscal 1996
and the value of unexercised options at December 31, 1996 for the Chief
Executive Officer and the four remaining most highly compensated executive
officers.
Aggregated Option Exercises In Last Fiscal Year
and Fiscal Year End Option Values
- ----------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at Fiscal In-the-Money Options
On Value Year End (shares) At Fiscal Year End(1)
----------- ------------- ----------- -------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen - $ 0 0 240,000 $0 $1,440,000
Greg T. Sloma. - 0 85,500 57,000 1,395,500 709,500
Robert S. Herman - 0 79,548 22,500 1,314,500 268,400
Roger W. Wallace - 0 79,548 22,500 1,314,500 268,400
James J. Marquiss - 0 54,874 17,000 908,900 202,000
<FN>
(1) The closing "bid" price of the Company's common stock as quoted by NASDAQ
on December 31, 1996 was $21.50. The values shown are computed based upon
the difference between this price and the exercise price of the underlying
options.
</FN>
</TABLE>
8
<PAGE>
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, 1991.
<TABLE>
<CAPTION>
Nasdaq
Nasdaq Total Telecommunications
Year DTN Return Index Industry Index
- ---- --- ------------ ------------------
<C> <C> <C> <C>
1991 100 100 100
1992 118 116 123
1993 219 134 189
1994 142 131 158
1995 410 185 207
1996 556 227 212
</TABLE>
9
<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 1996 for the Chief Executive Officer and the other
executive officers named in the Summary 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 1996, the bonus pool was eight percent of the Company's income
before income taxes and depreciation and amortization expenses of which
approximately 75% was earned and will be paid. The five executive officers named
in the Summary Compensation Table received approximately thirty-three 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.
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CEO Compensation
- ----------------
The factors and criteria upon which Mr. Brodersen's compensation was based
for fiscal year 1996 are the same as those considered by the Committee in
establishing the compensation program for all of the executive officers of the
Company as outlined above. The annual base salary of Mr. Brodersen was
established by the Committee on February 29, 1996 for the calendar year 1996.
The Committee's decision was based on Mr. Brodersen's personal performance of
his duties and on salary levels to chief executive officers of companies of
similar size, complexity and growth rates.
Mr. Brodersen's 1996 fiscal year incentive cash compensation was based on
the actual financial performance of the Company. His annual cash bonus award was
based on the bonus pool described above and represented approximately seven
percent of the bonus pool awarded for 1996.
An option grant for 15,000 shares was awarded to Mr. Brodersen under the
Company's Employee Stock Option Plan based upon his performance and leadership
with the Company. The grant placed a significant portion of his total
compensation at risk, since the value of the option depends on the appreciation
of the Company's common stock over the option term. On January 5, 1996, Mr.
Brodersen also surrendered unexpired and unexercised options previously awarded
to him under the plan in exchange for a replacement option. Such replacement
option was not considered as part of the Company's 1996 compensation program. It
was an isolated occurrence where the Company obtained cancellation of options
with exercise prices substantially below fair market value by exchanging a
replacement option with additional shares and an extended option term, but with
an exercise price equal to the fair market value of the common stock on the date
the replacement option was granted. See Footnote 2 to the table captioned Option
Grants In Last Fiscal Year for additional information concerning such
replacement option.
Compensation Committee
of the Board of Directors
-------------------------
David K. Karnes
J. Michael Parks
Jay E. Ricks
Greg T. Sloma
11
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PROPOSAL NO. 2
AMENDMENT TO EMPLOYEE STOCK OPTION PLAN
Description of Employee Stock Option Plan
- -----------------------------------------
The Company's Stock Option Plan of 1989 (the "Plan") provides for the grant
of options to purchase shares of the Company's common stock to full-time
employees of the Company. The Plan is administered by a subcommittee of the
Compensation Committee of the Board of Directors consisting of the non-employee
directors (the "Committee").
Options granted under the Plan are exercisable pursuant to a three-year
vesting schedule and they terminate no later than ten years from the date of
their grant. If employment ends sooner than the end of an options specified
exercise period, the options terminate six months after the termination of the
participant's employment for any reason other than disability or death. In the
event of disability or death, they terminate twelve months after such disability
or death.
The Plan currently reserves for issuance 2,100,000 shares of the Company's
common stock. The maximum number of shares for which options may be granted
under the Plan was adjusted from 700,000 to 2,100,000 as a result of a three for
one stock split effective June 28, 1997 for stockholders of record June 14,
1996. 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"). The Fifth Amendment will amend the Plan by increasing from
2,100,000 shares to 2,800,000 shares 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 and select those eligible
participants to whom and the terms upon which options shall be granted. No
options shall be granted at an exercise price less than 100% of the fair market
value of the shares at the date of the grant. As of March 5, 1997, the market
value of the shares of common stock of the Company, determined by the closing
"bid" price of such shares as reported by the NASDAQ system for such day, was
$23.38 per share. No cash consideration is to be received by the Company for the
granting of options pursuant to the Plan.
In the event of any changes in the number of issued shares through stock
splits, dividends, or other change in capitalization, the total number of shares
under the Plan is to be adjusted so that the aggregate consideration due the
Company and the value of each benefit shall not change.
Plan Activity
- -------------
As of March 5, 1997, options to purchase an aggregate of 388,344 shares of
common stock issued under the Plan had been exercised, and options to purchase
1,587,576 shares were outstanding. Without taking into account the proposed
amendment to the Plan, 124,080 shares remained available for future grants as of
March 5, 1997.
The table under the caption "Option Grants in Last Fiscal Year" provides
information with respect to the grant of options under the Plan to the Chief
Executive Officer and the next four most highly compensated executive officers
during fiscal year 1996. The following table sets forth additional information
with respect to options granted under the Plan during the fiscal year 1996 to
certain groups:
12
<PAGE>
<TABLE>
<CAPTION>
Option
Weighted Average Shares
Identity of Group Exercise Price Granted
- --------------------------- ---------------- --------
<S> <C> <C>
All executive officers as a
group (12 persons) $15.63 298,500
Non-executive officer
employees as a group
(approximately 610 persons) $15.53 222,300
</TABLE>
Certain United States Federal Income Tax Information
- ----------------------------------------------------
The Plan provides for the issuance of both incentive stock options and
non-qualified options. The two types of options are subject to differing federal
income tax treatment. There generally are no federal income tax consequences
either to the participant or the Company upon the grant of an option under the
Plan. Upon the exercise of an incentive stock option, the participant will not
recognize any income for income tax purposes, and the Company will not be
entitled to a deduction for income tax purposes, although such exercise may give
rise to a liability on the part of the participant under the alternative minimum
tax provisions of the Internal Revenue Code. Generally, if the participant
disposes of shares acquired upon the exercise of an incentive stock options
within two years after the date of grant or one year after the date of exercise,
the participant will recognize compensation income, and the Company will be
entitled to a deduction for income tax purposes, in the amount of the excess of
the fair market value of the shares of common stock of the Company on the date
of exercise over the option exercise price (or the gain upon such sale, if
less). Otherwise, the Company will not be entitled to any deduction for income
tax purposes upon the disposition of such shares, and the participant's entire
gain will be treated as a capital gain. Upon the exercise of a non-qualified
stock option, 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 non-qualified stock
option generally will result in a capital gain or loss for the participant but
will have no tax consequences for the Company.
Amendment To Employee Stock Option Plan
- ---------------------------------------
The Board of Directors has unanimously approved, and recommends to the
stockholders for their approval and adoption, the Fifth Amendment to the Plan
which will increase from 2,100,000 to 2,800,000 the total number of shares for
which options may be granted under the Plan. The Board of Directors has
determined that the ability of the Company to continue to attract and retain
highly qualified employees 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 amended Plan is available to any shareholder without
charge by oral or written request to the Company Secretary, Data Transmission
Network Corporation, 9110 West Dodge Road, Suite 200, Omaha, NE 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.
13
<PAGE>
PROPOSAL NO. 3
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, 1997, subject to ratification
by the stockholders of the Company. Deloitte & Touche LLP served as the
Company's auditors for the 1996 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.
TRANSACTIONS WITH MANAGEMENT
No reportable transactions occurred during fiscal 1996 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 K. Karnes, J. Michael Parks, Jay E. Ricks
and Greg T. Sloma. Mr. Sloma, because he is an officer and employee of the
Company, abstains from all votes dealing with officer compensation. Also, only
Mr. Karnes, Mr. Parks and Mr. Ricks are members of the Stock Option Plan
Subcommittee of the Compensation Committee which administers the Company's Stock
Option Plan of 1989.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders for which consideration is desired at the 1998
Annual Meeting of Stockholders must be received by the Company no later than
December 31, 1997, 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996, its
executive officers, directors and holders of more than 10% of the Company's
common stock complied with all Section 16(a) filing requirements, with the
following exception. James J. Marquiss, an officer, filed one late Form 4 for
the month of November 1996 with respect to a single transaction involving shares
of the Company's Common Stock sold by him during such month. 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
14
<PAGE>
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.
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 $3,000, including the reimbursement of
certain expenses.
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 5, 1997. 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 10 and the
Performance Graph on page 9 shall not be incorporated by reference into any such
filings.
THE BOARD OF DIRECTORS
Omaha, Nebraska
March 10, 1997
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, 0MAHA, NEBRASKA 68114.
15
<PAGE>
Exhibit A
FIFTH AMENDMENT TO
DATA TRANSMISSION NETWORK CORPORATION
STOCK OPTION PLAN OF 1989
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. In addition, in
accordance with Section 4 of Article I of the Plan, the terms of the Plan were
adjusted to reflect the effect of a three for one stock split implemented by the
Company on June 28, 1997. Section 1 of Article III of the Plan provides that the
Board of Directors of the Company or any authorized committee of the Board of
Directors may from time to time amend the Plan with shareholder approval
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 the 23rd day of April, 1997, the Plan is
hereby amended, effective as of May 1, 1997, as follows:
1. Subsections (a) and (b) of Section 1 of Article II of the Plan shall be
amended by increasing from 2,100,000 to 2,800,000 Shares the total number of
Shares for which Options may be granted under the Plan.
2. 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.
16
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17
<PAGE>
DATA TRANSMISSION NETWORK CORPORATION
9110 West Dodge Road, Suite 200
Omaha, NE 68114
18
<PAGE>
DATA TRANSMISSION NETWORK CORPORATION PROXY
Annual Meeting of Stockholders To Be Held April 23, 1997
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 5, 1997 at the Annual Meeting of Stockholders to be
held on April 23, 1997 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 STOCK OPTION PLAN OF 1989.
FOR
-----
AGAINST
-----
ABSTAIN
-----
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors of the Corporation for fiscal year ending December 31, 1997
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 23, 1997 and the Proxy
Statement for such meeting.
Dated , 1997
--------------------------- -----------------------------------
-----------------------------------
(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.
-19-
<PAGE>
