SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-15405.
DATA TRANSMISSION NETWORK CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 47-0669375
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(State of Incorporation) (I.R.S. Employer ID Number)
9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (402) 390-2328
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of voting stock (based upon the "bid" price as
quoted on NASDAQ) of the registrant held by non-affiliates on March 1, 1998 was
approximately $316,000,000.
At March 1, 1998, the registrant had outstanding 11,200,549 shares of its
common stock.
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DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1997 are incorporated by reference into Parts I,
II, and IV.
2. Portions of the Registrant's definitive Proxy Statement filed for the
Registrant's Annual Meeting of Stockholders to be held April 22, 1998, are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS.
(a) General Development of Business:
Data Transmission Network Corporation (the "Company", "DTN") was
incorporated on September 17, 1987 to change the name and state of incorporation
of its predecessor company, Dataline, Inc. from Nebraska to Delaware pursuant to
an Agreement and Plan of Merger dated October 8, 1987. The Company was
originally incorporated in Nebraska on April 9, 1984, as Scoular Information
Services, Inc., a subsidiary of a regional grain company, later changing its
name to Dataline, Inc.
On December 19, 1985 and January 31, 1986, in related transactions, certain
employees of the Company purchased all of the outstanding stock of the company
from the regional grain company.
In January, 1987, the Company completed an initial public offering of
common stock selling 698,085 shares at $5.40 per share (pre-stock split).
(b) Financial Information About Industry Segments:
Not Applicable
(c) Narrative Description of Business:
Data Transmission Network Corporation (DTN) began operations in April 1984
and continues to provide comprehensive, time-sensitive information and
communication services for a variety of industries. DTN services grew to 158,800
subscribers throughout the U.S. and Canada in 1997. The subscriber growth is
attributed to the high retention rate of existing services and the addition of
several new services in the agricultural, weather and financial service
industries. A review of these services and the year's highlights for each
industry are discussed in this report.
The Company's subscription services are targeted at niche business markets
and designed to be timely, simple to use, and convenient. The Company's
distribution technology provides an efficient means of sending data and
information from point to multi-point. The development of a cost-effective
electronic satellite delivery system, plus a total commitment to customer
service and information quality has enabled the Company to become a major player
in the communications industry. The Company continues to invest time and money
developing and enhancing its information distribution technology. These
investments allow the Company to take advantage of many engineering and software
advancements in an exciting and growing industry.
INFORMATION DISTRIBUTION TECHNOLOGY
The Company is committed to researching and developing distribution
technologies that cost effectively delivers the timely information that the
Company's subscribers demand. DTN supports several information distribution
technologies allowing the distribution (transmission) and receiving (capture,
manipulation and display) of information. These technologies include small dish
Ku-band satellite (Ku), FM radio side-band channels (FM), FAX, Cable TV (by
using the vertical blanking interval, or VBI), e-mail and the Internet.
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The first technology used by the Company was FM radio side-band. The Ku
technology was added in 1989, providing the ability to reach customers outside
the geographic territory of the FM signal. FAX, VBI, e-mail and the Internet
were added to further expand our distribution network.
The Company provides all of the equipment necessary for subscribers to
receive their service based on FM, Ku and VBI. The exception is DTN's new
service, DTN Real^Time, where information is delivered via a new generation of
proprietary hardware into a personal computer (PC), owned by the subscriber.
This equipment includes a receiver, specifically built for the Company, a video
monitor, FM antenna or a small 30" Ku-band satellite dish. A keyboard, mouse and
printer may be provided depending on the service. DTN is responsible for the
normal maintenance and repair of the subscriber equipment.
Prior to 1992, the Company utilized a "page-based" receiver and monochrome
system. The monochrome system translates the Company's data stream into text and
is capable, depending on capacity, of receiving and displaying from 126 to 246
pages of information. The monochrome receiver is also capable of downloading
information to a printer or computer.
In 1992, the Company introduced the Advanced Communications Engine (ACE)
receiver, a color graphics receiver system, expanding the unit's ability to
provide information and communication services. The ACE receiver contains
multiple processors for capturing, manipulating and displaying high resolution
color pictures, graphics and text. A separate processor enables the unit to play
audio clips for weather forecasts, voice advertisements or audio alarms set for
when a futures contract reaches a pre-set price. In addition, this processor may
send and retrieve information by using an internal modem connected to a phone
line.
The ACE receiver is also capable of downloading information to a printer or
computer. This receiver is equipped with an internal hard drive allowing
processed information to be stored, archived (versus frequent rebroadcasting)
and displayed. The receiver's built-in control panel, keyboard or mouse allows
subscribers to conveniently access this information.
One unique aspect of the Company's information distribution technology is
the computer software developed by the Company specifically for use with DTN
receivers. This software manages information from a wide array of input sources,
runs routines, sets priorities and then initiates transmissions to the
satellite. The software can individually address each receiver unit placed with
a subscriber, permitting the Company to transmit specific information to a
specific subscriber or group of subscribers. The Company leases FM radio
side-band channels, satellite channels and VBI space to deliver information to
the Company's receivers used by its subscribers. All information is up-linked
from Omaha to satellite (except Internet, FAX and other telephone delivery
technology) and down-linked from the satellite to the subscriber based on the
distribution technology.
FM monochrome subscribers receive their services from an FM antenna that
delivers the information via side-band signals transmitted from radio stations.
On December 31, 1997, 12,500 subscribers were receiving the Company's
services via FM distribution technology. The Ku subscribers utilize a 30"
satellite dish, a direct down-link, to receive their information. On December
31, 1997, 143,300 subscribers were receiving the Company's services via Ku
distribution technology.
Early in 1994, the Company began using a new cable TV distribution
technology involving vertical blanking intervals (VBI). The Company contracted
with a major cable TV superstation to transmit information along with the
station's TV signal. This technology eliminates the need for an FM antenna or
satellite dish and is available to businesses or residences that are wired for
cable TV and receive the superstation's service. On December 31, 1997, 2,000
subscribers were receiving the Company's services by VBI distribution
technology.
The Company has approximately 18,000 customers receiving information using
FAX technology. The e-mail business is primarily a subscriber (an e-mail source)
communicating specific messages to a group of subscribers. Currently, there are
over 900 e-mail sources delivering over 1,500 pages of information to
subscribers daily.
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Currently, DTN offers services via the Internet in the agriculture,
produce, weather and finance service lines and plans to continue researching
this information distribution technology. On December 31, 1997, 1,000
subscribers were receiving the Company's services by Internet distribution
technology.
SERVICES OFFERED
The Company's revenue is derived primarily from five categories: (1)
monthly, quarterly or annual subscriptions, (2) optional services, (3)
communication services, (4) advertising and (5) service initiation fees. The
percentage of total revenue for each category over the last three fiscal years
was:
<TABLE>
<CAPTION>
1997 1996 1995
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<S> <C> <C> <C>
Subscriptions 80 % 76 % 74 %
Optional services 5 % 6 % 6 %
Communication services 8 % 9 % 11 %
Advertising 3 % 3 % 3 %
Service Initiation Fees 4 % 6 % 6 %
</TABLE>
Subscription revenue is generated from monthly, quarterly or annual
subscription fees for one of the Company's services. The Company offers a
discount to subscribers who pre-pay their subscriptions annually. A more
detailed review of each service is found later in this report.
Optional services are offered to subscribers on an "a la carte" basis,
similar to premium channels on cable TV. Information for these services is
primarily provided by a third party with DTN receiving a share of the
subscription revenue paid by the subscriber. Optional services revenue continues
to grow in total dollars at a rate commensurate with the overall growth of the
Company due, in part, to new technological innovations using the Internet, FAX
and e-mail.
The Company sells communication services allowing companies to
cost-effectively communicate a large amount of timely information to their
customers or field offices. This category includes revenue generated from FAX
and e-mail services. Communication revenue continued to grow in total dollars
and management believes this area offers opportunities for future growth.
The Company sells advertising interspersed among the pages of news and
information, similar to a newspaper or magazine. The advantage of an electronic
advertisement over typical print media is the ability to change or replace the
advertising message quickly and as frequently as market conditions dictate.
Advertising revenue maintained the same percentage of total revenue due to rapid
subscriber and subscription revenue growth as well as the addition of new
services with available advertising space.
Service initiation fees are one-time charges for new subscriptions
depending on the service and the information distribution technology. DTN also
charges an initiation fee for subscribers converting to another service (ie:
from a monochrome FM to a Ku color service).
The Agricultural Industry
The DTN Agricultural Services are DTN Ag Services, DTNstant, DTN PROduce
and DTNiron. Within DTN Ag Services are DTN AgDaily, DTN ProSeries, DTN
FarmDayta and DTN FarmDayta On Line.
<TABLE>
<CAPTION>
1997 1996 1995
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<S> <C> <C> <C>
Revenues $87,600,000 $69,700,000 $45,000,000
Subscribers at year end 120,500 116,200 77,400
</TABLE>
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New subscriptions are primarily sold by the Company's national sales force
of employee district sales representatives, in-house sales staff, and
independent, commission-only sales representatives. The Company obtains leads
for the sales force through telemarketing, direct mail, print media advertising
and customer referrals.
The main competition to these services is the combination of printed
advisory services, radio, television, telephone, other satellite information
services, online services and the changing of old information gathering habits.
There are over 200 optional services available to agricultural subscribers.
These services consist of advisory, informational and educational products as
well as newswire, association and additional free services. DTN subscribers can
customize their DTN unit to their specific needs by choosing from a broad mix of
these "a la carte" services. DTN is continually developing new optional services
to meet customer demands by listening closely to the marketplace and the
customer.
The Company markets these services through a combination of individual free
trials, system-wide trials, on-screen advertising, direct mail, invoice
stuffers, equipment stuffers and telemarketing. Optional Service subscriptions
increased in 1997 fueled by these marketing campaigns and the increase in total
DTN subscription sales. Optional service subscription prices range from $6 to
$1,200 per quarter with the average subscription price of $60/quarter.
Communication services (DTN InfoMail) plays an important role in providing
a cost effective means to reach a large number of targeted customers daily. At
the touch of a button, subscribers have instant access to messages 24 hours a
day. Currently, there are over 900 InfoMail customers receiving information
tailored to their specific needs. DTN InfoMail provides services for elevators,
seed sales reps, agronomists, chemical sales reps and technical advisors,
commodity brokers, processing plants, feedlots and anyone with a need to
communicate to DTN subscribers.
In 1997, the agricultural services sold over $3.7 million dollars in
advertising to major players in the ag industry, ag chemical and seed companies,
equipment and finance businesses. The color system capabilities, such as
inter-activity and animation, continue to entice new advertisers. Advertising
research in 1997 confirmed that DTN is an important player in the agricultural
media field.
DTN Ag Services
Approximately 80% of the Ag Services subscribers are farmers or livestock
producers with the balance consisting primarily of grain elevators,
agribusinesses, and financial institutions. Subscribers to DTN Ag Services farm
nearly one third of the nation's total cropland and market more than 50% of the
nation's cattle and hogs. DTN ag management believes the trend toward
consolidation into larger farms as well as the government's move toward fewer
agricultural price supports and an open market system, expands the need for
agricultural information services. This expansion need provides for steady
growth within DTN Ag Services.
AgDaily Service Review
DTN AgDaily is an agricultural market information, quote and weather
service. Subscribers receive delayed commodity futures and options quotes; local
cash grain and livestock prices; selected regional and world weather updates;
and a variety of daily analysis, commentary and news that affect grain and
livestock prices.
DTN AgDaily color graphics allows for an advanced weather segment with
national and regional radar maps (updated every 15 minutes), infrared satellite
cloud cover maps, precipitation, temperature, jet stream, surface wind and snow
cover maps, and much more. The subscriber can custom design high resolution
charts and/or select from a library that holds over 1,000 charts. The system is
capable of custom programming the futures quotes pages to display only the
quotes subscribers desire. The service also includes information segments for
specific crop and livestock enterprises as well as general, business, sports and
entertainment news.
The DTN AgDaily color service also offers crop liability insurance and
livestock profitability calculators by using the inter-activity feature allowing
a subscriber to search a comprehensive database.
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Pro Series Service Review
DTN offers services with advanced features for the agricultural industry.
The Pro Series' enhanced functionality includes a high interest window to view
future or options quotes on any page, key word search that automatically
searches the news story database for articles affecting the user's operation, a
customized segment with up to five of the user's favorite pages, and a personal
library serving as a customized archive segment.
The DTN Pro Series includes six services: Weather Pro, News Pro, Chart Pro,
Intraday Pro, Stock Pro and DTN Premier.
Weather Pro is the "meteorological connection" to an array of current
weather, forecast and satellite radar information. This service allows
subscribers to choose from over 70 weather maps including detailed regional,
state and zone forecasts. The Weather Pro service gives subscribers 32
programmable pages for creating their own unique weather information.
News Pro is the "broadcast connection" to timely business, sports,
entertainment, financial, and general news of the day. The service also provides
an audio summary of the day's agricultural news. News Pro subscribers receive AP
Online, a service of the Associated Press.
Chart Pro is the "graphic connection" bringing a variety of information to
the screen in an organized format allowing subscribers to analyze trends,
patterns and cycles. This service includes 40 pages for programmable charts
allowing the subscriber to create an extensive "chart book".
Intraday Pro is the "trading connection" to the first low-cost system
available with the ability to chart market sessions minute-by-minute during the
trading day. This service allows subscribers to choose time intervals for
charting to keep them abreast of the markets.
Stock Pro is the "market connection" providing access to prices for over
50,000 issues of stocks, bonds and funds. This service includes stock quotes
using either the quick quote feature or the programmable quotes pages.
Additional features include a personal library for storing news and information
and the high interest windows allowing subscribers to constantly monitor up to
six futures, options, stock or bond quotes.
DTN Premier combines Weather Pro, News Pro, Chart Pro and Intraday Pro into
a comprehensive ag marketing and information package. DTN Premier Plus adds
Stock Pro to the package targeting the farmer, rancher or agribusiness needing
all the market information available in one convenient location.
DTN FarmDayta Service Review
DTN FarmDayta was the principle asset acquired from the acquisition of
Broadcast Partners in May 1996. Its content is very similar to DTN AgDaily. In
fact, since its inception in 1990, DTN FarmDayta was the primary competition for
DTN AgDaily. FarmDayta gives the Company a fully integrated agricultural service
line with price entry points across a wide spectrum, expanding the marketing
horizons for all DTN agricultural services. The Company maintains the DTN
FarmDayta facilities, with nearly 100 employees, in Des Moines, Iowa.
DTN FarmDayta is an agricultural market information, quote and weather
service delivering delayed commodity futures and options quotes; local cash
grain and livestock prices; selected regional and world weather updates; and a
variety of daily analysis, commentary and news that affect grain and livestock
prices.
DTN FarmDayta Elite is an advanced version of DTN FarmDayta. Features
include additional options quotes, charting, weather maps and a hard drive to
store data in the receiver which is critical to maintaining storage of
information during a power outage.
DTN FarmDayta Elite Plus is an advanced service that includes the DTN
FarmDayta Elite features and is similar in content to the DTN Pro Series. This
service includes more advanced news (Reuters Headline News), quotes, weather
(including motion and zoom capabilities) and programmable charts.
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DTN FarmDayta On Line Service Review
The Company introduced its first agricultural Internet service, DTN
FarmDayta On Line, in 1996. DTN FarmDayta On Line is similar in content to DTN
FarmDayta Elite Plus and is designed for the producer preferring to use his or
her personal computer to receive information or is not able to utilize the
traditional satellite-based system supplied by DTN. The market for
subscription-based Internet services is relatively new yet FarmDayta On Line
closed the year with over 1,000 subscribers.
Information includes animated weather maps, satellite and summary maps,
short and long range forecast maps, news commentary and analysis as well as
unlimited access to futures and option quotes from all the major exchanges. Also
available is commodities for energy, financial, currency, metals and other
exchanges as well as instant access to daily, weekly and monthly commodity
charts. Customization capabilities allow for organization of the most often used
information for business decisions.
DTNstant Service Review
DTNstant is a leader in providing satellite delivery of real-time futures
and options quotes from the major commodity exchanges and headline commodity
news from multiple sources such as the Associated Press, Futures World News and
Bridge. The service also provides market-leading cash information, in-depth
charting capabilities plus all the information available on the DTN AgDaily
color service.
In addition, the service provides information for the energy, metals, softs
(i.e., orange juice, coffee, cocoa), transportation and lumber industries.
DTNstant uses compatible software allowing the "pass thru" of data and graphics
into a computer's local area network (LAN). With this capability, a DTN ACE
receiver can feed information to multiple users/traders on the LAN. This "pass
thru" software opens new markets by utilizing information distribution within a
customer's LAN, enhancing analytical capabilities.
Other valuable features are user-programmable formulas for data analysis,
high interest windows to include news stories, and increased keyboard
functionality.
DTNstant operates in a very competitive market with numerous national and
regional providers of instant commodity quotes. The primary subscribers are
commercial grain companies and elevators, feedlots, commodity brokers and
commodity speculators. No other service in the industry offers a more
comprehensive news and information service. Due to the character of this
industry, the Company provides on-site service and installation by professional
service technicians.
DTNiron Service Review
DTNiron provides a cost-effective communication resource for the farm
implement industry. DTNiron is an equipment locator and inventory management
service providing a communication tool for farm implement dealers throughout the
U.S and Canada.
DTNiron provides detailed listings of farm implements and equipment for
sale or needed by dealers. A listing remains on the system for a minimum of 30
days, renewable at the dealer's request. Subscribers receive industry news,
financial information, economic indicators and information from the DTN AgDaily
service. DTNiron also includes listings of construction equipment, trucks,
trailers and other equipment found in the agricultural industry. The service
provides listings for implement and equipment parts, especially hard to find
parts. In addition, the service sorts listings by regions and provides hourly
updates keeping information timely for DTN subscribers.
DTNiron includes the Combine and Tractor Demand Monitor which provides the
first widely distributed annual sales outlook for the tractor and combine
manufacturers. This monthly economic study released to all DTNiron subscribers
helps track the money-making trends in the industry. The Combine and Tractor
Demand Monitor is released to the trade and agricultural press one or two days
after release to DTNiron subscribers.
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DTN PROduce Service Review
DTN PROduce is an authority in providing the produce industry with the most
timely information available. There are four major components to the DTN PROduce
service. First is weather, the most critical information for the produce
industry. Second is immediate pricing updates, formatted by commodity, growing
area and terminal market. Third is transportation information with freight rates
and daily truck availability for the major growing areas. Finally, the service
provides a comprehensive news package including AP Online. Other key-industry
news sources are "The Packer" and "The Produce News" in addition to credit
information provided by the "Produce Reporter Company" and the "Red Book Credit
Service".
DTN PROduce maintains a price discovery network, DTNdexSM, that is the
industry standard. Competition in this industry continues to focus on older
technology, such as FAX machines.
The entire produce food chain of growers, shippers, packers, brokers,
retailers and institutions benefit from information provided by this service. A
custom service for the produce grower is also available containing all the
features of DTN PROduce except for transportation information and AP Online
news. DTN PROduce expanded its service to the Internet in 1996 to accommodate
seasonal and international customers unable to utilize the satellite dish
technology.
DTN Cotton Network Service Review
In July of 1997, DTN acquired the customer base and other assets of "The
Network", a communications company based in Lubbock, Texas. DTN Cotton
Network is an electronic cotton marketing system designed to operate on a user's
personal computer using software developed specifically for cotton accounting
and marketing.
Users dial into a DTN data center via modem to upload bale ownership
information and to list cotton for broadcast to prospective buyers. Information
is broadcast via DTN Ku band satellite and passed through a serial port into
personal computers located at both buyer and seller locations.
The Weather Industry
DTN Weather Center Service Review
DTN Weather Center is a comprehensive weather information system designed
to meet the weather information needs of many industries. Markets specifically
targeted by DTN Weather Center are golf courses, turf management, emergency
management, state transportation departments, public works departments,
construction and aviation.
<TABLE>
<CAPTION>
1997 1996 1995
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<S> <C> <C> <C>
Revenues $10,700,000 $ 5,600,000 $ 1,000,000
Subscribers at year end 13,100 7,900 2,600
</TABLE>
DTN Weather Center introduced new products in 1997 designed especially for
the marine, forestry and travel industry. DTN Weather Center provides more than
100 weather maps, 20 regional radar maps, including NEXRAD radar and infrared
satellite photos and six satellite maps. The service provides short-range
(immediate to 48-hour) forecasts, long-range (3-90 day) outlooks, and 10-day
city forecasts for more than 550 cities in the U.S. and Canada. The service
includes programmable capabilities to customize maps, and an archival section
for saving maps.
Optional services, such as AP Online News, newswires, industry association
news and others are also available on all Weather Center services.
DTN Weather Center is a critical ingredient in operational planning and
staff decisions for industries where timely, accurate and accessible weather
information are vital.
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DTN Turf Manager Service Review
DTN Weather Center Turf Manager is available to individuals and businesses
involved in turf-related operations such as golf courses, lawn maintenance,
landscaping and sod farms. This service provides the news, weather and chemical
information needed for effective turf management.
Chemical and Pesticide Press Turf Index is a unique feature providing an
information database of more than 275 turf pesticides. Material Safety Data
Sheets (MSDS) were recently added providing an even more valuable information
service for subscribers.
Thor Guard, the only lightning prediction system available, warns of
lightning strikes before they happen and is now available as an optional
service. Evapotranspiration Tables provide regional evaporation rates to plan
for watering and chemical applications.
ESPN Sports Ticker provides current golf related stories and results and AP
Online provides more than 300 current news stories from four chapters, General,
Business, Sports and Entertainment. The National Golf Course Directory includes
a database of locations, phone numbers, course pros and course superintendents
for all member courses.
These features, along with the comprehensive weather information, provides
a complete turf industry package.
DTN Aviation Center Service Review
DTN Aviation Center is a comprehensive aviation weather package specially
designed for pilots, airports and Fixed Base Operators (FBO's). DTN Aviation
Center supplies airports, pilots and FBO's with the extensive flight-plan
information found on many premier "online" systems.
This package includes U.S. and regional depiction maps, 24-hour low-level
significant weather prognosis, U.S. region winds and temperatures aloft and also
METAR and TAF information. Subscribers use DTN Aviation Center during flight
services to visualize current weather conditions while creating their flight
plans. This service also aids in determining alternate route destinations.
Subscribers choose from the Level I service, designed for the
local/regional flyers up to 18,000 feet, or the Level II service, designed for
pilots and airports flying nationally up to 45,000 feet. The Level II service
also provides European flight information.
DTN Contractor Dayta Service Review
DTN Contractor Dayta is designed for the construction industry and includes
construction-related news and information providing a competitive advantage for
subscribers. This service provides valuable weather information necessary for
important day-to-day construction business decisions.
Industry specific information includes general information, association and
industry information, construction news, bids and resources and the contractor's
exchange. Additionally, subscribers receive sports scores, sports highlights and
financial indicators.
The service provides a practical tool contributing to labor and material
cost savings and effective management of scheduling and staffing for the
construction industry.
DTN Forestry Center Service Review
DTN Forestry Center combined efforts with the U.S. Forest Service to
provide critical forest fire information to subscribers. Previously, district
forest service offices relied on a modem network assembled in the late 1960's
for crucial information on forest fire locations and fire weather forecasts.
With DTN Forestry Center, forest service district managers quickly access fire
weather text bulletins along with a comprehensive set of weather maps.
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Bulletins provided for the forest service market are: Forest Weather
Forecasts; Red Flag Warnings; Fire Danger Indexes; Fire Weather Observations;
and Fire Weather Notices. A special chapter of fire weather maps provides
additional information such as: Haines Fire Index; Current and Forecast Relative
Humidity; Current and Forecast Wind Speed & Direction; upper air analysis from
5,000 to 10,000 feet; and moisture index information from both the Crop Moisture
Index and Palmer Drought Index.
DTN Marine Center Service Review
DTN Marine Center is a provider of satellite-delivered weather information
for all areas of the marine industry.
The service provides information necessary for cost-effective, efficient
decision-making regarding towing, shipping, salvage, service and recreation. The
service includes Lake and Marine Text Bulletins, Buoy Reports, Lake and Marine
Maps and Tide Tables as well as general weather information and sea conditions.
Optional Services are also available as service add-ons providing additional
means for a more complete information and weather package.
DTN Travel Center Service Review
DTN Travel Center is an interactive hotel quest service designed for the
hospitality and travel industries. The service targets hotels and motels with
50+ rooms and includes NEXRAD Real-Time Radar Maps, travel forecasts and road
conditions, detailed city and national forecasts, national and world news,
sports and sports scores. In addition, the service provides business and
financial news and market quotes and indexes.
DTN Travel Center provides a comprehensive weather and news information
package for the traveler whether he or she is on business or vacationing.
The Financial Services Industry
DTN Financial Services offers four services, DTN Real^Time, DTN SPECTRUM,
DTN Wall Street, and DTN FirstRate. There are a variety of Optional Services
available to Financial Service subscribers providing stock selection and timing
advice, earnings estimates, fundamental stock market data, U.S. Treasury quotes
and other financial market-related services.
<TABLE>
<CAPTION>
1997 1996 1995
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<S> <C> <C> <C>
Revenues $10,300,000 $ 8,600,000 $ 6,100,000
Subscribers at year end 12,900 11,300 9,600
</TABLE>
DTN Financial Services revenue grew 20% during 1997, adding to its bullish
26% compounded revenue growth for the past 5 years.
The main objective for Financial Services is providing comprehensive,
in-depth financial information at an affordable cost to its subscribers. This
objective is critical due to the highly competitive nature of the business.
Contents of all DTN Financial Services are broader in scope and cost less than
competitive services. The "a la carte" optional services offered to subscribers
give them an even greater variety of information. This combination allows the
services to maintain its competitive advantage in the market.
DTN Real^Time Service Review
DTN Real^Time delivers real-time stock and stock option quotes as well as
real-time futures quotes, fixed income government securities quotes, market
statistics and indicators, news, commentary and other time-sensitive financial
market information. The service is delivered at a rate of nearly 12,000
characters per second, roughly four times faster than a computer modem operating
at 28.8 kbs, the speed investors rely on to receive Internet-based quote
services. DTN Real^Time is two to more than four times faster than other
dedicated, competitive, real-time quote services.
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DTN Real^Time is the first DTN service delivered directly via proprietary
hardware to a personal computer. Previously, DTN services displayed information
on the DTN proprietary systems or stand-alone units. If desired, text and data
are "passed thru" these units to a PC using various software packages.
Subscribers are offered, at no additional cost, the option of using DTN
Chameleon, an exclusive software package compatible with Windows 95(R) to
display market data, news and other financial information delivered by DTN
Real^Time. DTN Chameleon software also provides market condition alarms, news
alerts and archiving, charting and portfolio monitoring. There are several other
popular third-party software programs available for formatting, manipulating,
analyzing and displaying market data and news on a single PC or networked PC's.
DTN SPECTRUM Service Review
DTN SPECTRUM is an enhanced version of DTN Wall Street utilizing the ACE
technology. The service provides advanced quote selection and custom programming
along with alarms, news search and charting capabilities appealing to a broad
market of individual investors and investment professions.
DTN SPECTRUM is very well received by new subscribers as well as existing
DTN Wall Street subscribers choosing to "switch-up" to the advanced SPECTRUM
features.
An extension of DTN SPECTRUM is the DTN SPECTRUM R-T service. DTN SPECTRUM
R-T provides real-time futures and commodity quotes along with exchange delayed
stock quotes, news and other information.
DTN Wall Street Service Review
DTN Wall Street provides exchange-delayed quotes on stocks, bonds, mutual
and money market funds, futures, interest rates, currencies and real-time index
quotes. This service also provides in-depth economic, financial and business
news and other time-sensitive financial market information such as
company-specific news and earnings. The service allows subscribers to custom
program the system to track their selection of financial quotes.
The majority of subscribers to DTN Wall Street are individual investors,
independent brokers, financial advisors and financial institutions. The primary
competition for DTN Wall Street is satellite, TV cable (VBI), Internet and
dial-up quote services.
DTN FirstRate Service Review
DTN FirstRate is a service for the mortgage industry providing wholesale
mortgage rates in an easy-to-use standard format and intra day interest rate
information indicating the direction of mortgage loan rates. This service also
provides subscribers with snapshots of real-time rates from Fannie Mae and
Freddie Mac plus other news, commentary and analysis for mortgage lenders.
DTN FirstRate+ is an enhanced color version of DTN FirstRate. This service
provides additional features which are well-received by subscribers, such as
keyword search, quick quote, alarms and zoom capabilities for weather.
DTN FirstRate is marketed by DTN Financial Services' institutional sales
group (a select group within the National Sales Force).
The Energy Industry
Energy related services include DTNergy for the refined fuels, natural gas
industries and electric industries.
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $14,300,000 $12,200,000 $10,000,000
Subscribers at year end 8,400 7,700 7,100
</TABLE>
10
<PAGE>
DTNergy Service Review
DTNergy provides pricing information and communication services for the
refined fuels industry. This service consists of several pages of delayed energy
futures and options quotes plus selected news and financial information.
DTNergy is designed to connect refiners (producers of refined fuels) to
wholesalers (distributors of refined fuels). The refiner sends refined fuel
prices to wholesalers authorized to receive this information. The refiner is
also capable of sending terminal alerts, electronic funds transfer
notifications, invoices, and other communications to the wholesaler. The DTNergy
system carries more than two million messages a month for this industry.
Subscribers also select from a variety of optional services providing even more
prices or news related to the petroleum industry.
The strength of the DTNergy Refined Fuel service is the ability to deliver,
within seconds, accurate refiner terminal prices and other vital communications
to the wholesalers. This service is more reliable, timely and less expensive
than the competition, which utilize telephone-delivered printer-only systems and
FAX services.
DTNergy generates revenue from two primary sources, the wholesaler and the
refiner. Wholesalers currently pay a monthly subscription fee of $40.00 for the
monochrome Ku-band satellite service. Refiners pay fees based on the number and
length of communications sent to wholesalers.
DTNergy also provides an information service for the natural gas and
electric industries. Subscribers receive instant or delayed NYMEX energy futures
and options quotes, a comprehensive weather package and industry specific news
and market information. This service targets energy producers and generators,
transporters, marketers, utilities and larger energy consumers.
The Auto Industry
DTNauto Service Review
DTNauto is a communication and information service for the automobile
industry. This service offers automobile dealers precision information for
valuing trade-ins and locating used car inventory. DTNauto provides a host of
convenient features for the industry such as the ability for automobile auction
companies and manufacturers to communicate directly with the dealers.
DTNauto provides information on more than 125 pre-auction automobile
listings (AuctionNet), results of past auctions, new and used car industry news,
weather and other news. The service allows subscribers to perform searches of
upcoming and past auction listings for specific automobile information.
DTNauto offers a variety of optional services providing information on
credit reporting (CREDCO), vehicle histories (CARFAX), warranty information (The
Warranty Guide) and residual value of leased vehicles (Lease Guide). CARFAX and
CREDCO optional services extensively utilize the internal modem to send and
receive information. These services create a comprehensive information service
placing the "subscriber in the driver's seat".
DTNauto is marketed by DTNauto sales specialists (a select group within the
National Sales Force).
DTN Joint Venture Services
DTN joined forces with several companies to market their services using DTN
technology. These services are TracElectric, DAT Transportation Terminal and DTN
Missing Children Information Center (MCIC).
Trac Electric Service Review
TracElectric is an equipment locator service for the electrical equipment
industry. This service provides over 100 pages of new, remanufactured, surplus
and used electrical equipment listings. The service connects buyers and sellers
throughout the U.S. and Canada.
DAT Service Review
The DAT (Dial-A-Truck) Transportation Terminal service, located in
Beaverton, Oregon, is an information communication system for the trucking
industry. The service provides load and truck matching performed on a database
of 50,000 listings updated daily.
11
<PAGE>
DAT allows subscribers to input listings into the DTN receiver and send
this information to a database using the internal modem. The service provides
subscribers with the ability to perform extensive searches to locate loads and
trucks and to set alarms alerting users of a match.
The service also provides regional radar maps of major highways and
interstate systems, transportation news, diesel fuel prices and other financial
information related to the trucking industry.
DAT targets all freight brokers and carriers throughout the U.S. and
Canada.
DTN Missing Children Information Center Service Review
DTN Missing Children Information Center (MCIC) provides instant
transmission of data regarding children in danger to local, regional, national
and Canadian outlets.
In an effort to assist parents, police and the National Center for Missing
and Exploited Children locate missing children and the criminals involved,
photos and information regarding these children are posted as a public service
on all DTN color systems.
EMPLOYEE DATA
At December 31, 1997 the company had approximately 900 full and part-time
employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales:
Not applicable
ITEM 2. PROPERTIES.
The Company leases its executive and administrative offices in Omaha,
Nebraska. Approximately 108,000 square feet of office space is leased for these
offices for periods up through May 2005. The Company also occupies approximately
19,000 square feet of office space located in Urbandale, Iowa, through the
Broadcast Partners acquisition.
In addition, the Company leases three distribution centers for the purpose
of storing and distributing the electronic equipment needed by subscribers to
receive the company's services. The main distribution center is located in
Omaha, Nebraska and occupies approximately 28,000 square feet. The Company also
serves its Canadian subscribers with a 2,500 square foot distribution center
located in Winnipeg, Manitoba. Approximately 7,000 square feet, located in
Urbandale, Iowa, was added to the Company's distribution center by way of the
1996 acquisition. The leases related to these distribution centers are for
various periods up through December, 2003.
The information set forth in Footnote 10 "Leases" on page 48 of the
Company's 1997 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to nor is its property subject to any material
pending legal proceedings, other than ordinary routine litigation incidental to
its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1997.
12
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the current executive officers of the company is as
follows:
<TABLE>
<CAPTION>
Year Joined
Name Title Age the Company
- ------------------- ------------------------- --- -----------
<S> <C> <C> <C>
Roger R. Brodersen Chairman of the Board and 52 1984
Chief Executive Officer
Greg T. Sloma President and Chief 46 1993
Operating Officer
Robert S. Herman Senior Vice President 45 1984
Research and Technology
Roger W. Wallace Senior Vice President and 41 1984
Co-President, Ag Division
James J. Marquiss Senior Vice President and 53 1986
Co-President, Ag Division
Charles R. Wood Senior Vice President and 57 1989
President, Financial Services
Keith A. Cook Vice President, Auto Services 59 1986
William R. Davison Vice President and 43 1989
President, Ag Division
Scott A. Fleck Vice President and 30 1991
Director of Engineering
H. Wade German Vice President, 56 1992
Business Research
Brian L. Larson Vice President, Chief Financial 37 1993
Officer, Secretary and Treasurer
Gordon R. Lundy Vice President and 59 1990
President, Energy Services
James G. Payne Vice President, Services Support 42 1990
and Special Projects
</TABLE>
The executive officers serve annual terms, and are elected by the board of
directors at their annual board of directors meeting in April of each year.
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Information concerning the market for the Company's common stock, the
number of stockholders of record and the Company's dividend history is on pages
51 and 53 of the Company's 1997 Annual Report to Stockholders and is
incorporated herein by reference.
Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not necessarily represent
actual transactions.
The company's most restrictive loan covenant restricts cash dividend
payments to 27% of net income after taxes in the previous four quarters.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the Company is on page 28 of the Company's 1997
Annual Report to Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of and results of operations is on
pages 29 through 35 of the Company's 1997 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company, together with the Independent
Auditors' Report, are on pages 37 through 48 of the Company's 1997 Annual Report
to Stockholders and are incorporated herein by reference.
Supplementary quarterly financial information is on page 33 of the Com-
pany's 1997 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT.
Information concerning the present directors of the Company and all persons
nominated to become directors at the Annual Meeting of Stockholders of the
Company to be held April 22, 1998, is contained in the section captioned
"Election of Directors" of the Proxy Statement for such annual meeting. Such
section is on pages 2 through 3 of such Proxy Statement, and is incorporated
herein by reference. Information concerning the registrant's executive officers
is furnished in a separate item captioned "Executive Officers of the Company",
included in Part I of this Form 10-K.
14
<PAGE>
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, 1997, its
executive officers, directors and holders of more than 10% of the Company's
common stock complied with all Section 16(a) filing requirements, except that
Mr. Herman filed one late report covering one transaction. In addition, Mr.
Brodersen filed a Form 5 reporting three transactions which he inadvertently
failed to report or incorrectly reported in 1991, 1994 and 1996. In making these
statements, the Company has relied solely upon a review of Forms 3 and 4 fur-
nished 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.
ITEM 11. EXECUTIVE COMPENSATION.
Information concerning executive compensation paid by the Company is
contained in the sections captioned "Executive Compensation" and "Compensation
Committee Report on Executive Compensation" on pages 7 through 11 of the Proxy
Statement for the Annual Meeting of Stockholders of the Company to be held April
22, 1998, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information concerning the ownership of equity securities of the Company by
certain beneficial owners and management is contained in the sections captioned
"Ownership By Certain Beneficial Owners" and "Election of Directors" on pages 2
through 6 of the Proxy Statement for the Annual Meeting of Stockholders of the
Company to be held April 22, 1998, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning transactions with management and others and
indebtedness of management is contained in the section captioned "Transactions
with Management" on page 12 of the Proxy Statement for the Annual Meeting of
Stockholders of the Company to be held April 23, 1998 and is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(A) 1. Financial Statements:
The Registrant's financial statements, together with the Independent
Auditors' Report, are incorporated herein by reference to the 1997 Annual Report
to Stockholders, pages 27 through 48. With the exception of the aforementioned
information and the information incorporated by reference into Items 2,5,6,7 and
8 of this report, the Annual Report to Stockholders for the year ended December
31, 1997, is not to be deemed filed as a part of this report. The supplemental
financial information listed below should be read in conjunction with the
financial statements in the Annual Report to Stockholders for the year ended
December 31, 1997.
15
<PAGE>
(A) 2. Financial Statement Schedule: Page
Auditors' Report on Financial Statement Schedule 23
Schedule
Number Description of Schedule
--------- ----------------------------------
II Valuation and Qualifying Accounts 24
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the financial
statements or notes thereto.
(B) Reports on Form 8-K:
1. The Registrant filed a report on 8-K dated August 29, 1997 related
to the Shareholder Rights Plan between Registrant and First National Bank of
Omaha, as Rights Agent.
No reports on Form 8-K were filed by the Registrant during the fourth
quarter of the year ended December 31, 1997.
(C) Exhibits:
(3) (a) Certificate of Incorporation of Registrant.
(b) By-Laws of Registrant.
(These documents are filed as exhibits to the Registrant's
Registration Statement on Form S-1 as filed December 4, 1987.)
(4) (a) Specimen certificate representing shares of
Common Stock, $.001 par value, of Registrant.
(This document is filed as an exhibit to the Registrant's
Registration Statement on Form S-1 as filed November 4, 1988.)
(b) Certificate of Incorporation of Registrant.
(This document is filed as an exhibit to the Registrant's Regis-
tration Statement on Form S-1 as filed December 4, 1987.)
(10) (a) Lease Agreement between the Registrant and
Embassy Plaza Limited Partnership.
(This document is filed as an exhibit to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990.)
(b) Registrant's Stock Option Plan of 1989.
(This document is included as an exhibit to the Registrant's
Proxy Statement for the Annual Meeting of Shareholders held on
April 26, 1989.)
(c) Registrant's Non-employee Directors Stock
Option Plan.
(This document is included as an exhibit to the Registrant's
Proxy Statement for the Annual Meeting of Shareholders held on
April 26, 1989.)
(d) Form of indemnification agreement between the
Registrant and the Officers and Directors of
the Registrant.
(This document is filed as an exhibit to the Registrant's
Registration Statement on Form S-1 as filed May 22, 1989.)
16
<PAGE>
(e) First Amendment to Registrant's Employee Stock
Option Plan of 1989 (amends Exhibit 10(b)).
(f) First Amendment to Registrant's Non-employee
Directors Stock Option Plan (amends Exhibit 10
(c)).
(These documents are included as exhibits to the Registrant's
Proxy Statement for the Annual Meeting of Stockholders held on
April 27, 1990.)
(g) Second Amendment to Registrant's Employee
Stock Option Plan of 1989 (amends Exhibit 10 (b)).
(h) Second Amendment to Registrant's Non-employee
Directors Stock Option Plan (amends Exhibit 10
(c)).
(These documents are included as exhibits to the Registrant's
Proxy Statement for the Annual Meeting of Stockholders held on
April 24, 1991.)
(i) Loan Agreement dated October 9, 1992 among the
Registrant, First National Bank of Omaha, FirsTier
Bank Lincoln and First National Bank of Wahoo.
(j) First Amendment to Loan Agreement dated
October 9, 1992 among the Registrant, First
National Bank of Omaha, FirsTier Bank of Lincoln
and First National Bank of Wahoo.
(k) Independent Sales Representative Agreement
dated March 28, 1990 between the Registrant and
Phil Huston.
(l) First Amendment dated March 1, 1991 to Indepen-
dent Sales Representative Agreement dated
March 28, 1990 between Registrant and Phil Huston.
(m) Amendment to Independent Sales Representative
Agreement dated March 28, 1990 between
Registrant and Phil Huston.
(These documents are included as exhibits to the Registrant's
Annual Report on Form 10-K as filed March 24, 1993).
(n) Third Amendment to Registrant's Stock Option
Plan of 1989 (amends Exhibit 10(b)).
(o) Third Amendment to Registrant's Non-Employee
Directors Stock Option Plan (amends Exhibit 10(c)).
(p) Fourth Amendment to Employee Stock Option Plan
of 1989 (amends Exhibit 10(b)).
(q) Fourth Amendment to Non-Employee Directors
Stock Option Plan (amends Exhibit 10(c)).
(These documents are included as exhibits to the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held
April 27, 1994).
(r) Restated Loan Agreement dated November 8, 1993
among the Registrant, First National Bank of Omaha,
FirsTier Bank Lincoln, First National Bank of
Wahoo, National Bank of Detroit, Norwest Bank
Nebraska, NA and The Boatmen's Bank of St. Louis.
17
<PAGE>
(s) Restated Security Agreement dated November 8,
1993 among the Registrant, First National Bank of
Omaha, FirsTier Bank Lincoln, First National Bank
of Wahoo, National Bank of Detroit, Norwest Bank
Nebraska, NA and The Boatmen's Bank of St. Louis.
(These documents are included as exhibits to the Registrant's
Annual Report on Form 10-K as filed March 14, 1994).
(t) Restated and amended Non-Employee Directors
Stock Option Plan.
(This document is included as an exhibit to the Registrant's
Proxy Statement for the annual meeting of stockholders to be held
April 26, 1995).
(u) First Amendment to the Restated Loan Agreement
dated November 8, 1993 among the Registrant, First
National Bank of Omaha, Firstier Bank Lincoln,
First National Bank of Wahoo, National Bank of
Detroit, Norwest Bank Nebraska, NA and The
Boatmen's Bank of St. Louis.
(v) Second Amendment to the Restated Loan
Agreement dated November 8, 1993 among the
Registrant, First National Bank of Omaha, Firstier
Bank Lincoln, First National Bank of Wahoo,
National Bank of Detroit, Norwest Bank Nebraska, NA
and The Boatmen's Bank of St. Louis.
(w) Third Amendment to the Restated Loan Agreement
dated November 8, 1993 among the Registrant, First
National Bank of Omaha, Firstier Bank Lincoln,
First National Bank of Wahoo, National Bank of
Detroit, Norwest Bank Nebraska, NA and The
Boatmen's Bank of St. Louis.
(x) Fourth Amendment to the Restated Loan
Agreement dated November 8, 1993 among the
Registrant, First National Bank of Omaha, Firstier
Bank Lincoln, First National Bank of Wahoo,
National Bank of Detroit, Norwest Bank Nebraska, NA
and The Boatmen's Bank of St. Louis.
(y) Lease agreement dated August 30, 1994 between
Registrant and The Prudential Insurance Company of
America.
(z) First Amendment to lease agreement dated
August 30, 1994 among the Registrant and The
Prudential Insurance Company of America.
(aa) Senior Subordinated Note dated June 30, 1994
between the Registrant and Equitable Capital
Private Income & Equity Partnership II, L.P.
(These documents are included as exhibits to the Registrant's
Annual Report on Form 10-K as filed March 28, 1995).
(ab) Fifth Amendment to the Restated Loan Agreement
dated November 8, 1993 among the Registrant and six
regional banks.
(ac) Sixth Amendment to the Restated Loan Agreement
dated November 8, 1993 among the Registrant and six
regional banks.
(ad) Lease agreement dated May 2, 1995 between the
Registrant and The Prudential Insurance Company of
America.
(ae) First Amendment to lease agreement dated May
2, 1995 between the Registrant and The Prudential
Insurance Company of America.
18
<PAGE>
(af) Restated Loan Agreement dated June 29, 1995
among the Registrant and seven regional banks.
(ag) Purchase and service agreement dated July 13,
1995 between the Registrant and Knight-Ridder
Financial.
(ah) Adjustment to Independent Sales Representative
Agreement dated March 28, 1990 between Registrant
and Phil Huston.
(ai) Senior Subordinated Notes and Warrant Purchase
Agreement dated June 30, 1994 between Registrant
and Equitable Capital Private Income and Equity
Partnership II, L.P.
(aj) First Amendment to Senior Subordinated Notes
and Warrant Purchase Agreement dated June 30, 1994
between Registrant and Equitable Capital Private
Income and Equity Partnership II, L.P.
(These documents are included as exhibits to the Registrant's
Annual Report on Form 10-K as filed March 22, 1997).
(ak) Independent Sales Representative Agreement
dated September 1, 1997, between Registrant,
Huston, Inc., and Phil Huston.
(al) Second Amendment to the lease agreement dated
May 2, 1995, between the Registrant and The
Prudential Insurance Company of America.
(am) Third Amendment to the lease agreement dated
May 2, 1995, between the Registrant and The
Prudential Insurance Company of America.
(an) Fourth Amendment to the lease agreement dated
May 2, 1995, between the Registrant and LAFP-SF,
Inc., successors in interest to The Prudential
Insurance Company of America.
(ao) Revolving Credit Agreement dated June 28,
1997, between the Registrant and a group of banks.
(ap) First Amendment to the Revolving Credit
Agreement dated June 28, 1997, between the
Registrant and a group of banks.
(aq) Second Amendment to the Revolving Credit
Agreement dated June 28, 1997, between the
Registrant and a group of banks.
(ar) Term Credit Agreement dated May 3, 1997,
between the Registrant and a group of banks.
(as) First Amendment to the Term Credit Agreement
dated May 3, 1997, between the Registrant and a
group of banks.
(at) Second Amendment to the Term Credit Agreement
dated May 3, 1997, between the Registrant and a
group of banks.
(au) Third Amendment to the Term Credit Agreement
dated May 3, 1997, between the Registrant and a
group of banks.
19
<PAGE>
(av) Restated Security Agreement dated May 3, 1997,
between the Registrant and a group of banks.
(aw) First Amendment to the Restated Security
Agreement dated May 3, 1997, between the Registrant
and a group of banks.
(ax) Second Amendment to the Restated Security
Agreement dated May 3, 1997, between the Registrant
and a group of banks.
(ay) Third Amendment to the Restated Security
Agreement dated May 3, 1997, between the Registrant
and a group of banks.
(az) Second Amendment to the Senior Subordinated
Notes and Warrant Purchase Agreement dated June 30,
1994, between the Registrant and Equitable Capital
Private Income and Equity Partnership II, L.P.
(These documents are included as exhibits to the Registrant's
Annual Report on Form 10-K as filed March 27, 1997).
(ba) Fifth Amendment to Employee Stock Option Plan
of 1989 (amends Exhibit 10(b).
(This document is included as an exhibit to the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held
on April 23, 1997).
(bb) Purchase and Sale of Assets Agreement dated January
2, 1997, between the Registrant, and Northern Data
Communications and Market Quoters, Inc.
(bc) Purchase and Service Agreement dated October 24,
1997, between the Registrant and the Arkansas Farm
Bureau.
(bd) Purchase and Restrictive Covenant Agreement dated
March 14, 1997, between the Registrant and Market
Communications Group, LLC.
(be) Asset Purchase Agreement dated July 1, 1997, be-
tween the Registrant and Cotton Communications
Network, Inc.
(bf) Fifth Amendment to the lease agreement dated May 2,
1995, between the Registrant and LAFP-SF, Inc.,
successors in interest to The Prudential
Insurance Company of America.
(bg) Sixth Amendment to the lease agreement dated May 2,
1995, between the Registrant and LAFP-SF, Inc.,
successors in interest to The Prudential
Insurance Company of America.
(bh) Seventh Amendment to the lease agreement dated May
2, 1995, between the Registrant and LAFP-SF, Inc.,
successors in interest to The Prudential Insurance
Company of America.
(bi) Eighth Amendment to the lease agreement dated
May 2, 1995, between the Registrant and LAFP-SF,
Inc., successors in interest to The Prudential
Insurance Company of America.
(bj) Ninth Amendment to the lease agreement dated May 2,
1995, between the Registrant and LAFP-SF, Inc.,
successors in interest to The Prudential
Insurance Company of America.
(bk) Tenth Amendment to the lease agreement dated May 2,
1995, between the Registrant and LAFP-SF, Inc.,
successors in interest to The Prudential Insurance
Company of America.
(bl) 1997 Revolving Credit Agreement dated February 26,
1997, between the Registrant and a group of banks.
(bm) First Amendment to the 1997 Revolving Credit Agree-
ment dated February 26, 1997, between the
Registrant and a group of banks.
(bn) Second Amendment to the 1997 Revolving Credit
Agreement dated February 26, 1997, between the
Registrant and a group of banks.
20
<PAGE>
(bo) 1997 Term Credit Agreement dated February 26, 1997
between the Registrant and a group of banks.
(bp) 1997 Security Agreement dated February 26, 1997 be-
tween the Registrant and a group of banks.
(bq) Sixth Amendment to Non-Employee Directors
Stock Option Plan (amends Exhibit 10(c)).
(br) Seventh Amendment to Non-Employee Directors Stock
Option Plan (amends Exhibit 10(c)).
(12) Not applicable.
(13) Registrant's 1997 Annual Report to Stockholders.
(This document is hereby incorporated by reference.)
(16) None.
(18) None.
(21) None.
(22) None.
(23) Consent of Deloitte & Touche LLP.
(24) None.
(27) Financial Data Schedule.
(28) None.
(99) Proxy Statement for the Annual Meeting of Stockholders
of the Registrant to be held April 22, 1998.
(This document is hereby incorporated by reference.)
21
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Data Transmission Network Corporation,
a Delaware Corporation
By: /s/ Roger R. Brodersen
----------------------
Roger R. Brodersen
Chief Executive Officer
Dated March 30, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Roger R. Brodersen March 30, 1998
------------------------------
Roger R. Brodersen, Chairman of the
Board, Chief Executive Officer
and Director
By: /s/ Greg T. Sloma March 30, 1998
------------------------------
Greg T. Sloma, President and
Chief Operating Officer
and Director
By: /s/ Roger W. Wallace March 30, 1998
------------------------------
Roger W. Wallace, Senior Vice
President, Co-President-Ag
Division and Director
By: /s/ Robert S. Herman March 30, 1998
------------------------------
Robert S. Herman, Senior Vice
President and Director
By: /s/ Brian L. Larson March 30, 1998
------------------------------
Brian L. Larson, Vice President,
Chief Financial Officer,
Secretary and Treasurer
By: /s/ David K. Karnes March 30, 1998
------------------------------
David K. Karnes, Director
By: /s/ J. Michael Parks March 30, 1998
------------------------------
J. Michael Parks, Director
By: /s/ Jay E. Ricks March 30, 1998
------------------------------
Jay E. Ricks, Director
</TABLE>
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Data Transmission Network Corporation
Omaha, Nebraska
We have audited the financial statements of Data Transmission Network
Corporation as of December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997 and have issued our report thereon dated
February 6, 1998, such financial statements and report are included in the 1997
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of Data Transmission
Network Corporation, listed in Item 14(a)2. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 6, 1998
23
<PAGE>
Schedule II
DATA TRANSMISSION NETWORK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Charged to Other End
Description of Period Expenses Accounts Deductions of Period
- ----------------------------- --------- ---------- ---------- ---------- ----------
Allowance for doubtful
accounts:
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997: $520,000 $842,000 - $552,000 $810,000
Year ended December 31, 1996: $300,000 $672,000 - $452,000 $520,000
Year ended December 31, 1995: $220,000 $358,000 - $278,000 $300,000
</TABLE>
24
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33- 50406 and No. 33-50412 of Data Transmission Network Corporation on Forms S-8
of our reports dated February 6, 1998, appearing in and incorporated by refer-
ence in this Annual Report on Form 10-K of Data Transmission Network Corporation
for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 27, 1998
25
AGREEMENT FOR PURCHASE AND SALE OF CORPORATION ASSETS
This is an agreement dated this day of ,
199 for the purchase and sale of the assets hereafter listed of Northern Data
Communications, Inc. (hereafter "NDC"), and Market Quoters, Inc.
(hereafter "MQI") by Data Transmission Network, Inc. (hereafter "DTN").
PURPOSE
The purpose of this agreement is to set forth in written form the terms
and conditions pursuant to which DTN shall purchase the assets of NDC and MQI.
RECITALS
1. The parties hereto wish to accomplish the sale and the purchase
of certain assets while, at the same time, minimizing any interruption or
inconvenience to the present customers of NDC and MQI and to accomplish such
transaction in a manner which is nearly transparent to all such existing
customers.
2. To this end, NDC and MQI will be servicing customer accounts for
a minimum period of three months or longer, following closing at the option of
DTN, and DTN will be reimbursing NDC and MQI for employee costs and other
operational costs incurred by NDC and MQI during this transitional period of
conversion. Continued customer servicing after sale, during this transitionary
period is aimed at minimizing inconvenience or interruption to any customer.
THEREFORE; AND IN CONSIDERATION OF THE MUTUAL COVENANTS AND CONDITIONS
HEREAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
1. DTN shall purchase the assets of NDC and MQI which are set forth
in the next paragraph for a total purchase price of $750,000.00 of which 56%, or
$420,000.00, shall be paid to MQI, and of which 44%, or $330,000.00, shall be
paid to NDC. The purchase price shall be paid as hereafter set forth at closing.
2. The assets to be purchased include, but are not limited to,
all customer lists, service records, customer service contracts, equipment
lists, software, and magnetic data (hard disks) pertaining to the customers of
NDC and MQI, and all equipment utilized by said NDC and MQI in servicing said
customer locations.
a. Any customer equipment which is purchased hereunder
that is compatible with the DTN system shall be considered assets purchased
under this agreement while any such customer equipment which is non-compatible
with the DTN system shall remain the property of the sellers, NDC and MQI. It is
the purpose of this paragraph to make certain that each customer is left whole
throughout this transaction.
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b. Also purchased hereunder is any existing equipment
that any customer would require to continue to receive market data via third
party software.
c. Also included in the assets purchased hereunder are
one service van, together with tools, necessary to provide service and
switch-out. Here, it is understood that MQI will transfer title of a 1993
Plymouth service van and said tools.
3. After closing, NDC and MQI shall continue to service customers
in the normal manner during a conversion period, the completion of which shall
be final once all customers have been switched to the necessary DTN hardware and
are receiving data via DTN. This conversion period is expected to last three
months, and during this period, DTN agrees that DTN shall reimburse NDC and MQI
for employee costs and operational costs incurred during the transition by NDC
and MQI employees. Attached hereto, marked Exhibit "A", and by this reference
made a part hereof, is a list setting forth the names of said transitional
employees and costs anticipated to be incurred.
4. DTN agrees that DTN shall employ Leonard Kotta and John Salewske
for a period of two years commencing with closing at an annual salary of
$48,000.00 each if said Leonard Kotta and John Salewske so choose such
employment.
5. DTN agrees that DTN shall interview all MQI and NDC employees
for the purpose of determining whether employment offers will be extended after
closing. DTN is not responsible for any severance package for MQI or NDC
employees.
6. DTN shall complete due diligence by December 31 with respect to
all items outlined in a certain November 29, 1996 letter to Paul Hedberg. This
agreement shall become binding upon the satisfactory completion of due
diligence, such satisfaction shall be in the sole discretion of DTN. DTN shall
be satisfied if the information reviewed is materially accurate when compared to
information received from NDC and MQI prior to December 17, 1996.
7. Closing shall be on January 2, 1997, and the purchase price
shall be accomplished by a transfer of funds by wire. Wire instructions are set
forth on Exhibit "B" hereto attached and by this reference made a part hereof.
8. As of the date of closing, January 2, 1997, all receivables
less unearned credit shall be the property of DTN. DTN shall pay to NDC and MQI,
in addition to the purchase price, the total of said receivables less any
unearned credit. Said receivables, together with said unearned credit, are set
forth on Exhibit "C" hereto attached and by this reference made a part hereof.
9. NDC and MQI shall defend, indemnify and hold DTN harmless and
free from any actions, claims, proceedings or liabilities arising from the
conduct of NDC or MQI prior to the date of closing (January 2, 1997).
10. This agreement shall enure to and be binding upon the successors
and assigns of the respective parties hereto.
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<PAGE>
11. This agreement represents the entire agreement of the parties.
Any prior agreements between the parties hereto, whether oral or written, are
superseded hereby, and there are no oral or written collateral representations,
agreements, or understandings.
12. For a period of two years Leonard Kotta and John Salewske, and
for a period of three years Paul Hedberg and Larry Risedt, following date of
closing shall not directly or indirectly engage in a trader business in the
United States which business would provide a service similar to the service
currently provided by NDC and MQI. Indirectly shall mean any type of entity
(Partnership, corporation, joint venture, trust, etc.) which is owned 20% or
more by one of the parties or their immediate ancestors and descendants.
13. This agreement may be executed in multiple counterparts, each
of which shall be deemed to be an original for all purposes.
MARKET QUOTERS, INC., a Minnesota Corp.
By:
-------------------------------------------
Title:
----------------------------------------
NORTHERN DATA COMMUNICATIONS, INC.
By:
-------------------------------------------
Title:
----------------------------------------
DATA TRANSMISSION NETWORK
CORPORATION, a Delaware Corporation
By:
-------------------------------------------
Title:
----------------------------------------
3
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PURCHASE AND SERVICE AGREEMENT
This Purchase and Service Agreement ("this Agreement") is made and
entered into this day of , 1997, between Data Transmission
Network Corporation, a Delaware corporation ("DTN"), whose address is 9110 West
Dodge Road, Suite 200, Omaha, Nebraska 68114, and Arkansas Farm Bureau
Federation ("AFB"), whose address is , Arkansas.
RECITALS:
---------
A. DTN is the owner and operator of an electronic information system
using color satellite data terminals (the "System") which continuously transmits
information to DTN's subscribers ("DTN Subscribers"). DTN provides various
information services to DTN Subscribers over the System. One of such services is
known as the FarmDayta II service (the "FarmDayta II Service").
B. AFB is a provider of services to the agriculture industry in the
State of Arkansas. AFB currently transmits information to subscribers ("AFB
Subscribers") of its ACRES program on equipment owned by AFB, which equipment
includes a monitor, databox, Ku satellite receiver, LNB, cable, and satellite
dish. Such satellite dish, LNB, and cable may be used by DTN in providing
information to the DTN Subscribers on the System, while the monitor, databox and
Ku satellite receiver must be replaced with DTN's equipment.
C. AFB desires for DTN to make the FarmDayta II Service and its other
information services available to the AFB Subscribers and other members of AFB
and AFB is willing to promote DTN's information services as provided in this
Agreement. DTN desires to provide its information services to the AFB
Subscribers who contract to receive such services.
D. AFB also desires for DTN to purchase certain of AFB's equipment
used by it in transmitting information to AFB Subscribers, and DTN is willing to
purchase such equipment pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the aforementioned recitals and
the covenants and conditions herein contained, the parties hereto agree as
follows:
1. Sale and Purchase. DTN agrees to purchase from AFB, and AFB agrees
to sell to DTN the equipment and accessories now owned by AFB and currently
being used by the Converted Subscribers (defined below) to receive AFB's
information service which shall include for each Converted Subscriber a monitor,
databox, Ku satellite receiver, LNB, cable, and satellite dish (hereinafter
collectively referred to as a "Unit"). AFB represents that there are
approximately 750 AFB Subscribers who possess one Unit each. The Units used by
Converted Subscribers which are to be sold to DTN are collectively referred to
in this Agreement as the "Converted Subscriber Units". For purposes of this
Agreement, the term "Converted Subscribers" shall mean those AFB Subscribers who
convert to and become DTN Subscribers during the Conversion Period (defined
below) upon the terms set forth in this Agreement, including the minimum
requirement of a 1-year subscription term. For purposes of this Agreement, the
term "Conversion Period" shall mean the 120-day period following the date of
1
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<PAGE>
this Agreement. In addition, DTN agrees to purchase those sets of color
satellite data terminals which AFB elects to sell (each set must consist of a
monitor, databox and Ku satellite receiver and is referred to herein as a "Color
Unit") and which are either currently being used by AFB Subscribers who do not
become Converted Subscribers or held in inventory by AFB. Color Units shall not
include any Converted Subscriber Units. For purposes of this Agreement, all
Converted Subscriber Units and Color Units shall be referred to in the aggregate
as the "Purchased Equipment".
2. Payments. In consideration for the Purchased Equipment and
for the services to be performed by AFB pursuant to this Agreement, DTN agrees
to pay AFB, and AFB agrees to accept from DTN as payment in full, the following
payments:
(a) Six Hundred Dollars ($600) for each Converted Subscriber. DTN
shall have no obligation to pay $600 to AFB for AFB
Subscribers who convert to and become DTN Subscribers after
the Conversion Period. This fee shall be paid on or before
the 15th day of the month following the month in which such
Converted Subscriber begins to receive the DTN information
service or the month in which that portion of the Converted
Subscriber Unit which is to be returned to DTN is received by
DTN in acceptable condition, whichever is later.
(b) Fifty Dollars ($50) for each Color Unit which AFB elects to
sell to DTN. This fee shall be paid on or before the 15th day
of the month following the month in which the Color Unit is
received by DTN in acceptable condition.
(c) During the term of this Agreement, DTN shall pay AFB a
monthly fee determined by multiplying Six Dollars ($6.00) by
the number of paid Converted Subscribers receiving a DTN
information service during such month. The per Converted
Subscriber fee shall be paid in arrears on or before the 15th
day of each month based on the number of paid Converted
Subscribers receiving the service in the prior month.
AFB shall be responsible for any sales or related taxes which may result as a
result of the payments made to AFB under this Agreement.
3. AFB Services. During the Conversion Period, AFB shall solicit (via
telephone call, written correspondence or face to face meeting) each AFB
Subscriber to enter into DTN's standard form of subscription agreement for the
FarmDayta II Service or another color service of DTN on the System for at least
a one (1) year subscription term. AFB agrees at its expense to send during the
Conversion Period to each AFB Subscriber a letter recommending DTN's information
services to such AFB Subscriber, which letter is to be accompanied by
promotional materials furnished by DTN. Such letter shall be in a form
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<PAGE>
satisfactory to both DTN and AFB. AFB shall be responsible for obtaining the
subscription agreement signed by the Converted Subscriber and returning it to
DTN for acceptance by DTN. An AFB Subscriber will not be considered a Converted
Subscriber until the subscription agreement is accepted by DTN in Omaha,
Nebraska. DTN will then deliver to each Converted Subscriber the DTN equipment
(likely to be the monitor, databox and satellite receiver) which will be needed
to allow such Converted Subscriber to receive the applicable DTN service. AFB
shall cause to be picked up from each Converted Subscriber that portion of the
Converted Subscriber Unit which has been replaced by the DTN equipment
(exclusive of monochrome monitors believed to be undesirable) and, at AFB's
expense, delivered to DTN. Where possible, such pick up and delivery shall be
accomplished through the use of UPS call tags. AFB shall be responsible for
installing or assisting the Converted Subscribers in installing the DTN
equipment and providing the necessary assistance and support to assure AFB
Subscribers a smooth conversion to the System. DTN will be responsible for
training Converted Subscribers on how to use the DTN equipment. In addition, AFB
shall at its expense deliver the Color Units to DTN no later than sixty (60)
days after the expiration of the Conversion Period.
4. DTN Services. DTN agrees to provide the FarmDayta II Service to
each Converted Subscriber at the same subscription rate at which such subscriber
currently receives the AFB service, during the initial 12-month period in which
such subscriber is a Converted Subscriber. DTN agrees to provide its DTN AgDaily
service to each Converted Subscriber at the subscription rate of Forty-Five
Dollars ($45.00) per month during the initial 12-month period in which such
subscriber is a Converted Subscriber. With respect to any DTN information
service offered on the color platform (other than the FarmDayta II Service and
the DTN AgDaily service), DTN will offer a Converted Subscriber a Five Dollar
($5.00) discount from DTN's standard monthly subscription rate for such service
during the initial 12-month period in which such subscriber is a Converted
Subscriber. A Converted Subscriber also will receive no initiation or start up
fee with its initial DTN subscription. DTN will impose no more than a Two Dollar
($2.00) increase in the standard monthly subscription rate during the second
12-month subscription period for those Converted Subscribers who have not
changed the DTN information service initially received by them. During the term
of this Agreement, DTN will furnish to AFB that number of complimentary DTN
units which equals the number of complimentary units currently furnished to AFB
in the ACRES program or a maximum of twenty (20), whichever is less. Such units
shall consist of no more than three units receiving the FarmDayta II Service, no
more than three units receiving DTN's AgDaily Pro service, no more than two
units receiving real time commodity quotations, and the remaining units shall
receive DTN's basic AgDaily service. AFB and DTN will execute DTN's standard
Subscription Agreements applicable to the various services, which will be
provided free of charge, except AFB will be responsible for all real time
exchange fees. DTN also shall provide to AFB during the term of this Agreement,
free of charge, a 5-page DTN Group E-Mail segment (to be used by the Vocational
Agriculture Department) and an 11-page DTN Group E-Mail segment (to be used by
the Cooperative Extension Service) on the System for delivery to those DTN
Subscribers in Arkansas designated by AFB. Such segments will be updated no more
than once per calendar week. AFB and DTN will execute DTN's standard Electronic
Mail Service Agreement applicable to such services.
5. Term. The term of this Agreement shall be for a period of ten (10)
years from the date of this Agreement, unless this Agreement is terminated
3
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<PAGE>
earlier as otherwise provided in this Agreement. This Agreement also shall
terminate upon the occurrence of the first to occur of either of the following
events:
(i) The mutual written agreement of both DTN and AFB; or
(ii) The adjudication of either party as a bankrupt, the
execution by either party of an assignment for the benefit
of its creditors, or the appointment of a receiver for
either party or substantially all of either party's
property.
6. Promotion. During the term of this Agreement, AFB agrees to
encourage all AFB members to use DTN's services and to otherwise promote to all
AFB members the DTN services being provided on the System. AFB agrees to
cooperate with DTN to market DTN's services to all AFB members; provided,
however, AFB shall not be required to incur out-of-pocket costs for such
marketing, except as specifically provided in this Agreement.
7. Cotton/Rice Information. During the term of this Agreement
(so long as such information or similar information is available to AFB), AFB
will furnish to DTN for transmission on the System the cotton and rice
information package currently provided by AFB to AFB Subscribers under the name
of Gene Martin (the "Cotton/Rice Information"). AFB may rename the Cotton/Rice
Information at its discretion if Mr. Gene Martin is no longer involved in
furnishing such information. During the term of this Agreement, DTN will
transmit the Cotton/Rice Information free of charge to all Converted Subscribers
who remain DTN Subscribers. During those periods in which DTN elects to offer
the Cotton/Rice Information to DTN Subscribers located in Arkansas (other than
the Converted Subscribers), DTN will offer such information free of charge.
8. Sales Agency. After the Conversion Period, AFB shall be eligible
to act as a sales agent of DTN to solicit and obtain subscriptions to DTN's
information services. AFB shall receive $200 for obtaining a basic subscription
agreement with a new DTN Subscriber and $350 for obtaining a real time
subscription agreement with a new DTN Subscriber. AFB and DTN will execute DTN's
standard Sales Agency Agreement upon the foregoing terms. AFB will be a sales
agent of DTN only for the purposes and to the extent expressly set forth in such
Sales Agency Agreement and its relationship with DTN shall be solely that of an
independent contractor. AFB also shall be entitled to receive a referral fee of
$50.00 for any referral which results in a new DTN Subscriber. Any solicitation
at an AFB meeting which results in a new DTN Subscriber or generates a referral
which leads to a new DTN Subscriber shall entitle AFB to the applicable fees as
set forth in this paragraph regardless of whether such solicitation is made by a
DTN sales representative or a staff member of AFB.
9. Bill of Sale. Concurrently with the execution of this Agreement,
AFB agrees to sell, transfer, assign and convey to DTN the Purchase Equipment by
duly executed warranty bill of sale and assignment, free and clear of all liens,
encumbrances, security interests, leasehold interests, actions, claims, and
4
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<PAGE>
equities of any kind whatsoever. AFB agrees to take such actions from time to
time as may in the reasonable judgment of DTN or its counsel be necessary or
advisable to confirm the title of DTN to any of the items of personal property
acquired by DTN from AFB pursuant to this Agreement. DTN shall be entitled to
possession of the Purchased Equipment upon the execution of this Agreement;
provided, however, that AFB agrees to maintain full replacement value insurance
on the Purchased Equipment until it is transported to DTN.
10. Bulk Sales Transfer. If applicable, DTN waives compliance by AFB
with the Bulk Sales provisions of the Arkansas Uniform Commercial Code or any
equivalent statute, and AFB agrees to indemnify DTN and to hold DTN harmless
from any loss or expense arising by reason of such non-compliance.
11.Representations of AFB. AFB warrants, represents and covenants to
and with DTN that AFB is the sole and lawful owner and has good and merchantable
title to all of the items of personal property to be acquired by DTN pursuant to
this Agreement and that, upon the transfer and assignment of such property to
DTN by warranty bill of sale and assignment as hereinbefore mentioned, DTN will
acquire good and merchantable title thereto, free and clear of interests,
leasehold interests, and claims of any kind whatsoever. AFB further warrants,
represents and covenants to and with DTN that the Purchased Equipment, when it
is received by DTN, will be in the same condition as it was when located at the
AFB Subscriber sites and, otherwise, DTN accepts the Purchased Equipment in its
present condition. The representations, warranties, and covenants contained in
this Agreement shall survive the date of this Agreement and shall be binding
upon the parties hereto and their successors and assigns.
12. Indemnification. Each party hereto agrees to indemnify and hold
harmless the other party, its officers, directors, employees, and agents from
and against any and all claims, demands, liability, loss, cost, damage, penalty
or expense, including attorneys' fees and costs of settlement, resulting from or
arising out of the failure of the indemnifying party to observe any covenant or
condition set forth in this Agreement, and the inaccuracy of any representation
made by the indemnifying party in this Agreement.
13. Covenant Not to Compete. After the Conversion Period and during
each month of the term of this Agreement in which AFB receives at least $2,000
in fees pursuant to Paragraph 2(c) of this Agreement, AFB and its affiliates
shall not, directly or indirectly, whether as an agent, consultant, independent
contractor, owner, partner or otherwise:
a) Solicit for itself or others, or advise or recommend to any
other person that such person solicit, any customer or
prospective customer of DTN or any current or future member of
AFB, for the purpose of obtaining the business of such
customer or member, in competition with DTN; or
b) Offer, transmit, facilitate or promote the distribution or
transmission to AFB members of information services in compe-
tition with DTN.
The phrase "in competition with DTN" shall mean any business that distributes or
transmits via any electronic information system the same or similar type of
5
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<PAGE>
information as currently offered by AFB on its ACRES program or the Cotton/Rice
Information; provided, however, AFB shall retain the right to continue providing
(i) the Cotton/Rice Information to ACRES pursuant to its existing contract and
(ii) in the context and via the medium currently provided, its information
services other than its ACRES program. Accordingly, AFB shall terminate
operation of its ACRES program by the end of the Conversion Period. AFB shall be
responsible for all of its obligations to AFB Subscribers and DTN does not
assume any of such obligations.
The covenants contained in this Section 13 are independent of one
another and are severable. In the event any part of the covenants set forth in
this Section shall be held to be invalid or unenforceable, the remaining parts
thereof will continue to be valid and enforceable. If any provisions of these
covenants relating to the time period, activity and/or area of restriction shall
be declared by a court of competent jurisdiction to exceed the maximum time
periods, activities or areas which such court deems reasonable and enforceable,
such time period, activity and/or area of restriction shall be deemed to be the
maximum time period, activity and/or area which such court deems reasonable and
enforceable. AFB acknowledges that the restrictions contained in this Section 13
are reasonable and necessary to protect the goodwill of that portion of the
business of AFB being acquired by DTN pursuant to this Agreement.
14. Severability. In the event that one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any of the other provisions contained in this Agreement, which
provisions shall remain in full force and effect.
15. Relationship of Parties. Nothing contained in this Agreement shall
be deemed or construed to create the relationship of principal and agent or of
partnership, joint venture, or any association whatsoever between the parties,
it being expressly understood and agreed that each party shall be an independent
contractor with respect to the other party in connection with the work performed
hereunder. Except as otherwise provided in this Agreement, each party shall bear
its own expenses with respect to the subject matter of this Agreement.
16. Notices. Any and all written notices, communications or payments
shall be made to the respective parties at their addresses indicated in the
first paragraph of this Agreement or at such other address as the party may
indicate in a written notice to the other party of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts and by the different parties hereto in separate counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
18. Choice of Law. This Agreement shall be subject to and
interpreted in accordance with the substantive laws of the State of Nebraska.
19. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, legal
representatives, and assigns; provided, however, that the rights, duties, and
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<PAGE>
privileges of AFB hereunder may not be assigned or otherwise transferred by it,
in whole or in part, without the prior written consent of DTN which may be
withheld for any reason.
20. Default. This Agreement may be terminated by either party upon
twenty (20) days prior written notice if the other party has materially breached
the provisions of this Agreement and has not cured such breach within such
notice period. Upon the occurrence of any event of default, the non-defaulting
party may exercise any right or remedy which may be available to it under
applicable law.
21. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter of this
Agreement and shall supersede all prior offers, negotiations, and agreements
with respect to such subject matter. Any provision of any party's invoices,
statements, orders, acknowledgements, or other forms which is inconsistent with
or in addition to the provisions of this Agreement shall be of no force or
effect unless specifically consented to in writing by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DATA TRANSMISSION NETWORK
CORPORATION, a Delaware corporation
By:
--------------------------------
Title:
-----------------------------
ARKANSAS FARM BUREAU FEDERATION
By:
--------------------------------
Title:
-----------------------------
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PURCHASE AND RESTRICTIVE COVENANT AGREEMENT
This Purchase and Restrictive Covenant Agreement (this "Agreement") is
entered into as of March 12, 1997, by and between Data Transmission Network
Corporation, a Delaware corporation ("DTN"), and Market Communications Group,
L.L.C., a Delaware limited liability company ("MCG").
RECITALS:
DTN owns and operates a satellite information transmission system that
provides its subscribers with access via electronic transmission to various
types of information services.
MCG owns and operates a satellite information transmission system that
provides its subscribers with access via electronic transmission to various
types of information services.
MCG and DTN desire in this Agreement to provide for the purchase by
DTN of the assets and business as a going concern of MCG.
NOW THEREFORE, in consideration of the premises and mutual agreements
and covenants contained herein, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the
meanings ascribed to them elsewhere in this Agreement and as follows:
1.1 "Affiliate" means a Person who directly or indirectly,
through one or more intermediaries or otherwise, controls, is controlled by or
is under common control with another Person.
1.2 "Assumed Liabilities" shall mean, collectively: (a) all
trade accounts payable of MCG in existence as of the Effective Date and incurred
in the ordinary course of the Business, whenever created ("Trade Payables"); (b)
all obligations and liabilities under the Leases which accrue or are to be
performed following the Effective Date; and (c) all obligations and liabilities
under the Contracts which accrue or are to be performed following the Effective
Date. The Trade Payables are listed in SCHEDULE 1.2 attached hereto. All of the
Assumed Liabilities are listed in SCHEDULES 1.2, 1.4 AND 1.7.
1.3 "Business" shall mean MCG's business of providing the
MCG Services to Subscribers.
1.4 "Contracts" shall mean, collectively: (a) all agreements
between MCG and Subscribers in effect as of the Effective Date; and (b) the
1
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<PAGE>
license agreements and other contracts to which MCG is a party in connection
with the Business and listed in SCHEDULE 1.4 attached hereto.
1.5 "Effective Date" shall mean March 12, 1997. It is intend-
ed that this Agreement will be simultaneously executed and closed as of the
Effective Date.
1.6 "Farmland" shall mean Farmland Industries, Inc., a
Kansas corporation.
1.7 "Leases" shall mean all real estate and equipment leases
to which MCG is a party in connection with the Business and listed in SCHEDULE
1.7 attached hereto.
1.8 "MCG Services" shall mean, collectively: (a) MCG's
MarketPulse and MarketPRO electronic information services; and (b) all other
electronic data and/or information services provided by MCG as of the Effective
Date.
1.9 "Person" shall mean an individual, partnership,
corporation, limited liability company, trust or other entity.
1.10 "Purchased Assets" means all assets owned by MCG and used
in connection with the Business as of the Effective Date, including: (a) the
Business and the MCG Services as a going concern and all goodwill in connection
therewith; (b) all rights under the Contracts and the Leases; (c) all accounts
receivable of the Business in existence as of the Effective Date, whenever
created; (d) subject to the provisions of Section 5.1.5, all computer hardware
and peripherals, office equipment, communication systems and equipment,
host/uplink and transmission system and equipment, back-up generators and other
equipment owned by MCG, used in the Business and listed in SCHEDULE 1.10
(collectively, the "MCG Equipment") but excluding equipment subject to equipment
Leases; (e) all computer software developed or owned by MCG, including source
codes, object codes, datafeed protocols and interface programs, (f) prepaid
expenses; (g) telephone numbers, furniture, fixtures, leasehold improvements and
supplies; (h) all trade marks, service marks, trade names, logos and other
intangible assets and intellectual property of MCG; and (i) all cash of the
Business on hand as of the Effective Date, but not including the Purchase Price
to be received by MCG.
1.11 "Reuters" shall mean Reuters America Inc., a Delaware
corporation.
1.12 "Subscribers" small mean customers of MCG for one or more
of the MCG Services, including Subscribers who receive one or more of the MCG
Services; (a) directly from MCG for redistribution to their subscribers; (b) via
redistributors of the MCG Services; (c) directly from MCG for internal
redissemination physically controlled by the Subscriber independent of MCG, or
(d) directly from MCG for internal use with no redissemination.
2
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<PAGE>
1.13 "Terminal" shall mean any devise installed at a
Subscriber location that is capable of providing one individual with access to
one or more of the MCG Services at that location independent of access to the
MCG Services by any other individual at the same location, but excluding: (a)
any Terminal operating by a Subscriber whose account with MCG is more than 90
days past due as of the Effective Date; (b) any device installed by MCG
exclusively for promotion, marketing, sales or customer support purposes, and
(c) any device installed at a Subscriber location on a free trial basis for not
more than one period of not to exceed 60 days.
1.14 "Territory" means the United States of America and
Canada.
2. Purchase and Sale of Purchased Assets.
2.1 Upon the terms and conditions contained herein, MCG here-
by sells, transfers and assigns to DTN, and DTN hereby purchases and acquires
from MCG, the Purchased Assets.
2.2 The Purchased Assets are purchased by DTN and sold and
delivered by MCG "as is, where is," with all faults. MCG warrants that it has
good and marketable title to the Purchased Assets free and clear of all liens,
charges, claims, encumbrances and equities other than the Assumed Liabilities.
Otherwise, MCG makes no representation or warranty, express or implied, oral or
in writing, with regard to the condition, quality, adequacy or fitness of the
Purchased Assets, including but not limited to any implied warranties of
merchantability, fitness for a particular purpose or noninfringement, and all
such warranties are expressly disclaimed.
3. Liabilities.
3.1 DTN hereby assumes and agrees to pay and discharge when
due all Assumed Liabilities and shall hold MCG, its members, Affiliates,
successors and assigns harmless therefrom.
3.2 DTN is not assuming and shall have no responsibility for
any debts, obligations or liabilities of MCG not included within the Assumed
Liabilities or not otherwise expressly assumed by DTN in accordance with this
Agreement.
3.3 MCG shall have no liability to DTN from and after the
Effective Date under that Amended and Restated Datafeed Dissemination and
Equipment Lease Agreement between DTN and MCG ("Datafeed and Equipment Lease
Agreement").
4. Purchase Price.
4.1 The purchase price (the "Purchase Price") for the
Purchased Assets shall be an amount equal to $1,500 times the number of
Terminals in existence on the day prior to the Effective Date. The parties
anticipate there will be approximately 2,400 Terminals in existence as of the
3
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<PAGE>
Effective Date and attached to an Assignment and Assumption Agreement to be
executed by MCG and DTN.
4.2 The Purchase Price shall be paid by DTN to MCG by
wire transfer in immediately available funds on the Effective Date
4.3 The Purchase Price shall be allocated as follows:
Fixed Assets [ $ ]
-------------
Goodwill/Subscriber Contracts [ $ ]
-------------
Restrictive Covenant [ $ ]
-------------
DTN and MCG shall each prepare IRS Form 8594 in accordance
with the allocation set forth above in time to file such Form with the Internal
Revenue Service in accordance with applicable IRS procedures and Treasury
regulations.
5. Deliveries.
5.1 In addition to any other documents specifically required
to be delivered pursuant to this Agreement, MCG shall, in form and substance
satisfactory to DTN and its counsel, deliver to DTN on the Effective Date:
5.1.1 A bill of sale, assignments and other
instruments of transfer as required to effectively vest in DTN all of MCG's
right, title and interest in the Purchased Assets, free and clear of all liens,
charges, claims, encumbrances and equities other than the Assumed Liabilities.
5.1.2 Such consents to the assignment of the
Contracts as required under the terms on the Contracts and which MCG is able to
obtain prior to the Effective Date.
5.1.3 A copy of the resolution of MCG's Management
Committee authorizing the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby.
5.1.4. Executed originals or accurate copies of the
Contracts and Leases, all amendments thereto, and all extensions and renewals
thereof.
5.1.5. Copies of all business records of MCG.
DTN acknowledges that the software on which MCG's accounting system is contained
is licensed by MCG from a third party and is necessary for the purpose of
winding down MCG's operations and preparing tax returns. Accordingly, MCG's
accounting system (including hardware and software) shall be made available to
MCG and/or its members for such purposes, at no charge, for a period of twelve
months after the Effective Date. DTN shall maintain the integrity of MCG's
accounting data, software and operating system
4
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<PAGE>
and shall not remove any MCG accounting information from the server or software
during such period. In the alternative, DTN shall provide after the Effective
Date such records and information as MCG or its members require for such
purposes.
5.2 In addition to any other documents specifically required
to be delivered pursuant to this Agreement, DTN shall, in form and substance
satisfactory to MCG and its counsel, deliver to MCG on the Effective Date such
assumptions and undertakings as MCG reasonably deems necessary to evidence DTN's
obligation to assume and discharge the Assumed Liabilities.
5.3 DTN shall not be required to close this Agreement unless
prior to our simultaneous with closing DTN and Reuters enter into the Datafeed
Dissemination Agreement between DTN and Reuters.
6. Documentation Subsequent to Effective Date.
6.1 From time to time after the Effective Date, without
additional consideration, MCG shall execute and deliver such further instruments
and take such other actions as DTN reasonably requests to more effectively
transfer to and vest in DTN, and to put DTN in possession of, the Purchased
Assets.
6.2 From time to time after the Effective Date, without
additional consideration, DTN shall execute and deliver such further instruments
and take such other actions as MCG reasonably requests to more effectively
evidence DTN's obligation to assume and discharge the Assumed Liabilities.
7. Absence of Brokers. Each party represents that it has not
retained or incurred liability to any Person for a broker's, finder's or agent's
fee in connection with the transactions contemplated by this Agreement; and each
party agrees to indemnify and hold the other harmless from the claim of any such
broker, finder or agent retained by such party.
8. Restrictive Covenants.
8.1 For a period of three years commencing on the Effective
Date, MCG agrees that it shall not directly or indirectly or through an
Affiliate provide, anywhere in the Territory, and real-time electronic
information service package which is substantially similar to MCG's MarketPulse
or MarketPRO Ag Service as provided on the Effective Date. DTN shall not be
required to close this Agreement unless prior to or simultaneous with closing,
Farmland enters into a noncompete agreement with DTN containing identical
covenants.
8.2 If any court having jurisdiction shall hold any of the
restrictive covenants in this Section 8 to be unenforceable or unreasonable in
scope, territory or duration and if such court shall determine the scope,
territory or duration which such court deems reasonable, then the scope,
5
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<PAGE>
territory or duration of the covenants in this Section 8 shall be automatically
reduced to that determined to be reasonable by such court. Notwithstanding the
foregoing, if any provision of this Section 8 shall be unenforceable, then such
provision shall be severed from this Section 8, but every other provision shall
continue in full force and effect. The covenants in this Section 8 are an
integral part of the transactions contemplated by this Agreement and DTN would
not have entered into this Agreement in the absence of such covenants. DTN and
MCG agree that no allocation of the Purchase Price shall in any way reflect the
damages which would accrue to DTN in the event of any breach of such restrictive
covenants.
8.3 MCG acknowledges that the covenants in this Section 8 are
reasonable and necessary in order that DTN receive the benefits intended from
the transactions contemplated by this Agreement and that any breach of such
covenants will result in irreparable injury to DTN for which DTN has no adequate
remedy at law. In the even MCG breaches any of the covenants in this Section 8,
DTN shall be authorized to seek from any court of competent jurisdiction a
temporary restraining order and/or preliminary and permanent injunctive relief.
Such remedies shall be cumulative and not exclusive of any other rights or
remedies to which DTN may be entitled as a result of such breach.
9. MCG Employees. DTN shall have no obligation to hire any em-
ployees of MCG. MCG shall be responsible for all obligations to its employees,
including but not limited to salaries, bonuses, vacation pay, retirement bene-
fits, sick pay, insurance premiums, severance pay and other fringe benefits.
10. Indemnification.
10.1 With the exception of the Assumed Liabilities, MCG shall
defend, indemnify and hold DTN, its Affiliates, successors and assigns harmless
from any loss, claim, liability, damage, cost or expense (including but not
limited to reasonable attorneys' fees) ("Damages") arising from: (a) the conduct
of the Business or the provision of the MCG Services or the use of the Purchased
Assets prior to the Effective Date; (b) any breach of this Agreement by MCG; (c)
any material inaccuracy in any of the representations or warranties made by MCG
in this Agreement; or (d) any material inaccuracy or misrepresentation in any
certificate or other document delivered by MCG in accordance with this
Agreement.
10.2 DTN waives compliance with the Bulk Sales provisions of
the Uniforms Commercial Code in connection with this transaction. MCG shall
indemnify DTN, its Affiliates, successors and assigns against any Damages
arising by reason of non-compliance by MCG with the Bulk Sales provisions of the
Uniform Commercial Code or any equivalent statute in connection with the sale of
the Purchased Assets.
10.3 DTN shall be responsible for and shall pay the Assumed
Liabilities. DTN may make adjustments in such Assumed Liabilities as DTN deems
appropriate, provided DTN shall indemnify MCG, its members, Affiliates,
6
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<PAGE>
successors and assigns from any liability which may accrue as a result of any
such adjustment.
10.4 DTN shall defend, indemnify and hold MCG, its members,
Affiliates, successors and assigns harmless from any Damages arising from: (a)
the conduct of the Business or the provision of the MCG Services or the use of
the Purchased Assets following the Effective Date, whether integrated with DTN's
other operations or operated on a stand-line basis; (b) the Assumed Liabilities;
(c) any breach of this Agreement by DTN, (d) any material inaccuracy in any of
the representations or warranties made by DTN in this Agreement; or (e) any
material inaccuracy or misrepresentation in any certificate or other document
delivered by DTN in accordance with this Agreement.
10.5 If any party ("Indemnified Party") entitled to
indemnification from the other party ("Indemnifying Party") under this Agreement
receives notice of any claim or the commencement of any action or proceeding
with respect to which the Indemnifying Party is obligated to indemnify pursuant
to this Agreement, the Indemnified Party shall promptly give the Indemnifying
Party written notice thereof. Such notice shall describe the claim in reasonable
detail and shall indicate the amount (estimated if necessary) of the loss that
has been or may be sustained by the Indemnified Party in connection therewith.
The Indemnifying Party may elect to compromise or defend, at its own expense and
by its own counsel, any such matter involving the asserted liability of the
Indemnified Party. If the Indemnifying Party elects to compromise or defend such
asserted liability, it shall within 30 days (or sooner, if the nature of the
asserted liability so requires) notify the Indemnified Party of its intent to do
so, and the Indemnified Party shall cooperate, at the Indemnifying Party's
expense, in the compromise of or defense against such asserted liability. If the
Indemnifying Party elects not to compromise or defend against the asserted
liability, if the Indemnified Party reasonably determines that the Indemnifying
Party's counsel has a conflict of interest with the Indemnified Party or the
Indemnifying Party or its counsel is not adequately defending the Indemnified
Party's interests, or if the Indemnifying Party fails to notify the Indemnified
Party of its election as provided herein, the Indemnified Party may, if acting
in accordance with its good faith business judgment, pay, compromise or defend
such asserted liability at the Indemnifying Party's expense, and such settlement
shall be binding on the Indemnifying Party for purposes of this Section 10.
Notwithstanding the foregoing, neither the Indemnifying Party nor Indemnified
Party may settle or compromise any claim over the reasonable good faith
objection of the other. The Indemnified Party may object to any settlement which
obligates the Indemnified Party to pay any funds or perform or desist from
performing any actions or which does not provide the Indemnified Party with a
full release from liability. In any event, the Indemnified Party and
Indemnifying Party may each participate, at its own expense, in the defense of
such asserted liability. If the Indemnifying Party elects to defend any claim,
the Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.
7
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<PAGE>
10.6 Notwithstanding the foregoing provisions of this Section
10: (a) neither party shall have any liability to the other party under this
Section 10 for any indirect, incidental or consequential damages or expenses;
and (b) the aggregate liability of each party to the other under this Section 10
shall be limited to an amount not to exceed the Purchase Price.
11. Taxes and Prorations.
11.1 All sales and other similar taxes (not including state or
federal income taxes) payable in connection with this transaction and the
transfer of the Purchased Assets shall be paid by DTN, and DTN shall indemnify
and hold MCG, its members, Affiliates, successors and assigns harmless from any
and all such taxes.
11.2 All property taxes, annual license fees and similar
annual assessments due in connection with the ownership or operation of the
Purchased Assets shall be prorated between DTN and MCG as of the Effective Date.
MCG will provide DTN with an estimate of such taxes, fees and assessments and
shall make available to DTN copies of all tax assessments, notices and related
documents in its possession.
12. Nonassignable Rights. Despite anything contained herein to the
contrary, this Agreement shall not constitute an agreement to assign any
Contract if such assignment without the consent of the other party thereto would
constitute a breach thereof or in any material way affect the rights of MCG
thereunder unless such consent is obtained. If any such consent is not obtained
as of the Effective Date, of if any attempted assignment without such consent
would be ineffective or would materially affect MCG's rights thereunder so that
DTN would not in fact receive all such rights, the parties agree to cooperate in
any reasonable arrangement designed to ensure that DTN shall have the benefits,
rights, obligations and duties under such Contract as soon as practicable
following the Effective Date.
13. Confidentiality. The terms and conditions of this Agreement
are and shall remain and be kept confidential by the parties hereto, their
employees, agents and legal counsel. Except as required by law, regulations or
auditing requirements, the terms of this Agreement shall not be disclosed to any
third Person by MCG without the prior written consent of DTN nor by DTN without
the prior written consent of MCG and its members. No press release regarding
this transaction shall be issued by MCG without the prior written consent of DTN
nor by DTN without the prior written consent of MCG, which consent by MCG shall
not be unreasonably withheld.
14. Lost Equipment Charges. DTN acknowledges that all or sub-
stantially all Equipment (as defined in the Datafeed and Equipment Lease
Agreement) has been accounted for as of the Effective Date. MCG shall have no
responsibility for, and DTN shall not assess or attempt to collect against MCG,
any Lost Equipment Charges under the Datafeed and Equipment Lease Agreement.
8
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<PAGE>
15. Survival of Representations and Warranties. The repre-
sentations and warranties of DTN and MCG contained in this Agreement shall
survive the Effective Date for a period of twelve months.
16. No Assignment. Neither party may assign this Agreement or
delegate any duties hereunder without the written consent of the other party.
Any attempted assignment without such consent shall be null and void.
17. Expenses of Transaction. Except as specifically provided in
this Agreement, each party shall bear its own expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated
hereby.
18. Entire Agreement. Together with the Schedules hereto,
this constitutes the entire agreement between the parties with respect to the
subject matter hereof. There are no other agreements, representations,
warranties or covenants, written or oral, with respect to the transactions
contemplated by this Agreement which are not expressly set forth herein. This
Agreement may not be modified or amended except by written instrument executed
by both parties hereto.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original and both of which, taken together, shall
constitute a single instrument.
20. Notices. Any notice required or permitted under this Agree-
ment shall be in writing and may be delivered personally or sent by a nationally
recognized overnight courier, United States registered or certified mail,
postage prepaid, or facsimile transmission, addressed as set forth below:
If to MCG: Market Communications Group, L.L.C.
8610 NW 107th Terrace
Kansas City, MO 64153
FAX (816) 880-1210
Attn: President
With copies to: Stimson, Mag & Fizzell, P.C.
Suite 2800
1201 Walnut Street
Kansas City, MO 64106
FAX (816) 691-3495
Attn: Marc Salle, Esq.
and
9
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<PAGE>
Farmland Industries, Inc.
3315 N. Farmland Trafficway
Department 62
Kansas City, MO 64116
FAX (816) 459-5902
Attn: Vice President and General
Counsel
and
Reuters America Inc.
1700 Broadway
New York, NY 10019
FAX (212) 307-9378
Attn: Vice President and General
Counsel
If to DTN: Data Transmission Network Corp.
9110 West Dodge Road, Suite 200
Omaha, NE 68114
FAX (402) 390-7188
Attn: President
With a copy to: Abrahams, Kaslow & Cassman
8712 West Dodge Road, Suite 300
Omaha, NE 68114
FAX (402) 392-0816
Attn: R. Craig Fry, Esq.
or to any other address or facsimile number as either party shall give the other
in writing.
21. Binding Effect. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
22. Section Headings. Section headings in this Agreement are
for the purpose of reference only and shall not limit or otherwise affect the
meaning of any of the provisions of this Agreement.
23. Incorporation of Schedules. Each of the Schedules referred
to herein and attached hereto are incorporated herein and shall be deemed to be
a part of this Agreement.
24. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Nebraska, without
reference to conflicts of laws rules.
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<PAGE>
25. Survival. Those provisions of this Agreement which by their
nature are intended to survive the Effective Date shall so survive for such
period of time as necessary to achieve full performance thereof.
26. Conduct and Transactions of MCG Prior to Closing. It is in-
tended that this Agreement will be simultaneously executed and closed. However,
from the date of this Agreement until closing, except to the extent expressly
permitted by this Agreement or resulting from or incident to the transaction
contemplated hereby, or as otherwise consented to by an instrument in writing
signed by DTN:
26.1 MCG will use commercially reasonable efforts to keep the
Business and MCG's organization intact and will not take or permit to be taken
or do or suffer to be done anything other than in the ordinary course of the
Business as presently conducted or necessary or incidental to the performance of
this Agreement, and MCG will use its commercially reasonable efforts to keep
available the services of its officers, employees and agents and to maintain the
goodwill and reputation associated with the MCG Services.
26.2 MCG will not make any changes in its Certificate of
Formation or Limited Liability Company Agreement which would preclude, hinder,
interfere with or otherwise impair the ability of MCG to perform its obligations
pursuant to this Agreement and to consummate the transaction contemplated
hereby.
26.3 MCG will use commercially reasonable efforts to maintain
the Purchased Assets, tangible or intangible, in good operating condition and
repair and take all steps necessary to keep its operations functioning properly.
26.4 MCG will not sell, lease or dispose of, or make any
contract for the sale, lease or disposition of, any of the Purchased Assets
other than in the ordinary and usual course of the Business consistent with the
representations and warranties of MCG contained herein and not in breach of any
of the provisions of this Section 26.
26.5 MCG shall not encumber or permit to be encumbered any
of the Purchased Assets.
26.6 MCG shall not do, or cause to be done, any act or suffer,
or cause to be suffered, any omission which would result in a breach of any of
the representation, warranties or covenants of MCG contained herein if the same
were made a new immediately after such act or omission.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalves by their respective duly authorized
officers, all as of the day and year first above written.
MARKET COMMUNICATIONS GROUP, L.L.C.,
a Delaware limited liability company
By:
-----------------------------------------
Richard H. Weaver
President and CEO
DATA TRANSMISSION NETWORK CORPORATION
a Delaware corporation
By:
-----------------------------------------
Greg T. Sloma
President Chief Operating Officer
12
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<PAGE>
SCHEDULE 1.2
Trade Payables
13
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<PAGE>
SCHEDULE 1.4
Contract Other Than Subscriber Agreements
14
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<PAGE>
SCHEDULE 1.7
Leases
15
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<PAGE>
SCHEDULE 1.10
MCG Equipment
16
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<PAGE>
NONCOMPETE AGREEMENT
This Agreement is entered into as of March 12, 1997 by Farmland Industries Inc.,
a Kansas corporation ("Farmland"), and Data Transmission Network Corporation, a
Delaware corporation ("DTN").
RECITALS
DTN has agreed to purchase the assets and business of Market
Communications Group, L.L.C., a Delaware limited liability company ("MCG")
pursuant to that Purchase and Restrictive Covenant Agreement of even date
herewith ("Purchase Agreement"). Farmland is a member of MCG and is willing to
give the undertakings contained herein as an inducement for DTN to enter into
the Purchase Agreement.
In consideration of the foregoing and the mutual promises and covenants
contained herein, the parties agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement.
2. Restrictive Covenant. For a period of three years commencing on the
Effective Date, Farmland agrees that it shall not directly or indirectly or
through an Affiliate provide, anywhere in the Territory, any real-time
electronic information service package which is substantially similar to MCG's
MarketPulse or MarketPRO Ag Service as provided on the Effective Date (the
"Restrictive Covenant"). DTN acknowledges and agrees that the businesses and
activities conducted by Farmland as of the date of this Agreement are not in
violation of the provisions of the Restrictive Covenant.
3. Enforcement. Farmland acknowledges the Restrictive Covenant is
reasonable and necessary in order that DTN receive the benefits intended from
the transaction contemplated by the Purchase Agreement and that any breach of
the Restrictive Covenant will result in irreparable injury to DTN for which DTN
has no adequate remedy at law. Accordingly, if Farmland breaches the Restrictive
Covenant, DTN shall be authorized to seek from any court of competent
jurisdiction a temporary restraining order and/or preliminary and permanent
injunctive relief for the duration of the Restrictive Covenant.
4. Severability. If a final judicial determination is made that any
provision of the Restrictive Covenant constitutes an unreasonable or otherwise
unenforceable restriction against Farmland, Farmland and DTN agree that such
provision shall be void only to the extent such provision is so determined to be
unreasonable or otherwise unenforceable, and shall be modified to the extent
required to render the same reasonable and enforceable under the circumstances.
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<PAGE>
5. Miscellaneous. This constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except by written instrument executed by Farmland and DTN. This Agreement shall
be binding on the parties and their respective Affiliates, associates and
employees. This Agreement shall be governed by the laws of the State of
Nebraska, without reference to conflicts of laws rules. This Agreement may be
executed in counterparts, each of which shall be an original and both of which,
taken together, shall constitute a single instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
FARMLAND INDUSTRIES, INC.
By:
---------------------------------
"Farmland"
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------
"DTN"
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<PAGE>
BILL OF SALE
------------
Effective March 12, 1997, Market Communications Group, L.L.C., a
Delaware limited liability company ("Seller"), for good and valuable
consideration paid to Seller by Data Transmission Network Corporation, a
Delaware corporation ("Buyer"), receipt of which is hereby acknowledged, and
subject to the terms and conditions of that Purchase and Restrictive Covenant
Agreement of even date herewith (the "Purchase Agreement"), does hereby
irrevocably sell, assign, transfer and deliver to Buyer, its successors and
assigns, the entire right, title and interest of Seller in the Purchase Assets,
as defined in Section 1.10 of the Purchase Agreement, including, without
limitation, the tangible assets listed on Exhibit A attached hereto, wherever
such Purchased Assets may be located and whether or not reflected on the balance
sheet of Seller. All capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Purchase Agreement.
Seller warrants, covenants and agrees that it:
(i) is hereby conveying good and indefeasible title to the
Purchase Assets, free and clear of all liens, charges, claims, encumbrances and
equities whatsoever;
(ii) has complete and unrestricted power to enter into this Bill of
Sales and to sell, assign and transfer its right, title and interest in and to
the Purchase Assets and such sale, assignment and transfer do not and will not
require the consent or approval of any third person or governmental entity,
except as provided in the Purchase Agreement or as otherwise disclosed in
writing to Buyer;
(iii) will forever fully warrant and defend Seller's title to the
Purchased Assets against any and all claims and demands of any kind and
description (other than claims or demands created by sanctions or omissions of
Buyer); and
(iv) will take all steps necessary to put Buyer, its successors or
assigns, in actual possession and control of the Purchased Assets.
Seller agrees that it shall execute and deliver or cause to be executed and
delivered from time to time such instruments, documents, agreements, consents
and assurances and shall take such other actions as Buyer reasonably may require
to more effectively convey, transfer and vest in Buyer all right, title and
interest in and to the Purchased Assets, to put Buyer in possession of the
Purchased Assets, and to carry out the intent and purposes of this instrument.
This instrument shall be binding upon Seller and inure to the benefit
of and be enforceable by Buyer, and their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Seller has caused this instrument to be executed as
of March 12, 1997.
MARKET COMMUNICATIONS GROUP, L.L.C.
By:
---------------------------------------
Richard H. Weaver
President and CEO
"Seller"
ACCEPTED:
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------------
Greg T. Sloma
President and Chief Operating Officer
"Buyer"
20
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<PAGE>
EXHIBIT A
Tangible Assets
---------------
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<PAGE>
ASSIGNMENT AND ASSUMPTION OF SUBSCRIBER AGREEMENTS
--------------------------------------------------
This Assignment is entered into as of March 12, 1997, by Market
Communications Group, L.L.C., a Delaware limited liability company ("Assignor"),
and Data Transmission Network Corporation, a Delaware corporation ("Assignee").
RECITALS
--------
A. Assignor and Assignee are parties to that Purchase and Re-
strictive Covenant Agreement (the "Purchase Agreement") pursuant to which
Assignee has agreed to acquire the assets and business as a going concern of
Assignor.
B. Assignor is a party to the subscriber agreements (the "Sub-
criber Agreements") listed on Exhibit A attached hereto.
C. As part of the transaction contemplated by the Purchase
Agreement, Assignor desires to assign to Assignee all of Assignor's rights and
obligations under the Subscriber Agreements.
AGREEMENT
---------
In consideration of the foregoing and the mutual promises and covenants
contained herein, Assignor and Assigned agree as follows:
1. Assignor assigns to Assignee all of Assignor's right, title
and interest in and obligations under the Subscriber agreements.
2. Assignee accepts such assignment and assumes and agrees to
perform when due all of Assignor's obligations under the Subscriber Agreements
which accrue following the date hereof.
3. This Assignment may be executed in counterparts, each of which
shall be an original and both of which, taken together, shall constitute a
single instrument.
21
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<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have cause this Assignment to
be executed as of the date set forth above.
MARKET COMMUNICATIONS GROUP, L.L.C.
By:
---------------------------------------
Richard H. Weaver
President and CEO
"Assignor"
``
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------------
Greg T. Sloma
President and Chief Operating Officer
"Assignee"
22
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<PAGE>
EXHIBIT A
List of Subscribers
23
- 34 -
<PAGE>
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
--------------------------------------
This Assignment is entered into as of March 12, 1997, by Market
Communications Group, L.L.C., a Delaware limited liability company ("Assignor"),
and Data Transmission Network Corporation, a Delaware corporation ("Assignee").
RECITALS
--------
A. Assignor and Assignee are parties to that Purchase and Restrictive
Covenant Agreement (the "Purchase Agreement") pursuant to which Assignee has
agreed to acquire the assets and business as a going concern of Assignor.
B. Assignor is a party to the agreements (the "Contracts") listed
on Exhibit A attached hereto.
C. As part of the transaction contemplated by the Purchase
Agreement, Assignor desires to assign to Assignee all of Assignor's rights and
obligations under the Contracts.
AGREEMENT
---------
In consideration of the foregoing and the mutual promises and covenants
contained herein, Assignor and Assignee agree as follows:
1. Assignor assigns to Assignee all of Assignor's right, title
and interest in and obligations under the Contracts.
2. Assignee accepts such assignment and assumes and agrees to pay and
perform when due all of Assignor's obligations under the Contracts which accrue
following the date hereof.
3. This Assignment may be executed in counterparts, each of which shall
be an original and both of which, taken together, shall constitute a single
instrument.
24
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<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have cause this Assignment to
be executed as of the date set forth above.
MARKET COMMUNICATIONS GROUP, L.L.C.
By:
---------------------------------------
Richard H. Weaver
President and CEO
"Assignor"
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------------
Greg T. Sloma
President and Chief Operating Officer
"Assignee"
25
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<PAGE>
EXHIBIT A
List of Contracts
26
- 37 -
<PAGE>
CONSENT
-------
The undersigned hereby consents to the assignment by Market
Communications Group, L.L.C., a Delaware limited liability company ("MCG"), to
Data Transmission Network Corporation, a Delaware corporation ("DTN") of the
contract identified below (the "Contract"). The undersigned acknowledges the
Contract is in full force and effect and constitutes the legal, valid and
binding obligation of the undersigned, and that MCG is not in default
thereunder.
Dated as of March 12, 1997.
------------------------------------------
Company Name
By
-----------------------------------------
Signature
Contract:
---------------------------------------------
---------------------------------------------
27
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<PAGE>
ASSIGNMENT AND ASSUMPTION OF OFFICE LEASE
-----------------------------------------
This Assignment is entered into as of March 12, 1997, by Market
Communications Group, L.L.C., a Delaware limited liability company ("Assignor"),
and Data Transmission Network Corporation, a Delaware corporation ("Assignee").
RECITALS
--------
A. Assignor and Assignee are parties to that Purchase and Re-
strictive Covenant Agreement (the "Purchase Agreement") pursuant to which
Assignee has agreed to acquire the assets and business as a going concern of
Assignor.
B. Assignor maintains office space at 8610 N.W. 107th Terrace,
Kansas City, Missouri 64153 (the "Leased Premises").
The Leased Premises are subject to a lease (the "Office Lease") between
Farmland Industries, Inc. as landlord ("Landlord") and Assignor as tenant.
C. As part of the transaction contemplated by the Purchase
Agreement, Assignor desires to assign to Assignee all of Assignor's rights and
obligations under the Contracts.
AGREEMENT
---------
In consideration of the foregoing and the mutual promises and covenants
contained herein, Assignor and Assignee agree as follows:
1. Assignor assigns to Assignee all of Assignor's right, title
and interest in and obligations under the Office Lease.
2. Assignee accepts such assignment and assumes and agrees to
pay and perform when due all of Assignor's obligations under the Office Lease
which accrue following the date hereof.
3. This Assignment may be executed in counterparts, each of which
shall be an original and both of which, taken together, shall constitute a
single instrument.
28
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<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have cause this Assignment to
be executed as of the date set forth above.
MARKET COMMUNICATIONS GROUP, L.L.C.
By:
---------------------------------------
Richard H. Weaver
President and CEO
"Assignor"
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------------
Greg T. Sloma
President and Chief Operating Officer
"Assignee"
29
- 40 -
<PAGE>
CONSENT
-------
The undersigned Landlord consents to the assignment by Market
Communications Group, L.L.C., a Delaware limited liability company ("MCG"), to
Data Transmission Network Corporation, a Delaware corporation ("DTN") of that
Office Lease for the premises located at 8610 N.W. 107th Terrace, Kansas City,
Missouri 64153 and releases MCG from all duties and obligations under the Office
Lease which accrue following the date hereof. The undersigned acknowledges that
the Office Lease is in full force and effect and constitutes the legal, valid
and binding obligation of the undersigned, and that MCG is not in default
thereunder.
Dated as of March 12, 1997.
Farmland Industries, Inc.
By
----------------------------------------
30
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<PAGE>
ASSIGNMENT AND ASSUMPTION OF EQUIPMENT LEASES
---------------------------------------------
This Assignment is entered into as of March 12, 1997, by Market
Communications Group, L.L.C., a Delaware limited liability company ("Assignor"),
and Data Transmission Network Corporation, a Delaware corporation ("Assignee").
RECITALS
--------
A. Assignor and Assignee are parties to that Purchase and Re-
strictive Covenant Agreement (the "Purchase Agreement") pursuant to which
Assignee has agreed to acquire the assets and business as a going concern of
Assignor.
B. Assignor is a party to the equipment leases (the "Equipment
Leases") identified on Exhibit A attached hereto.
C. As part of the transaction contemplated by the Purchase
Agreement, Assignor desires to assign to Assignee all of Assignor's rights and
obligations under the Equipment Leases.
AGREEMENT
---------
In consideration of the foregoing and the mutual promises and covenants
contained herein, Assignor and Assignee agree as follows:
1. Assignor assigns to Assignee all of Assignor's right, title and
interest in and obligations under the Equipment Leases.
2. Assignee accepts such assignment and assumes and agrees to pay and
perform when due all of Assignor's obligations under the Equipment
Leases which accrue following the date hereof.
3. This Assignment may be executed in counterparts, each of which shall be
an original and both of which, taken together, shall constitute a
single instrument.
31
- 42 -
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have cause this Assignment to
be executed as of the date set forth above.
MARKET COMMUNICATIONS GROUP, L.L.C.
By:
---------------------------------------
Richard H. Weaver
President and CEO
"Assignor"
DATA TRANSMISSION NETWORK
CORPORATION
By:
---------------------------------------
Greg T. Sloma
President and Chief Operating Officer
"Assignee"
32
- 43 -
<PAGE>
EXHIBIT A
---------
Equipment Leases
33
- 44 -
<PAGE>
CONSENT
-------
The undersigned equipment lessor hereby consents to the assignment by
Market Communications Group, L.L.C., a Delaware limited liability company
("MCG"), to Data Transmission Network Corporation, a Delaware corporation
("DTN") of that Equipment Lease identified below (the "Equipment Lease"). The
undersigned acknowledges that the Equipment Lease is in full force and effect
and constitutes the legal, valid and binding obligation of the undersigned, and
that MCG is not in default thereunder.
Dated as of March 12, 1997.
------------------------------------------
Company
By
----------------------------------------
Signature
Equipment Lease:
-----------------------------------
-----------------------------------
34
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<PAGE>
STATEMENT OF UNANIMOUS CONSENT
OF THE MANAGEMENT COMMITTEE
OF
MARKET COMMUNICATIONS GROUP, L.L.C.
------------------------------------
The undersigned, being all the members of the Management Committee of
Market Communications Group, L.L.C., a Delaware limited liability company (the
"Company"), in lieu of holding a special meeting of the Management Committee,
hereby consent to the adoption of and hereby adopt the following resolutions,
effective as of this date, such resolutions to have the same force and effect as
if adopted at a special meeting of the Management Committee duly called and
held:
BE IT RESOLVED, that the Management Committee
believes it to be in the best interests of the Company that the assets
and business as a going concern of the Company be sold to Data
Transmission Network Corporation ("DTN") pursuant to that Purchase and
Restrictive Covenant Agreement (the "Purchase Agreement") between the
Company and DTN.
FURTHER RESOLVED, that the Purchase Agreement and the
terms thereof and the transactions contemplated thereby are ratified
and improved in all respects, and the Company is authorized to enter
into and perform its obligations under the Purchase Agreement.
FURTHER RESOLVED, that the President of the Company
is authorized and directed to execute and deliver the Purchase
Agreement in the name and on behalf of the Company, with such changes,
additions or deletions as approved by the Management Committee, such
approval being conclusively evidenced by the President's signature
thereto.
FURTHER RESOLVED, that the President of the Company
is authorized and directed to execute and deliver such further
agreements, certificates and documents and to take such other actions,
in the name and on behalf of the company, as he deems necessary or
appropriate to carry out the Company's obligations under the Purchase
Agreement, to consummate the transactions contemplated thereby and to
carry out the purpose and intent of the foregoing resolutions.
FURTHER RESOLVED, that the President of the Company
is authorized and directed to engage and consult with such accountants,
legal counsel and other advisers as he deems appropriate in connection
with the actions to be taken under the foregoing resolutions.
FURTHER RESOLVED, that any and all actions heretofore
or hereafter taken by the President of the company in furtherance of
the transactions contemplated by the foregoing resolutions are ratified
and approved in all respects.
Dated : March 12, 1997.
For Reuters America Inc. For Farmland Industries, Inc.
- ---------------------------- ------------------------------
Sara Dunn H. D. Cleberg
- ---------------------------- ------------------------------
Jeffrey Maron John Berardi
- ---------------------------- ------------------------------
Howard Naphtali Kent Nunn
35
- 46 -
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made July , 1997,
among THE COTTON COMMUNICATION NETWORK, INC., a Texas corporation, also known as
The Network ("Seller"), DANIEL DAVIS, majority shareholder of Seller
("Shareholder"), and DATA TRANSMISSION NETWORK CORPORATION, a Delaware
corporation ("Purchaser").
R E C I T A L S:
A. Purchaser owns and operates a satellite information transmission
system (the "DTN System") that provides its subscribers with access via
electronic transmission to various types of information services. Purchaser
offers certain information services which provide futures and options quotations
from the major commodity exchanges, including the cotton exchange. Purchaser
also offers other information services serving the agriculture industry as well
as other industries.
B. Seller operates a cotton trading network service (the "Service")
pursuant to which Seller delivers information to end users via the DTN System
(as optional services on certain of Purchaser's information services), provides
such end users with computer programs to process the information on their
personal computers, and allows such end users to communicate trades via a
phone-line based transmission system. Seller has approximately fifty customers
who subscribe to the Service. Seller also develops, markets, distributes,
licenses, maintains, and supports other systems and applications computer
programs. Seller's various lines of business are collectively referred to in
this Agreement as the "Business".
C. Seller and Purchaser desire to enter into this Agreement providing
for the sale to Purchaser of certain of the assets used in the operation of the
Business and assumption by Purchaser of certain liabilities relating to the
Business on the terms and conditions and subject to the exceptions set forth in
this Agreement.
In consideration of the recitals and provisions herein, the parties
agree as follows:
1. Assets To Be Purchased. Seller agrees to sell and Purchaser
agrees to purchase the Business and all of the Assets. The term "Assets" means,
except for the Excluded Assets (as defined at the end of this Section 1), if
any, all of the assets of Seller of every nature and kind, whether tangible or
intangible, and wherever situated, belonging to or used in the Business,
including without limitation all of the following:
1
- 47 -
<PAGE>
(a) The Business and goodwill as a going concern of Seller arising
out of the Business including the right to use the name "The
Network".
(b) The assets (other than cash and equivalents, investments,
notes and accounts receivable, prepaid expenses, and tax
refunds) listed on the balance sheet of Seller as of May 31,
1997 included in Schedule 9.4, including without limitation
the furniture, fixtures, equipment, supplies, leasehold
improvements, computer hardware and other fixed assets listed
on Schedule 1(b) attached hereto, subject to any changes in
the assets which may occur in the ordinary course of the
Business between May 31, 1997 and the Closing Date.
(c) All rights of Seller under contracts, leases and agreements
relating to the Business, whether written or oral, including
without limitation those listed on Schedule 1(c), but
excluding those (if any) which are Excluded Assets.
(d) All trade names, trademarks, service marks, patents, patent
rights, copyrights, and all applications for or registrations
thereof, together with the right to sue for past infringement
thereof, all inventions or discoveries whether patentable or
unpatentable, and all other proprietary rights belonging to or
used in the Business, including without limitation those
listed on Schedule 1(d).
(e) All computer software programs and associated documentation,
whether owned or licensed, used by Seller in the operation of
the Business, including without limitation those listed on
Schedule 1(e).
(f) All licenses, permits, approvals, qualifications, certificates
or the like issued or to be issued or held by Seller with
respect to the Business, including without limitation those
listed on Schedule 1(f).
(g) All of Seller's assignable insurance policies relating to the
Business or the Assets being acquired by Purchaser pursuant to
this Agreement, including all rights of Seller under such
insurance policies as are listed on Schedule 1(g).
(h) All warranties held by Seller with respect to the Assets to
the extent that such warranties are assignable.
(i) All of Seller's know-how, trade secrets and other technology
or procedures relating to the conduct of the Business.
2
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<PAGE>
(j) All of Seller's customer lists, vendor lists, and books and
records of every nature and kind of or used in the Business.
(k) All telephone and facsimile numbers, including "800" numbers,
and post office boxes, of or used in the Business, as
described on Schedule 1(k).
The term "Excluded Assets" as used herein means those current assets of Seller
excluded in Section 1(b) and those contracts, leases and agreements, if any,
which relate to the Business and (i) have not been listed as Assumed Liabilities
on Schedule 3.1 and (ii) after Purchaser becomes aware of such non-listed assets
Purchaser declines to accept them.
2. Purchase Price and Payment. The purchase price payable by
Purchaser for the Assets, subject to the provisions of Section 5, shall be One
Million Dollars ($1,000,000) (the "Purchase Price"), payable without interest as
follows:
(a) Forty Thousand Dollars ($40,000) shall be paid to Seller at
Closing.
(b) Four monthly payments of Forty Thousand Dollars ($40,000) each
shall be paid to Seller commencing one month after the Closing
Date and continuing on the same day of each month for the next
three consecutive months thereafter.
(c) Four payments of Two Hundred Thousand Dollars ($200,000) each
shall be paid to Seller commencing on the second anniversary
date of the Closing Date and continuing on each of the next
three consecutive anniversary dates thereafter.
3. Assumption of Liabilities.
3.1 Assumed Liabilities. At the Closing Purchaser shall
assume, agree to perform, and discharge when due only those obligations of
Seller arising out of the contracts, leases and agreements listed on Schedule
3.1 with respect to the period from and after the Closing Date.
3.2 Excluded Liabilities. Seller and Purchaser agree that
Purchaser does not agree to assume and shall have no responsibility for any of
the debts, obligations or liabilities of Seller other than the Assumed
Liabilities (the "Excluded Liabilities"), all of which shall remain the sole
responsibility of and shall be paid and discharged by Seller as they become due.
The Excluded Liabilities include without limitation all of the following:
(a) Any tax liability or tax obligation of Seller, its directors,
officers, shareholders and agents which has been or may be
3
- 49 -
<PAGE>
asserted by any taxing authority, including without limitation
any such liability or obligation arising out of or in
connection with this Agreement or the transactions
contemplated hereby.
(b) Any liability or obligation of Seller whether incurred prior
to, at or subsequent to the Closing Date for any amounts due
or which may become due to any person or entity who is or has
been a holder of any debt or equity security of Seller.
(c) Any trade account payable or note payable of Seller or any
contract obligation of Seller (other than those referred to in
Section 3.1) whether incurred prior to, at or subsequent to
the Closing Date.
(d) Any liability or obligation arising out of any litigation,
suit, proceeding, action, claim or investigation, at law or in
equity or in arbitration, related to Seller's operation of the
Business prior to the Closing Date.
(e) Any claim, liability or obligation, known or unknown,
contingent or otherwise, the existence of which is a breach
of, or inconsistent with, any representation, warranty or
covenant of Seller set forth in this Agreement.
(f) Any liability or obligation specifically stated in this
Agreement or the Schedules hereto as not to be assumed by
Purchaser.
4. Allocation of Purchase Price. The Purchase Price shall be al-
located among the Assets and the Seller/Shareholder Non-Competition Agreement in
the manner described on Schedule 4. Seller and Purchaser each agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding which is in any way inconsistent with the provisions of this Section
4.
5. Option of Purchaser to Unwind Agreement. At anytime after
the Closing, Purchaser may notify (the "Notice") Seller in writing of
Purchaser's election to terminate this Agreement and unwind the acquisition
contemplated by this Agreement, in which case the obligations of the parties
under all provisions of this Agreement (other than this Section) and under the
Seller/ Shareholder Non-Competition Agreement and the Shareholder Consulting
Agreement shall cease. If the Notice is given, then the obligations of Purchaser
to pay the remainder of the Purchase Price to Seller shall cease; provided that
Seller shall retain that portion of the Purchase Price paid to Seller prior to
the Notice. Seller may, at its option, reacquire from Purchaser any of the
Assets then held by Purchaser plus those improvements or enhancements made by
Purchaser
4
- 50 -
<PAGE>
to the computer software listed on Schedule 1(e) which are used by Purchaser
solely in connection with the cotton trading network. For purposes of
illustration and not by way of limitation, such improvements and enhancements
shall not include any computer software possessed by Purchaser prior to the
Closing or any computer software used by Purchaser in providing any of its
information services other than its cotton trading network service, even if it
also is used in providing such cotton trading network service. The consideration
to be given by Seller to Purchaser shall be the assumption by Seller of those
obligations of Purchaser arising out of the contracts, leases and agreements
listed on Schedule 3.1 and those additional contracts entered into by Purchaser
with customers to receive the cotton trading network service with respect to the
period from and after the date of such reacquisition. In addition, Seller may,
at its option, acquire from Purchaser any additional computer hardware which is
acquired by Purchaser after the date of this Agreement and used by Purchaser
solely in providing the cotton trading network service, for a cash purchase
price equivalent to Purchaser's net book value of the hardware (as determined by
Purchaser in the preparation of its financial statements) as of the last day of
the calendar quarter immediately preceding the date of the Notice. The
reacquisition and purchase by Seller as contemplated by this Section shall occur
at the option of Seller within thirty (30) days after the date of the Notice and
Seller shall be responsible for the sales taxes, if any, arising from such
transaction. If such reacquisition or purchase occurs, such property is to be
reacquired by and sold to Seller "AS IS" and Seller assumes the responsibility
and risks of all defects and conditions relating to such property. Purchaser
makes no representation and assumes no liability for the condition or
completeness of such property (including but not limited to the computer
software and any improvements or enhancements thereto) and Seller assumes all
risk in connection with the use thereof, and releases Purchaser from any
liability in connection with the use thereof by Seller or by any other person.
If the Notice is given, then Purchaser agrees that for a period of three (3)
years after the date of the Notice it will not offer on the DTN System a cotton
trading network service in direct competition with the Service; provided,
however, such restriction shall not preclude Purchaser from continuing to offer
during such three-year period those information services offered by Purchaser on
the date of this Agreement.
6. Information and Access. Seller shall allow Purchaser and
its representatives full access to all of Seller's books and records, files,
contracts, documents, facilities, attorneys and accountants pertaining to the
Business and Assets for purposes of Purchaser's due diligence review. Seller
shall furnish to Purchaser such financial and operating data and other
information concerning the Business and Assets as Purchaser may reasonably
request.
5
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<PAGE>
7. Related Transactions.
7.1 Seller/Shareholder Non-Competition Agreements. At the
Closing, Seller and Shareholder shall execute and deliver a five (5) year
Confidentiality and Non-Competition Agreement in the form of Exhibit A
("Seller/Shareholder Non-Competition Agreement").
7.2 Shareholder Consulting Agreement. At the Closing,
Shareholder and Purchaser shall execute and deliver a Consulting Agreement in
the form of Exhibit B ("Shareholder Consulting Agreement").
7.3 Employees of the Business.
(a) Prior to the Closing Date Seller shall send a letter of
termination (in form and timing approved by Purchaser)
effective as of the Closing Date to all employees of the
Business who will no longer be employed by Seller following
the Closing. Seller shall be solely responsible for and shall
pay at Closing or as soon thereafter as required by law, all
salaries, bonuses, commissions, vacation pay, severance pay,
sick leave, profit-sharing plan contributions, health and
accident insurance, pension benefits, and all other employee
benefits of any kind accruing in favor of the employees of the
Business, and any payroll taxes owing thereon, through the
termination of their employment with Seller. If requested by
Purchaser, Seller will take such actions as may be necessary
to transfer to Purchaser Seller's unemployment compensation
insurance experience accounts relating solely to the Business
as of the Closing Date.
(b) Purchaser may, but is not obligated to, offer to employ as
Purchaser's own employees any of the persons actively
participating in the Business on the Closing Date. All
employees accepting employment under the employment terms and
conditions offered by Purchaser, if any, shall be eligible, as
other similarly situated new employees of Purchaser would be,
for those employee benefit plans which Purchaser has in effect
for its similarly situated existing employees as of the
Closing Date.
7.4 Continued Relationships With Clients. Seller and
Shareholder shall cooperate with Purchaser on communications with clients of the
Business prior to the Closing. Seller understands that Purchaser will expect
satisfactory assurances as to the continued level of business to be anticipated
from clients of the Business from and after the Closing.
6
- 52 -
<PAGE>
8. Closing.
8.1 Date and Place. The closing under this Agreement (the
"Closing") shall take place on or before ______________, 1997, at
________________________________________ or at such other place and time as may
be mutually agreed upon by the parties. The actual date of Closing is referred
to in this Agreement as the "Closing Date".
8.2 Deliveries by Seller and Shareholder. Seller and
Shareholder shall deliver to Purchaser at the Closing the following items and
documents, executed as appropriate by Seller and Shareholder: (a) possession of
all of the Assets; (b) such bills of sale and other instruments of transfer, in
form satisfactory to Purchaser, as are required or appropriate to convey to
Purchaser good and marketable title to the Assets, free and clear of all liens,
encumbrances, claims and restrictions of any nature; (c) the Shareholder
Consulting Agreement; (d) the Seller/Shareholder Non-Competition Agreement; (e)
all third party consents necessary for Seller and Shareholder to consummate the
transactions contemplated by this Agreement; (f) such other documents as
Purchaser may reasonably request in order to show that Seller and Shareholder
have fulfilled all of their other obligations required under this Agreement for
the Closing to occur; and (g) a certified copy of the resolutions of the
shareholders and Board of Directors of the Seller authorizing the execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated by this Agreement.
8.3 Deliveries by Purchaser. Purchaser shall deliver to Seller
and Shareholder at the Closing the following documents, executed as appropriate
by Purchaser: (a) the portion of the Purchase Price specified in Section 2(a);
(b) the Shareholder Consulting Agreement; (c) all third party consents necessary
for Purchaser to consummate the transactions contemplated by this Agreement; (d)
such other documents as Seller and Shareholder may reasonably request in order
to show that Purchaser has fulfilled all of its other obligations required under
this Agreement for the Closing to occur; and (e) a certified copy of the
resolutions of the Board of Directors of the Purchaser approving the execution
and delivery of this Agreement by Purchaser and the consummation of the
transactions contemplated by this Agreement.
9. Representations and Warranties of Seller and Shareholder.
Seller and Shareholder hereby jointly and severally represent, warrant and
covenant to and with Purchaser, as of the date of this Agreement and also as of
the Closing Date, as follows:
9.1 Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Seller has all requisite corporate power and authority to own its assets and to
carry on the Business as now conducted. Seller is duly licensed or qualified to
do business as a foreign corporation and is in good standing in all
7
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<PAGE>
jurisdictions in which it is required to be so licensed or qualified in order to
conduct the Business as presently conducted.
9.2 Authorization. Seller has the requisite corporate power
and authority to execute, deliver and perform this Agreement in accordance with
its terms. The execution, delivery and performance of this Agreement by Seller
have been duly authorized by all necessary corporate action and do not
contravene or constitute a default under any provision of the Articles of
Incorporation or Bylaws of Seller. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by Seller in
accordance with the provisions hereof, will be duly executed and delivered on or
before Closing by Seller through its duly authorized officers. This Agreement
constitutes, and the other agreements, documents and instruments required to be
delivered by Seller or Shareholder (or both) in accordance with the provisions
of this Agreement when executed and delivered by Seller or Shareholder (or both)
will constitute, the legal, valid and binding obligation of Seller or
Shareholder (or both), enforceable against Seller or Shareholder (or both) in
accordance with its and their terms.
9.3 No Violation. The execution and delivery of this Agreement
does not, and the performance of the transactions contemplated hereby by Seller
and Shareholder will not, (i) create, permit or result at any time in the
creation or imposition of any lien, encumbrance, claim or charge of any nature
whatsoever with respect to the Assets; (ii) violate or conflict at any time with
any provision of Seller's Articles of Incorporation or Bylaws or of any
agreement to which Seller or Shareholder is a party or by which Seller,
Shareholder or any of the Assets is bound; and (iii) violate any law,
regulation, rule, or order of any court or governmental authority affecting
Seller, Shareholder, the Business or the Assets.
9.4 Financial Statements. Attached as Schedule 9.4 are true
and correct copies of (a) Seller's unaudited detailed income statements for the
Business for the fiscal years ending December 31, 1993, 1994, 1995, and 1996 and
for the five month period ended May 31, 1997, respectively, and (b) the
unaudited balance sheets of Seller as of December 31, 1993, 1994, 1995 and 1996
and as of May 31, 1997 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principals consistently applied except for the omission of footnotes [and any
other exceptions] and fairly present the financial condition, assets and
liabilities, and results of operations of the Business as of such dates and for
such periods. All liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of the Business as of the date of this Agreement are
fully reflected or reserved against in such balance sheet, except for the
additional liabilities or obligations of the Business accruing in the ordinary
course of the Business since the date of such balance sheet consistent with the
representations, warranties and covenants herein.
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9.5 Title to Assets. Seller has good and marketable title to
and the right to convey the Assets to Purchaser. There are not presently any,
and at Closing there will be no, liens, encumbrances, claims or restrictions of
any kind against any of the Assets. No person or entity other than Seller has or
claims any right, title or interest in and to any of the Assets or the Business.
None of the Assets are leased or being purchased on installment or conditional
sale contract, except as described on Schedule 9.5.
9.6 Necessary Consents. Except as disclosed on
Schedule 9.6, there are no consents of third parties or approvals of any
governmental authority required to be obtained by Seller or Shareholder in order
to consummate the transactions contemplated by this Agreement.
9.7 Litigation. Except as disclosed on Schedule 9.7, there are
no legal, administrative, governmental, arbitration or other actions,
proceedings or investigations pending or, to the knowledge of Seller and
Shareholder, threatened against Seller or Shareholder which would affect in any
respect the Assets or the Business or the ability of Seller and Shareholder to
consummate the transactions contemplated by this Agreement.
9.8 Taxes. Seller has duly and timely paid all taxes required
to be paid, and has duly and timely filed all returns/reports required to be
filed, with respect to the Business under applicable federal, state, local and
other laws and regulations. Seller will duly and timely pay all taxes owing, and
file all returns/reports required, with respect to the Business for any period
ending on or before the Closing Date.
There are no unpaid federal, state or local income, sales, payroll, property or
other taxes of any kind which could constitute a claim, charge or lien against
the Assets or the Business.
9.9 Employees and Sales Representatives; Employee Benefits.
Seller has furnished to Purchaser a true and correct list of the names, ages and
titles of all employees of Seller who work in the Business (whether full or part
time), together with the annual rate of compensation (including bonuses) being
paid to each such employee and the benefits (including without limitation
accrued vacation pay, sick pay, and severance pay) payable to each such employee
upon or with respect to their termination of employment with Seller effective as
of the Closing Date. Seller has also furnished to Purchaser a true and correct
list of the names, ages and titles of all non-employee sales representatives or
agents of Seller who work for the Business, together with the applicable
commissions or consulting fee rates with respect to each such person and the
respective commissions or consulting fees earned by each such person for the
last fiscal year of the Seller. Schedule 9.9 contains a complete list of each
benefit plan or arrangement, whether formal or informal and whether binding or
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not, maintained or contributed to by Seller for the benefit of any of the
employees or non-employee sales representatives or agents of the Business.
9.10 Contracts With Clients and Suppliers. Seller has listed
on Schedule 9.10 all of Seller's contracts (oral or written) with clients and
suppliers of the Business; Seller has no other contracts (oral or written) with
clients and suppliers of the Business. Seller has delivered to Purchaser true,
correct and complete copies of all written contracts relating to the Business,
and written summaries of the terms of all oral contracts relating to the
Business, and all of such contracts are presently in full force and effect and
are assignable. Seller has not received any notices from any clients or
suppliers of the Business that indicate that they intend to terminate any of
such contracts and, except as reflected in the copies delivered to Purchaser or
on Schedule 9.10, such contracts have not been amended and Seller and the other
parties to such contracts are not in default in any material respect under such
contracts. Seller has not been apprised and does not currently believe or have
reason to believe that any of the clients of the Business plan to cancel or
reduce the volume under any client contracts.
9.11 Other Contracts. Schedule 9.11 contains a complete list
of all of Seller's contracts (oral and written) relating to the Business, if
any, other than the contracts with clients and suppliers listed on Schedule
9.10. Seller has delivered to Purchaser true, correct and complete copies of all
such other written contracts relating to the Business and written summaries of
the terms of all such other oral contracts relating to the Business, and all of
such contracts are presently in full force and effect and are assignable, and,
except as reflected in the copies delivered to Purchaser or on Schedule 9.11,
such contracts have not been amended and Seller and the other parties to such
contracts are not in default in any material respect under such contracts.
9.12 Fixed Assets. Attached as Schedule 9.12 is a true and
correct list of all furniture, equipment, leasehold improvements and other fixed
assets of or used in the Business. All of such Assets are in good working
condition with no known material defects and shall be maintained in such
condition pending Closing.
9.13 Bulk Sales. Seller has taken any and all actions required
under the bulk sales laws of the State of Texas with respect to the transactions
contemplated by this Agreement and will satisfy on or before the Closing (or
make arrangements satisfactory to Purchaser in its sole discretion to satisfy)
all creditor claims, excluding Assumed Liabilities.
9.14 Insurance. Seller shall maintain in effect through the
Closing Date all policies of fire, casualty, public liability, workmen's
compensation and errors and omissions insurance presently in effect with respect
to the Business and the Assets.
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9.15 Necessary Assets. Except for any Excluded Assets,
the Assets include all property and rights reasonably required to operate the
Business in the manner the Business is presently operated by Seller. All of the
Assets are located at the Business in Lubbock, Texas.
9.16 Patents, Copyrights, Trademarks and Trade Names. Schedule
9.16 contains an accurate and complete description of all domestic and foreign
patents, copyrights, trademarks, service marks, trademark and service mark
registrations, logos, corporate names, trade names, assumed or fictitious names,
copyrights and copyright registrations, and all applications for any of the
above, (collectively, "Intellectual Property"), presently owned or held by
Seller, or under which Seller owns or holds any license, and which are used in
the operation of the Business. Except with respect to the patents referred to in
Section 14.1(d), to the best knowledge of Seller and Shareholder, neither the
Service nor any Intellectual Property used in the operation of the Business
infringes on any patents, trademarks, service marks, copyrights, or any other
rights, of any person or entity. Seller is the sole owner of, has the sole and
exclusive right to use (without payment of any license fee, royalty or similar
charge), and has the full right and power to sell, has taken all reasonable
measures to maintain and protect, the Intellectual Property, and has granted no
licenses or other rights to utilize the Intellectual Property (except as
provided in the contracts listed on Schedule 9.10); and no claims have been
asserted by any person to the use of any such Intellectual Property or
questioning the validity or effectiveness of any such license, and, to the best
knowledge of Seller and Shareholder, there is no valid basis for any such
claims.
9.17 Compliance With Applicable Laws. In respect to its
ownership of the Assets and operation of the Business, Seller has not in the
past been in violation of and is not presently in violation in any material
respect of any applicable law, rule, regulation, order, ordinance, or judgment
of any governmental authority (collectively, "laws"). Seller has not received
notification of any claimed present or past failure of Seller to comply in any
material respect with any of such laws.
9.18 No Subsidiaries. Seller does not own any shares of
any corporation or any ownership or other investment interest, either of record,
beneficially or equitably, in any association, partnership, joint venture or
other legal entity.
10. Representations and Warranties by Purchaser. Purchaser
represents, warrants and covenants to and with Seller as follows:
10.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has all requisite corporate power and authority to own its assets and
to carry on its business as now conducted.
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10.2 Authorization. Purchaser has the requisite corporate
power and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by Purchaser have been
duly authorized by all necessary corporate action. This Agreement has been, and
the other agreements, documents and instruments required to be delivered by
Purchaser in accordance with this Agreement will be, duly executed and delivered
by Purchaser through its duly authorized officers, and this Agreement
constitutes, and the other agreements, documents and instruments when executed
and delivered will constitute, the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its and their terms.
10.3 No Violation. The execution and delivery of this
Agreement does not, and the performance of the transactions contemplated hereby
by Purchaser will not, (i) violate or conflict at any time with any provision of
Purchaser's Articles of Incorporation or Bylaws or of any agreement to which
Purchaser is a party or by which Purchaser is bound; and (ii) violate any law,
regulation, rule, or order of any court or governmental authority affecting
Purchaser.
10.4 Necessary Consents. There are no consents of
third parties or approvals of any governmental authority required to be obtained
by Purchaser in order to consummate the transactions contemplated by this
Agreement.
10.5 Litigation. There are no legal, administrative,
governmental, arbitration or other actions, proceedings or investigations
pending or, to the knowledge of Purchaser, threatened against Purchaser which
would affect in any respect the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
11. Conditions to Closing.
11.1 Conditions to Purchaser's Obligations. Purchaser's
obligations under this Agreement are expressly conditioned upon each of the
following: (a) All of Seller's representations and warranties set forth in
Section 9 shall be true and correct as of the Closing Date.
(b) Seller and Shareholder shall have taken all actions required
of them under this Agreement and delivered to Purchaser all of
the closing items set forth in Section 8.2 of this Agreement.
(c) There shall have been no damage, destruction or loss to or of
the Assets, whether or not insured, other than ordinary wear
and tear and use in the ordinary course of business, between
the date of this Agreement and the Closing.
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(d) Purchaser shall be satisfied in all respects, in its sole
judgment, with its business, legal, accounting, tax and
financial review of the Assets and Business;
(e) Purchaser shall obtain, upon terms and conditions satisfactory
to Purchaser in its sole judgment, an agreement with EWR Inc.
providing for Purchaser's access to, use of and interactivity
with (including but not limited to the right and ability of
Purchaser to download) the information and applications of
EWR's electronic warehouse receipt system.
(f) Purchaser shall have obtained, or satisfied itself that
it will obtain upon satisfactory terms and costs, such
permits, licenses or other rights (in addition to those
included in the Assets and however denominated) which may be
necessary, in Purchaser's sole and absolute judgement, to
enable Purchaser to develop and operate a cotton trading
network in the manner contemplated by Purchaser (which is to
exceed the scope of the Service offered by Seller) and without
infringing on any patents, trademarks, service marks,
copyrights, or proprietary rights of others. Seller
acknowledges that the Assets and Business may be of no use to
Purchaser unless certain conditions precedent to developing
such cotton trading network exist.
(g) This Agreement and the transactions contemplated hereby
shall have been approved by the Board of Directors of
Purchaser.
11.2 Conditions to Seller's and Shareholder's
Obligations. Seller's and Shareholder's obligations under this Agreement are
expressly conditioned upon each of the following:
(a) All of the representations and warranties of Purchaser
set forth in Section 10 are true and correct as of the Closing
Date; and
(b) Purchaser shall have taken all actions required of it under
this Agreement and delivered to Seller and Shareholder all of
the closing items set forth in Section 8.3 of this Agreement.
12. Conduct of Business. Until the Closing, Seller (a) will carry
on the Business in the ordinary course; (b) will not buy, sell or dispose of any
Assets except in the ordinary course of the Business; (c) will use its best
efforts to preserve its existing relations with its clients, employees,
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suppliers and others; (d) will not increase the compensation and benefits of any
of its employees without Purchaser's approval; (e) will not enter into, or
terminate, any material contracts without Purchaser's consent; and (f) will take
no actions, or fail to take any actions, which would cause its representations
and warranties in this Agreement to become untrue as of the Closing Date.
13. Broker. Each party warrants to the other that it has not used
a broker or finding agent in connection with this transaction and will hold the
other party harmless from any claim made by any person or entity claiming to
have been employed by such party as a broker or finding agent in connection with
the transactions contemplated by this Agreement.
14. Indemnification.
14.1 Indemnification Obligation of Seller and Shareholder.
Seller and Shareholder, jointly and severally, shall indemnify Purchaser and
hold Purchaser harmless from and against any and all liability, loss,
litigation, expense or claim (including reasonable attorney fees) arising out
of, resulting from, relating to, in the nature of or caused by:
(a) Any breach of any representation, warranty, covenant or
agreement made by Seller and/or Shareholder in this Agreement
or in any agreement, statement, certificate, instrument or
other document furnished or delivered or to be furnished or
delivered to Purchaser pursuant hereto or in connection with
the transactions contemplated by this Agreement;
(b) The ownership or operation of the Assets or the Business
prior to the Closing Date (except to the extent included in
the Assumed Liabilities);
(c) The Excluded Liabilities; and
(d) Any infringement or claim of infringement (notice of which
is given to Seller within five years after the Closing) of
either United States Patents Nos. 5063507 or 5285383
registered to Plains Cotton Cooperative Association by any
portion of the Service or the Assets as used in the cotton
trading network developed by Purchaser, but excluding any
infringement to the extent caused by the modification or
enhancement of the Service or the Assets by Purchaser (as an
example of such exclusion, if the infringement is caused by
Purchaser combining the Service with the providing of
electronic warehouse receipt processing); provided, however,
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the cumulative liability of Seller and Shareholder pursuant
to the indemnification obligations under this subsection (d)
alone shall not exceed the amount of the Purchase Price or,
in the case the Notice is given pursuant to Section 5 hereof,
the portion of the Purchase Price paid or payable under this
Agreement.
14.2 Indemnification Obligation of Purchaser. Purchaser shall
indemnify Seller and Shareholder and hold Seller and Shareholder harmless from
and against any and all liability, loss, litigation, expense or claim (including
reasonable attorney fees) arising out of, resulting from, relating to, in the
nature of or caused by:
(a) Any breach of any representation, warranty, covenant or
agreement made by Purchaser in this Agreement or in any
statement, certificate, instrument or other document or item
furnished or delivered or to be furnished or delivered to
Seller and Shareholder pursuant hereto or in connection with
the transactions contemplated by this Agreement;
(b) The ownership or operation of the Assets or the Business on
or after the Closing Date (except to the extent included in
the Excluded Liabilities); and
(c) The Assumed Liabilities.
15. Survival of Representations, Warranties, Covenants and
Indemnities. All representations, warranties, covenants and indemnities in this
Agreement shall survive the Closing, regardless of any investigations made prior
to Closing.
16. Governing Law. This Agreement shall be governed by the laws
of the State of Nebraska without regard to its conflicts of laws principles.
17. Modification. This Agreement may be modified only by a writ-
ing signed by all parties.
18. Schedules and Exhibits. All references to Schedules and
Exhibits herein, unless otherwise stated, means the schedules and exhibits
attached to this Agreement which are hereby incorporated by reference.
19. Notices. Notices to any party shall be deemed given when
deposited in the U.S. Mail, postage prepaid and addressed to the parties as
follows, and otherwise when received:
(The following addresses are for after the Closing)
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If to Seller or Shareholder:
The Cotton Communication Network, Inc.
P.O. Box 5963
Lubbock, Texas 79408
Attention: Daniel Davis, President
If to Purchaser:
Data Transmission Network Corporation
9110 West Dodge Road, Suite 200
Omaha, Nebraska 68114
Attention: Greg T. Sloma, President
Any party may change its address for notice by giving notice to the other
parties as provided above.
20. Assignment and Binding Effect. This Agreement may not be as-
signed prior to the Closing by any party hereto without the prior written
consent of the other parties; provided, however, that Data Transmission Network
Corporation shall have the right to assign its rights and obligations under this
Agreement at any time prior to the Closing to a corporation which is a direct or
indirect wholly-owned subsidiary of Data Transmission Network Corporation.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.
21. Expenses. Each party shall pay its own expenses with
respect to the negotiation and preparation of documents and the consummation of
the transactions provided for in this Agreement.
22. Risk of Loss. Until the Closing, Seller shall bear the risk
of loss to the Assets or Business.
23. Exclusivity. Seller and Shareholder agree not to entertain
any discussions regarding the sale of the Business or Assets with any third
party while this Agreement remains in effect.
24. Post-Closing Effectuation. Following the Closing, each party
agrees to deliver to any other party to this Agreement such instruments and
documents, and to take such other actions, as may be reasonably requested by
such other party to this Agreement to more fully effectuate any of the
transactions contemplated by this Agreement.
25. Right of Set-off. Purchaser shall have the right to
offset against any obligations which Purchaser has to Seller any amount or
amounts which Seller hereafter owes Purchaser pursuant to the indemnification
provisions of this Agreement.
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26. Responsibility for Sales Taxes. Seller shall pay any and
all state and local sales taxes arising out of the sale of the Assets to
Purchaser.
27. Announcements. Neither Seller nor Purchaser shall make any
public announcements about the transactions contemplated by this Agreement
without the other's prior written consent; provided, however, that Purchaser
shall, after reasonable advance notice to Seller, be entitled to make such
public announcements about the transactions contemplated by this Agreement as
may be required by reason of its status as a public company.
28. Severability. If any term or provision of this Agreement
is judicially determined to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the remainder of the Agreement which shall be
enforced so as to give effect as nearly as possible to the parties' original
intent.
29. Entire Agreement. This Agreement, including the Schedules
and Exhibits and the other agreements referenced herein to be executed pursuant
to this Agreement, contains the full understanding of the parties concerning its
subject matter. This Agreement may not be amended except in writing signed by
all parties and none of the provisions of this Agreement may be waived except in
writing signed by the party or parties against whom enforcement of such waiver
is sought.
30. Counterparts. This Agreement may be signed in one or more
counterparts each of which will be an original but which together constitute one
and the same instrument.
31. Confidentiality. Seller and Shareholder agree that following
the Closing and for a period of three (3) years thereafter, all Confidential
Information (as defined herein) shall be maintained in strict confidence by them
and shall not be disclosed to any third party without Purchaser's prior written
consent, except to the extent that information about the operating results of
the Business is required to be furnished by Seller or Shareholder in filings and
other reports to tax and other governmental authorities. For purposes of this
Section 32, "Confidential Information" means, in addition to the information
within that term in the Seller/Shareholder Non-Competition Agreement, the terms
of this Agreement and of all other agreements executed and delivered pursuant
hereto.
[Signature page follows]
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SIGNATURE PAGE TO
ASSET PURCHASE AGREEMENT
AMONG THE NETWORK, INC., DANIEL DAVIS,
AND DATA TRANSMISSION NETWORK CORPORATION
IN WITNESS WHEREOF, the parties have executed this Agreement.
SELLER:
THE COTTON COMMUNICATION NETWORK,
INC.
By:
---------------------------------------
Daniel Davis, President
---------------------------------------
Daniel Davis, Shareholder
PURCHASER:
DATA TRANSMISSION NETWORK CORPORATION
By:
------------------------------------
Title:
---------------------------------
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FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into this ______ day of June, 1997, by and between LAFP-SF, Inc., successor in
interest to The Prudential Insurance Company Of America ("Landlord"), having an
office c/o Lowe Enterprises Colorado, Inc., 1475 Lawrence Street, Suite 210,
Denver, Colorado 80202, and Data Transmission Network Corporation ("Tenant"),
having an office at 9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114.
RECITALS
A. The Prudential Insurance Company of America and Data Transmission
Network Corporation entered into that certain Lease dated as of May 2,
1995, for Suites #175A, #110, #200, #300, #301, #310, #320, #325, #340,
#360, and #362 containing 75,931 rentable square feet (RSF) in the
Building known as Embassy Plaza, located at 9110 West Dodge Road,
Omaha, Nebraska ("the Premises").
B. Subsequently, The Prudential Insurance Company Of America and Data
Transmission Network Corporation executed a First Amendment To Lease
dated September 29, 1995, a Second Amendment To Lease dated November
30, 1995, a Third Amendment To Lease dated January 5, 1996, and a
Fourth Amendment to Lease between LAFP-SF, Inc. and Tenant dated
December 23, 1996. The combined terms of the Lease and subsequent
Amendments shall herein be referred to as the "Lease". Under the Lease
the Premises consists of a total of 88,136 RSF.
C. Landlord and Tenant acknowledge that the surface parking for the
Building is overburdened, in part as a result of Tenant's use thereof.
D. Landlord intends to construct additional parking facilities to ser-
vice Tenant and other tenants in the Building subject to the terms and
conditions contained below.
E. All capitalized terms not defined herein shall have the meanings as-
cribed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing promises and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Parking. Landlord shall construct approximately ninety-six (96)
additional parking spaces to be located on the north side of the
Building in the area outlined in blue on Exhibit A attached hereto and
incorporated herein by this reference ("Additional Parking"). The
Additional Parking shall be for the non-exclusive use of the Tenant in
common with the other tenants in the Building.
2. Base Rent. Tenant shall pay to Landlord, as additional Base Rent,
$39,999.96 per year for the remainder of the Term, payable in monthly
installments of $3,333.33 in accordance with the provisions of Section
2 of the Lease. Tenant's obligation to pay such additional Base Rent
shall commence the first day of the month following substantial
completion of the Additional Parking pursuant to a notice thereof from
Landlord.
3. Effect of Agreement. Except as herein specifically provided, the
terms and conditions of the Lease shall continue in full force and
effect.
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4. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
5. The parties hereto hereby reaffirm and ratify all covenants, represen-
tations and warranties in the Lease as amended by this Amendment.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
Tenant: Landlord:
Data Transmission Network Corporation, LAFP-SF, Inc.
a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
----------------------------------
Its: By:
--------------------------------- ------------------------------
Its:
-----------------------------
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SIXTH AMENDMENT TO LEASE
THIS SIXTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into this ______ day of June, 1997, by and between LAFP-SF, Inc., successor in
interest to The Prudential Insurance Company Of America ("Landlord"), having an
office c/o Lowe Enterprises Colorado, Inc., 1475 Lawrence Street, Suite 210,
Denver, Colorado 80202, and Data Transmission Network Corporation ("Tenant"),
having an office at 9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114.
RECITALS
A. The Prudential Insurance Company of America and Data Transmission
Network Corporation entered into that certain Lease dated as of May 2,
1995, for Suites #175A, #110, #200, #300, #301, #310, #320, #325, #340,
#360, and #362 containing 75,931 rentable square feet (RSF) in the
Building known as Embassy Plaza, located at 9110 West Dodge Road,
Omaha, Nebraska ("the Premises").
B. Subsequently, The Prudential Insurance Company Of America and Data
Transmission Network Corporation executed a First Amendment To Lease
dated September 29, 1995, a Second Amendment To Lease dated November
30, 1995, a Third Amendment To Lease dated January 5, 1996, and a
Fourth Amendment To Lease between LAFP-SF, Inc. and Tenant dated
December 23, 1996, and a Fifth Amendment To Lease dated June , 1997.
The combined terms of the Lease and subsequent Amendments shall herein
be referred to as the "Lease". Under the Lease the Premises consists of
a total of 88,136 RSF.
C. Landlord and Tenant acknowledge that the surface parking for the
Building is overburdened, in part as a result of Tenant's use thereof.
D. Landlord intends to construct additional parking facilities to ser-
vice Tenant and other tenants in the Building subject to the terms and
conditions contained below.
E. All capitalized terms not defined herein shall have the meanings
ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing promises and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Premises. Effective August 1, 1997, the Premises shall be expanded
to include Suite 100, measuring 4,544 RSF as shown on the floor plan
attached hereto, marked Exhibit "A" (the "Expansion Space") and by this
reference made a part hereof. Notwithstanding the above, both Tenant
and Landlord understand that the law offices of Young & White currently
leases Suite 100 with such lease expiring approximately July 31, 1997.
Should Young & White holdover and not vacate Suite 100 by July 31,
1997, Landlord will make reasonable efforts to pursue its legal
remedies to have Young & White removed from the space. If the Expansion
Space is delivered to Tenant after July 31, 1997, Landlord and Tenant
shall execute a Commencement Date Certificate in the form attached
hereto as Exhibit "C", confirming Landlord's delivery of the Expansion
Space and commencement of the Lease with respect to the Expansion
Space.
2. Term. The term of the Lease with respect to the Expansion Space
identified in Paragraph 1 above shall commence August 1, 1997, and
terminate upon termination of the Lease.
3. Base Rent. Tenant shall pay as Base Rent for the Expansion Space
during the Term the sum of Six Hundred and Five Thousand, Four Hundred
Eighty-Eight Dollars and Sixteen Cents ($605,488.16) payable monthly as
follows:
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August 1, 1997 - May 31, 2001 $6,248.00 / Month
June 1, 2001 - May 31, 2005 $6,626.67 / Month
4. Adjustment Rent. Effective upon commencement of the Term for the
Expansion Space, Tenant shall pay Adjustment Rent with respect to the
Expansion Space in accordance with the terms and conditions contained
in Paragraph 2 of the Lease, except that the Base Expense Year and Base
Tax Year with respect to the Expansion Space herein shall be the
calendar year 1997.
5. Tenant Improvements. Landlord shall provide a tenant improvement
allowance of up to $45,440.00 to be applied toward the cost of Tenant's
required building improvements. All improvements shall be performed in
accordance with the Tenant Improvement Work Schedule attached hereto,
marked as Exhibit "B", and by this reference made a part hereof.
6. Tenant's Proportionate Share. Tenant's Proportionate Share with respect
to the Expansion Space shall be 3.45% (4,544 RSF / 131,740 RSF). In
addition, as a part of this Amendment, Tenant's Proportionate Share
schedule for Tenant's remaining Premises contained in paragraph 6 of
the Fourth Amendment To Lease, dated December 23, 1996, shall be
replaced with the following schedule:
January 1, 1997 - December 31, 1997 59.20% (77,990 RSF / 131,740 RSF)
January 1, 1998 - May 31, 2005 66.90% (88,136 RSF / 131,740 RSF)
7. Parking. In order to avoid future problems with overburdened
parking facilities at Embassy Plaza, Tenant acknowledges the building
surface parking lot currently provides a parking ratio of
approximately four (4) parking stalls per 1,000 rentable square feet of
lease space and that this ratio may change from time to time. Effective
January 1, 1998, Tenant agrees to cause its employees, independent
contractors, and other invitees to conform to the current parking
ratio, as it changes from time to time, and further agrees to only park
up to the number of cars permitted using the following calculation:
Tenant's total rentable square feet / 1,000 times the current parking
ratio. In addition, Tenant agrees not to allow its employees,
independent contractors, and other invitees to park cars in the
adjacent Financial Plaza parking lots. Landlord shall maintain the
right to use any means it determines, in its reasonable discretion, to
enforce Tenant's parking space limitations as described herein and/or
in the Rules and Regulations including towing, and Tenant agrees to
cooperate with Landlord in such efforts.
Notwithstanding the above, should Tenant be in default of the Lease as
a result of the parking provisions contained herein, Tenant shall have
up to sixty (60) days to either cure such default or reach written
agreement with the Landlord as to a solution and schedule for curing
such default. Tenant will be allowed, as a method of curing such
default, to acquire from other tenants of the building, if available,
parking spaces from that tenant's parking stall allocation not being
required by such tenant. Such agreement between Tenant and other
building tenant's shall be documented by both parties and approved by
Landlord, with such approval not to be unreasonably withheld. Such
documentation shall include employee counts for such tenant and an
agreement for policing such action. Such agreement shall end upon
termination of such tenant's rights for space within the Embassy Plaza
building.
8. Effect of Agreement. Except as herein specifically provided, the
terms and conditions of the Lease shall continue in full force and
effect.
9. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
2
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<PAGE>
10. The parties hereto hereby reaffirm and ratify all covenants, represen-
tations and warranties in the Lease as amended by this Amendment.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
Tenant: Landlord:
Data Transmission Network Corporation, LAFP-SF, Inc.
a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
----------------------------------
Its: By:
--------------------------------- -----------------------------
Its:
----------------------------
3
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<PAGE>
EXHIBIT "B" to be made a part of a Sixth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997 (Page 1 of 2)
TENANT IMPROVEMENTS WORK SCHEDULE
---------------------------------
ARTICLE I
Landlord's Construction Obligations
-----------------------------------
Landlord shall have no construction obligations under this Amendment.
Tenant accepts the Additional Premises in an "as is" condition, with all faults
and with the understanding that it shall be responsible for any and all
improvements required for its occupancy and use in accordance with Article II of
this Exhibit "B".
ARTICLE II
Construction of Tenant Improvements
-----------------------------------
Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the Additional Space in accordance with the
provisions of Paragraph 9 of the Lease. Landlord shall provide Tenant a tenant
finish allowance of up to Forty Eight Thousand, Six Hundred Dollars and Nineteen
Cents ($45,440.00) to be applied toward the cost of any such tenant-provided
improvements as follows:
1. The tenant finish allowance shall be paid in periodic installments, not
more frequently than once per month, equal to the total of the contractor's or
consultant's invoice amounts for improvements made to the Additional Space,
excluding any furnishings or business equipment (such as computers,
satellite/microwave dish, office equipment, etc.), as submitted by Tenant and
verified to Landlord's reasonable satisfaction; provided, however, that such
payments will be made only if Tenant is not then in Default under the terms of
this Lease and invoices are accompanied by lien waivers in the amount equal to
that of the invoices. The tenant finish allowance shall be allocated and
distributed subject to the provisions of this Exhibit "B" as follows:
August 1, 1997 - July 31, 1998 Up To $45,440.00
2. Upon the earlier of the end date identified in the allocation schedule
specified in Paragraph 1 above, or the satisfaction of all obligations
associated with the tenant improvements covered under this Article II and
receipt of the associated lien waivers for the work, the Tenant shall forfeit
any unused portion of the allowance. Any requests for payment received by the
Landlord after the above specified end dates, will be returned to the Tenant and
will be the obligation and sole responsibility of the Tenant.
3. In addition to the provisions set forth in Paragraph 9 of the Lease,
Tenant's contractor shall (and its contract shall so provide):
(a) conduct its work in such a manner so as not to unreasonably
interfere with other tenants in the Building, Building operations,
or any other construction occurring on or in the Building or the
Premises;
(b) execute a set of and comply with all rules and regulations
relating to the construction activities in or on the Building as
may be reasonably promulgated from time to time by Landlord or its
agents;
(c) maintain such insurance (such as general liability and workman's
compensation) and bonds (such as performance and completion) in
force and effect as may be reasonably requested by Landlord or as
required by applicable law (but in any event said bonds shall be
in amounts equal to the full value or cost of the work being done
by the Tenant contractor);
4
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<PAGE>
EXHIBIT "B" to be made a part of a Sixth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997. (Page 2 of 2)
(d) be responsible for reaching an agreement with Landlord and its
agents as to the terms and conditions for all contractor items
relating to the conducting of its work, including but not limited
to, those matters relating to hoisting, systems interfacing, use
of temporary utilities, storage of materials, placement of
dumpsters, access to the Premises and the Building, and the
purchase and return of Building standard materials.
(e) Upon completion of any tenant improvements, Tenant shall prompt-
ly furnish Landlord with sworn owner's and contractors' statements
and full and final waivers of lien covering all labor and
materials included in such improvements. Tenant shall not permit
any mechanic's lien to be filed against the Building, or any part
thereof, arising out of any improvement performed, or alleged to
have been performed, by or on behalf of Tenant. If any such lien
is filed, Tenant shall within ten (10) days thereafter have such
lien released of record or deliver to Landlord a bond in form,
amount, and issued by a surety satisfactory to Landlord,
indemnifying Landlord against all costs and liabilities resulting
from such lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to have such lien so released or to
deliver such bond to Landlord, Landlord, without investigating the
validity of such lien, may pay or discharge the same; and Tenant
shall reimburse Landlord upon demand for the amount so paid by
Landlord, including Landlord's expenses and attorney's fees.
4. Landlord shall have the right to approve all subcontractors to be used
by the Tenant's contractor, which approval shall not be unreasonably withheld as
long as such subcontractors satisfy the requirements of this Article II.
5. Tenant shall indemnify and hold harmless Landlord, its agents,
contractors (including Building Contractor), and any mortgagee of Landlord, from
and against any and all losses, damages, costs (including costs of suit and
attorneys' fees), liabilities, or causes of action for injury to or death of any
person, for damage to any property, and for mechanic's materialmen's or other
liens or claims arising out of or in connection with the work done by the
Tenant's contractor (and Tenant's contractor's subcontractors and
sub-subcontractors) under its contract with Tenant.
6. The failure by Tenant, after receiving written notice, to materially
comply with any of the provisions of Article II of this Exhibit shall constitute
a Default by Tenant under the terms of the Lease and Landlord shall have the
benefit of all remedies provided for in the Lease, except Tenant shall have a
thirty (30) day right to cure Default upon receipt of written notice .
7. Upon completion of the Tenant Improvements, Tenant shall deliver to
Landlord two (2) copies of the "as built" plans and specifications for the
Tenant Improvements completed under Article II of this Exhibit within thirty
(30) days of completing the same.
5
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SEVENTH AMENDMENT TO LEASE
THIS SEVENTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into this ______ day of , 1997, by and between LAFP-SF, Inc., successor in
interest to The Prudential Insurance Company Of America ("Landlord"), having an
office c/o Lowe Enterprises Colorado, Inc., 1475 Lawrence Street, Suite 210,
Denver, Colorado 80202, and Data Transmission Network Corporation ("Tenant"),
having an office at 9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114.
RECITALS
A. The Prudential Insurance Company of America and Data Transmission
Network Corporation entered into that certain Lease dated as of May 2,
1995, for Suites #175A, #110, #200, #300, #301, #310, #320, #325, #340,
#360, #362, and #100 containing 75,931 rentable square feet (RSF) in
the Building known as Embassy Plaza, located at 9110 West Dodge Road,
Omaha, Nebraska ("the Premises").
B. Subsequently, The Prudential Insurance Company Of America and Data
Transmission Network Corporation executed a First Amendment To Lease
dated September 29, 1995, a Second Amendment To Lease dated January 5,
1996, a Third Amendment To Lease dated January 5, 1996, and a Fourth
Amendment To Lease between LAFP-SF, Inc. and Tenant dated December 23,
1996, a Fifth Amendment To Lease dated July 7, 1997, and a Sixth
Amendment To Lease dated July 7, 1997. The combined terms of the Lease
and subsequent Amendments shall herein be referred to as the "Lease".
Under the Lease the Premises consists of a total of 92,680 RSF.
C. Landlord and Tenant acknowledge that the surface parking for the
Building is overburdened, in part as a result of Tenant's use thereof.
D. Landlord intends to construct additional parking facilities to ser-
vice Tenant and other tenants in the Building subject to the terms and
conditions contained below.
E. All capitalized terms not defined herein shall have the meanings as-
cribed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing promises and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Premises. Effective September 16, 1997, the Premises shall be expand-
ed to include Suite 130, measuring 1,180 RSF as shown on the floor
plans attached hereto, marked Exhibit "A" (the "Expansion Premises")
and by this reference made a part hereof. Notwithstanding the above,
both Tenant and Landlord understand that E.L.H., Inc. / d.b.a. Todays
Temporary currently leases Suite 130, with such lease expiring
approximately September 15, 1997. Should E.L.H., Inc. / d.b.a. Todays
Temporary holdover and not vacate Suite 130 by September 15, 1997,
Landlord will make reasonable efforts to pursue its legal remedies to
have E.L.H., Inc. / d.b.a. Todays Temporary removed from the space. If
the Expansion Premises is delivered to Tenant after September 16, 1997,
Landlord and Tenant shall execute a Commencement Date Certificate in
the form attached hereto as Exhibit "C", confirming Landlord's delivery
of the Expansion Premises and commencement of the Lease with respect to
the Expansion Premises.
2. Term. The term of the Lease with respect to the Expansion Premises
identified in Paragraph 1 above shall commence September 16, 1997, and
terminate upon termination of the Lease.
1
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<PAGE>
3. Base Rent. Tenant shall pay as Base Rent for the Expansion Pre-
mises during the Term the sum of One Hundred Fifty-Four Thousand, Nine
Hundred and One Dollars, and Nine Cents ($154,901.09) payable monthly
as follows:
September 16, 1997 - May 31, 2001 $1,622.50 / Month
June 1, 2001 - May 31, 2005 $1,720.83 / Month
4. Adjustment Rent. Effective upon commencement of the Term with respect
to the Expansion Premises, Tenant shall pay Adjustment Rent with
respect to the Expansion Premises in accordance with the terms and
conditions contained in Paragraph 2 of the Lease, except that the Base
Expense Year and Base Tax Year with respect to the Expansion Premises
herein shall be the calendar year 1997.
5. Tenant Improvements. Landlord shall provide a tenant improvement
allowance of up to $11,800.00 to be applied toward the cost of Tenant's
required building improvements. All improvements shall be performed in
accordance with the Tenant Improvement Work Schedule attached hereto,
marked as Exhibit "B", and by this reference made a part hereof.
6. Tenant's Proportionate Share. The schedule for Tenant's Propor-
tionate Share with space having a Base Expense Year and Base Tax Year
of 1997, shall be revised to reflect the incorporation of the Expansion
Premises as follows:
August 1, 1997 - September 15, 1997 3.45% (4,544 RSF / 131,740 RSF)
September 16, 1997 - May 31, 2005 4.34% (5,724 RSF / 131,740 RSF)
7. Effect of Agreement. Except as herein specifically provided, the
terms and conditions of the Lease shall continue in full force and
effect.
8. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
9. The parties hereto hereby reaffirm and ratify all covenants, represen-
tations and warranties in the Lease as amended by this Amendment.
2
- 73 -
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
Tenant: Landlord:
Data Transmission Network Corporation, LAFP-SF, Inc.
a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
-----------------------------------
Its: By:
---------------------------------- -----------------------------
Its:
----------------------------
3
- 74 -
<PAGE>
EXHIBIT "B" to be made a part of a Seventh Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997 (Page 1 of 2)
TENANT IMPROVEMENTS WORK SCHEDULE
---------------------------------
ARTICLE I
Landlord's Construction Obligations
-----------------------------------
Landlord shall have no construction obligations under this Amendment.
Tenant accepts the Expansion Premises in an "as is" condition, with all faults
and with the understanding that it shall be responsible for any and all
improvements required for its occupancy and use in accordance with Article II of
this Exhibit "B".
ARTICLE II
Construction of Tenant Improvements
-----------------------------------
Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the Expansion Premises in accordance with
the provisions of Paragraph 9 of the Lease. Landlord shall provide Tenant a
tenant finish allowance of up to Eleven Thousand, Eight Hundred Dollars and No
Cents ($11,800.00) to be applied toward the cost of any such tenant-provided
improvements as follows:
1. The tenant finish allowance shall be paid in periodic installments, not
more frequently than once per month, equal to the total of the contractor's or
consultant's invoice amounts for improvements made to the Expansion Premises,
excluding any furnishings or business equipment (such as computers,
satellite/microwave dish, office equipment, etc.), as submitted by Tenant and
verified to Landlord's reasonable satisfaction; provided, however, that such
payments will be made only if Tenant is not then in Default under the terms of
this Lease and invoices are accompanied by lien waivers in the amount equal to
that of the invoices. The tenant finish allowance shall be allocated and
distributed subject to the provisions of this Exhibit "B" as follows:
September 16, 1997 - September 15, 1998 Up To $11,800.00
2. Upon the earlier of the end date identified in the allocation schedule
specified in Paragraph 1 above, or the satisfaction of all obligations
associated with the tenant improvements covered under this Article II and
receipt of the associated lien waivers for the work, the Tenant shall forfeit
any unused portion of the allowance. Any requests for payment received by the
Landlord after the above specified end date, will be returned to the Tenant and
will be the obligation and sole responsibility of the Tenant.
3. In addition to the provisions set forth in Paragraph 9 of the Lease,
Tenant's contractor shall (and its contract shall so provide):
(a) conduct its work in such a manner so as not to unreasonably
interfere with other tenants in the Building, Building operations,
or any other construction occurring on or in the Building or the
Premises;
(b) execute a set of and comply with all rules and regulations
relating to the construction activities in or on the Building as
may be reasonably promulgated from time to time by Landlord or its
agents;
(c) maintain such insurance (such as general liability and workman's
compensation) and bonds (such as performance and completion) in
force and effect as may be reasonably requested by Landlord or as
required by applicable law (but in any event said bonds shall be
in amounts equal to the full value or cost of the work being done
by the Tenant contractor);
4
- 75 -
<PAGE>
EXHIBIT "B" to be made a part of a Seventh Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997. (Page 2 of 2)
(d) be responsible for reaching an agreement with Landlord and its
agents as to the terms and conditions for all contractor items
relating to the conducting of its work, including but not limited
to, those matters relating to hoisting, systems interfacing, use
of temporary utilities, storage of materials, placement of
dumpsters, access to the Premises and the Building, and the
purchase and return of Building standard materials.
(e) Upon completion of any tenant improvements, Tenant shall
promptly furnish Landlord with sworn owner's and contractors'
statements and full and final waivers of lien covering all labor
and materials included in such improvements. Tenant shall not
permit any mechanic's lien to be filed against the Building, or
any part thereof, arising out of any improvement performed, or
alleged to have been performed, by or on behalf of Tenant. If any
such lien is filed, Tenant shall within ten (10) days thereafter
have such lien released of record or deliver to Landlord a bond in
form, amount, and issued by a surety satisfactory to Landlord,
indemnifying Landlord against all costs and liabilities resulting
from such lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to have such lien so released or to
deliver such bond to Landlord, Landlord, without investigating the
validity of such lien, may pay or discharge the same; and Tenant
shall reimburse Landlord upon demand for the amount so paid by
Landlord, including Landlord's expenses and attorney's fees.
4. Landlord shall have the right to approve all subcontractors to be used
by the Tenant's contractor, which approval shall not be unreasonably withheld as
long as such subcontractors satisfy the requirements of this Article II.
5. Tenant shall indemnify and hold harmless Landlord, its agents,
contractors (including Building Contractor), and any mortgagee of Landlord, from
and against any and all losses, damages, costs (including costs of suit and
attorneys' fees), liabilities, or causes of action for injury to or death of any
person, for damage to any property, and for mechanic's materialmen's or other
liens or claims arising out of or in connection with the work done by the
Tenant's contractor (and Tenant's contractor's subcontractors and
sub-subcontractors) under its contract with Tenant.
6. The failure by Tenant, after receiving written notice, to materially
comply with any of the provisions of Article II of this Exhibit shall constitute
a Default by Tenant under the terms of the Lease and Landlord shall have the
benefit of all remedies provided for in the Lease, except Tenant shall have a
thirty (30) day right to cure Default upon receipt of written notice .
7. Upon completion of the Tenant Improvements, Tenant shall deliver to
Landlord two (2) copies of the "as built" plans and specifications for the
Tenant Improvements completed under Article II of this Exhibit within thirty
(30) days of completing the same.
5
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<PAGE>
EXHIBIT "C" TO A SEVENTH AMENDMENT TO LEASE
BETWEEN
LAFP-SF, INC., (LANDLORD)
AND
DATA TRANSMISSION NETWORK CORPORATION, (TENANT)
DATED JANUARY 5, 1998
COMMENCEMENT DATE AGREEMENT
This Commencement Date Agreement is entered into by Landlord and Tenant
pursuant to Paragraph 1 of this Amendment.
1. DEFINITIONS. In this Agreement the following terms have the
meanings given to them:
(a) Landlord: LAFP-SF, Inc.
(b) Tenant: Data Transmission Network
Corporation
(c) Lease: Lease between Landlord and Tenant,
dated May 2, 1995, and subsequently amended
via a First Amendment To Lease dated
September 29, 1995, a Second Amendment To
Lease dated January 5, 1996, a Third
Amendment To Lease dated January 5, 1996, a
Fourth Amendment To Lease dated December 23,
1996, a Fifth Amendment To Lease dated July
7, 1997, and a Sixth Amendment To Lease
dated July 7, 1997, a Seventh Amendment To
Lease dated September 19, 1997, and an
Eighth Amendment To Lease dated September
19, 1997.
2. CONFIRMATION OF THE COMMENCEMENT DATE WITH REGARD TO THE
OCCUPANCY, BY TENANT, OF SUITE. Landlord and Tenant confirm that the
Commencement Date of the Lease with regard to the Expansion Premises is January
5, 1998.
Landlord and Tenant have executed this Commencement Date Agreement as
of the date set forth above.
Tenant: Landlord:
DATA TRANSMISSION NETWORK LAFP-SF, INC.
CORPORATION, a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
---------------------------------
Its: By:
-------------------------------- -----------------------------
Its:
----------------------------
6
- 77 -
EIGHTH AMENDMENT TO LEASE
THIS EIGHTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into this ______ day of , 1997, by and between LAFP-SF, Inc., successor in
interest to The Prudential Insurance Company Of America ("Landlord"), having an
office c/o Lowe Enterprises Colorado, Inc., 1475 Lawrence Street, Suite 210,
Denver, Colorado 80202, and Data Transmission Network Corporation ("Tenant"),
having an office at 9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114.
RECITALS
A. The Prudential Insurance Company of America and Data Transmission
Network Corporation entered into that certain Lease dated as of May 2,
1995, for Suites #175A, #110, #200, #300, #301, #310, #320, #325, #340,
#360, #362, and #100 containing 75,931 rentable square feet (RSF) in
the Building known as Embassy Plaza, located at 9110 West Dodge Road,
Omaha, Nebraska ("the Premises").
B. Subsequently, The Prudential Insurance Company Of America and Data
Transmission Network Corporation executed a First Amendment To Lease
dated September 29, 1995, a Second Amendment To Lease dated January 5,
1996, a Third Amendment To Lease dated January 5, 1996, and a Fourth
Amendment To Lease between LAFP-SF, Inc. and Tenant dated December 23,
1996, a Fifth Amendment To Lease dated July 7, 1997, a Sixth Amendment
To Lease dated July 7, 1997, and a Seventh Amendment To Lease dated
September , 1997. The combined terms of the Lease and subsequent
Amendments shall herein be referred to as the "Lease". Under the Lease
the Premises consists of a total of 93,860 RSF.
C. Landlord and Tenant acknowledge that the surface parking for the
Building is overburdened, in part as a result of Tenant's use thereof.
D. Landlord intends to construct additional parking facilities to ser-
vice Tenant and other tenants in the Building subject to the terms and
conditions contained below.
E. All capitalized terms not defined herein shall have the meanings
ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing promises and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Premises. Effective September 16, 1997, the Premises shall be expanded
to include Suite 315 (3,430 RSF) and the adjacent corridor space (142
RSF), measuring 3,572 RSF as shown on the floor plans attached hereto,
marked Exhibit "A" (the "Additional Expansion Premises") and by this
reference made a part hereof for a total Premises of 97,432 RSF.
Notwithstanding the above, both Tenant and Landlord understand that GAB
Robins, Inc., currently leases Suite 315, with such lease expiring
approximately September 15, 1997. Should GAB Robins, Inc., holdover and
not vacate Suite 315 by September 15, 1997, Landlord will make
reasonable efforts to pursue its legal remedies to have GAB Robins,
Inc., removed from the space. If the Additional Expansion Premises is
delivered to Tenant after September 16, 1997, Landlord and Tenant shall
execute a Commencement Date Certificate in the form attached hereto as
Exhibit "C", confirming Landlord's delivery of the Additional Expansion
Premises and commencement of the Lease with respect to the Additional
Expansion Premises.
2. Term. The term of the Lease with respect to the Additional Expansion
Premises identified in Paragraph 1 above shall commence September 16,
1997, and terminate upon termination of the Lease.
1
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<PAGE>
3. Base Rent. Tenant shall pay as Base Rent for the Additional Expansion
Premises during the Term the sum of Four Hundred Sixty-Eight Thousand,
Six Hundred and One Dollars, and Ninety-One Cents ($468,601.91) payable
monthly as follows:
September 16, 1997 - May 31, 2001 $4,911.50 / Month
June 1, 2001 - May 31, 2005 $5,209.17 / Month
4. Adjustment Rent. Effective upon commencement of the Term with respect
to the Additional Expansion Premises, Tenant shall pay Adjustment Rent
with respect to the Additional Expansion Premises in accordance with
the terms and conditions contained in Paragraph 2 of the Lease, except
that the Base Expense Year and Base Tax Year with respect to the
Additional Expansion Premises herein shall be the calendar year 1997.
5. Tenant Improvements. Landlord shall provide a tenant improvement
allowance of up to $35,720.00 to be applied toward the cost of Tenant's
required building improvements. All improvements shall be performed in
accordance with the Tenant Improvement Work Schedule attached hereto,
marked as Exhibit "B", and by this reference made a part hereof.
6. Tenant's Proportionate Share. The schedule for Tenant's Proportionate
Share shall be revised to reflect the incorporation of the Additional
Expansion Premises as follows:
Floor Space with a 1994 Base Expense Year and Base Tax Year:
January 1, 1997-September 15, 1997 59.20% (77,992 RSF / 131,740 RSF)
September 16, 1997-December 31, 1997 59.14% (77,992 RSF / 131,882 RSF)
January 1, 1998-May 31, 2005 66.83% (88,136 RSF / 131,882 RSF)
Floor Space with a 1997 Base Expense Year and Base Tax Year:
August 1, 1997 - September 15, 1997 3.45% (4,544 RSF / 131,740 RSF)
September 16, 1997 - May 31, 2005 7.05% (9,296 RSF / 131,882 RSF)
7. Effect of Agreement. Except as herein specifically provided, the
terms and conditions of the Lease shall continue in full force and
effect.
8. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
9. The parties hereto hereby reaffirm and ratify all covenants, represen-
tations and warranties in the Lease as amended by this Amendment.
2
- 79 -
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
Tenant: Landlord:
Data Transmission Network Corporation, LAFP-SF, Inc.
a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
-----------------------------------
Its: By:
---------------------------------- -----------------------------
Its:
----------------------------
3
- 80 -
<PAGE>
EXHIBIT "B" to be made a part of an Eighth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated
1997 (Page 1 of 2).
- ---------------------------
TENANT IMPROVEMENTS WORK SCHEDULE
---------------------------------
ARTICLE I
Landlord's Construction Obligations
-----------------------------------
Landlord shall have no construction obligations under this Amendment.
Tenant accepts the Additional Expansion Premises in an "as is" condition, with
all faults and with the understanding that it shall be responsible for any and
all improvements required for its occupancy and use in accordance with Article
II of this Exhibit "B".
ARTICLE II
Construction of Tenant Improvements
-----------------------------------
Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the Additional Expansion Premises in
accordance with the provisions of Paragraph 9 of the Lease. Landlord shall
provide Tenant a tenant finish allowance of up to Thirty-Five Thousand, Seven
Hundred and Twenty Dollars and No Cents ($35,720.00) to be applied toward the
cost of any such tenant-provided improvements as follows:
1. The tenant finish allowance shall be paid in periodic installments, not
more frequently than once per month, equal to the total of the contractor's or
consultant's invoice amounts for improvements made to the Additional Expansion
Premises, excluding any furnishings or business equipment (such as computers,
satellite/microwave dish, office equipment, etc.), as submitted by Tenant and
verified to Landlord's reasonable satisfaction; provided, however, that such
payments will be made only if Tenant is not then in Default under the terms of
this Lease and invoices are accompanied by lien waivers in the amount equal to
that of the invoices. The tenant finish allowance shall be allocated and
distributed subject to the provisions of this Exhibit "B" as follows:
September 16, 1997 - September 15, 1998 Up To $35,720.00
2. Upon the earlier of the end date identified in the allocation schedule
specified in Paragraph 1 above, or the satisfaction of all obligations
associated with the tenant improvements covered under this Article II and
receipt of the associated lien waivers for the work, the Tenant shall forfeit
any unused portion of the allowance. Any requests for payment received by the
Landlord after the above specified end date, will be returned to the Tenant and
will be the obligation and sole responsibility of the Tenant.
3. In addition to the provisions set forth in Paragraph 9 of the Lease,
Tenant's contractor shall (and its contract shall so provide):
(a) conduct its work in such a manner so as not to unreasonably
interfere with other tenants in the Building, Building operations,
or any other construction occurring on or in the Building or the
Premises;
(b) execute a set of and comply with all rules and regulations
relating to the construction activities in or on the Building as
may be reasonably promulgated from time to time by Landlord or its
agents;
(c) maintain such insurance (such as general liability and workman's
compensation) and bonds (such as performance and completion) in
force and effect as may be reasonably requested by Landlord or as
required by applicable law (but in any event said bonds shall be
in amounts equal to the full value or cost of the work being done
by the Tenant contractor);
4
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<PAGE>
EXHIBIT "B" to be made a part of an Eighth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated
1997. (Page 2 of 2).
- --------------
(d) be responsible for reaching an agreement with Landlord and its
agents as to the terms and conditions for all contractor items
relating to the conducting of its work, including but not limited
to, those matters relating to hoisting, systems interfacing, use
of temporary utilities, storage of materials, placement of
dumpsters, access to the Premises and the Building, and the
purchase and return of Building standard materials.
(e) Upon completion of any tenant improvements, Tenant shall promptly
furnish Landlord with sworn owner's and contractors' statements
and full and final waivers of lien covering all labor and
materials included in such improvements. Tenant shall not permit
any mechanic's lien to be filed against the Building, or any part
thereof, arising out of any improvement performed, or alleged to
have been performed, by or on behalf of Tenant. If any such lien
is filed, Tenant shall within ten (10) days thereafter have such
lien released of record or deliver to Landlord a bond in form,
amount, and issued by a surety satisfactory to Landlord,
indemnifying Landlord against all costs and liabilities resulting
from such lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to have such lien so released or to
deliver such bond to Landlord, Landlord, without investigating the
validity of such lien, may pay or discharge the same; and Tenant
shall reimburse Landlord upon demand for the amount so paid by
Landlord, including Landlord's expenses and attorney's fees.
4. Landlord shall have the right to approve all subcontractors to be used
by the Tenant's contractor, which approval shall not be unreasonably withheld as
long as such subcontractors satisfy the requirements of this Article II.
5. Tenant shall indemnify and hold harmless Landlord, its agents,
contractors (including Building Contractor), and any mortgagee of Landlord, from
and against any and all losses, damages, costs (including costs of suit and
attorneys' fees), liabilities, or causes of action for injury to or death of any
person, for damage to any property, and for mechanic's material men's or other
liens or claims arising out of or in connection with the work done by the
Tenant's contractor (and Tenant's contractor's subcontractors and
sub-subcontractors) under its contract with Tenant.
6. The failure by Tenant, after receiving written notice, to materially
comply with any of the provisions of Article II of this Exhibit shall constitute
a Default by Tenant under the terms of the Lease and Landlord shall have the
benefit of all remedies provided for in the Lease, except Tenant shall have a
thirty (30) day right to cure Default upon receipt of written notice .
7. Upon completion of the Tenant Improvements, Tenant shall deliver to
Landlord two (2) copies of the "as built" plans and specifications for the
Tenant Improvements completed under Article II of this Exhibit within thirty
(30) days of completing the same.
5
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<PAGE>
EXHIBIT "C" TO AN EIGHTH AMENDMENT TO LEASE
BETWEEN
LAFP-SF, INC., (LANDLORD)
AND
DATA TRANSMISSION NETWORK CORPORATION, (TENANT)
DATED , 1997
-----------
COMMENCEMENT DATE AGREEMENT
---------------------------
This Commencement Date Agreement is entered into by Landlord and Tenant
pursuant to Paragraph 1 of this Amendment.
1. DEFINITIONS. In this Agreement the following terms have the
meanings given to them:
(a) Landlord: LAFP-SF, Inc.
(b) Tenant: Data Transmission Network
Corporation
(c) Lease: Lease between Landlord and Tenant,
dated May 2, 1995, and subsequently amended
via a First Amendment To Lease dated
September 29, 1995, a Second Amendment To
Lease dated January 5, 1996, a Third
Amendment To Lease dated January 5, 1996, a
Fourth Amendment To Lease dated December 23,
1996, a Fifth Amendment To Lease dated July
7, 1997, a Sixth Amendment To Lease dated
July 7, 1997, and an Seventh Amendment To
Lease dated 1997.
--------------
2. CONFIRMATION OF THE COMMENCEMENT DATE WITH REGARD TO THE
OCCUPANCY, BY TENANT, OF SUITE. Landlord and Tenant confirm that the
Commencement Date of the Lease with regard to the Additional Expansion Premises
is , 1997.
----------------
Landlord and Tenant have executed this Commencement Date Agreement as
of the date set forth above.
Tenant: Landlord:
DATA TRANSMISSION NETWORK LAFP-SF, INC.
CORPORATION, a Delaware corporation
Lowe Enterprises Investment Management,
Inc.
By: Its: Authorized Agent
--------------------------------
Its: By:
------------------------------- ------------------------------------
Its:
-----------------------------------
6
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EXHIBIT "B" to be made a part of a Ninth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997 (Page 1 of 2)
TENANT IMPROVEMENTS WORK SCHEDULE
ARTICLE I
Landlord's Construction Obligations
Landlord shall have no construction obligations under this Amendment.
Tenant accepts the Option Space in an "as is" condition, with all faults and
with the understanding that it shall be responsible for any and all improvements
required for its occupancy and use in accordance with Article II of this Exhibit
"B".
ARTICLE II
Construction of Tenant Improvements
Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the Option Space in accordance with the
provisions of Paragraph 9 of the Lease. Landlord shall provide Tenant a tenant
finish allowance of up to One Hundred Twenty-One Thousand, Seven Hundred and
Twenty-Eight Dollars and No Cents ($121,728.00) to be applied toward the cost of
any such tenant-provided improvements as follows:
1. The tenant finish allowance shall be paid in periodic installments, not
more frequently than once per month, equal to the total of the contractor's or
consultant's invoice amounts for improvements made to the Option Space,
excluding any furnishings or business equipment (such as computers,
satellite/microwave dish, office equipment, etc.), as submitted by Tenant and
verified to Landlord's reasonable satisfaction; provided, however, that such
payments will be made only if Tenant is not then in Default under the terms of
this Lease and invoices are accompanied by lien waivers in the amount equal to
that of the invoices. The tenant finish allowance shall be allocated and
distributed subject to the provisions of this Exhibit "B" as follows:
January 1, 1998 - December 31, 1998 Up To $121,728.00
2. Upon the earlier of the end date identified in the allocation schedule
specified in Paragraph 1 above, or the satisfaction of all obligations
associated with the tenant improvements covered under this Article II and
receipt of the associated lien waivers for the work, the Tenant shall forfeit
any unused portion of the allowance. Any requests for payment received by the
Landlord after the above specified end date, will be returned to the Tenant and
will be the obligation and sole responsibility of the Tenant.
3. In addition to the provisions set forth in Paragraph 9 of the Lease,
Tenant's contractor shall (and its contract shall so provide):
(a) conduct its work in such a manner so as not to unreasonably
interfere with other tenants in the Building, Building operations,
or any other construction occurring on or in the Building or the
Premises;
(b) execute a set of and comply with all rules and regulations
relating to the construction activities in or on the Building as
may be reasonably promulgated from time to time by Landlord or its
agents;
(c) maintain such insurance (such as general liability and workman's
compensation) and bonds (such as performance and completion) in
force and effect as may be reasonably requested by Landlord or as
required by applicable law (but in any event said bonds shall be
in amounts equal to the full value or cost of the work being done
by the Tenant contractor);
1
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<PAGE>
EXHIBIT "B" to be made a part of a Ninth Amendment To Lease between LAFP-SF,
INC. (Landlord), and DATA TRANSMISSION NETWORK CORPORATION (Tenant), dated ,
1997. (Page 2 of 2)
(d) be responsible for reaching an agreement with Landlord and its
agents as to the terms and conditions for all contractor items
relating to the conducting of its work, including but not limited
to, those matters relating to hoisting, systems interfacing, use
of temporary utilities, storage of materials, placement of
dumpsters, access to the Premises and the Building, and the
purchase and return of Building standard materials.
(e) Upon completion of any tenant improvements, Tenant shall
promptly furnish Landlord with sworn owner's and contractors'
statements and full and final waivers of lien covering all labor
and materials included in such improvements. Tenant shall not
permit any mechanic's lien to be filed against the Building, or
any part thereof, arising out of any improvement performed, or
alleged to have been performed, by or on behalf of Tenant. If any
such lien is filed, Tenant shall within ten (10) days thereafter
have such lien released of record or deliver to Landlord a bond in
form, amount, and issued by a surety satisfactory to Landlord,
indemnifying Landlord against all costs and liabilities resulting
from such lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to have such lien so released or to
deliver such bond to Landlord, Landlord, without investigating the
validity of such lien, may pay or discharge the same; and Tenant
shall reimburse Landlord upon demand for the amount so paid by
Landlord, including Landlord's expenses and attorney's fees.
4. Landlord shall have the right to approve all subcontractors to be used
by the Tenant's contractor, which approval shall not be unreasonably withheld as
long as such subcontractors satisfy the requirements of this Article II.
5. Tenant shall indemnify and hold harmless Landlord, its agents,
contractors (including Building Contractor), and any mortgagee of Landlord, from
and against any and all losses, damages, costs (including costs of suit and
attorneys' fees), liabilities, or causes of action for injury to or death of any
person, for damage to any property, and for mechanic's materialmen's or other
liens or claims arising out of or in connection with the work done by the
Tenant's contractor (and Tenant's contractor's subcontractors and
sub-subcontractors) under its contract with Tenant.
6. The failure by Tenant, after receiving written notice, to materially
comply with any of the provisions of Article II of this Exhibit shall constitute
a Default by Tenant under the terms of the Lease and Landlord shall have the
benefit of all remedies provided for in the Lease, except Tenant shall have a
thirty (30) day right to cure Default upon receipt of written notice .
7. Upon completion of the Tenant Improvements, Tenant shall deliver to
Landlord two (2) copies of the "as built" plans and specifications for the
Tenant Improvements completed under Article II of this Exhibit within thirty
(30) days of completing the same.
2
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TENTH AMENDMENT TO LEASE
THIS TENTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into this ______ day of December, 1997, by and between LAFP-SF, Inc., successor
in interest to The Prudential Insurance Company Of America ("Landlord"), having
an office c/o Lowe Enterprises Colorado, Inc., 1475 Lawrence Street, Suite 210,
Denver, Colorado 80202, and Data Transmission Network Corporation ("Tenant"),
having an office at 9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114.
RECITALS
A. The Prudential Insurance Company of America and Data Transmission
Network Corporation entered into that certain Lease dated as of May 2,
1995, for Suites #175A, #110, #200, #300, #301, #310, #320, #325, #340,
#360, #362, and #100 containing 75,931 rentable square feet (RSF) in
the Building known as Embassy Plaza, located at 9110 West Dodge Road,
Omaha, Nebraska ("the Premises").
B. Subsequently, The Prudential Insurance Company Of America and Data
Transmission Network Corporation executed a First Amendment To Lease
dated September 29, 1995, a Second Amendment To Lease dated January 5,
1996, a Third Amendment To Lease dated January 5, 1996, and a Fourth
Amendment To Lease between LAFP-SF, Inc. and Tenant dated December 23,
1996, a Fifth Amendment To Lease dated July 7, 1997, a Sixth Amendment
To Lease dated July 7, 1997, a Seventh Amendment To Lease dated
September 19, 1997, an Eighth Amendment To Lease dated September 19,
1997, and a Ninth Amendment To Lease dated September 19, 1997. The
combined terms of the Lease and subsequent Amendments shall herein be
referred to as the "Lease".
Under the Lease the Premises consists of a total of 107,576 RSF.
C. All capitalized terms not defined herein shall have the meanings
ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing promises and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Parking. Landlord and Tenant recognize that the construction of the
additional parking spaces required under paragraph 1 of the Fifth
Amendment To Lease, as referenced above, is substantially underway and
has been delayed from time to time due to weather conditions beyond the
control of the Landlord. In consideration of Landlord's reasonable
efforts to complete said parking as weather permits (estimated to be
prior to May 1, 1998) and other provisions of this Amendment, Tenant
agrees, effective December 1, 1997, to commence payment of the
additional Base Rent called for in paragraph 2 of said Fifth Amendment
To Lease.
2. Tenant Improvements. As a part of this Amendment, paragraph 1 of
Article II, of Exhibit B to the Fourth Amendment To Lease, as
referenced above, shall be modified to provide Tenant an extension of
the time frame for submittal of invoices relative to Tenant's use of
the tenant finish allowance provided under this Fourth Amendment To
Lease. Such extension shall be for a period of up to four (4) months
through April 30, 1998.
3. Effect of Agreement. Except as herein specifically provided, the
terms and conditions of the Lease shall continue in full force and
effect.
1
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<PAGE>
4. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
5. The parties hereto hereby reaffirm and ratify all covenants, represen-
tations and warranties in the Lease as amended by this Amendment.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
Tenant: Landlord:
Data Transmission Network Corporation, LAFP-SF, Inc.
a Delaware corporation
By: Lowe Enterprises Investment
Management, Inc.
By: Its: Authorized Agent
-----------------------------------
Its: By:
---------------------------------
Its:
----------------------------
2
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1997 REVOLVING CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
1
- 88 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. DEFINITIONS..................................................... 2
II. REVOLVING FACILITY............................................. 9
2.1 Revolving Credit........................................... 9
2.2 Revolving Credit Fees...................................... 11
2.3 Interest on Revolving Credit............................... 11
2.4 Conversion................................................. 12
2.5 Interest on Converted Notes................................ 12
2.6 Payments................................................... 14
2.7 Prepayments................................................ 14
2.8 Security................................................... 14
2.9 Existing Term Notes........................................ 14
2.10 Related Loan Agreement..................................... 15
III. REPRESENTATIONS AND WARRANTIES................................ 15
3.1 Corporate Existence........................................ 15
3.2 Corporate Authority........................................ 15
3.3 Validity of Agreements..................................... 15
3.4 Litigation................................................. 15
3.5 Governmental Approvals..................................... 16
3.6 Defaults Under Other Documents............................ 16
3.7 Judgments.................................................. 16
3.8 Compliance with Laws....................................... 16
3.9 Taxes...................................................... 16
3.10 Collateral................................................. 16
3.11 Pension Benefits........................................... 16
3.12 Margin Regulations......................................... 17
3.13 Financial Condition........................................ 17
4.1 Financial Reports.......................................... 17
4.2 Corporate Structure and Assets............................. 19
4.3 Net Worth.................................................. 19
4.4 Indebtedness............................................... 19
4.5 Use of Proceeds............................................ 19
4.6 Notice of Default.......................................... 20
4.7 Distributions.............................................. 20
4.8 Compliance with Law and Regulations........................ 21
4.9 Maintenance of Property; Accounting; Corporate
Form; Taxes; Insurance................................... 21
4.10 Inspection of Properties and Books......................... 21
4.11 Guaranties................................................. 22
4.12 Collateral................................................. 22
4.13 Name; Location............................................. 22
4.14 Notice of Change in Ownership or Management................ 22
2
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<PAGE>
4.15 Interest Coverage.......................................... 23
4.16 Subordinated Debt.......................................... 23
4.17 Subsidiaries............................................... 23
4.18 Amendments to Purchase Agreement........................... 23
4.19 Capital Expenditures....................................... 23
4.20 Acquisitions............................................... 23
V. CONDITIONS PRECEDENT............................................. 24
5.1 Closing Conditions......................................... 24
VI. DEFAULTS AND REMEDIES........................................... 24
6.1 Events of Default.......................................... 24
6.2 Remedies................................................... 26
VII. INTER-CREDITOR AGREEMENTS..................................... 27
7.1 FNB-O as Servicer.......................................... 27
7.2 Application of Payments.................................... 28
7.3 Liability of FNB-O......................................... 29
7.4 Transfers.................................................. 29
7.5 Reliance................................................... 29
7.6 Relationship of Lenders.................................... 29
7.7 New Lenders................................................ 29
VIII. MISCELLANEOUS................................................ 30
8.1 Entire Agreement........................................... 30
8.2 Governing Law.............................................. 30
8.3 Notices.................................................... 30
8.4 Headings................................................... 30
8.5 Counterparts............................................... 30
8.6 Survival; Successors and Assigns........................... 31
8.7 Severability............................................... 31
8.8 Assignment................................................. 31
8.9 Amendments................................................. 31
8.10 Consent to Form of Security Agreement, Term Agreement...... 31
EXHIBIT A........................................................... 43
EXHIBIT B........................................................... 9
EXHIBIT C........................................................... 11
</TABLE>
3
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<PAGE>
1997 REVOLVING CREDIT AGREEMENT
This 1997 REVOLVING CREDIT AGREEMENT (the "Agreement") is entered into as of
the 26th day of February, 1997, among DATA TRANSMISSION NETWORK CORPORATION, a
Delaware corporation having its principal place of business at Suite 200, 9110
West Dodge Road, Omaha, Nebraska 68114 (the "Borrower"), FIRST NATIONAL BANK OF
OMAHA, a national banking association having its principal place of business at
One First National Center, Omaha, Nebraska 68102 ("FNB-O"), FIRST NATIONAL BANK,
WAHOO, NEBRASKA, a national banking association having its principal place of
business at Wahoo, Nebraska 68066 ("FNB-W"), NBD BANK, a bank organized under
the laws of the State of Michigan and having its principal place of business at
611 Woodward Avenue, Detroit, Michigan 48226 ("NBD"), NORWEST BANK NEBRASKA,
N.A., a national banking association having its principal place of business at
20th and Farnam Streets, Omaha, Nebraska 68102 ("Norwest"), THE SUMITOMO BANK,
LIMITED, a Japanese bank being represented by its office at 200 North Broadway,
Suite 1625, St. Louis, Missouri 63102 and acting through its Chicago branch
("Sumitomo"), MERCANTILE BANK OF ST. LOUIS, N.A., a national banking association
having its principal place of business at One Mercantile Center, 7th and
Washington Streets, St. Louis, Missouri 63101 ("Mercantile"), FIRST BANK,
NATIONAL ASSOCIATION (successor in interest to FirsTier Bank, National
Association), a national banking association having its principal place of
business at 13th and M Streets, Lincoln, Nebraska 68508 ("First Bank"), THE
BOATMEN'S NATIONAL BANK OF ST. LOUIS, a national banking association having its
principal place of business at One Boatmen's Plaza, 800 Market Street, P.O. Box
236, St. Louis, Missouri 63166-0236 ("Boatmen's"), BANK OF MONTREAL, a Canadian
bank represented by its office at 430 Park Avenue, New York, New York 10022
("Montreal"), and LASALLE NATIONAL BANK, a national banking association being
represented by its offices at One Metropolitan Square, 211 North Broadway, St.
Louis, Missouri 63102 ("LaSalle").
WITNESSETH:
WHEREAS, the Borrower and certain of the Lenders (as such term is
hereinafter defined) are parties to a 1996 Term Credit Agreement dated as of May
3, 1996, which has been amended, (the "1996 Term Credit Agreement"), the
proceeds of which were used to acquire substantially all of the assets of
Broadcast Partners, a general partnership having its principal place of business
in Des Moines, Iowa;
WHEREAS, the Borrower and certain of the Lenders are parties to a 1996
Revolving Credit Agreement dated as of June 28, 1996, which has been amended
(the "1996 Revolving Credit Agreement"), which 1996 Revolving Credit Agreement
provided a revolving credit facility for general corporate purposes;
4
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<PAGE>
WHEREAS, the Borrower desires to increase the amount and extend the maturity
of the revolving credit facility which was the subject of the 1996 Revolving
Credit Agreement; and
WHEREAS, the parties do not intend for this 1997 Revolving Credit Agreement
to be deemed to extinguish any existing indebtedness of the Borrower or to
release, terminate or affect the priority of any security therefor, but the
parties do intend that this 1997 Revolving Credit Agreement shall supersede and
replace the terms of the above-referenced 1996 Revolving Credit Agreement;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is agreed as follows:
I. DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
Acquisition
Notes: The Notes issued by the Borrower to the Term Lenders
under the Term Agreement, and all extensions, renewals and
substitutions, if any, of or for the same.
Advance: Any advance of funds to the Borrower by the Revolving
Lenders or any of them under the revolving credit facility
provided in this Agreement.
Agreement: This 1997 Revolving Credit Agreement dated as of February
26, 1997, between the Borrower and certain Lenders, as
amended or restated from time to time.
Base Rate: The floating interest rate announced from time to
time by FNB-O as its "National Base Rate." The National
Base Rate is set by FNB-O, solely in its discretion, to
reflect generally the rates charged by national money
center banks as their reference rates. (Previously, the
rate was announced by FNB-O as its "New York Base Rate.")
Rates charged by FNB-O may be at, above or below the
National Base Rate, as determined by FNB-O as to each
respective customer.
Boatmen's: The Boatmen's National Bank of St. Louis, a national
banking association having its principal place of business
at One Boatmen's Plaza, 800 Market Street, St. Louis,
Missouri 63166-0236, and its successors and assigns.
Borrower: Data Transmission Network Corporation, a Delaware
corporation having its principal place of business at
Suite 200, 9110 West Dodge Road, Omaha, Nebraska 68114.
5
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<PAGE>
Broadcast
Partners: Broadcast Partners, a general partnership having its
current principal place of business at 11275 Aurora
Avenue, Des Moines, Iowa 50322.
Business
Day: Any day other than a Saturday, Sunday or a legal holiday
on which banks in the State of Nebraska are not open for
business.
Change of
Control: (a) At any time when any of the equity securities of the
Borrower shall be registered under Section 12 of the
Securities Exchange Act of 1934 as amended from time to
time (the "Exchange Act"), (i) any person, entity or
"group" (within the meaning of Section 13(d)(3) of the
Exchange Act) (other than any person which is a management
employee, or any such "group" which consists entirely of
management employees, of the Borrower) being or becoming
the beneficial owner, directly or indirectly, of more than
50% of the voting stock of the Borrower, or (ii) a
majority of the members of the Borrower's board of
directors (the "Board") consisting of persons other than
Continuing Directors (as hereinafter defined); and (b) at
any other time, less than 50% of the voting stock of the
Borrower being owned beneficially, directly or indirectly,
by employees of the Borrower or its subsidiaries. As used
herein, the term "Continuing Director" means any member of
the Board on June 29, 1995, and any other member of the
Board who shall be recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors
who are the members of the Board.
Collateral: All personal property of the Borrower described in the
Security Agreement, whether now owned or hereafter
acquired, including, without limitation:
(a) all of the Borrower's accounts, accounts
receivable, Subscriber contract rights, chattel paper,
documents, instruments, goods, inventory, equipment,
general intangibles; and
(b) all proceeds and products of the foregoing.
Conversion: This term shall have the meaning set forth in Section 2.4.
Converted
Notes: Any note evidencing Conversion under or of all or a
portion of the Revolving Credit Notes (or any such similar
notes issued to any additional Revolving Lenders
hereinafter added to this Agreement), and all extensions,
renewals and substitutions of or for the foregoing.
6
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<PAGE>
Default Rate: The floating interest rate announced from time to
time by FNB-O as its "National Base Rate" plus 4.0%. The
National Base Rate is set by FNB-O, solely in its
discretion, to reflect generally the rates charged by
national money center banks as their reference rates.
(Previously, the rate was announced by FNB-O as its "New
York Base Rate.") Rates charged by FNB-O may be at, above
or below the National Base Rate, as determined by FNB-O as
to each respective customer.
Existing
Term Notes: Those certain promissory notes from the Borrower to
FNB-O, FirsTier, FNB-W, NBD, Norwest and Boatmen's dated
as of April 16, 1993, July 8, 1993, August 30, 1994,
November 29, 1994, and February 27, 1995, and all
extensions, renewals, and substitutions of or for the
foregoing.
First Bank: First Bank, National Association, a national banking
association having its principal place of business at 13th
and M Streets, Lincoln, Nebraska 68508, and its successors
and assigns (it being acknowledged that First Bank is the
successor in interest to FirsTier).
FNB-O: First National Bank of Omaha, a national banking
association having its principal place of business at One
First National Center, Omaha, Nebraska 68102, and its
successors and assigns.
FNB-W: First National Bank, Wahoo, Nebraska, a national banking
association having its principal place of business at
Wahoo, Nebraska 68066, and its successors and assigns.
Fixed Rate
Notice: This term shall have the meaning set forth in Section 2.5.
Interest Rate
Protection
Contract
Amounts: "Interest Rate Protection Contract Amounts" shall mean
amounts due from the Borrower under interest rate
protection contracts between the Borrower and one or more
Lenders as to (i) the interest differential amounts due in
respect of periodic netting payments under any such
contract, and (ii) any amount due as a result of marking
to market the Borrower's obligations under any such
contract upon the occurrence of an event of default under,
or other early termination of, such contract; in either
case without inclusion of fees and other expenses related
to such contract. Such Interest Rate Protection Contract
Amounts shall be reported in writing to FNB-O and the
Borrower by the applicable Lender at such times as shall
be appropriate to carry out the intent of this Agreement.
7
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<PAGE>
LaSalle: LaSalle National Bank, a national banking association
having its principal place of business at 135 South
LaSalle Street, Chicago, Illinois 60603.
Lenders: FNB-O, FNB-W, NBD, Norwest, LaSalle, Sumitomo, Mercantile,
First Bank and Montreal, in their capacity as Revolving
Lenders under this Agreement, the Term Lenders, lenders of
the Related Bank Debt, Boatmen's (as to Articles VI and
VII and as to Section 8.6 only), and such additional
lenders as may be added hereto or thereto from time to
time.
Leverage
Ratio: The number which is obtained at the time of determination
by dividing Total Indebtedness at the applicable time by
Operating Cash Flow at the applicable time.
Make-Whole
Premium: An amount which shall be sufficient as determined by the
relevant Lender in good faith and on a reasonable basis
and certified to the Borrower in writing, to compensate
the Lender for any loss (including any lost yield), cost
or expense incurred by the Lender (i) in liquidating or
redeploying deposits or other funds acquired by the Lender
to fund or maintain the loan prepaid and (ii) in
unwinding, amending, canceling or otherwise modifying or
terminating any match funding, swap or other arrangement
entered into by the Lender in connection with acquiring or
maintaining the funding for the loan prepaid.
Mercantile: Mercantile Bank of St. Louis, N.A., a national banking
association having its principal place of business at One
Mercantile Center, 7th and Washington Streets, St. Louis,
Missouri 63101, and its successors and assigns.
Montreal: Bank of Montreal, a Canadian bank being represented by its
offices at 430 Park Avenue, New York, New York 10022.
NBD: NBD Bank, a bank organized under the laws of the State of
Michigan and having its principal place of business at 611
Woodward Avenue, Detroit, Michigan 48226, and its
successors and assigns.
Net Operating
Profit After
Taxes: For any period, the net earnings (or loss) after taxes of
Borrower and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period and
determined in conformity with generally accepted
accounting principles; provided that there shall be
excluded (i) the income (or loss) of any entity accrued
prior to the date it becomes a Subsidiary of Borrower or
is merged into or consolidated with Borrower and (ii) any
extraordinary gains or losses for such period determined
in accordance with generally accepted accounting
principles.
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<PAGE>
Net Worth: The Borrower's consolidated net worth as determined
in accordance with generally accepted accounting
principles plus subordinated debt. For purposes of this
definition, "subordinated debt" means indebtedness of the
Borrower which is subordinate, in a manner satisfactory to
the Lenders, to the indebtedness due to the Lenders, and
the repayment of which is forbidden during the existence
of any Event of Default hereunder; provided however, that
any such indebtedness shall not be deemed subordinated
debt to the extent of the amount of principal payments
that are due thereon within one (1) year from the date of
determination.
Norwest: Norwest Bank Nebraska, N.A., a national banking
association having its principal place of business at 20th
and Farnam Streets, Omaha, Nebraska 68102, and its
successors and assigns.
Notes: (i) The Revolving Credit Notes, the Converted Notes, the
Existing Term Notes, the Acquisition Notes, and such
additional similar notes as may be issued to certain
additional Lenders, and all extensions, renewals, and
substitutions of or for the foregoing; and (ii) notes and,
in the case of interest rate protection contracts, such
contracts evidencing the obligations of the Borrower to
any Lender under the Related Bank Debt.
Operating
Cash Flow: The Borrower's consolidated average monthly earnings
or loss before interest, depreciation, amortization and
taxes, less current tax expense and plus or minus any
non-ordinary non-cash charges or credits to earnings,
which average shall be based on the Borrower's actual
financial results in the two (2) full calendar months
preceding the date of determination. For purposes of
calculating Operating Cash Flow for this Agreement, the
Borrower shall not permit deferred commission expenses to
be capitalized for any period in excess of twelve (12)
months.
Operative
Documents: This Agreement, the Notes, the Security Agreement, the
financing statements regarding the Collateral and the
documents and certificates delivered pursuant to Section
5.1.
Principal
Loan
Amount: As to the Revolving Credit Notes, the aggregate prin-
cipal amount of all unpaid Advances outstanding at any
time (not including the unpaid balance under the
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<PAGE>
Related Bank Debt, Existing Term Notes or any Acquisition
Notes, or any amounts converted to a term loan hereunder),
and as to Converted Notes hereunder, the unpaid principal
amount thereof.
Purchase
Agreement: The Asset Purchase and Sale Agreement dated as of
May 3, 1996, between the Borrower and Broadcast Partners,
as amended from time to time.
Quarterly
Compliance
Certificate: The certificate delivered to the Lenders by the Borrower
pursuant to Section 4.1(d).
Related
Bank Debt: The aggregate unpaid balance of all indebtedness,
now or hereafter existing (including future advances)
under (i) the Related Loan Agreement, including, without
limitation, the amounts outstanding under those certain
promissory notes from the Borrower to FNB-O, FirsTier and
FNB-W dated as of October 13, 1992 and December 7, 1992,
and all extensions, renewals, and substitutions of or for
the foregoing; and (ii) certain interest rate protection
contracts entered into from time to time by the Borrower
with one or more of the Lenders.
Related
Loan
Agreement: The Loan Agreement dated as of October 9, 1992, between
the Borrower and FNB-O, FirsTier and FNB-W and any loan
agreements issued in extension, renewal, replacement, or
restatement of the foregoing.
Release: The Federal Reserve Statistical Release.
Restricted
Quarter: This term shall have the meaning set forth in Section 2.5
hereof.
Revolving
Credit Notes: The Notes issued to the Revolving Lenders pursuant
to Section 2.1, and such additional similar notes as may
be issued to Revolving Lenders hereinafter added to this
Agreement by mutual written agreement of the parties, and
all extensions, renewals, and substitutions of or for the
same. Such notes shall be in the form of Exhibit A hereto.
Revolving
Credit Rate: The Base Rate minus the applicable margin as determined
pursuant to Section 2.3.
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<PAGE>
Revolving
Lenders: FNB-O, FNB-W, NBD, Norwest, LaSalle, Sumitomo, Mercantile,
First Bank and Montreal, and such additional Revolving
Lenders as may be added as Revolving Lenders under Section
2.1 hereto from time to time by mutual written agreement
of the parties.
Security
Agreement: The 1997 Security Agreement dated as of the date hereof,
between the Borrower and FNB-O, as agent for the Lenders,
(which amends and restates the 1996 Restated Security
Agreement dated as of May 3, 1996, as amended by the First
Amendment to 1996 Restated Security Agreement dated as of
June 28, 1996; the Second Amendment to 1996 Restated
Security Agreement dated as of July 31, 1996; and the
Third Amendment to 1996 Restated Security Agreement dated
as of December 27, 1996), and as further amended or
restated from time to time.
Subscribers: Those customers of the Borrower which have subscribed for
the Borrower's "Basic DTN Subscription Service" and/or
"Farm Dayta Service" and/or other similar services and who
are not in default of their payment or other obligations
with respect thereto.
Subsidiary: Any corporation business association, partnership, joint
venture, limited liability company or other business
entity in which the Borrower, or one or more of its
Subsidiaries, or the Borrower and one or more of its
Subsidiaries has either (i) more than 50% of the equity
ownership thereof, or (ii) the power to elect a majority
of the directors or to control the identification of the
managing or general partners or similar governing persons
thereof.
Sumitomo: The Sumitomo Bank, Limited, a Japanese bank being
represented by its office at 200 North Broadway, Suite
1625, St. Louis, Missouri 63102, and acting through its
Chicago branch, and its successors and assigns.
Term
Agreement: The 1997 Term Credit Agreement dated as of the date
hereof, among the Borrower and certain Lenders specified
therein, (which amends and restates the 1996 Term Credit
Agreement dated as of May 3, 1996, as amended by the First
Amendment to 1996 Term Credit Agreement dated as of July
17, 1996; the Second Amendment to 1996 Term Credit
Agreement dated as of July 31, 1996; and the Third
Amendment to 1996 Term Credit Agreement dated as of
December 27, 1996), and as further amended or restated
from time to time.
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<PAGE>
Term
Lenders: "Lenders" to the Borrower as such term is defined in the
Term Agreement.
Total
Indebtedness: All loans and other obligations of the Borrower and its
Subsidiaries, without duplication, for borrowed money
(including, without limitation, the indebtedness due to
the Lenders) regardless of the maturity thereof but such
term shall not include subordinated debt of the Borrower,
as such term is defined in the definition of Net Worth up
to $15,000,000 if such subordinated debt was existing on
May 3, 1996. For purposes of this definition of "Total
Indebtedness," indebtedness under an interest rate
protection agreement shall mean the amount if any, at the
time of determination, of the unpaid Interest Rate
Protection Contract Amounts; provided, however, that
solely for purposes of voting under this Agreement by the
Lenders, "Total Indebtedness" will not include such
Interest Rate Protection Contract Amounts.
Trigger
Event: This term shall have the meaning set forth in Section 2.5
hereof.
All accounting terms not otherwise defined herein shall have the meaning
ordinarily applied under generally accepted accounting principles.
II. REVOLVING FACILITY
2.1 Revolving Credit.
(a) Until the earlier of June 30, 1998, or the date on which the
loan hereunder is converted to a term loan in accordance with Section 2.4,
the Revolving Lenders severally agree to advance funds for general corporate
purposes not to exceed $59,500,000 (the "Base Revolving Credit Facility") to
the Borrower on a revolving credit basis (amounts outstanding under the
Acquisition Notes, Existing Term Notes and Related Bank Debt shall not be
counted against such Base Revolving Credit Facility limit). Such Advances
shall be made on a pro rata basis by the Revolving Lenders, based on the
following maximum advance limits and applicable percentages for each
Revolving Lender: (i) as to FNB-O, $12,316,500 (20.7%); (ii) as to FNB-W,
$297,500 (.50%); (iii) as to NBD, $7,080,500 (11.9%); (iv) as to Norwest,
$2,856,000 (4.8%); (v) as to LaSalle, $11,840,500 (19.9%); (vi) as to
Sumitomo, $5,950,000 (10%); (vii) as to Mercantile, $6,128,500 (10.3%),
(viii) as to First Bank, $6,128,500 (10.3%); and (ix) as to Montreal,
$6,902,000 (11.6%).
(b) The Base Revolving Credit Facility shall be increased, up to a
maximum of $71,000,000, upon satisfaction of the following conditions. For
each six-month period shown below, the Base Revolving Credit Facility shall
be increased in the amount shown, up to the maximum indicated for such
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<PAGE>
period, based on the conversion in accordance with Section 2.4 below of
outstanding balances on the Revolving Credit Notes:
<TABLE>
<CAPTION>
Maximum Principal
Conversion Amount Maximum Increase In
Period Increasing Facility Size Revolving Credit Facility
-------------------- ------------------------ -------------------------
<S> <C> <C>
January-June, 1997 $38,000,000 $11,500,000
July-December, 1997 $38,000,000 minus the
principal amount, if
any, converted during the
prior period $ 7,667,000
January-June, 1998 $38,000,000 minus the
principal amount, if
any, converted during the
prior periods $ 3,833,000
</TABLE>
provided, however, that the total amount of converted principal which shall
result in an increase to the Base Revolving Credit Facility over the term
hereof shall not exceed $38,000,000; and provided, further, that regardless
of conversions, in no event shall the Base Revolving Credit Facility, plus
the principal amount outstanding under Converted Notes issued after the date
hereof, exceed $71,000,000; and provided further, that no such increase in
the Base Revolving Credit Facility amount shall occur after the occurrence
of an Event of Default. In the event that the principal amount converted
during any six-month period shown above is less than the maximum principal
conversion amount shown above for such period, the amount of the increase
shall be determined by multiplying the maximum possible increase in the
revolving credit facility permitted for such period by a fraction, the
numerator of which is the amount of actual converted principal (up to the
maximum permitted) and the denominator of which is the difference between
$38,000,000 and the principal amount converted during any of the prior
six-month periods shown on the above chart. The "Maximum Revolving Credit
Facility" shall mean, as of the date of this Agreement, $71,000,000, and, if
the maximum increase in the Base Revolving Credit Facility is not effected
prior to July 1, 1997, shall be adjusted on July 1, 1997, and, if
applicable, on January 1, 1998 to reflect such lesser maximum amount which
is possible to be effected during the succeeding six-month period pursuant
to the above chart.
(c) Any increase in the Base Revolving Credit Facility shall be pro
rated among the Revolving Lenders in the percentages shown in (a) above;
provided that in no event shall the respective revolving credit facility
attributable to each such Revolving Lender exceed the amounts shown below:
(i) as to FNB-O, $14,697,000; (ii) as to FNB-W, $355,000; (iii) as to
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<PAGE>
NBD, $8,449,000; (iv) as to Norwest, $3,408,000; (v) as to LaSalle, $14,129,000;
(vi) as to Sumitomo, $7,100,000; (vii) as to Mercantile, $7,313,000; (viii) as
to First Bank, $7,313,000; and (ix) as to Montreal, $8,236,000.
The Borrower shall not be entitled to any Advance hereunder if, after the making
of such Advance, the Total Indebtedness would exceed thirty-six (36) times the
Borrower's Operating Cash Flow, determined at the time of the Advance. Nor shall
the Borrower be entitled to any further Advances hereunder after the occurrence
of a material adverse change in its management personnel, as described in
Section 4.14(b), or after the occurrence of any Event of Default with respect to
the Borrower. Advances shall be made, on the terms and conditions of this
Agreement, upon the Borrower's request. Requests shall be made by 12:00 noon
Omaha time on the Business Day prior to the requested date of the Advance.
Requests shall be made by presentation to FNB-O of a drawing certificate in the
form of Exhibit B. The Borrower's obligation to make payments of principal and
interest on the foregoing revolving credit indebtedness shall be further
evidenced by the Revolving Credit Notes.
2.2 Revolving Credit Fees. The Borrower shall pay to the Revolving
Lenders a commitment fee equal to the product of the per annum unused commitment
fee percentage shown below times the unadvanced portion of the Maximum Revolving
Credit Facility described above:
Leverage Ratio Unused Commitment Fee Percentage
--------------------------- --------------------------------
Greater than 42 .375%
Greater than 24 but not in
excess of 42 .250%
24 or less .125%
Such fee shall be paid to FNB-O quarterly (calendar quarters) in arrears and
based on the average unused portion of the revolving credit commitment during
the applicable quarter and the Leverage Ratio in effect on the last day of the
month preceding such quarter. FNB-O shall distribute to each Revolving Lender
its pro rata share of such fee based on the maximum advance limits set forth
above. Furthermore, the Borrower will pay to FNB-O an agenting fee equal to
$40,000 annually, payable quarterly in arrears.
2.3 Interest on Revolving Credit. Until the earlier of June 30,
1998, or the date on which the revolving credit loan hereunder is converted to a
term loan, interest shall accrue on the Principal Loan Amount outstanding from
time to time at a variable rate, which shall fluctuate on a monthly basis, equal
to the Base Rate minus a margin as determined below. The margin shall be
adjusted quarterly after receipt of the Borrower's Quarterly Compliance
Certificate, commencing with the Quarterly Compliance Certificate in the form of
Exhibit C hereto for the quarter ended 12/31/96. Adjustments shall be
retroactive to the beginning of the current quarter.
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<PAGE>
<TABLE>
<CAPTION>
Leverage Ratio Margin Below Base Rate
----------------------------- ----------------------
<S> <C>
Greater than 42 .25%
Greater than 36 but not more
than 42 .50%
Greater than 30 but not more
than 36 .75%
Greater than 24 but not more
than 30 1.00%
Greater than 18 but not more
than 24 1.25%
18 or less 1.375%
</TABLE>
The Base Rate minus the applicable margin as determined above is hereinafter
referred to as the "Revolving Credit Rate." Changes in the Base Rate shall be
effective on the first day of each month, based on the Base Rate in effect as of
such day. Interest shall be due upon the rendering of each monthly invoice
therefor by FNB-O. Notwithstanding anything to the contrary elsewhere herein,
after an Event of Default has occurred interest shall accrue on the entire
outstanding balance of principal and interest on all indebtedness hereunder at a
fluctuating rate equal to the Default Rate.
2.4 Conversion. Upon the earlier of: (i) June 30, 1998; or (ii) the
Borrower's giving notice of its election to convert the revolving credit loan
hereunder, or any portion thereof, to a term loan, the revolving credit loan
described above (or applicable portion thereof) shall be deemed converted to a
term loan (hereinafter referred to as "Conversion"). Any such term loans shall
be evidenced by notes (the "Converted Notes") separate from the initial
Revolving Credit Notes. Upon the issuance of Converted Notes, the Revolving
Credit Facility will be reduced by the principal amount of such Converted Notes
(and shall be increased to the extent permitted in Section 2.1(b) hereof), and
no further Advances shall be made by the Revolving Lenders on the converted
amount. The then outstanding Principal Loan Amount of each respective Converted
Note shall become due and payable in forty-eight (48) equal installments of
principal, with the first such installment due on the last day of the month
following Conversion, or, if such day is not a Business Day, on the next
succeeding Business Day, and subsequent installments due on the last day of each
consecutive month thereafter. In any event, the total amount of all unpaid
principal and accrued interest hereunder shall be due and payable no later than
June 30, 2002.
2.5 Interest on Converted Notes. After Conversion, interest shall
accrue on the Principal Loan Amount outstanding on the respective Converted Note
from time to time at a variable rate, which shall fluctuate on a monthly basis,
which is equal to the Revolving Credit Rate plus one quarter of one percent
(.25%). For purposes of computing such variable rate, changes in the Base Rate
shall be effective on the first day of each month based on the Base Rate in
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<PAGE>
effect on such day. Notwithstanding anything in the foregoing to the contrary,
after Conversion, the Borrower may elect to have a fixed interest rate apply to
the outstanding Principal Loan Amount converted and outstanding after the date
of giving notice of such fixed rate election (the "Fixed Rate Notice"). Such
fixed rate shall be the greater of:
(a) the Revolving Credit Rate in effect on the date of the notice,
plus one-half of one percent (.50%), or
(b) the average of the yields on constant maturity Treasury
Bonds with maturities of three (3) years and five (5) years, as quoted
in the immediately preceding monthly Release for the month preceding such
Release, plus the incremental percentage shown below:
<TABLE>
<CAPTION>
Leverage Ratio1 Incremental %
--------------- -------------
<S> <C>
Greater than 36 2.25%
Greater than 24 but not in
excess of 36 2.00%
24 or less 1.75%
<FN>
1 Determined on the last day of the preceding quarter.
</FN>
</TABLE>
Any election of a fixed rate by the Borrower shall be final and irrevocable.
Interest shall be due each month concurrently with the Borrower's principal
payment. Notwithstanding anything to the contrary elsewhere herein, after an
Event of Default has occurred interest shall accrue on the entire outstanding
balance of principal and interest on all indebtedness hereunder at a fluctuating
rate equal to the Default Rate. All interest due under this Agreement shall be
calculated on the basis of the actual number of days outstanding and a 360-day
year. Interest shall continue to accrue on the full unpaid balance of all
indebtedness hereunder notwithstanding any permitted or unpermitted failure of
the Borrower to make a scheduled payment or the fact that a scheduled payment
day falls on a day other than a Business Day. If the Borrower's most recent
Quarterly Compliance Certificate shows that, as of the end of the prior quarter,
Total Indebtedness was at such date more than thirty-six (36) times the
Operating Cash Flow at the end of such quarter, the current quarter shall be
deemed a "Restricted Quarter." If, any time during a Restricted Quarter
(including, without limitation, during any period in such quarter prior to
delivery of the Quarterly Compliance Certificate), the interest rate accruing on
any Existing Term Note or Converted Note is less than seven and one-half percent
(7.50%) per annum, a "Trigger Event" shall be deemed to have occurred. Upon the
occurrence of a Trigger Event, the Borrower shall be obligated to pay the
following fees: (i) three-eighths of one percent (.375%) of the outstanding
principal balance as of the date preceding the Trigger Event of each Existing
Term Note or Converted Note which accrues interest at less than seven and
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<PAGE>
one-half percent (7.50%) per annum, which amount shall be payable promptly upon
invoicing by FNB-O; (ii) the same amount as computed in clause (i), payable on
the six (6) month anniversary of the Trigger Event; and (iii) the same amount as
computed in clause (i), payable on the twelve (12) month anniversary of the
Trigger Event.
2.6 Payments. All obligations of the Borrower under the Related
Bank Debt (other than obligations under any interest rate protection contract),
Revolving Credit Notes and Converted Notes and under the other Operative
Documents shall be payable in immediately available funds in lawful money of the
United States of America at the principal office of FNB-O in Omaha, Nebraska or
at such other address as may be designated by FNB-O in writing. In the event
that a payment day is not a Business Day, the payment shall be due on the next
succeeding Business Day.
2.7 Prepayments. The Borrower may at any time prepay the Principal
Loan Amount outstanding under the Revolving Credit Notes or any of the Converted
Notes if the Borrower has given the Revolving Lenders at least two (2) Business
Days prior written notice of its intention to make such prepayment. Any such
prepayment may be made without penalty except for Converted Notes as to which
interest is accruing at a fixed rate in accordance with Section 2.5, in which
event a prepayment penalty shall be due to each Revolving Lender, at each
Revolving Lender's option, either: (1) the Make-Whole Premium due to such
Revolving Lender in respect of such prepayment; or (2) such Revolving Lender's
applicable prepayment fee as set forth below. The applicable prepayment fee for
any Converted Note shall be: (i) if the notice electing fixed interest was given
within twelve (12) months of Conversion, the fee shall be one and one-half
percent (1.50%) of the amount of such prepayment; (ii) if the notice electing
fixed interest was given after twelve (12) months of Conversion but within
twenty-four (24) months of Conversion, the fee shall be three-fourths of one
percent (.75%) of the amount of such prepayment; (iii) if the notice electing
fixed interest was given after twenty-four (24) months of Conversion but within
thirty-six (36) months of Conversion, the fee shall be three-tenths of one
percent (.30%) of the amount of such prepayment. The applicable prepayment fee
for any Existing Term Note shall be as specified in such Existing Term Note.
2.8 Security. All obligations of the Borrower hereunder and under
the Operative Documents, including, without limitation, the Borrower's
obligations to make payments of principal and interest on the Notes shall be
secured by a first security interest in the Collateral, as more specifically
described in the Security Agreement.
2.9 Existing Term Notes. The Borrower's obligations under the
Existing Term Notes shall continue in full force and effect in accordance with
the terms thereof. Such notes shall be deemed amended to include this 1997
Revolving Credit Agreement within the definition of Obligations in such notes,
it being understood that this 1997 Revolving Credit Agreement, rather than the
1996 Revolving Credit Agreement, shall be controlling with respect to defaults,
covenants and all other relevant matters arising under the Existing Term Notes
and the Notes executed and delivered in connection with this 1997 Revolving
Credit Agreement. The Existing Term Notes shall continue to be secured by the
security interest provided in the Security Agreement.
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<PAGE>
2.10 Related Loan Agreement. Nothing herein shall be deemed to
alter or amend the Borrower's obligations under the Related Loan Agreement, the
Related Bank Debt or any collateral security therefor, all of which shall
continue in full force and effect in accordance with the terms thereof.
III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that as of the date hereof
and as of the date of each and every request for an Advance hereunder, the
following are and shall be true and correct:
3.1 Corporate Existence. It and each of its Subsidiaries, if any,
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and duly qualified and in good standing in all
states where it is doing business except where the failure to be so qualified
would not have a material adverse effect on it and it has full power and
authority to own and operate its properties and to carry on its business. As of
the date of this Agreement, the Borrower has no Subsidiaries.
3.2 Corporate Authority. It has full corporate power, authority
and legal right to execute, deliver and perform the Operative Documents to which
it is a party, and all other instruments and agreements contemplated hereby and
thereby, and to perform its obligations hereunder and thereunder; and such
actions have been duly authorized by all necessary corporate action, and are not
in conflict with any applicable law or regulation, or any order, judgment or
decree of any court or other governmental agency or instrumentality or its
articles of incorporation or bylaws, or with any provisions of any indenture,
contract or agreement to which it or any of its Subsidiaries is a party or by
which it or any of its Subsidiaries or any of its or their property may be
bound.
3.3 Validity of Agreements. The Borrower's Operative Documents
have been duly authorized, executed and delivered and constitute its legal,
valid and binding agreements, enforceable against the Borrower in accordance
with their respective terms (except to the extent that enforcement thereof may
be limited by any applicable bankruptcy, reorganization, moratorium or similar
laws now or hereafter in effect, or by principles of equity).
3.4 Litigation. Neither the Borrower nor any Subsidiary is a
party to any pending lawsuit or proceeding before or by any court or
governmental body or agency, which is likely to have a materially adverse effect
on the Borrower's ability to perform its obligations under its Operative
Documents; nor is the Borrower aware of any threatened lawsuit or proceeding, to
which it or any Subsidiary may become a party or of any investigation of any
Court or governmental body or agency into its affairs, which if instituted would
have a material adverse effect upon the Borrower's ability to perform its
obligations under its Operative Documents.
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<PAGE>
3.5 Governmental Approvals. The execution, delivery and perfor-
mance by the Borrower of the Operative Documents or the Purchase Agreement do
not require the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any federal,
state or other governmental authority or agency other than as contemplated
herein and therein.
3.6 Defaults Under Other Documents. Neither the Borrower nor any
Subsidiary is in default or in violation (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default or violation) under
any document or any agreement or instrument to which it may be a party or under
which it or any of its properties may be bound and the result of which would
have a material adverse effect upon the Borrower's ability to perform its
obligations under its Operative Documents.
3.7 Judgments. There are no outstanding or unpaid judgments (which
are not adequately bonded) of the Borrower or any Subsidiary which would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents.
3.8 Compliance with Laws. Neither the Borrower nor any Subsidiary
is in violation of any laws, regulations or judicial or governmental decrees in
any respect which could have any material adverse effect upon the validity or
enforceability of any of the terms of the Borrower's Operative Documents or
which could have a material adverse effect upon the Borrower's ability to
perform its obligations under its Operative Documents.
3.9 Taxes. All tax returns of the Borrower and its Subsidiaries
for material taxes required to be filed have been filed or extensions permitted
by law have been obtained; all taxes of the Borrower and its Subsidiaries of a
material nature and which are due and payable as reflected on such returns have
been paid, other than taxes which are due but for which only a nominal late
payment penalty is payable and for which the taxing authority is not yet
entitled to enforce its remedies for payment thereof and other than taxes being
contested in good faith and with respect to which adequate reserves have been
established; and no material amounts of taxes of the Borrower and its
Subsidiaries not reflected on such returns are payable.
3.10 Collateral. The Borrower has good and marketable title to the
Collateral and the Collateral is free from all liens, encumbrances or security
interests, except as disclosed on Schedule A attached hereto. The Borrower's
principal place of business, chief executive office, and the principal place
where it keeps its records concerning the Collateral is Suite 200, 9110 West
Dodge Road, Omaha, Nebraska 68114. The Borrower also keeps certain of its
records regarding the Collateral at 11275 Aurora Avenue, Des Moines, Iowa 50322.
3.11 Pension Benefits. Neither the Borrower nor any Subsidiary
maintains a "Plan" as defined in Section 3 of the Employees Retirement Income
Security Act of 1974 ("ERISA"), or each such entity is in compliance with the
minimum funding requirements with respect to any such "Plan"
19
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<PAGE>
maintained by it and it has not incurred any material liability to the Pension
Benefit Guaranty Corporation ("PBGC") or otherwise under ERISA in connection
with any such Plan.
3.12 Margin Regulations. No part of the proceeds of any Advance
hereunder shall be used to purchase or carry any "margin stock" (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
of the United States) or any "margin security" (within the meaning of Regulation
G of said Board of Governors), or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or margin security. No part of the
proceeds of any Advance hereunder shall be used for any purpose that violates,
or which is inconsistent with, the provisions of Regulation G, T, U or X of said
Board of Governors.
3.13 Financial Condition. The financial condition of the Borrower
and its Subsidiaries is truly and accurately set forth in the most recent
financial statement which has been provided to the Lenders and no material
adverse change has occurred which would make such financial statement inaccurate
or misleading.
IV. COVENANTS
The Borrower hereby covenants that:
4.1 Financial Reports.
(a) Within forty-five (45) days after the end of each month,
the Borrower, at its sole expense, shall furnish the Lenders a consolidated
balance sheet, a statement of earnings of the Borrower and its consolidated
Subsidiaries and a statement of cash flows of the Borrower and its
consolidated Subsidiaries, and such financial statements on a consolidating
basis as to the Borrower, all such financial statements to be prepared in
accordance with generally accepted accounting principles consistently
applied and certified as completed and correct, subject to normal changes
resulting from year-end audit adjustments, by the chief financial officer
of the Borrower.
(b) Within ninety (90) days after the close of the Borrower's
fiscal year, the Borrower, at its sole expense, shall furnish the Lenders:
(i) a consolidated balance sheet, a statement of earnings of the Borrower
and its consolidated Subsidiaries and a statement of cash flows of the
Borrower and its consolidated Subsidiaries, certified by Deloitte & Touche,
or other independent certified public accountants acceptable to the
Lenders, that such financial reports fairly present the financial condition
of the Borrower and its consolidated Subsidiaries and have been prepared in
accordance with generally accepted accounting principles consistently
applied; and (ii) a certificate from such accountants certifying that in
making the requisite audit for certification of the Borrower's financial
statements, the auditors either (1) have obtained no knowledge, and are not
otherwise aware of, any condition or event which constitutes an Event of
Default or which with the passage of time or the giving of notice would
constitute an Event of Default under Sections 4.3, 4.4, 4.7, 4.9(b),
4.9(d), 4.11, 4.19, or 4.20; or (2) have discovered such condition or
event, as specifically set forth in such certificate, which
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constitutes an Event of Default or which with the passage of time or the
giving of notice would constitute an Event of Default under such sections.
The auditors shall not be liable to the Lenders by reason of the auditors'
failure to obtain knowledge of such event or condition in the ordinary
course of their audit unless such failure is the result of negligence or
willful misconduct in the performance of the audit.
(c) Within thirty (30) days after submission to the Securities
and Exchange Commission, the Borrower shall provide to the Lenders copies
of its Forms 10K and 10Q, as submitted to the Securities and Exchange
Commission during the term of this Agreement.
(d) Within twenty (20) days after the end of each quarter, the
Borrower, at its expense, shall furnish the Lenders a certificate of the
chief financial officer of the Borrower in the form of Exhibit C, setting
forth such information (including detailed calculations) sufficient to
verify the conclusions of such officer after due inquiry and review, that:
(i) The Borrower and each Subsidiary, either (y)
is in compliance with the requirements set forth in this
Agreement or (z) is NOT in compliance with the foregoing for
reasons specifically set forth therein; and
(ii) The chief financial officer of the Borrower has
reviewed or caused to be reviewed all of the terms of the
Operative Documents of the Borrower and that such review either
(1) has NOT disclosed the existence of any condition or event
which constitutes an event of default or any condition or event
which with the passage of time or the giving of notice would
constitute an event of default under the Operative Documents or
(2) has disclosed the existence of a condition or event which
constitutes an event of default, or a condition or event which
with the passage of time or the giving of notice would constitute
an event of default, under the aforesaid instrument or instruments
and the specific condition or event is specifically set forth.
For the quarter ended December 31, 1996, the Borrower shall provide the
Quarterly Compliance Certificate in the form of Exhibit C, plus the
compliance certificate in the form which was required by the 1996 Revolving
Credit Agreement in effect on December 31, 1996.
(e) The Borrower shall provide the Lenders with such other
financial reports and statements as the Lenders may reasonably request.
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4.2 Corporate Structure and Assets. The Borrower shall not merge
or consolidate with any other corporation or entity unless the Borrower shall be
the surviving entity, nor sell any assets except items that are obsolete or no
longer necessary for operation of the business, other than in the ordinary
course of business without the prior written consent of the Lenders. The Lenders
shall be entitled to receive as a prepayment on the Notes the proceeds of any
sale of assets of the Borrower which are prohibited by the preceding sentence.
Notwithstanding the foregoing prepayment requirements, any such prohibited sale
shall remain a violation of this Agreement. In addition, the Borrower shall not
engage in any business materially different from that in which it is presently
engaged without the prior written consent of the Lenders, which consent shall
not be unreasonably withheld. The foregoing restrictions on mergers and
consolidations shall not apply if: (i) in the case of a merger, the Borrower is
the surviving entity and expressly reaffirms its obligations hereunder; (ii) in
the case of a consolidation, the resulting corporation expressly assumes the
obligations of the Borrower hereunder; (iii) the surviving or resulting
corporation is organized under the laws of the United States or a jurisdiction
thereof; (iv) after giving effect to such merger or consolidation, the surviving
or resulting corporation will be engaged in substantially the same lines of
business as are now engaged in by the Borrower; and (v) immediately after giving
effect to such merger or consolidation, no Event of Default will exist
hereunder.
4.3 Net Worth. The Borrower shall maintain a minimum Net Worth
during the term of this Agreement of at least $23,500,000, plus fifty percent
(50%) of the net income (but not losses) of the Borrower for each fiscal year,
commencing with the fiscal year beginning January 1, 1997; provided, however,
solely for purposes of determining compliance with the provisions of this
Section 4.3, "Net Worth" shall not include any subordinated debt.
4.4 Indebtedness.
(a) The Borrower shall not at any time permit the sum of the
Total Indebtedness to the Lenders to exceed forty-eight (48) times
Operating Cash Flow.
(b) On the day the Borrower or a Subsidiary becomes liable with
respect to any debt and immediately after giving effect thereto and to the
concurrent retirement of any other debt, the sum of Total Indebtedness,
plus the amount of any outstanding subordinated debt of the Borrower and
its Subsidiaries, plus the contingent obligations of the Borrower and its
Subsidiaries under any guaranty of the debt of any other person or entity
(other than unsecured debt of a Subsidiary incurred in the ordinary course
of business for other than borrowed money or to finance the purchase price
of any property or business) shall not exceed an amount equal to sixty (60)
times Operating Cash Flow at such date.
4.5 Use of Proceeds. The Borrower shall not use the proceeds of
the Advances hereunder to purchase or carry any "margin stock" (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
of the United States) or any "margin security" (within the meaning of Regulation
G of said Board of Governors), or to extend credit to others for the purpose of
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purchasing or carrying any such margin stock or margin security. No part of such
proceeds shall be used for any purpose that violates, or which is inconsistent
with, the provisions of Regulation G, T, U or X of said Board of Governors. This
section shall not preclude the Borrower from repurchasing any of its own issued
and outstanding common stock; provided, however, that such repurchase does not
result in the occurrence of any other Event of Default hereunder.
4.6 Notice of Default. The Borrower shall give to the Lenders
prompt written notification of the existence or occurrence of:
(a) any fact or event which results, or which with notice or the
passage of time, or both, would result in an Event of Default hereunder;
(b) any proceedings instituted by or against the Borrower in any
federal, state or local court or before any governmental body or agency, or
before any arbitration board, or any such proceedings threatened against
the Borrower by any governmental agency, which is likely to have a material
adverse effect upon the Borrower's ability to perform its obligations under
its Operative Documents;
(c) any default or event of default involving the payment of money
under any agreement or instrument which is material to the Borrower or any
Subsidiary to which such entity is a party or by which it or any of its
property may be bound, and which default or event of default would have a
material adverse effect upon the Borrower's ability to perform its
obligations under its Operative Documents; and
(d) the Borrower shall give immediate notice of the
commencement of any proceeding under the Federal Bankruptcy Code by or
against the Borrower or any Subsidiary.
4.7 Distributions.
(a) Neither Borrower nor any Subsidiary shall declare any
dividends or make any cash distribution in respect of any shares of its
capital stock or warrants of its capital stock, without the prior written
consent of the Lenders; provided, however, that the Borrower may declare
stock dividends; provided, further, that the Borrower need not obtain the
Lenders' consent with respect to (i) dividends in any one (1) year which
are, in the aggregate, less than 25% of the Borrower's Net Operating Profit
After Taxes in the previous four (4) quarters, as reported to the Lenders
pursuant to Section 4.1; or (ii) dividends or distributions from any
consolidated Subsidiary.
(b) Neither the Borrower nor any Subsidiary other than a
Subsidiary which is wholly-owned by the Borrower shall purchase, redeem, or
otherwise retire any shares of its capital stock or warrants of its capital
stock if, immediately after the making of such purchase or redemption, the
Borrower or any Subsidiary will be in default of any other covenant or
provision of this Agreement (including, without limitation, the covenants
and provisions pertaining to minimum net worth and limitations on
indebtedness).
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4.8 Compliance with Law and Regulations. The Borrower and each
Subsidiary shall comply in all material respects with all applicable federal and
state laws and regulations.
4.9 Maintenance of Property; Accounting; Corporate Form;
Taxes; Insurance.
(a) The Borrower and each Subsidiary shall maintain its
property in good condition in all material respects, ordinary wear and tear
excepted, and make all renewals, replacements, additions, betterments and
improvements thereto necessary for the efficient operation of its business.
(b) The Borrower and each Subsidiary shall keep true books of
record and accounts in which full and correct entries shall be made of all
its business transactions, all in accordance with generally accepted
accounting principles consistently applied.
(c) The Borrower and each Subsidiary shall do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate form of existence as is necessary for the continuation of its
business in substantially the same form, except where such failure to do so
with respect to any Subsidiary would not have a material adverse effect on
the ability of the Borrower to perform its obligations under the Operative
Documents.
(d) The Borrower and each Subsidiary shall pay all taxes,
assessments and governmental charges or levies imposed upon it or its
property; provided, however, that the Borrower or any Subsidiary shall not
be required to pay any of the foregoing taxes which are being diligently
contested in good faith by appropriate legal proceedings and with respect
to which adequate reserves have been established.
(e) The Borrower shall maintain or cause to be maintained
liability insurance and casualty insurance, in a form and amount
satisfactory to FNB-O as agent for the Lenders, upon the Collateral
(excluding equipment or inventory provided to Subscribers in the ordinary
course of business) and other tangible assets owned by it and its
Subsidiaries. The Borrower shall name FNB-O as agent for the Lenders as the
loss payee on all such casualty insurance, and as an additional insured on
all such liability insurance and shall provide the Lenders with evidence of
such insurance upon request.
4.10 Inspection of Properties and Books. The Borrower shall
recognize and honor the right of the Lenders, upon request to an officer of the
Borrower, to visit and inspect any of the properties of, to examine the books,
accounts, and other records of, and to take extracts therefrom and to discuss
the affairs, finances, loans and accounts of, and to be advised as to the same
by the
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officers of, the Borrower at all such times, in such detail and through such
agents and representatives as the Lenders may reasonably desire.
4.11 Guaranties. Neither the Borrower nor any Subsidiary shall
guaranty or become responsible for the indebtedness of any other person or
entity; provided, however, that a Subsidiary may guaranty the obligation of the
Borrower; provided further, that the Borrower may guaranty the obligations of a
Subsidiary so long as no Event of Default (or no event or occurrence which with
the passage of time or notice, or both, would become an Event of Default) has
occurred or will occur hereunder, taking into account such guaranty and
indebtedness.
4.12 Collateral. Neither the Borrower nor any Subsidiary shall
incur or permit to exist any mortgage, pledge, lien, security interest or other
encumbrance on the Collateral, except as permitted in the Security Agreement.
Subject to Section 4.4(b), the foregoing shall not be construed to prohibit the
Borrower or any Subsidiary from acquiring leased equipment in the ordinary
course of business. Without limiting the generality of the foregoing, the
Borrower covenants and agrees that it shall on request enforce for the benefit
of the Lenders, but at the sole expense of the Borrower, any and all rights and
remedies (including, without limitation, rights to indemnity), that it may have
with respect to the existence of any liens, security interests or other
encumbrances that may exist on the property of the Borrower acquired from
Broadcast Partners under the Purchase Agreement. Notwithstanding anything else
to the contrary herein or in the Operative Documents, Broadcast Partners shall
have no right to share in the proceeds of any such recovery which constitutes
the proceeds of any indemnity claim by the Borrower under the Purchase
Agreement.
4.13 Name; Location. The Borrower shall give the Lenders ninety
(90) days notice prior to changing its name, identity or corporate structure,
moving its principal place of business, chief executive office or place where it
keeps its records concerning the Collateral.
4.14 Notice of Change in Ownership or Management. During the term
of this Agreement, the Borrower shall give the Lenders notice of the occurrence
of any of the following described events, which notice shall be given as soon as
the Borrower obtains notice or knowledge thereof:
(a) any change, directly or indirectly, in the existing
controlling interest in the Borrower; or
(b) any material adverse change in its management
personnel. A material adverse change in the Borrower's management personnel
shall be deemed to have occurred if any one (1) of the following has
occurred with respect to two of the four (4) individuals who are both
officers and members of the Board of Directors of the Borrower: (i) the
resignation, retirement, or voluntary or involuntary termination of
employment and/or status of such persons as officers and directors of the
Borrower; (ii) any announcement, notice of intent, resolution or similar
advance notice with respect to the matters referenced in the foregoing
clause; or (iii) the death, disability or legal incompetence of such
persons.
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4.15 Interest Coverage. The ratio of Operating Cash Flow to
interest expense (as determined in accordance with generally accepted accounting
principles but excluding amortization of deferred offering costs and any fees
related to the Trigger Event in Section 2.5 of this Agreement) at the end of
each quarter during the term of this Agreement, as shown on the Quarterly
Compliance Report, shall not be less than 2.25 to 1.0.
4.16 Subordinated Debt. Neither the Borrower nor any Subsidiary
shall incur any subordinated debt or issue any preferred stock or warrants for
preferred stock except upon the prior written consent of the Lenders. Neither
the Borrower nor any Subsidiary shall make any voluntary or optional prepayment
on any subordinated debt without the prior written consent of the Lenders.
Similarly, the Borrower shall not amend its articles of incorporation or any
other documents or agreements relating to the issuance of subordinated debt,
preferred stock or warrants for preferred stock without the prior written
consent of the Lenders. The indebtedness to Broadcast Partners under the Notes
shall not be considered subordinated debt.
4.17 Subsidiaries. The Borrower shall give prompt written notice to
the Lenders of the Borrower's intent to acquire, or the Borrower's acquisition
of, any Subsidiary. Prior to the creation or acquisition of such Subsidiary, the
Borrower (i) shall cause a first security interest in the assets of such
Subsidiary to be perfected in favor of FNBO, as agent for the Lenders, and (ii)
shall cause the Subsidiary to enter into a security agreement, to execute and
file such financing statements and to provide opinions all in form satisfactory
to the Lenders as to compliance with this section.
4.18 Amendments to Purchase Agreement. The Borrower shall
not amend the Purchase Agreement without the prior written consent of the
Lenders.
4.19 Capital Expenditures. The Borrower shall not incur in any
fiscal year, commencing with the fiscal year beginning January 1, 1997, capital
expenditures, determined in accordance with generally accepted accounting
principles, of more than $1,000,000; provided, however, that capital
expenditures for (a) equipment to be used by Subscribers of the Borrower, and
(b) telecommunication equipment, computer equipment, software, and software
consulting shall not be counted for purposes of this annual limitation.
4.20 Acquisitions. The Borrower shall not acquire any stock or any
equity interest in, or warrants therefor or securities convertible into the
same, or a substantial portion of the assets of, another entity without the
prior written consent of the Revolving Lenders; provided, however, that the
Borrower shall be permitted to make on a cumulative basis from and after the
date of this Agreement such acquisitions in an amount not to exceed Six Million
Dollars ($6,000,000) in the aggregate without the consent of the Revolving
Lenders if such acquisitions are in or from entities which:
(a) are in the business of electronically communicating time-
sensitive information to subscribers;
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(b) have their principal place of business in the United States;
and
(c) except for Market Communications Group, L.L.C., have a
positive operating cash flow, calculated in the same method as is used
to calculate the Borrower's Operating Cash Flow for purposes of this
Agreement.
V. CONDITIONS PRECEDENT
5.1 Closing Conditions. Any and all obligations of the
Lenders hereunder are subject to satisfaction of the following conditions
precedent:
(a) FNB-O, as agent, shall have received an opinion of counsel
to the Borrower covering such matters as the Lenders may request
(including, without limitation, corporate existence and good standing,
corporate authority, due authorization, execution and delivery of the
Operative Documents, the legal, valid, binding and enforceable nature of
the Operative Documents, the perfection and priority of the security
interest in the Collateral granted to the Lenders, and the Borrower's
compliance with applicable state and federal laws in connection with the
equity offering made in connection with the Purchase Agreement), such
opinion to be satisfactory in form and substance to counsel to FNB-O;
(b) FNB-O, as agent, shall have received such certificates and
documents as the Lenders may reasonably request from the Borrower,
including articles of incorporation and bylaws, certificates regarding good
standing, incumbency, copies of other corporate documents, and appropriate
authorizing resolutions; and
(c) the Operative Documents shall have been duly auth-
orized and executed and shall be in full force and effect, and such UCC
financing statements shall have been executed and filed in such offices as
may be appropriate to perfect the security interest of FNB-O, as agent for
the Lenders, in the Collateral.
VI. DEFAULTS AND REMEDIES
6.1 Events of Default. Any of the following shall be deemed
an event of default under this Agreement (an "Event of Default"):
(a) Any payment of principal required by any of the
Operative Documents shall not be paid when due.
(b) Any payment of interest or other fees due hereunder or under
any of the Operative Documents shall not be paid within fifteen (15)
calendar days after the date on which such payment was invoiced or due.
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(c) Any representation or warranty of the Borrower under
any of the Operative Documents, or any financial reports or statements or
certificates submitted pursuant to this Agreement, shall prove to have been
false in any material respect when made.
(d) A failure of the Borrower or any Subsidiary to comply
with any requirement or restriction applicable to such entity and contained
in Sections 4.1, 4.2, 4.3, 4.4, 4.7, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.19, or 4.20 of this Agreement.
(e) A failure of the Borrower or any Subsidiary to comply
with any requirement or restriction contained in any provision of the
Operative Documents not otherwise specified in this Article VI, which
failure remains unremedied for ten (10) days following receipt of notice
from FNB-O on behalf of the Lenders.
(f) The occurrence of a default or a breach of any of the
obligations of the Borrower or any Subsidiary (other than obligations of
such Subsidiary to the Borrower) under any note, loan agreement, preferred
stock, subordinated debt instrument or agreement, or any other agreement
evidencing an obligation to repay borrowed money.
(g) The entry of a final judgment against the Borrower or
any Subsidiary for the payment of money, which is not covered by insurance,
and the expiration of thirty (30) days from the date of such entry during
which the judgment is not discharged in full or stayed.
(h) The occurrence of any one or more of the following:
(1) The Borrower or any Subsidiary shall file a
voluntary petition in bankruptcy or an order for relief
shall be entered in a bankruptcy case as to such entity or
shall file any petition or answer seeking or acquiescing
in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief
for itself under any present or future federal, state or
other statute, law or regulation relating to bankruptcy,
insolvency or other relief for debtors; or shall seek or
consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of such entity or of all or any
part of its property, or of any or all of the royalties,
revenues, rents, issues or profits thereof, or shall make
any general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts or
shall generally not pay its debts as they become due; or
(2) A court of competent jurisdiction shall enter
an order, judgment or decree approving a petition filed
against the Borrower or any Subsidiary seeking any
reorganization, dissolution or similar relief under any
present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other
relief for debtors, and such order, judgment or decree
shall remain unvacated and unstayed for an aggregate of
thirty (30) days (whether or not consecutive) from the
first date of entry thereof; or any trustee, receiver or
liquidator of the Borrower or any Subsidiary or of all or
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any part of its property, or of any or all of the
royalties, revenues, rents, issues or profits thereof,
shall be appointed without the consent or acquiescence of
such entity and such appointments shall remain unvacated
and unstayed for an aggregate of thirty (30) days (whether
or not consecutive); or
(3) A writ of execution or attachment or any
similar process shall be issued or levied against all or
any part of or interest in the Collateral, or any judgment
involving monetary damages shall be entered against the
Borrower or any Subsidiary which shall become a lien on
the Collateral or any portion thereof or interest therein
and such execution, attachment or similar process or
judgment is not released, bonded, satisfied, vacated or
stayed within thirty (30) days after its entry or levy.
(i) Any event of default shall occur under any Operative Document.
(j) A change shall occur after November 8, 1993, directly or
indirectly, in the ownership or control of the Borrower; provided, however,
that changes in the ownership or control of, or new issuances of, voting
common stock which do not exceed, cumulatively, 50% of the total issued and
outstanding shares of the Borrower as of September 30, 1993 shall not be
deemed an Event of Default under this Section 6.1(j); provided further,
that acquisitions of additional shares by members of the existing executive
management group of the Borrower shall not be counted as changes in the
ownership or control of the Borrower under this Section 6.1(j). For
purposes of computing the total issued and outstanding shares as of
September 30, 1993, warrants and options for such shares shall be included.
(k) An Event of Default shall occur under any Existing
Term Note or the Related Loan Agreement and the expiration of any
applicable cure period thereunder.
(l) The Borrower shall be obligated to prepay all or any
portion of its subordinated debt as a result of a Change of Control.
(m) The Borrower pays, or is determined to be obligated to
pay, any indemnity to Broadcast Partners under the Purchase Agreement in
excess of $1,000,000 in the aggregate.
6.2 Remedies. If an Event of Default occurs and is continuing, up-
on the election of the Lenders holding two-thirds of the then outstanding
aggregate Total Indebtedness of the Borrower to the Lenders (including under the
Revolving Credit Notes, the Existing Term Notes, the Related Bank Debt, the
Acquisition Notes, and any similar indebtedness), the entire unpaid principal
amount under the Notes, together with interest accrued thereon, shall become
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, and the Lenders may exercise
their rights
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under the other Operative Documents, the Notes, the Term Agreement, and the
Related Loan Agreement (and the operative documents with respect thereto),
including, without limitation, under the Security Agreement. For purposes of
this Article VI, the term Lenders includes Boatmen's. In addition, the Lenders
shall have such other remedies as are available at law and in equity. Remedies
under this Agreement, the Operative Documents, the Notes, the Term Agreement,
the Related Loan Agreements (and the operative documents with respect thereto)
are cumulative. Any waiver must be in writing by the Lenders and no waiver shall
constitute a waiver as to any other occurrence which constitutes an Event of
Default or as to any party not specifically included in such written waiver.
VII. INTER-CREDITOR AGREEMENTS
7.1 FNB-O as Servicer. FNB-O will act as sole servicer of the
loans evidenced by the Notes (other than in connection with interest rate
protection contracts). For purposes of this Article VII, the term Lenders
includes Boatmen's and the term Event of Default means any Event of Default
hereunder, under any Note, or under the Term Agreement or the Related Loan
Agreement. FNB-O will enforce, administer and otherwise deal with the loans made
by the Lenders in accordance with safe and prudent banking standards employed by
FNB-O in the case of the loan made by FNB-O. Without limiting the generality of
the foregoing, FNB-O will, on its own behalf and on behalf of the Lenders: (i)
maintain originals of the Operative Documents (excluding the Notes) and the
operative documents in connection with the Term Agreement and the Related Loan
Agreement; (ii) receive requests for Advances from the Borrower, promptly
transmit the same to the Revolving Lenders and make such Advances on behalf of
the Revolving Lenders (provided that FNB-O is assured of reimbursement therefor
by the other Revolving Lenders for their pro rata shares); (iii) receive
payments and prepayments from the Borrower and apply such payments as provided
in Section 7.2; (iv) receive notices from the Borrower and send copies thereof
to the Lenders if FNB-O has reasonable cause to believe that such Lenders have
not received such notice from another source; and (v) advise the Lenders of the
occurrence of any Event of Default which FNB-O obtains actual knowledge of. The
Lenders agree not to attempt to take any action against the Borrower under the
Operative Documents, the Notes, the Term Agreement or the Related Bank Debt or
with respect to the indebtedness evidenced thereby without FNB-O's consent
unless holders of two-thirds of the then outstanding aggregate Total
Indebtedness of the Borrower to the Lenders (including under the Notes and any
similar indebtedness) shall have requested FNB-O to take specific action against
the Borrower and FNB-O shall have failed to do so within a reasonable period
after receipt of such request. All actions, consents, waivers and approvals by
the Lenders shall be deemed taken or given and amendments hereto deemed agreed
to if the holders of more than two-thirds of the outstanding aggregate Total
Indebtedness of the Borrower to the Lenders shall have indicated their consent
thereto. Notwithstanding the foregoing, unanimous approval of the applicable
Lenders under the respective Notes shall be required for: (i) any reduction or
compromise of the principal loan amount of such Notes, the amount or rate of
interest accrued or accruing thereon or the fees due hereunder; and (ii)
extension of the date of any scheduled payment; and unanimous consent of all the
Lenders shall be required for (iii) permitting the sale of or releasing the
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security interest of the Lenders in Collateral which comprises more than ten
percent (10%) of net book value of fixed assets of the Borrower; and (iv) any
amendment of Sections 7.1 or 7.2 hereof. A Revolving Lender's commitment
hereunder may not be increased without the consent of such Revolving Lender, it
being understood, however, that increases in the total revolving credit facility
hereunder may be made with the consent of the holders of more than two-thirds of
the outstanding aggregate total outstanding obligation of the Borrower to the
Revolving Lenders, so long as such increase does not result in the increase of
any non-consenting Revolving Lender's commitment hereunder.
7.2 Application of Payments. Until the earlier of the occurrence
of an Event of Default or any Lender's giving of notice to the others that it
deems itself insecure, payments or prepayments made by the Borrower may be
applied to the indebtedness designated by the Borrower or otherwise applied as
follows:
(a) first, to pay interest to date on the Revolving
Credit Notes and fees due to the Lenders;
(b) second, to make payments due but unpaid under any
of the other Notes; and
(c) third, pro rata to the Lenders, such pro rata share to
be determined as set forth below in subsection (bb) of this Section 7.2.
After the occurrence of an Event of Default or any Lender's giving of notice
that it deems itself insecure, payments or prepayments on the Notes received by
FNB-O or any of the Lenders and funds realized upon the disposition of any of
the Collateral shall be applied as follows:
(aa) first, to reimburse FNB-O for any costs, expenses,
and disbursements (including attorneys' fees) which may be incurred or made
by FNB-0: (i) in connection with its servicing obligations; (ii) in the
process of collecting such payments or funds; or (iii) as advances made by
FNB-O to protect the Collateral (provided, however, that FNB-O shall have
no obligation to make such protective advances); and
(bb) second, pari passu among the Lenders, based on their
respective pro rata shares of the funds to be applied. Each Lender's pro
rata share shall be equal to a fraction, (x) the numerator of which shall
be the total principal loan amount then outstanding which is owing to each
such Lender under its Notes, and (y) the denominator of which shall be the
total principal loan amount then outstanding which is owing to the Lenders
under all Notes. As to any Note which represents an obligation of the
Borrower to one or more Lenders under an interest rate protection contract,
"principal loan amount then outstanding" shall mean, as of the date of
determination by FNB-O of the Lenders' respective pro rata shares, the
amount, if any, of the unpaid Interest Rate Protection Contract Amounts.
31
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<PAGE>
Except as specifically provided in this Section 7.2, FNB-O shall have no
obligation to repay or prepay any amount due from the Borrower to any of the
other Lenders nor shall FNB-O have any obligation to purchase all or a part of
any Note hereunder or any Advance made by any Lenders, nor shall the Lenders
have any recourse whatsoever against FNB-O with respect to any failure of the
Borrower to repay the indebtedness referenced herein.
7.3 Liability of FNB-O. FNB-O shall not be liable to the Lenders
for any error of judgment or for any action taken or omitted to be taken by it
hereunder, except for gross negligence or willful misconduct. Without limiting
the generality of the foregoing, FNB-O, except as expressly set forth herein,
(a) may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (b) makes no representation or warranty with respect to,
and shall not be responsible for, the accuracy, completeness, execution,
legality, validity, legal effect or enforceability of this 1997 Revolving Credit
Agreement, the Notes, or the other Operative Documents or the operative
documents under the Term Agreement or the Related Bank Debt, or the value or
sufficiency of any Collateral given by the Borrower or the priority of the
Lenders' security interest therein or the financial condition of the Borrower;
and (c) shall not be responsible for the performance or observance of any of the
terms, covenants or conditions of the Operative Documents, the Existing Term
Notes, or the operative documents under any Related Bank Debt on the part of the
Borrower and shall not have any duty to inspect the property (including, without
limitation, the books and records) of the Borrower.
7.4 Transfers. No Lender shall subdivide, transfer or grant a
participation in its respective Notes or in any Advance hereunder without the
prior written consent of FNB-O which consent shall not be unreasonably withheld.
For purposes of this Section 7.4, "Notes" shall not include interest rate
protection contracts.
7.5 Reliance. The Lenders acknowledge that they have been advised
that none of the Notes nor any interest therein or related thereto has been (i)
registered under the Securities Act of 1933, as amended, nor (ii) insured by the
Federal Deposit Insurance Corporation. The Lenders acknowledge that they have
received from the Borrower all financial information and other data relevant to
their decision to extend credit to the Borrower and that they have independently
approved the credit quality of the Borrower.
7.6 Relationship of Lenders. The Lenders intend for the
relationships created by this Agreement to be construed as concurrent direct
loans from each Lender respectively to the Borrower. Nothing herein shall be
construed as a loan from any Lender to FNB-O or as creating a partnership or
joint venture relationship among them.
7.7 New Lenders. In the event that new Lenders are added to this
Agreement, the Term Agreement or the Related Loan Agreement, such Lenders shall
be required to agree to the inter-creditor provisions of this Article VII.
32
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<PAGE>
VIII. MISCELLANEOUS
8.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and may not be effectively amended, changed, modified or altered, except in
writing executed by all parties.
8.2 Governing Law. The Operative Documents shall be governed
by and construed pursuant to the laws of the State of Nebraska.
8.3 Notices. Until changed by written notice from one party hereto
to the other, all communications under the Operative Documents shall be in
writing and shall be hand delivered or mailed by registered mail to the parties
as follows:
If to the Borrower:
DATA TRANSMISSION NETWORK CORPORATION
Suite 200
9110 West Dodge Road
Omaha, Nebraska 68114
Attention: Chief Financial Officer
If to the Lenders:
FIRST NATIONAL BANK OF OMAHA
One First National Center
Omaha, Nebraska 68102
Attention: Mr. James P. Bonham
Notices shall be deemed given when mailed, except that any notice by the
Borrower under Sections 2.4 and 2.5 shall not be deemed given until received
by FNB-O.
8.4 Headings. The captions and headings herein are for convenience
only and in no way define, limit or describe the scope or intent of any
provisions or sections of this Agreement.
8.5 Counterparts. This Agreement may be executed in several
counterparts and such counterparts together shall constitute one and the same
instrument.
8.6 Survival; Successors and Assigns. The covenants, agreements,
representations and warranties made herein, and in the certificates delivered
pursuant hereto, shall survive the execution and delivery to the Lenders of this
Agreement and shall continue in full force and effect so long as any Note or any
obligation to the Lenders under any of the Operative Documents is outstanding
and unpaid. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party, and all covenants, promises and agreements by or on behalf of the
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<PAGE>
Borrower which are contained in this Agreement shall bind the successors and
assigns of the Borrower and shall inure to the benefit of the successors and
assigns of the Lenders.
8.7 Severability. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
8.8 Assignment. The Borrower may not assign its rights
or obligations hereunder and any assignment in contravention of the terms
hereof shall be void.
8.9 Amendments. Any amendment, modification or supplement
to this Agreement must be in writing and must be signed by the requisite parties
hereto.
8.10 Consent to Form of Security Agreement, Term Agreement.
The parties hereto expressly approve the form of the Term Agreement and the
Security Agreement, both amended and restated as of the date hereof.
IN WITNESS WHEREOF, the Borrower, Boatmen's and the Revolving
Lenders have caused this 1997 Revolving Credit Agreement to be executed by their
duly authorized corporate officers as of the day and year first above written.
34
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<PAGE>
DATA TRANSMISSION NETWORK
CORPORATION
By
--------------------------------------------
Title:
35
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<PAGE>
FIRST NATIONAL BANK OF OMAHA
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
36
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<PAGE>
THE SUMITOMO BANK, LIMITED
By
--------------------------------------------
Title:
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
---------
Borrower
37
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<PAGE>
FIRST NATIONAL BANK, WAHOO,
NEBRASKA
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
38
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<PAGE>
NBD BANK
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
39
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<PAGE>
NORWEST BANK NEBRASKA, N.A.
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
40
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<PAGE>
LASALLE NATIONAL BANK, a national
banking association
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
41
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<PAGE>
MERCANTILE BANK OF
ST. LOUIS, N.A.
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
---------
Borrower
42
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<PAGE>
FIRST BANK, NATIONAL
ASSOCIATION
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
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<PAGE>
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
44
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<PAGE>
BANK OF MONTREAL, a Canadian bank
By
--------------------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
45
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<PAGE>
EXHIBIT A
TO 1997 REVOLVING CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
AND
LASALLE NATIONAL BANK
FORM OF NOTES
46
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<PAGE>
SECURED BUSINESS PROMISSORY NOTE
Omaha, Nebraska $
-----------------------------
, 19 June 30, 1998
- ---------------------- ---- ------------------
(Note Date) (Maturity Date)
REVOLVING NOTE TERMS
On or before June 30, 1998, DATA TRANSMISSION NETWORK CORPORATION
("Maker") promises to pay to the order of [REVOLVING LENDER] ("Lender") the
principal sum hereof, which shall be the lesser of
Dollars, or so much thereof as may have been advanced by Lender, either directly
under this Note or as an advance pursuant to the 1997 Revolving Credit Agreement
dated as of February 26, 1997, as amended from time to time (the "Agreement")
among Maker and Lender, First National Bank of Omaha, First National Bank,
Wahoo, Nebraska, NBD Bank, Norwest Bank Nebraska, N.A., LaSalle National Bank,
The Sumitomo Bank, Limited, Mercantile Bank of St. Louis, N.A., Bank of
Montreal, First Bank, National Association, and Boatmen's Bank of St. Louis,
N.A. (collectively, the "Lenders"). All capitalized terms not defined herein
shall have their respective meanings as set forth in the Agreement.
Interest shall accrue on the principal sum hereof from and including
the Note Date above to the earlier of the Maturity Date or the date of
Conversion (as such term is defined hereafter) at a variable rate, which shall
fluctuate on a monthly basis, equal to the rate announced from time to time by
FNB-O as its "National Base Rate" minus a margin as determined below. The margin
shall be adjusted quarterly after receipt of Maker's Quarterly Compliance
Certificate (as defined in the Agreement), commencing with the Quarterly
Compliance Certificate for the quarter ended December 31, 1996. Adjustments
shall be retroactive to the beginning of the current quarter.
(a) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was greater than 42,
the margin for the current quarter (meaning the quarter in which the
certificate is required to be delivered) shall be .25%.
(b) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was greater than 36
but equal to or less than 42, the margin for the current quarter shall
be .50%.
(c) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was greater than 30
but equal to or less than 36, the margin for the current quarter shall
be .75%.
47
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<PAGE>
(d) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was greater than 24
but equal to or less than 30, the margin for the current quarter shall
be 1.00%.
(e) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was greater than 18
but equal to or less than 24, the margin for the current quarter shall
be 1.25%.
(f) If the Quarterly Compliance Certificate shows that, as of
the end of the prior quarter, the Leverage Ratio was equal to or less
than 18, the margin for the current quarter shall be 1.375%.
The Base Rate minus the applicable margin as determined above is hereinafter
referred to as the "Revolving Credit Rate." Changes in the Base Rate shall be
effective on the first day of each month, based on the Base Rate in effect as of
such day. Interest shall be due upon the rendering of each monthly invoice
therefor by FNB-O.
TERM NOTE TERMS
Upon the earlier of: (i) June 30, 1998; or (ii) Maker's giving notice
of its election to convert the revolving credit loan evidenced by this Note, or
any portion thereof, to a term loan, the revolving loan referenced above (or
applicable portion thereof) shall be deemed converted to a term loan (the
"Conversion"). Any such term loan shall be evidenced by notes (the "Converted
Notes") separate from the initial Revolving Credit Notes. Upon the issuance of
Converted Notes, the Revolving Credit Facility shall be reduced by the principal
amount of such Converted Notes (and shall be increased to the extent permitted
in Section 2.1(b) of the Agreement) and no further Advances shall be made by the
Revolving Lenders on the converted amount. The then outstanding principal
hereunder shall become due and payable in forty-eight equal installments of
principal, with the first such installment due on the last day of the month
following Conversion, or, if such day is not a Business Day, on the next
succeeding Business Day, subsequent installments due on the last day of each
consecutive month thereafter. In any event, the total amount of all unpaid
principal and accrued interest hereunder shall be due and payable no later than
June 30, 2002.
After Conversion, interest shall accrue on the principal outstanding
from time to time at a variable rate, which shall fluctuate on a monthly basis,
which is equal to the Revolving Credit Rate plus .25%. For purposes of computing
such variable rate, changes in the Base Rate shall be effective on the first day
of each month based on the Base Rate in effect on such day. Notwithstanding
anything in the foregoing to the contrary, after Conversion, Maker may elect to
have a fixed interest rate apply to the outstanding Principal Loan Amount
converted and outstanding after the date of giving notice of such fixed rate
election (the "Fixed Rate Notice"). Such fixed rate shall be equal to the
greater of:
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<PAGE>
(a) the Revolving Credit Rate in effect on the date of the
notice, plus .50%, or
(b) the average of the yields on constant maturity Treasury
Bonds with maturities of three years and five years, as quoted
in the immediately preceding monthly Federal Reserve
Statistical Release (the "Release") plus the following
incremental percentage determined based upon the Leverage
Ratio as of the last day of the preceding month: (x) if the
Leverage Ratio is greater than 36, the incremental percentage
shall be 2.25%; (y) if the Leverage Ratio is greater than 24
but not in excess of 36, the incremental percentage shall be
2.00%; and (z) if the Leverage Ratio is 24 or less, the
incremental percentage should be 1.75%;
Any election of a fixed rate by Maker shall be final and irrevocable.
Interest shall be due each month concurrently with the Maker's principal
payment. Notwithstanding anything to the contrary elsewhere herein, after an
Event of Default has occurred interest shall accrue on the entire outstanding
balance of principal and interest at a fluctuating rate equal to the Default
Rate. Interest shall be calculated on the basis of the actual number of days
outstanding and a 360-day year. Interest shall continue to accrue on the full
unpaid balance hereunder notwithstanding any permitted or unpermitted failure of
Maker to make a scheduled payment or the fact that a scheduled payment day falls
on a day other than a Business Day. If Maker's most recent Quarterly Compliance
Certificate shows that, as of the end of the prior quarter, Total Indebtedness
was in excess of thirty-six (36) times the Operating Cash Flow at the end of
such quarter, the current quarter shall be deemed a "Restricted Quarter." If,
any time during a Restricted Quarter (including, without limitation, during any
period in such quarter prior to delivery of the Quarterly Compliance
Certificate), the interest rate accruing on any Existing Term Note (as defined
in the Agreement) or Converted Note is less than 7.50% per annum, a "Trigger
Event" shall be deemed to have occurred. Upon the occurrence of a Trigger Event,
Maker shall be obligated to pay the following fees: (i) .375% of the outstanding
principal balance as of the date preceding the Trigger Event of each Existing
Term Note or Converted Note which accrues interest at less than seven and
one-half percent (7.50%) per annum which amount shall be payable promptly upon
invoicing by FNB-O; (ii) the same amount as computed in clause (i), payable on
the six-month anniversary of the Trigger Event; and (iii) the same amount as
computed in clause (i), payable on the twelve-month anniversary of the Trigger
Event.
Maker may at any time prepay in whole or in part the Principal Loan
Amount outstanding under this Revolving Credit Note or a Converted Note if the
Maker has given the Revolving Lenders at least two (2) business days prior
written notice of its intention to make such prepayment. Any such prepayment may
be made without penalty except for a Converted Note as to which interest is
accrued at a fixed rate in accordance with clause (a) or (b) above, in which
event a prepayment penalty shall be due to the Lender, at Lender's option,
either: (1) the Make-Whole Premium due in respect of such prepayment; or (2) the
applicable prepayment fee as set forth below. The applicable prepayment fee for
any Converted Note shall be: (i) if the notice electing fixed interest was given
49
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<PAGE>
within twelve (12) months of Conversion, the fee shall be 1.50% of the amount of
such prepayment; (ii) if the notice electing fixed interest was given after
twelve (12) months of Conversion, but within twenty-four (24) months of
Conversion, the fee shall be .75% of the amount of such prepayment; and (iii) if
the notice electing fixed interest was given after twenty- four (24) months of
Conversion, but within thirty-six (36) months of Conversion, the fee shall be
.30% of the amount of such prepayment.
GENERAL TERMS
Payment of this Note and the performance of Maker's obligations under
the Agreement ("Obligations") are secured by a security interest granted to
First National Bank of Omaha, as agent for the Lenders and others ("Agent"),
under the Security Agreement in:
All of Maker's accounts, accounts receivable, chattel paper, documents,
instruments, goods, inventory, equipment, general intangibles, contract
rights, all rights of Maker in deposits and advance payments made to
Maker by its customers and Subscribers, accounts due from advertisers
and all ownership, proprietary, copyright, trade secret and other
intellectual property rights in and to computer software (and
specifically including, without limitation, all such rights in DTN
transmission computer software used in the provision of the Basic DTN
Subscription Service and Farm Dayta Service to Maker's Subscribers) and
all documentation, source code, information and works of authorship
pertaining thereto, all now owned or hereafter acquired and all
proceeds and products thereof; and such additional collateral as is
more specifically described in the Security agreement.
Maker's liability under its Obligations shall not be affected by any of
the following:
Acceptance or retention by Lender or Agent of other property
or interests as security for the Obligations, or for the liability of
any person other than a Maker with respect to the Obligations;
The release of all or any of the Collateral or other
security for any of the Obligations to any Maker;
Any release, extension, renewal, modification or compromise
of any of the Obligations or the liability of any obligor thereon; or
Failure by Lender or Agent to resort to other security or any
person liable for any of the Obligations before resorting to the
Collateral.
50
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<PAGE>
Neither Lender nor Agent is required to take any action whatsoever in
respect of the Collateral. Impairment or destruction of the Collateral shall not
release Maker of its liability hereunder.
Maker represents, warrants and covenants as follows:
Maker is authorized to grant to Agent a security interest in
the Collateral;
This Note, the Agreement and the Security Agreement have been
duly authorized, executed and delivered by the Maker and constitute
legal, valid and binding obligations of Maker;
This Note evidences a loan for business or agricultural pur-
poses; and
Maker agrees to pay all costs of collection in connection with
this Note, the Agreement and the Security Agreement, including
reasonable attorneys' fees and legal expenses.
Upon the failure of Maker to make any payment of principal or interest
when due hereunder or the occurrence of any Event of Default, all of the
Obligations shall, at the option of Agent and without notice or demand, mature
and become immediately due and payable; and Agent shall have all rights and
remedies for default provided by the Uniform Commercial Code, any other
applicable law and/or the Obligations.
All costs and expenses incurred by Lender or Agent in enforcing its
rights under this Note or any mortgage, endorsement, surety agreement, guaranty
relating thereto are the obligation of Maker and are immediately due and
payable. Interest shall accrue on such costs and expenses from the date of
incurrence at the rate specified herein for delinquent Note payments. Each
Maker, endorser, surety and guarantor hereby waives presentment, protest,
demand, notice of dishonor, and the defense of any statute of limitations.
Without affecting the liability of any Maker, endorser, surety or
guarantor, the holder or Agent may, without notice, renew or extend the time for
payment, accept partial payments, release or impair any Collateral or other
security for the payment of this Note or agree to sue any party liable on it.
Neither Lender nor Agent shall be deemed to have waived any of its
rights upon or under this Note, or under any mortgage, endorsement, surety
agreement or guaranty, unless such waivers be in writing and signed by Lender or
Agent, as the case may be. No delay or omission on the part of Lender or Agent
in exercising any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right on any future occasion. All rights and remedies of Lender or Agent
on liabilities or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly or
concurrently.
51
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<PAGE>
Maker, if more than one, shall be jointly and severally liable
hereunder and all provisions hereof regarding the liabilities or security of
Maker shall apply to any liability or any security of any or all of them. This
Note shall be binding upon the heirs, executors, administrators, assigns or
successors of Maker; shall constitute a continuing agreement, applying to all
future as well as existing transactions, whether or not of the character
contemplated at the date of this Note, and if all transactions between Lender
and Maker shall be at any time closed, shall be equally applicable to any new
transactions thereafter, provided that Lender's interest in the Collateral shall
be limited to the extent provided in the Security Agreement; shall benefit
Lender, its successors and assigns; and shall so continue in force
notwithstanding any change in any partnership party hereto, whether such change
occurs through death, retirement or otherwise.
All obligations of Maker hereunder shall be payable in immediately
available funds in lawful money of the United States of America at the principal
office of First National Bank of Omaha in Omaha, Nebraska or at such other
address as may be designated by Bank in writing.
This Note shall be construed according to the laws of the State of
Nebraska.
Unless the content otherwise requires, all terms used herein which are
defined in the Uniform Commercial Code shall have the meanings therein stated.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
This Note is given in substitution of that certain Secured Business
Promissory Note dated , the original principal amount of
$ . This Note shall not affect, and there remains outstanding from
the Maker to the Lender the Related Bank Debt (as such term is defined in the
Agreement) and those certain Secured Business Promissory Notes dated as of April
16, 1993, July 8, 1993, August 30, 1994, November 29, 1994 and February 27,
1995, and all extensions, renewals, and substitutions of or for the foregoing.
Executed as of this day of , .
DATA TRANSMISSION NETWORK
CORPORATION
By:
--------------------------------
Title:
52
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<PAGE>
PROMISSORY NOTE SCHEDULE
Loan Advances and Payments of Principal
DATA TRANSMISSION NETWORK CORPORATION
REVOLVING NOTE ADVANCES AND PAYMENTS:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Unpaid
Amount Principal Paid Amount of Principal Notation
Date of Advance or Prepaid Interest Paid Balance Made By
- ---- ---------- --------------- ------------- --------- ---------
</TABLE>
53
- 140 -
<PAGE>
TERM NOTE:
Date of Conversion:
--------------------------------------
Amount Due at Date of Conversion:
------------------------
Fixed Rate Notice Date: Fixed Rate: %
------------------- -----------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Unpaid
Amount Principal Paid Amount of Principal Notation
Date of Advance or Prepaid Interest Paid Balance Made By
- ---- ---------- --------------- ------------- --------- ---------
</TABLE>
54
- 141 -
<PAGE>
EXHIBIT B
TO 1997 REVOLVING CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL,
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
AND
LASALLE NATIONAL BANK,
DRAWING CERTIFICATE
55
- 142 -
<PAGE>
DRAWING CERTIFICATE
DATA TRANSMISSION NETWORK CORPORATION
To induce the First National Bank of Omaha, First National Bank, Wahoo,
Nebraska, NBD Bank, Norwest Bank Nebraska, N.A., LaSalle National Bank, The
Sumitomo Bank, Limited, Mercantile Bank of St. Louis, N.A., First Bank, National
Association, and Bank of Montreal (the "Revolving Lenders") to make an advance
under the 1997 Revolving Credit Agreement (the "Agreement") dated as of February
26, 1997, between the undersigned (the "Borrower"), The Boatmen's National Bank
of St. Louis ("Boatmen's"), and the Revolving Lenders (as to Boatmen's and the
Revolving Lenders together, (the "Banks"), the Borrower hereby certifies to the
Banks that its Operating Cash Flow (as defined in the Agreement) as represented
below is true and correct and that there is no default under the aforementioned
Agreement, or on any other liability of the Borrower to the Banks.
All information as of: Date
-------------------------
a) Maximum Revolving Credit Facility $
--------
b) Principal on Converted Notes,
Acquisition Notes, Existing Term Notes,
and Related Bank Debt Outstanding $
--------
c) Principal on Revolving Credit $
--------
d) ADVANCE REQUEST $
--------
e) Total Proposed Bank Debt
(line b + line c + line d, but $
not to exceed line a) --------
f) Most recent month's operating cash flow $
--------
g) Prior month's operating cash flow $
--------
h) Operating Cash Flow
(average of line f and line g) $
--------
i) 36 x Operating Cash Flow $
--------
j) Excess (line i - line e) $
--------
Name of Borrower: Data Transmission Network Corporation
Signature:
----------------------------------------------
Title:
----------------------------------------------
56
- 143 -
<PAGE>
EXHIBIT C
TO 1997 REVOLVING CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL,
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
AND
LASALLE NATIONAL BANK
OFFICER'S CERTIFICATE
57
- 144 -
<PAGE>
COMPLIANCE CERTIFICATE
DATA TRANSMISSION NETWORK CORPORATION
First National Bank of Omaha Date
Attn: James Bonham
16th & Dodge Streets
Omaha, Nebraska 68102
I certify that Data Transmission Network Corporation is in compliance with the
requirements set forth in the 1997 Revolving Credit Agreement (the "Agreement")
dated as of February 26, 1997, between First National Bank of Omaha, First
National Bank, Wahoo, Nebraska, NBD Bank, Norwest Bank Nebraska, N.A., LaSalle
National Bank, The Sumitomo Bank, Limited, Mercantile Bank of St. Louis, N.A.,
First Bank, National Association, The Boatmen's National Bank of St. Louis and
Data Transmission Network Corporation.
The following calculations are as of (statement date) as required by
-----------
Section 4.1(d) of said Agreement:
Evaluations:
Total Indebtedness (TI):
Operating Cash Flow: most recent month previous month
ending ending
---------- -----------
Net Income (loss) -------------- ---------------
Interest Expense -------------- ---------------
Depreciation -------------- ---------------
Amortization -------------- ---------------
Deferred Income
Taxes -------------- ---------------
Non-Ordinary
Non-Cash
Charges (Credits) -------------- ---------------
Total a) -------------- b) ---------------
Operating Cash Flow = OCF = (a+b)/2 =
------------------
Leverage Ratio (TI/OCF):
Section 2.3
. Pricing: If the Leverage Ratio is greater than 42 then the
margin is .25%.
If the Leverage Ratio is greater than 36 but equal
to or less than 42 then the margin is .50%. If the
Leverage Ratio is greater than 30 but equal to or
less than 36 then the margin is .75%.
58
- 145 -
<PAGE>
If the Leverage Ratio is greater than 24 but equal
to or less than 30 then the margin is 1.00%.
If the Leverage Ratio is greater than 18 but equal
to or less than 24 then the margin is 1.25%. If
the Leverage Ratio is equal to or less than 18
then the margin is 1.375%.
Position: The Revolving Credit Rate is the Base Rate minus
-------------
Section 2.5
. Trigger Fee: If Total Indebtedness is more than 36 times
Operating Cash Flow, then a one time fee, paid in
three installments of 3/8% of the then outstanding
principal balances, on any of the Existing Term
Notes, Acquisition Notes or Converted Notes which
have an interest rate less than 7.5% per annum is
due.
Position: A Trigger Event has/has not occurred.
Section 4.3
. Net Worth: A minimum Net Worth (exclusive of subordinated
debt) of $23,500,000 plus fifty percent (50%) of
the net income (but not losses) of the Borrower
for each fiscal year, commencing with the fiscal
year beginning January 1, 1997; provided, however,
solely for purposes of determining compliance with
the provisions of this Section 5.3, "Net Worth"
shall not include any subordinated debt.
Minimum Net Worth (exclusive of subordinated
debt)= $ 23,500,000.
Net Income Year ending Addition (50%)
$ 12/31/97 $
------------ ------------
Total Minimum Net
Worth $
============
Position:
Total Net Worth (exclusive of subordinated debt) = $
--------------
Section 4.4
. Indebtedness: At no time will Total Indebtedness exceed 48x OCF.
Position: (48 x OCF) - Total Indebtedness =
59
- 146 -
<PAGE>
. Total At no time will Adjusted Total Indebtedness
Indebtedness exceed 60 x OCF
plus
subordinated
debt plus
guaranty
contingencies
(Adjusted
Total
Indebtedness or
ATI):
Position: Adjusted Total Indebtedness = $
-------------
(60 x OCF) - (ATI) = $
-----------------
Section 4.7
. Distributions: Neither the Borrower nor any Subsidiary shall
declare any dividends (other than dividends
payable in stock of the Borrower or dividends or
distributions from any consolidated Subsidiary) or
make any cash distribution in respect of any
shares of its capital stock or warrants of its
capital stock, without the prior written consent
of the Lenders; provided that the Borrower need
not obtain the Lenders' consent with respect to
dividends in any one (1) year which are in the
aggregate less than 25% of the Borrower's Net
Operating Profit After Taxes in the previous four
(4) quarters, as reported to the Lenders pursuant
to Section 4.1
. Position: Net Operating Profit
After Taxes for
last four (4) quarters =
-----------
x .25
Available for dividends
or distributions in the most
recent quarter plus the
prior three (3) quarters =
--------------
Dividends and distributions
(excluding dividends payable
solely in stock of the Borrower
and distributions from consolidated
Subsidiaries) declared or paid
in the most recent quarter plus the
prior three (3) quarters =
--------------
The Borrower [is/is not] in compliance with
Section 4.7.
60
- 147 -
<PAGE>
Section 4.15
. Interest The ratio of OCF to Interest Expense ("IE")
Coverage: at the end of each quarter will not be less than
2.25 to 1.0 (225%).
Position: OCF = $
--------------
IE = $
--------------
OCF/IE = %
-------
Section 4.19
. Capital Expenditures: The Borrower shall not make
capital expenditures (other than permitted earning
assets specified in Section 4.19) in any fiscal
year, commencing with the fiscal year beginning
January 1, 1997, in excess of $1,000,000.
Position: Capital Expenditures (other than permitted
earning assets specified in Section 4.19) this
fiscal year = $
--------------
The Borrower [is/is not] in compliance with Section 4.19.
Section 4.20
. Acquisitions The Borrower shall not make acquisitions
which in the aggregate exceed $6,000,000 except
certain permitted unlimited acquisitions.
Position: Acquisitions (other than permitted unlimited
acquisitions) in the aggregate since the date of
the Agreement = .
----------
Date Amount Acquired Company
---- ------ ----------------
Permitted Unlimited Acquisition:
Principal Line
Acquired Place of Of
Date Amount Company Business Business
---- ------ -------- --------- --------
The Borrower [is/is not] in compliance with Section 4.20.
Additional Representations:
There have/have not been any sale(s) of assets which would require
prepayment of the Notes under Section 4.2.
61
- 148 -
<PAGE>
There has/has not been:
(i) a Change of Control or a material adverse change in
management personnel as defined in Section 4.14 of the
Agreement; or
(ii) a default under Section 6.1(j) or 6.1(l) regarding a
change in ownership or control of the Company.
(iii) an indemnity claim by Broadcast Partners under Section
6.1(m).
Name of Borrower: Data Transmission Network Corporation
Signature:
-------------------------------------
Title:
-------------------------------------
62
- 149 -
<PAGE>
SCHEDULE A
TO 1997 TERM CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
PERMITTED ENCUMBRANCES
<TABLE>
<CAPTION>
Secured Party Financing Statements
Nebraska Secretary of State
- ---------------------------
<S> <C> <C> <C>
First National Bank of Omaha 12/28/87 #401690
10/13/92 #564918 Amendment
11/13/92 #568176 Continued
First National Bank of Omaha, as agent 5/8/96 #691938 Amendment
FirsTier, Lincoln 6/24/87 #384782
First National Bank of Omaha 2/03/88 #405477 Amendment
First National Bank, Wahoo 5/28/92 #553205 Continued
NBD, Detroit 10/13/92 #564919 Amendment
2/05/93 #576038 Amendment
11/10/93 #603168 Amendment
First National Bank of Omaha, as agent 5/8/96 #691936 Amendment
FirsTier, Lincoln 2/10/88 #406144
First National Bank of Omaha 10/13/92 #564917 Amendment
First National Bank, Wahoo 1/07/93 #572981 Continued
NBD, Detroit 2/05/93 #576039 Amendment
11/10/93 #603169 Amendment
First National Bank of Omaha, as agent 5/8/96 #691937 Amendment
63
- 150 -
<PAGE>
First Bank of Minneapolis 11/25/91 #534665
(Norstan) 8/24/92 #561090 Assignment
Douglas County Clerk, Nebraska
- ------------------------------
FirsTier, Lincoln 2/11/88 #000534
First National Bank of Omaha 10/15/92 #000534 Amendment
First National Bank, Wahoo 1/08/93 #0000054 Continued
NBD, Detroit 2/05/93 #000253 Amendment
11/17/93 #54 Amendment
First National Bank of Omaha, as agent 5/ /96 Amendment
Iowa Secretary of State
- -----------------------
FirsTier, Lincoln 2/10/88 H842023
First National Bank of Omaha 10/15/92 K395184 Amendment
First National Bank, Wahoo 1/08/93 K424887 Continued
NBD, Detroit 2/08/93 K434908 Amendment
11/15/93 K503145 Amendment
First National Bank of Omaha, as agent 5/6/96 K734148 Amendment
Kansas Secretary of State
- -------------------------
FirsTier, Lincoln 2/10/88 #1286572
First National Bank of Omaha 10/15/92 #1842986 Amendment
First National Bank, Wahoo 1/08/93 #1868482 Continued
NBD, Detroit 2/11/93 #1879069 Amendment
11/12/93 #1964342 Amendment
First National Bank of Omaha, as agent 7/18/96 #2265201 Amendment
Illinois Secretary of State
- ---------------------------
FirsTier, Lincoln 3/18/88 #2402370
First National Bank of Omaha 10/21/92 #3043202 Amendment
First National Bank, Wahoo 2/11/93 #3084199 Amendment
NBD, Detroit 2/25/93 #3089132 Continued
12/09/93 #3197498 Amendment
First National Bank of Omaha, as agent 7/9/96 #3562627 Amendment
64
- 151 -
<PAGE>
Michigan Secretary of State
- ---------------------------
FirsTier, Lincoln 2/12/88 #C034473
First National Bank of Omaha 10/16/92 #C646856 Amendment
First National Bank, Wahoo 1/08/93 #C672590 Continued
NBD, Detroit 3/01/93 #C689434 Amendment
11/15/93 #C778208 Amendment
First National Bank of Omaha, as agent 7/8/96 #D128002 Amendment
Wisconsin Secretary of State
- ----------------------------
FirsTier, Lincoln 2/18/88 #968701
First National Bank of Omaha 10/21/92 #1309942 Amendment
First National Bank, Wahoo 01/15/93 #1326550 Continued
NBD, Detroit 2/08/93 #1331412 Amendment
11/23/93 #1393268 Amendment
First National Bank of Omaha, as agent 7/23/96 #1602740 Amendment
Indiana Secretary of State
- --------------------------
FirsTier, Lincoln 2/11/88 #1454192
First National Bank of Omaha 10/21/92 #1808780 Amendment
First National Bank, Wahoo 1/11/93 #1822115 Continued
NBD, Detroit 2/08/93 #1827451 Amendment
11/12/93 #1878806 Amendment
First National Bank of Omaha, as agent 7/9/96 #2065412 Amendment
Minnesota Secretary of State
- ----------------------------
FirsTier, Lincoln 2/17/88 1#121648#00
First National Bank of Omaha 10/16/92 #1537269 Amendment
First National Bank, Wahoo 01/19/93 #1557397 Continued
NBD, Detroit 2/08/93 #1562125 Amendment
11/23/93 #1632156 Amendment
First National Bank of Omaha, as agent 9/5/96 #1875684 Amendment
South Dakota Secretary of State
- -------------------------------
FirsTier, Lincoln 2/10/88 880410802864
First National Bank of Omaha 10/16/92 #22901003596 Amend.
First National Bank, Wahoo 1/08/93 #30081001734 Cont.
NBD, Detroit 2/09/93 #30391203308 Amend.
11/22/93 #33261003899 Amend.
First National Bank of Omaha, as agent 7/8/96 #961900902562 Amend.
65
- 152 -
<PAGE>
Missouri Secretary of State
- ---------------------------
FirsTier, Lincoln 2/11/88 #1555991
First National Bank of Omaha 10/16/92 #2184193 Amendment
First National Bank, Wahoo 1/08/93 #2212473 Continued
NBD, Detroit 2/08/93 #2224113 Amendment
11/15/93 #2331876 Amendment
First National Bank of Omaha, as agent 7/8/96 #2684601 Amendment
Ohio Secretary of State
- -----------------------
FirsTier, Lincoln 2/12/88 #Y00095612
First National Bank of Omaha 10/19/92 #01097336 Amendment
First National Bank, Wahoo 1/11/93 #01119343901 Cont.
NBD, Detroit 2/09/93 #02099338901 Amend.
11/12/93 #1129331801 Amendment
First National Bank of Omaha, as agent 7/9/96 #07099607117 Amendment
Kentucky Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 134318
First National Bank of Omaha, as agent 7/23/96 Amendment
Pennsylvania Department of State
- --------------------------------
First National Bank of Omaha 11/12/93 22571277
First National Bank of Omaha, as agent 7/8/96 25631529 Amendment
Oklahoma Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 059782
First National Bank of Omaha, as agent 7/8/96 035257 Amendment
Mississippi Secretary of State
- ------------------------------
First National Bank of Omaha 11/12/93 0756092--
First National Bank of Omaha, as agent 7/8/96 01015782 Amendment
Colorado Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 932082461
First National Bank of Omaha, as agent 7/8/96 962051575 Amendment
66
- 153 -
<PAGE>
California Secretary of State
- -----------------------------
First National Bank of Omaha 11/12/93 93229491
First National Bank of Omaha, as agent 7/5/96 96191C0067 Amendment
Washington Secretary of State
- -----------------------------
First National Bank of Omaha 11/15/93 933190075
First National Bank of Omaha, as agent 7/5/96 96-187-9060 Amendment
Montana Secretary of State
- --------------------------
First National Bank of Omaha 11/15/93 419540
First National Bank of Omaha, as agent 7/8/96 419540 Amendment
Arizona Secretary of State
- ---------------------------
First National Bank of Omaha 11/15/93 765359
First National Bank of Omaha, as agent 7/8/96 765359 Amendment
North Carolina Secretary of State
- ---------------------------------
First National Bank of Omaha 11/15/93 050742
First National Bank of Omaha, as agent 7/8/96 1357308 Amendment
North Dakota Secretary of State
- -------------------------------
First National Bank of Omaha 11/16/93 93-380331
First National Bank of Omaha, as agent 7/8/96 96-608985 Amendment
Florida Secretary of State
- ---------------------------
First National Bank of Omaha 11/17/93 930000236992
First National Bank of Omaha, as agent 7/10/96 960000142090 Amendment
Texas Secretary of State
- ------------------------
First National Bank of Omaha 11/29/93 227591--
First National Bank of Omaha, as agent 7/8/96 96683548 Amendment
67
- 154 -
<PAGE>
Alabama Secretary of State
- --------------------------
First National Bank of Omaha, as agent 6/27/95 B-95-26462FS
7/19/96 95-26462 Amendment
Arkansas Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/29/95 968722
7/10/96 968722 Amendment
New York Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/26/95 130246
7/8/96 532973 Amendment
</TABLE>
68
- 155 -
FIRST AMENDMENT TO 1997 REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT to 1997 REVOLVING CREDIT AGREEMENT (the "First
Amendment") is intended to amend the terms of the 1997 Revolving Credit
Agreement (the "Agreement") dated as of February 26, 1997, among DATA
TRANSMISSION NETWORK CORPORATION; FIRST NATIONAL BANK OF OMAHA; FIRST NATIONAL
BANK, WAHOO, NEBRASKA; NBD BANK, N.A.; NORWEST BANK NEBRASKA, N.A.; THE SUMITOMO
BANK, LIMITED; MERCANTILE BANK OF ST. LOUIS, N.A.; FIRST BANK, NATIONAL
ASSOCIATION; BANK OF MONTREAL; LASALLE NATIONAL BANK; and THE BOATMEN'S NATIONAL
BANK OF ST. LOUIS. All terms and conditions of the Agreement shall remain in
full force and effect except as expressly amended herein. All capitalized terms
herein shall have the meanings prescribed in the Agreement. The Agreement shall
be amended as follows:
The parties hereby acknowledge that, effective as of the date hereof,
$38,000,000 of the outstanding balance of the Borrower's loan shall be converted
to a term loan in accordance with Section 2.4 of the Agreement. Such loan shall
bear interest at the rate of 7.865% per annum. In Section 2.1 of the Agreement,
the reference to the maximum amount of revolving credit available to be advanced
shall be reduced from $59,500,000 to $33,000,000, and the references to each
Bank's maximum advance limit shall be reduced accordingly on a pro rata basis,
as shown on Exhibit A. No further increases in the Base Revolving Credit
Facility are available to be implemented under Section 2.1 of the Agreement.
In connection with this First Amendment the Borrower is
contemporaneously executing and delivering to the Banks Converted Notes dated as
of the date hereof in the respective principal amounts shown on Exhibit A
hereto. This First Amendment shall not affect and there remain outstanding from
the Borrower to the Banks, the Existing Term Notes and the Related Bank Debt.
This First Amendment may be executed in several counterparts and such
counterparts together shall constitute one and the same instrument.
Except as expressly agreed herein, all terms of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this FIRST AMENDMENT
TO 1997 REVOLVING CREDIT AGREEMENT dated as of March 31, 1997.
1
- 156 -
<PAGE>
DATA TRANSMISSION NETWORK
CORPORATION
By
----------------------------------
Title:
- 157 -
<PAGE>
FIRST NATIONAL BANK OF OMAHA
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
2
- 158 -
<PAGE>
THE SUMITOMO BANK, LIMITED
By
-----------------------------------
Title:
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
3
- 159 -
<PAGE>
FIRST NATIONAL BANK, WAHOO,
NEBRASKA
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
4
- 160 -
<PAGE>
NBD BANK
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
5
- 161 -
<PAGE>
NORWEST BANK NEBRASKA, N.A.
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
6
- 162 -
<PAGE>
LASALLE NATIONAL BANK, a national
banking association
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
7
- 163 -
<PAGE>
MERCANTILE BANK OF
ST. LOUIS, N.A.
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
8
- 164 -
<PAGE>
FIRST BANK, NATIONAL
ASSOCIATION
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
9
- 165 -
<PAGE>
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
10
- 166 -
<PAGE>
BANK OF MONTREAL, a Canadian bank
By
-----------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
11
- 167 -
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
to
FIRST AMENDMENT TO
1997 REVOLVING CREDIT AGREEMENT
Maximum Amount
Converted Available Under
Bank Pro Rata % Note Amount Revolving Facility*
- ---------- ---------- ----------- -------------------
<S> <C> <C> <C>
FNB-O 20.7% $ 7,866,000 $ 6,831,000
FNB-W .5% 190,000 165,000
NBD 11.9% 4,522,000 3,927,000
Norwest 4.8 % 1,824,000 1,584,000
LaSalle 19.9% 7,562,000 6,567,000
Sumitomo 10.0% 3,800,000 3,300,000
Mercantile 10.3% 3,914,000 3,399,000
Montreal 11.6% 4,408,000 3,828,000
First Bank 10.3% 3,914,000 3,399,000
--------- ------------
$38,000,000 $33,000,000
<FN>
*Includes current amounts outstanding after Conversion
</FN>
</TABLE>
12
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SECOND AMENDMENT TO 1997 REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT to 1997 REVOLVING CREDIT AGREEMENT (the "Second
Amendment") is intended to amend the terms of the 1997 Revolving Credit
Agreement (the "Agreement") dated as of February 26, 1997, as amended by the
First Amendment to 1997 Revolving Credit Agreement, dated as of March 31, 1997,
among DATA TRANSMISSION NETWORK CORPORATION; FIRST NATIONAL BANK OF OMAHA; FIRST
NATIONAL BANK, WAHOO, NEBRASKA; NBD BANK, N.A.; NORWEST BANK NEBRASKA, N.A.; THE
SUMITOMO BANK, LIMITED; MERCANTILE BANK OF ST. LOUIS, N.A.; FIRST BANK, NATIONAL
ASSOCIATION; BANK OF MONTREAL; LASALLE NATIONAL BANK; and NATIONSBANK, N.A.
(successor in interest to the Boatmen's National Bank of St. Louis). All terms
and conditions of the Agreement shall remain in full force and effect except as
expressly amended herein. All capitalized terms herein shall have the meanings
prescribed in the Agreement. The Agreement shall be amended as follows:
The parties hereby acknowledge that, effective as of the date hereof:
1. The maturity date referenced in Section 2.1 of the Agreement
shall be extended to June 30, 1999. Every reference in the
Agreement to June 30, 1998 shall be changed to June 30, 1999.
The maximum maturity date for Converted Notes of June 30, 2002
referenced in Section 2.4 of the Agreement shall be extended
to June 30, 2003.
2. Section 4.20 of the Agreement is amended to read as follows:
4.20 Acquisitions. The Borrower shall not acquire any
stock or any equity interest in, or warrants therefor
or securities into the same, or a substantial portion
of the assets of, another entity without the prior
written consent of the Revolving Lenders; provided,
however, that the Borrower shall be permitted to make
on a cumulative basis from and after July 1, 1997
such acquisitions in an amount not to exceed Fifteen
Million Dollars ($15,000,000) in the aggregate
without the consent of the Revolving Lenders if such
acquisitions are in or from entities which:
(a) are in the business of electron-
ically communicating time-sensitive
information to subscribers;
(b) have their principal place of
business in the United States or
Canada; and
(c) have a positive operating cash flow,
calculated in the same method as is used to
calculate the Borrower's Operating Cash Flow
for purposes of this Agreement; and
1
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<PAGE>
the Borrower or any Subsidiary is not, and
immediately after the making of such acquisition,
will not be in default under any other covenant or
provision of this Agreement (including, without
limitation, the covenants and provisions pertaining
to minimum net worth and limitations on
indebtedness).
This Second Amendment shall not affect and there remain outstanding
from the Borrower to the Banks, the Existing Term Notes and the Related Bank
Debt.
This Second Amendment may be executed in several counterparts and such
counterparts together shall constitute one and the same instrument.
Except as expressly agreed herein, all terms of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this SECOND AMENDMENT
TO 1997 REVOLVING CREDIT AGREEMENT dated as of June 30, 1997.
DATA TRANSMISSION NETWORK
CORPORATION
By
-------------------------------
Title:
2
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<PAGE>
FIRST NATIONAL BANK OF OMAHA
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
3
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<PAGE>
THE SUMITOMO BANK, LIMITED
By
-------------------------------
Title:
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
4
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<PAGE>
FIRST NATIONAL BANK, WAHOO,
NEBRASKA
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
5
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<PAGE>
NBD BANK
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
6
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<PAGE>
NORWEST BANK NEBRASKA, N.A.
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
7
- 175 -
<PAGE>
LASALLE NATIONAL BANK, a national
banking association
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
8
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<PAGE>
MERCANTILE BANK OF
ST. LOUIS, N.A.
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
9
- 177 -
<PAGE>
FIRST BANK, NATIONAL
ASSOCIATION
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
10
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<PAGE>
NATIONSBANK, N.A.,
Successor in Interest to The
Boatmen's Nat'l Bank of St. Louis
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
11
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<PAGE>
BANK OF MONTREAL,
Chicago Branch
By
-------------------------------
Title:
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
12
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1997 TERM CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
1
- 181 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
II. TERM FACILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Term Credit . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Acquisition Term Notes. . . . . . . . . . . . . . . . . 12
2.3 Payments. . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Payment . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Prepayment. . . . . . . . . . . . . . . . . . . . . . . 13
2.6A Permitted Prepayments to Broadcast Partners . . . . . . 14
2.7 Security . . . . . . . . . . . . . . . . . . . . . . . 14
2.8 Related Loan Agreements . . . . . . . . . . . . . . . . 14
III. [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . 14
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 14
4.1 Corporate Existence. . . . . . . . . . . . . . . . . . . . 14
4.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . 14
4.3 Validity of Agreements. . . . . . . . . . . . . . . . . . . 15
4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . 15
4.6 Defaults Under Other Documents. . . . . . . . . . . . . . . 15
4.7 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . 15
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.10 Collateral . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Pension Benefits. . . . . . . . . . . . . . . . . . . . . . 16
4.12 Margin Regulations . . . . . . . . . . . . . . . . . . . . 16
4.13 Financial Condition . . . . . . . . . . . . . . . . . . . . 16
V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Financial Reports . . . . . . . . . . . . . . . . . . . . . 17
5.2 Corporate Structure and Assets. . . . . . . . . . . . . . . 18
5.3 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 19
5.6 Notice of Default . . . . . . . . . . . . . . . . . . . . 19
5.7 Distributions . . . . . . . . . . . . . . . . . . . . . . .20
5.8 Compliance with Law and Regulations. . . . . . . . . . . . .20
5.9 Maintenance of Property; Accounting;
Corporate Form; Taxes; Insurance. . . . . . . . . . . .20
2
- 182 -
<PAGE>
5.10 Inspection of Properties and Books . . . . . . . . . . . . 21
5.11 Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.12 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.13 Name; Location . . . . . . . . . . . . . . . . . . . . . . 22
5.14 Notice of Change in Ownership or Management . . . . . . . . 22
5.15 Interest Coverage . . . . . . . . . . . . . . . . . . . . . 22
5.16 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . 22
5.17 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 23
5.18 Amendments to Purchase Agreement. . . . . . . . . . . . . . 23
5.19 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 23
5.20 Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 23
VI. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Closing Conditions . . . . . . . . . . . . . . . . . . . . 23
VII. DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . 24
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 24
7.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 26
VIII. INTER-CREDITOR AGREEMENTS. . . . . . . . . . . . . . . . . . . . 28
8.1 FNB-O as Servicer . . . . . . . . . . . . . . . . . . . . . 28
8.2 Application of Payments . . . . . . . . . . . . . . . . . 28
8.3 Liability of FNB-O. . . . . . . . . . . . . . . . . . . . . 29
8.4 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.5 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.6 Relationship of Lenders . . . . . . . . . . . . . . . . . . 30
8.7 New Lenders . . . . . . . . . . . . . . . . . . . . . . . . 30
8.8 Broadcast Partners . . . . . . . . . . . . . . . . . . . . 30
IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 31
9.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 31
9.6 Survival; Successors and Assigns . . . . . . . . . . . . . 31
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . 31
9.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 31
9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
Exhibit A: Form of Notes
Exhibit B: Officer's Certificate
Schedule A: Permitted Encumbrances
- 183 -
<PAGE>
3
1997 TERM CREDIT AGREEMENT
This 1997 Term Credit Agreement (the "Agreement"), entered into as of
the 26th day of February, 1997, amends and restates the 1996 Term Credit
Agreement entered into as of the 3rd day of May, 1996, among DATA TRANSMISSION
NETWORK CORPORATION, a Delaware corporation having its principal place of
business at Suite 200, 9110 West Dodge Road, Omaha, Nebraska 68114 (the
"Borrower"), FIRST NATIONAL BANK OF OMAHA, a national banking association having
its principal place of business at One First National Center, Omaha, Nebraska
68102 ("FNB-O"), FIRST NATIONAL BANK, WAHOO, NEBRASKA, a national banking
association having its principal place of business at Wahoo, Nebraska 68066
("FNB-W"), NBD BANK, a bank organized under the laws of the State of Michigan
and having its principal place of business at 611 Woodward Avenue, Detroit,
Michigan 48226 ("NBD"), NORWEST BANK NEBRASKA, N.A., a national banking
association having its principal place of business at 20th and Farnam Streets,
Omaha, Nebraska 68102 ("Norwest"), THE SUMITOMO BANK, LIMITED, a Japanese bank
being represented by its office at 200 North Broadway, Suite 1625, St. Louis,
Missouri 63102 and acting through its Chicago branch ("Sumitomo"), MERCANTILE
BANK OF ST. LOUIS, N.A., a national banking association having its principal
place of business at One Mercantile Center, 7th and Washington Streets, St.
Louis, Missouri 63101 ("Mercantile"), FIRST BANK, NATIONAL ASSOCIATION
(successor in interest to FirsTier Bank, National Association), a national
banking association having its principal place of business at 13th and M
Streets, Lincoln, Nebraska 68508 ("First Bank"), BANK OF MONTREAL, a Canadian
Bank being represented by its office at 430 Park Avenue, New York, New York
10022 ("Montreal"), and LASALLE NATIONAL BANK, a national banking association
being represented by its office at One Metropolitan Square, 211 North Broadway,
St. Louis, Missouri 63102 ("LaSalle"); as amended by the First Amendment to 1996
Term Credit Agreement dated as of July 17, 1996, the Second Amendment to 1996
Term Credit Agreement dated as of July 31, 1996, and the Third Amendment to 1996
Term Credit Agreement dated as of December 27, 1996.
WITNESSETH:
WHEREAS, the parties have entered into that certain 1996 Term Credit
Agreement, dated as of May 3, 1996, as amended by the First Amendment to 1996
Term Credit Agreement dated as of July 17, 1996, the Second Amendment to 1996
Term Credit Agreement dated as of July 31, 1996 and the Third Amendment to 1996
Term Credit Agreement dated as of December 27, 1996 (as so amended and restated,
the "1996 Term Credit Agreement"), pursuant to which the Borrower obtained a
term credit facility for the purpose of acquiring substantially all of the
assets of Broadcast Partners; and
WHEREAS, the parties desire to further amend and restate the 1996 Term
Credit Agreement; and
4
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<PAGE>
WHEREAS, the parties do not intend for this 1997 Term Credit Agreement
to be deemed to extinguish any existing indebtedness of the Borrower or to
release, terminate or affect the priority of any security therefor;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is agreed as follows:
I. DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
Agreement: The 1996 Term Credit Agreement dated as of May 3,
1996, between the Borrower and the Lenders, as
amended by the First Amendment to 1996 Term Credit
Agreement, dated as of July 17, 1996; the Second
Amendment to 1996 Term Credit Agreement, dated as of
July 31, 1996; and the Third Amendment to 1996 Term
Credit Agreement, dated as of December 27, 1996, as
further amended and restated by this 1997 Term Credit
Agreement dated as of February 26, 1997, between the
Borrower and the Lenders, and as further amended or
restated from time to time. Reference in the Notes to
the Agreement shall mean the Agreement as defined
herein.
Banks: FNB-O, FNB-W, First Bank, Mercantile, NBD, Norwest,
Sumitomo, LaSalle and Montreal, and such additional
banks as may be added hereto from time to time by
mutual written agreement of the parties.
Boatmen's: The Boatmen's National Bank of St. Louis, a
national banking association having its principal
place of business at One Boatmen's Plaza, 800 Market
Street, St. Louis, Missouri 63166-0236, and its
successors and assigns.
Borrower: Data Transmission Network Corporation, a Delaware
corporation having its principal place of business at
Suite 200, 9110 West Dodge Road, Omaha, Nebraska
68114.
Broadcast
Partners: Broadcast Partners, a general partnership having
its current principal place of business at 11275
Aurora Avenue, Des Moines, Iowa 50322. For purposes
of future notices or communications under this
Agreement Broadcast Partners address shall be:
Broadcast Partners, care of Thomas M. Hanigan,
Pioneer Hi-Bred International, Inc., 7200 N.W. 62nd
Ave., P.O. Box 184, Johnston, Iowa 50131-0184.
5
- 185 -
<PAGE>
Business
Day: Any day other than a Saturday, Sunday or a legal
holiday on which banks in the State of Nebraska are
not open for business.
Change of
Control: (a) At any time when any of the equity
securities of the Borrower shall be registered under
Section 12 of the Securities Exchange Act of 1934 as
amended from time to time (the "Exchange Act"), (i)
any person, entity or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than any
person which is a management employee, or any such
"group" which consists entirely of management
employees, of the Borrower) being or becoming the
beneficial owner, directly or indirectly, of more
than 50% of the voting stock of the Borrower, or (ii)
a majority of the members of the Borrower's board of
directors (the "Board") consisting of persons other
than Continuing Directors (as hereinafter defined);
and (b) at any other time, less than 50% of the
voting stock of the Borrower being owned
beneficially, directly or indirectly, by employees of
the Borrower or its subsidiaries. As used herein, the
term "Continuing Director" means any member of the
Board on June 29, 1995 and any other member of the
Board who shall be recommended or elected to succeed
a Continuing Director by a majority of Continuing
Directors who are the members of the Board.
Collateral: All personal property of the Borrower described in
the Security Agreement, whether now owned or
hereafter acquired, including, without limitation:
(a) all of the Borrower's accounts, accounts
receivable, subscriber contract rights, chattel
paper, documents, instruments, goods, inventory,
equipment, general intangibles; and
(b) all proceeds and products of the
foregoing.
Existing
Term Notes: Those certain promissory notes from the Borrower
to FNB-O, FirsTier, FNB-W, NBD, Norwest and Boatmen's
dated as of April 16, 1993, July 8, 1993, August 30,
1994, November 29, 1994, and February 27, 1995.
FirsTier: FirsTier Bank, National Association, Lincoln,
Nebraska, a national banking association having its
principal place of business at 13th and M Streets,
Lincoln, Nebraska 68508, and its successors and
assigns (it being acknowledged that First Bank is the
successor in interest to FirsTier).
First Bank: First Bank, National Association, a national
banking association having its principal place of
business at 13th and M Streets, Lincoln, Nebraska
6
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<PAGE>
68508, and its successors and assigns (it being
acknowledged that First Bank is the successor in
interest to FirsTier).
FNB-O: First National Bank of Omaha, a national banking
association having its principal place of business at
One First National Center, Omaha, Nebraska 68102, and
its successors and assigns.
FNB-W: First National Bank, Wahoo, Nebraska, a national
banking association having its principal place of
business at Wahoo, Nebraska 68066, and its successors
and assigns.
Interest Rate
Protection Contract
Amounts: "Interest Rate Protection Contract Amounts" shall
mean amounts due from the Borrower under interest
rate protection contracts between the Borrower and
Lender as to (i) the interest differential amounts
due in respect of periodic netting payments under any
such contract, and (ii) any amount due as a result of
marking to market the Borrower's obligations under
any such contract upon the occurrence of an event of
default under, or other early termination of, such
contract; in either case without inclusion of fees
and other expenses related to such contract. Such
Interest Rate Protection Contract Amounts shall be
reported in writing to FNB-O and the Borrower by the
applicable Lender at such times as shall be
appropriate to carry out the intent of this
Agreement.
LaSalle: LaSalle National Bank, a national banking association
having its principal place of business at 135 South
LaSalle Street, Chicago, Illinois 60603.
Lenders: The Banks.
Leverage Ratio: The number which is obtained at the time of
determination by dividing Total Indebtedness at the
applicable time by Operating Cash Flow at the
applicable time.
Make-Whole
Premium: An amount which shall be sufficient as determined by
the relevant Bank in good faith and on a reasonable
basis and certified to the Borrower in writing, to
compensate the Bank for any loss (including any lost
yield), cost or expense incurred by the Bank (i) in
liquidating or redeploying deposits or other funds
acquired by the Bank to fund or maintain the loan
prepaid and (ii) in unwinding, amending, cancelling
or otherwise modifying or terminating any match
funding, swap or other arrangement entered into by
7
- 187 -
<PAGE>
the Bank in connection with acquiring or maintaining
the funding for the loan prepaid.
Mercantile: Mercantile Bank of St. Louis, N.A., a national
banking association having its principal place of
business at One Mercantile Center, 7th and Washington
Streets, St. Louis, Missouri 63101.
Montreal: Bank of Montreal, a Canadian bank being represented
by its office at 430 Park Avenue, New York, New York,
10022.
NBD: NBD Bank, a bank organized under the laws of the
State of Michigan and having its principal place of
business at 611 Woodward Avenue, Detroit, Michigan
48226.
Net Operating
Profit After Taxes: For any period, the net earnings (or loss) after
taxes of Borrower and its Subsidiaries on a
consolidated basis for such period taken as a single
accounting period and determined in conformity with
generally accepted accounting principals; provided
that there shall be excluded (i) the income (or loss)
of any entity accrued prior to the date it becomes a
Subsidiary of Borrower or is merged into or
consolidated with Borrower and (ii) any extraordinary
gains or losses for such period determined in
accordance with generally accepted accounting
principles.
Net Worth: The Borrower's consolidated net worth as deter-
mined in accordance with generally accepted
accounting principles plus subordinated debt. For
purposes of this definition, "subordinated debt"
means indebtedness of the Borrower which is
subordinate, in a manner satisfactory to the Lenders,
to the indebtedness due to the Lenders, and the
repayment of which is forbidden during the existence
of any Event of Default hereunder; provided however,
that any such indebtedness shall not be deemed
subordinated debt to the extent of the amount of
principal payments that are due thereon within one
(1) year from the date of determination.
New York
Prime: The floating interest rate published as the
"Prime Rate" (the base rate on corporate loans posted
by at least 75% of the nation's 30 largest banks) in
the Wall Street Journal on the first day of each
month, or if no rate is published on
the first day of any month, on the first day
thereafter when such rate is published. For purposes
of this Agreement, New York Prime shall fluctuate on
a monthly basis. Changes to New York Prime shall be
effective on the first day of each month based on the
"Prime Rate" in effect on such day.
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Norwest: Norwest Bank Nebraska, N.A., a national banking
association having its principal place of business at
20th and Farnam Streets, Omaha, Nebraska 68102, and
its successors and assigns.
Notes: Those certain promissory notes from the Borrower to
the Lenders dated as of May 3, 1996, July 17, 1996,
and July 31, 1996, including, without limitation, the
Notes to the Banks as referenced in Section 2.1
hereof, and such additional term notes as the parties
may hereafter agree to add hereto as Notes.
Operating
Cash Flow: The Borrower's consolidated average monthly earnings
or loss before interest, depreciation, amortization
and taxes, less current tax expense and plus or minus
any non-ordinary non-cash charges or credits to
earnings, which average shall be based on the
Borrower's actual financial results in the two (2)
full calendar months preceding the date of
determination. For purposes of calculating Operating
Cash Flow for this Agreement, the Borrower shall not
permit deferred commission expenses to be capitalized
for any period in excess of twelve (12) months.
Operative
Documents: This 1996 Loan Agreement, the Notes, the Security
Agreement, the financing statements regarding the
Collateral and the documents and certificates, other
than the Purchase Agreement, delivered pursuant to
Article VI.
Purchase
Agreement: The Asset Purchase and Sale Agreement dated as of
May 3, 1996, between the Borrower and Broadcast
Partners.
Quarterly
Compliance
Certificate: The certificate delivered to the Lenders by the
Borrower pursuant to Section 5.1(d).
Related
Bank Debt: The aggregate unpaid balance of all indebtedness,
now or hereafter existing (including future advances)
under the Related Loan Agreements, including, without
limitation, the amounts outstanding under those
certain promissory notes from the Borrower to FNB-O,
FirsTier and FNB-W dated as of October 13, 1992 and
December 7, 1992; the amounts outstanding under the
Existing Term Notes; the amounts outstanding under
the revolving credit notes issued under the Revolving
Credit Agreement, and under any term notes issued to
convert such revolving credit notes or any portion
thereof to a term obligation; all extensions,
renewals, and substitutions of or for the foregoing;
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and all obligations, if any, as to the accrued and
unpaid Interest Rate Protection Contract Amounts.
Related
Loan
Agreements: The Loan Agreement dated as of October 9, 1992
between the Borrower and FNB-O, FirsTier and FNB-W,
and the Revolving Credit Agreement, and any loan
agreements issued in extension, renewal, replacement,
or reinstatement of the foregoing, in each case as
any such agreement is amended from time to time.
Release: The Federal Reserve Statistical Release.
Restricted
Quarter: This term shall have the meaning set forth in Section
2.2 hereof.
Revolving Credit
Agreement: The 1996 Revolving Credit Agreement dated as of June
28, 1996, between the Borrower and the Lenders as
amended by the First Amendment to 1996 Revolving
Credit Agreement, dated as of July 31, 1996, and by
the Second Amendment to 1996 Revolving Credit
Agreement, dated as of December 27, 1996; and, as
further amended and restated by the 1997 Revolving
Credit Agreement, dated as of February 26, 1997,
between the Borrower and the Lenders, and as further
amended or restated from time to time.
Revolving
Credit Rate: The floating interest rate announced from time
to time by FNB-O as its "National Base Rate." The
National Base Rate is set by FNB-O, solely in its
discretion, to reflect generally the rates charged by
national money center banks as their reference rates.
(Previously, the rate was announced by FNB-O as its
"New York Base Rate.") Rates charged by FNB-O may be
at, above or below the National Base Rate, as
determined by FNB-O as to each respective customer.
Security
Agreement: The 1996 Restated Security Agreement restated as of
May 3, 1996, between the Borrower and FNB-O, as agent
for the Lenders and others, as amended by the First
Amendment to 1996 Restated Security Agreement, dated
as of June 28, 1996; the Second Amendment to 1996
Restated Security Agreement, dated as of July 31,
1996; and the Third Amendment to 1996 Restated
Security Agreement, dated as of December 27, 1996;
and as further amended and restated by the 1997
Security Agreement dated as of February 26, 1997,
between the Borrower and FNB-O, as agent for the
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Lenders and others and as further amended or restated
from time to time. References in the Notes to the
1996 Restated Security Agreement shall mean the
Security Agreement as defined herein.
Subsidiaries: Any corporation, business association, partnership,
joint venture, limited liability company or other
business entity in which the Borrower, or one or more
of its Subsidiaries, or the Borrower and one or more
of its Subsidiaries has either (i) more than 50% of
the equity ownership thereof, or (ii) the power to
elect a majority of the directors or to control the
identification of the managing or general partners or
similar governing persons thereof.
Sumitomo: The Sumitomo Bank, Limited, a Japanese bank being
represented by its office at 200 North Broadway,
Suite 1625, St. Louis, Missouri 63102 and acting
through its Chicago branch.
Total
Indebtedness: All loans and other obligations of the Borrower and
its Subsidiaries, without duplication, for borrowed
money (including, without limitation, the
indebtedness due to the Lenders and the holders of
the Related Bank Debt) regardless of the maturity
thereof but such term shall not include subordinated
debt of the Borrower, as such term is defined in the
definition of Net Worth, up to $15,000,000 if such
subordinated debt was existing on May 3, 1996. For
purposes of this definition of "Total Indebtedness,"
indebtedness under an interest rate protection
Agreement shall mean the amount, if any, at the time
of determination, of the unpaid Interest Rate
Protection Contract Amounts; provided, however, that
solely for purposes of voting under this Agreement by
the Lenders, "Total Indebtedness" will not include
such Interest Rate Protection Contract Amounts.
Trigger
Event: This term shall have the meaning set forth in Section
2.2 hereof.
All accounting terms not otherwise defined herein shall have the meaning
ordinarily applied under generally accepted accounting principles.
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II. TERM FACILITY
2.1. Term Credit. The Banks agree to advance $48,490,000 to the
Borrower for the purchase of substantially all of the assets of Broadcast
Partners. Such advances shall be made, in one or more closings, on a pro rata
basis by the Banks, based on the following maximum advance limits for each Bank:
(1) as to FNB-O, $10,780,000; (ii) as to FNB-W, $245,000; (iii) as to NBD,
$6,223,000; (iv) as to Norwest, $4,047,000; (v) as to LaSalle, $10,388,000; (vi)
as to Mercantile, $5,333,900; (vii) as to Sumitomo, $5,170,000; (viii) as to
First Bank, $1,933,000; and (ix) as to Montreal, $4,370,100.
It is understood and agreed by the parties that the foregoing advances
by FNB-O, FNB-W, and NBD were made at the initial closing under the 1996 Term
Credit Agreement on May 3, 1996. The foregoing advance by Norwest represents an
advance of $1,822,000 which was made at the initial closing under the Agreement
on May 3, 1996, and an additional advance of $2,225,000, which was made at the
closing under the First Amendment on July 17, 1996. The foregoing advances by
Mercantile, Sumitomo and First Bank were made at the closing under the First
Amendment on July 17, 1996. The advance made by Montreal was made at the closing
of the Second Amendment on July 31, 1996; the proceeds of such advance were used
to prepay the existing Note held by Broadcast Partners in the remaining
principal amount of $4,070,100, and to provide an additional $300,000 to the
Borrower. The advance made by LaSalle was made on December 27, 1996, at the
closing of the Third Amendment. This Agreement shall not be deemed to extinguish
any existing indebtedness of the Borrower under the 1996 Term Credit Agreement
or the Notes issued thereunder or to release, terminate or affect the priority
of any security therefor.
2.2. Notes. The Notes shall bear interest on the principal loan
amount thereof outstanding through June 30, 1999, at the rate of 8.25% per
annum; thereafter the interest rate for the balance of the term shall be set on
June 30, 1999, at two percent (2.00%) above the yield on constant maturity
Treasury Bonds with maturities of three years, as quoted for the Business Day
immediately preceding June 30, 1999 in the applicable Release. Notwithstanding
the foregoing, the Notes issued to the following Lenders shall bear interest as
follows: (i) as to First Bank, at the rate of 8.36% per annum through June 30,
1999 (whereupon the interest rate reset described above shall be applicable);
and (ii) as to Mercantile, NBD, Sumitomo, Norwest, FNB-W and Montreal, at a
variable rate per annum equal to New York Prime minus one-half of one percent
(0.5%). After an Event of Default has occurred, interest shall accrue: (i) with
respect to the fixed rate Notes, on the entire outstanding balance of principal
and interest at a fluctuating rate equal to the Revolving Credit Rate plus four
percent (4.00%); and (ii) as to the floating rate Notes, on the principal loan
amount thereof at a rate per annum equal to three and one-half percent (3.5%)
above New York Prime. Interest shall be calculated on actual days elapsed and a
year of 360 days. If the Borrower's most recent Quarterly Compliance Certificate
shows that, as of the end of the prior quarter, Total Indebtedness was at such
date more than thirty-six (36) times the Operating Cash Flow at the end of such
quarter, the current quarter shall be deemed a "Restricted Quarter." If, any
time during a Restricted Quarter (including, without limitation, during any
period in such quarter prior to delivery of the Quarterly Compliance
Certificate), the interest rate accruing on any Note is less than seven and
one-half percent (7.50%), a "Trigger Event" shall be deemed to have occurred.
Upon the occurrence of a Trigger Event, the Borrower shall be obligated to pay
the Lenders the following fees: (i) three-eighths of one percent (.375%) of the
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outstanding principal balance of such Note as of the date preceding the Trigger
Event, which amount shall be payable promptly upon invoicing by FNB-O; (ii) the
same amount as computed in clause (i), payable on the six-month anniversary of
the Trigger Event; and (iii) the same amount as computed in clause (i), payable
on the twelve-month anniversary of the Trigger Event.
2.3. Payments. Interest on the unpaid balance of the Notes
shall be due on the last day of each month beginning May 31, 1996. The principal
amount of each respective Note shall become due and payable in seventy-two equal
monthly installments, with the first such installment due on January 31, 1997,
and subsequent installments due on the last day of each consecutive month
thereafter. The total amount of all unpaid principal and accrued interest
hereunder shall be due and payable no later than December 31, 2002. In the event
that a payment day is not a Business Day, the payment shall be due on the next
succeeding Business Day. Interest shall continue to accrue on the full unpaid
balance hereunder notwithstanding any permitted or unpermitted failure of the
Borrower to make a scheduled payment or the fact that a scheduled payment day
falls on a day other than a Business Day.
2.4. Fees. The Borrower will pay to FNB-O an initial fee equal
to $14,729, payable at closing. Such fee will be paid to FNB-O and allocated by
FNB-O pro rata among the Banks based on their respective commitments as shown in
Section 2.1 above. Furthermore, the Borrower will pay to FNB-O at closing an
agenting fee equal to $25,500. At the closing of the First Amendment on July 17,
1996, the Borrower paid a fee of $7,330.95 to FNB-O for distribution to the
following Banks: (i) $1,112.50 to Norwest; (ii) $2,666.95 to Mercantile; (iii)
$2,585.00 to Sumitomo; and (iv) $966.50 to First Bank. At the closing of the
Second Amendment on July 31, 1996, the Borrower paid a fee of $2,185.05 to FNB-O
for distribution to Montreal.
2.5 Payment. The Borrower's obligation to make payments of
principal and interest hereunder shall be further evidenced by the Notes, the
form of which is attached hereto as Exhibit A. All obligations of the Borrower
under the Notes and the other Operative Documents shall be payable in
immediately available funds in lawful money of the United States of America at
the principal office of FNB-O in Omaha, Nebraska or at such other address as may
be designated by FNB-O in writing.
2.6 Prepayment. Prepayments of the Notes may be made in
full or in part at any time upon 10 days prior written notice to the Lenders;
provided, however, that unanimous consent of the Lenders shall be required for
any prepayment (other than a prepayment to Broadcast Partners in accordance with
Section 2.6A below) which is not applied pro rata to the Lenders in accordance
with Section 8.2. Prepayment penalties will be required as indicated below:
(a) The Borrower may prepay in full without penalty the
principal loan amounts outstanding under all Notes
which bear interest at a fixed rate in accordance
with Section 2.2 hereof, if such prepayment occurs on
June 30, 1999 and the Borrower has given the Banks at
least 30 days prior written notice of its intention
to make such prepayment.
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(b) If a prepayment of a Note which bears interest at a
fixed rate in accordance with Section 2.2 hereof
occurs other than in accordance with (a) above, the
Borrower shall pay to the respective Bank payee
thereof, at such payee's option, either: (1) the
Make-Whole Premium due in respect of such prepayment;
or (2) a prepayment fee equal to one and one-half
percent (1.50%) of the amount of such prepayment.
(c) The Borrower shall not be obligated to pay a
Make-Whole Premium or prepayment fee to Broadcast
Partners or to any Bank payee of a Note which bears
interest at a floating rate indexed to New York
Prime.
2.6A Permitted Prepayments to Broadcast Partners. Broadcast
Partners' Notes were prepaid in full at the closing of the Second Amendment on
July 31, 1996.
2.7 Security. All obligations of the Borrower hereunder and under the
Operative Documents, including, without limitation, the Borrower's obligations
to make payments of principal and interest shall be secured by a first security
interest in the Collateral, as more specifically described in the Security
Agreement.
2.8 Related Loan Agreements. Nothing herein shall be deemed to alter or
amend the Borrower's obligations under the Related Loan Agreements, the Related
Bank Debt or any collateral security therefor, all of which shall continue in
full force and effect in accordance with the terms thereof.
III. [INTENTIONALLY OMITTED]
IV. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that as of May 3, 1996, and the
date hereof the following are and shall be true and correct:
4.1 Corporate Existence. It and each of its Subsidiaries, if any, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and duly qualified and in good standing in all states
where it is doing business except where the failure to be so qualified would not
have a material adverse effect on it and it has full power and authority to own
and operate its properties and to carry on its business. As of May 3, 1996 and
the date hereof , the Borrower has no Subsidiaries.
4.2 Corporate Authority. It has full corporate power, authority and
legal right to execute, deliver and perform the Operative Documents to which it
is a party, and all other instruments and agreements contemplated hereby and
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<PAGE>
thereby, and to perform its obligations hereunder and thereunder; and such
actions have been duly authorized by all necessary corporate action, and are not
in conflict with any applicable law or regulation, or any order, judgment or
decree of any court or other governmental agency or instrumentality or its
articles of incorporation or bylaws, or with any provisions of any indenture,
contract or agreement to which it or any of its Subsidiaries is a party or by
which it or any of its Subsidiaries or any of its or their property may be
bound.
4.3 Validity of Agreements. The Borrower's Operative Documents have
been duly authorized, executed and delivered and constitute its legal, valid and
binding agreements, enforceable against the Borrower in accordance with their
respective terms (except to the extent that enforcement thereof may be limited
by any applicable bankruptcy, reorganization, moratorium or similar laws now or
hereafter in effect, or by principles of equity).
4.4 Litigation. Neither the Borrower nor any Subsidiary is a party to
any pending lawsuit or proceeding before or by any court or governmental body or
agency, which is likely to have a materially adverse effect on the Borrower's
ability to perform its obligations under its Operative Documents; nor is the
Borrower aware of any threatened lawsuit or proceeding, to which it or any
Subsidiary may become a party or of any investigation of any Court or
governmental body or agency into its affairs, which if instituted would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents.
4.5 Governmental Approvals. The execution, delivery and performance by
the Borrower of the Operative Documents or the Purchase Agreement do not require
the consent or approval of, the giving of notice to, the registration with, or
the taking of any other action in respect of, any federal, state or other
governmental authority or agency other than as contemplated herein and therein.
4.6 Defaults Under Other Documents. Neither the Borrower nor any
Subsidiary is in default or in violation (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default or violation) under
any document or any Agreement or instrument to which it may be a party or under
which it or any of its properties may be bound and the result of which would
have a material adverse effect upon the Borrower's ability to perform its
obligations under its Operative Documents.
4.7 Judgments. There are no outstanding or unpaid judgments (which are
not adequately bonded) of the Borrower or any Subsidiary which would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents.
4.8 Compliance with Laws. Neither the Borrower nor any Subsidiary is in
violation of any laws, regulations or judicial or governmental decrees in any
respect which could have any material adverse effect upon the validity or
enforceability of any of the terms of the Borrower's Operative Documents or
which could have a material adverse effect upon the Borrower's ability to
perform its obligations under its Operative Documents.
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4.9 Taxes. All tax returns of the Borrower and its Subsidiaries for
material taxes required to be filed have been filed or extensions permitted by
law have been obtained; all taxes of the Borrower and its Subsidiaries of a
material nature and which are due and payable as reflected on such returns have
been paid, other than taxes which are due but for which only a nominal late
payment penalty is payable and for which the taxing authority is not yet
entitled to enforce its remedies for payment thereof and other than taxes being
contested in good faith and with respect to which adequate reserves have been
established; and no material amounts of taxes of the Borrower and its
Subsidiaries not reflected on such returns are payable.
4.10 Collateral. The Borrower has good and marketable title to the
Collateral and the Collateral is free from all liens, encumbrances or security
interests, except as disclosed on Schedule A attached hereto. The Borrower's
principal place of business, chief executive office, and the principal place
where it keeps its records concerning the Collateral is Suite 200, 9110 West
Dodge Road, Omaha, Nebraska 68114. The Borrower also keeps certain of its
records regarding the Collateral at 11275 Aurora Avenue, Des Moines, Iowa 50322.
4.11 Pension Benefits. Neither the Borrower nor any Subsidiary
maintains a "Plan" as defined in Section 3 of the Employees Retirement Income
Security Act of 1974 ("ERISA"), or each such entity is in compliance with the
minimum funding requirements with respect to any such "Plan" maintained by it
and it has not incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") or otherwise under ERISA in connection with any such Plan.
4.12 Margin Regulations. No part of the proceeds of any advance
hereunder shall be used to purchase or carry any "margin stock" (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
of the United States) or any "margin security" (within the meaning of Regulation
G of said Board of Governors), or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or margin security. No part of the
proceeds of any advance hereunder shall be used for any purpose that violates,
or which is inconsistent with, the provisions of Regulation G, T, U or X of said
Board of Governors.
4.13 Financial Condition. The financial condition of the Borrower and
its Subsidiaries is truly and accurately set forth in the most recent financial
statement which has been provided to the Lenders and no material adverse change
has occurred which would make such financial statement inaccurate or misleading.
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V. COVENANTS
The Borrower hereby covenants that:
5.1 Financial Reports.
(a) Within forty-five (45) days after the end of each
month, the Borrower, at its sole expense, shall
furnish the Lenders a consolidated balance sheet,
statement of earnings of the Borrower and its
consolidated Subsidiaries, and a statement of cash
flows of the Borrower and its consolidated
subsidiaries and such financial statements on a
consolidating basis as to the Borrower, all such
financial statements to be prepared in accordance
with generally accepted accounting principles
consistently applied and certified as completed and
correct, subject to normal changes resulting from
year-end audit adjustments, by the chief financial
officer of the Borrower.
(b) Within ninety (90) days after the close of the
Borrower's fiscal year, the Borrower, at its sole
expense, shall furnish the Lenders: (i) a
consolidated balance sheet, a statement of earnings
of the Borrower and its consolidated Subsidiaries and
a statement of cash flows of the Borrower and its
consolidated subsidiaries, certified by Deloitte &
Touche, or other independent certified public
accountants acceptable to the Lenders, that such
financial reports fairly present the financial
condition of the Borrower and its consolidated
Subsidiaries and have been prepared in accordance
with generally accepted accounting principles
consistently applied; and (ii) a certificate from
such accountants certifying that in making the
requisite audit for certification of the Borrower's
financial statements, the auditors either (1) have
obtained no knowledge, and are not otherwise aware
of, any condition or event which constitutes an Event
of Default or which with the passage of time or the
giving of notice would constitute an Event of Default
under Sections 5.3, 5.4, 5.7, 5.9(b), 5.9(d), 5.11,
5.19 or 5.20; or (2) have discovered such condition
or event, as specifically set forth in such
certificate, which constitutes an Event of Default or
which with the passage of time or the giving of
notice would constitute an Event of Default under
such sections. The auditors shall not be liable to
the Lenders by reason of the auditors' failure to
obtain knowledge of such event or condition in the
ordinary course of their audit unless such failure is
the result of negligence or willful misconduct in the
performance of the audit.
(c) Within thirty (30) days after submission to the
Securities and Exchange Commission, the Borrower
shall provide to the Lenders copies of its Forms 10K
and 10Q, as submitted to the Securities and Exchange
Commission during the term of this Agreement.
(d) Within twenty (20) days after the end of each
quarter, the Borrower, at its expense, shall furnish
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the Lenders a certificate of the chief financial
officer of the Borrower in the form of Exhibit C,
setting forth such information (including detailed
calculations) sufficient to verify the conclusions
of such officer after due inquiry and review, that:
(i) The Borrower and each Subsidiary, either (y)
is in compliance with the requirements set
forth in this Agreement or (z) is NOT in
compliance with the foregoing for reasons
specifically set forth therein; and
(ii) The chief financial officer of the
Borrower has reviewed or caused to be
reviewed all of the terms of the Operative
Documents of the Borrower and that such
review either (1) has NOT disclosed the
existence of any condition or event which
constitutes an event of default or any
condition or event which with the passage of
time or the giving of notice would
constitute an event of default under the
Operative Documents or (2) has disclosed the
existence of a condition or event which
constitutes an event of default, or a
condition or event which with the passage of
time or the giving of notice would
constitute an event of default, under the
aforesaid instrument or instruments and the
specific condition or event is specifically
set forth.
For the quarter ended December 31, 1996, the Borrower
shall provide the Quarterly Compliance Certificate in
the form of Exhibit B, plus the Quarterly Compliance
Certificate in the form which was required by the
1996 Term Credit Agreement in effect on December 31,
1996.
(e) The Borrower shall provide the Lenders with such
other financial reports and statements as the Lenders
may reasonably request.
5.2 Corporate Structure and Assets. The Borrower shall not merge or
consolidate with any other corporation or entity unless the Borrower shall be
the surviving entity, nor sell any assets except items that are obsolete or no
longer necessary for operation of the business, other than in the ordinary
course of business without the prior written consent of the Lenders. The Lenders
shall be entitled to receive as a prepayment on the Notes the proceeds of any
sale of assets of the Borrower which are prohibited by the preceding sentence.
Notwithstanding the foregoing prepayment requirements, any such prohibited sale
shall remain a violation of this Agreement. In addition, the Borrower shall not
engage in any business materially different from that in which it is presently
engaged without the prior written consent of the Lenders, which consent shall
not be unreasonably withheld. The foregoing restrictions on mergers and
consolidations shall not apply if: (i) in the case of a merger, the Borrower is
the surviving entity and expressly reaffirms its obligations hereunder; (ii) in
the case of a consolidation, the resulting corporation expressly assumes the
obligations of the Borrower hereunder; (iii) the surviving or resulting
corporation is organized under the laws of the United States or a jurisdiction
thereof; (iv) after giving effect to such merger or consolidation, the surviving
or resulting corporation will be engaged in substantially the same lines of
business as are now engaged in by the Borrower; and (v) immediately after giving
effect to such merger or consolidation, no Event of Default will exist
hereunder.
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5.3 Net Worth. The Borrower shall maintain a minimum Net Worth during
the term of this Agreement of at least $23,500,000 plus fifty percent (50%) of
the net income (but not losses) of the Borrower for each fiscal year, commencing
with the fiscal year beginning January 1, 1997; provided, however, solely for
purposes of determining compliance with the provisions of this Section 5.3, "Net
Worth" shall not include any subordinated debt.
5.4 Indebtedness.
(a) The Borrower shall not at any time permit the sum of
the Total Indebtedness to the Lenders and the holders
of the Related Bank Debt to exceed forty-eight (48)
times Operating Cash Flow.
(b) On the day the Borrower or a Subsidiary becomes
liable with respect to any debt and immediately after
giving effect thereto and to the concurrent
retirement of any other debt, the sum of Total
Indebtedness, plus the amount of any outstanding
subordinated debt of the Borrower and its
Subsidiaries, plus the contingent obligations of the
Borrower and its Subsidiaries under any guaranty of
the debt of any other person or entity (other than
unsecured debt of a Subsidiary incurred in the
ordinary course of business for other than borrowed
money or to finance the purchase price of any
property or business) shall not exceed an amount
equal to sixty (60) times Operating Cash Flow at such
date.
5.5 Use of Proceeds. The Borrower shall not use the proceeds of the
advances hereunder to purchase or carry any "margin stock" (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System of the
United States) or any "margin security" (within the meaning of Regulation G of
said Board of Governors), or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or margin security. No part of such
proceeds shall be used for any purpose that violates, or which is inconsistent
with, the provisions of Regulation G, T, U or X of said Board of Governors. This
section shall not preclude the Borrower from repurchasing any of its own issued
and outstanding common stock; provided, however, that such repurchase does not
result in the occurrence of any other Event of Default hereunder.
5.6 Notice of Default. The Borrower shall give to the Lenders
prompt written notification of the existence or occurrence of:
(a) any fact or event which results, or which with notice
or the passage of time, or both, would result in an
Event of Default hereunder;
(b) any proceedings instituted by or against the Borrower
in any federal, state or local court or before any
governmental body or agency, or before any
arbitration board, or any such proceedings threatened
against the Borrower by any governmental agency,
which is likely to have a material adverse effect
upon the Borrower's ability to perform its
obligations under its Operative Documents;
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(c) any default or event of default involving the payment
of money under any Agreement or instrument which is
material to the Borrower or any Subsidiary to which
such entity is a party or by which it or any of its
property may be bound, and which default or event of
default would have a material adverse effect upon the
Borrower's ability to perform its obligations under
its Operative Documents; and
(d) the Borrower shall give immediate notice of the
commencement of any proceeding under the Federal
Bankruptcy Code by or against the Borrower or any
Subsidiary.
5.7 Distributions.
(a) Neither Borrower nor any Subsidiary shall declare
any dividends or make any cash distribution in
respect of any shares of its capital stock or
warrants of its capital stock, without the prior
written consent of the Lenders; provided, however,
that the Borrower may declare stock dividends;
provided, further, that the Borrower need not obtain
the Lenders' consent with respect to (i) dividends in
any one (1) year which are, in aggregate, less than
25% of the Borrower's Net Operating Profit After
Taxes in the previous four (4) quarters, as reported
to the Lenders pursuant to Section 5.1; or (ii)
dividends or distributions from any consolidated
Subsidiary.
(b) Neither the Borrower nor any Subsidiary other than a
Subsidiary which is wholly-owned by the Borrower
shall purchase, redeem, or otherwise retire any
shares of its capital stock or warrants of its
capital stock if, immediately after the making of
such purchase or redemption, the Borrower or any
Subsidiary will be in default of any other covenant
or provision of this Agreement (including, without
limitation, the covenants and provisions pertaining
to minimum net worth and limitations on
indebtedness).
5.8 Compliance with Law and Regulations. The Borrower and each
Subsidiary shall comply in all material respects with all applicable federal and
state laws and regulations.
5.9 Maintenance of Property; Accounting; Corporate Form; Taxes;
Insurance.
(a) The Borrower and each Subsidiary shall maintain its
property in good condition in all material respects,
ordinary wear and tear excepted, and make all
renewals, replacements, additions, betterments and
improvements thereto necessary for the efficient
operation of its business.
(b) The Borrower and each Subsidiary shall keep true
books of record and accounts in which full and
correct entries shall be made of all its business
transactions, all in accordance with generally
accepted accounting principles consistently applied.
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(c) The Borrower and each Subsidiary shall do or cause to
be done all things necessary to preserve and keep in
full force and effect its corporate form of existence
as is necessary for the continuation of its business
in substantially the same form, except where such
failure to do so with respect to any Subsidiary would
not have a material adverse effect on the ability of
the Borrower to perform its obligations under the
Operative Documents.
(d) The Borrower and each Subsidiary shall pay all taxes,
assessments and governmental charges or levies
imposed upon it or its property; provided, however,
that the Borrower or any Subsidiary shall not be
required to pay any of the foregoing taxes which are
being diligently contested in good faith by
appropriate legal proceedings and with respect to
which adequate reserves have been established.
(e) The Borrower shall maintain or cause to be maintained
liability insurance and casualty insurance, in a form
and amount satisfactory to FNB-O as agent for the
Lenders, upon the Collateral (excluding equipment or
inventory provided to Subscribers in the ordinary
course of business) and other tangible assets owned
by it and its Subsidiaries. The Borrower shall name
FNB-O as agent for the Lenders and the holders of the
Related Bank Debt as the loss payee on all such
casualty insurance, and as an additional insured on
all such liability insurance and shall provide the
Lenders with evidence of such insurance upon request.
5.10 Inspection of Properties and Books. The Borrower shall recognize
and honor the right of the Lenders, upon request to an officer of the Borrower,
to visit and inspect any of the properties of, to examine the books, accounts,
and other records of, and to take extracts therefrom and to discuss the affairs,
finances, loans and accounts of, and to be advised as to the same by the
officers of, the Borrower at all such times, in such detail and through such
agents and representatives as the Lenders may reasonably desire.
5.11 Guaranties. Neither the Borrower nor any Subsidiary shall guaranty
or become responsible for the indebtedness of any other person or entity;
provided, however, that a Subsidiary may guaranty the obligation of the
Borrower; provided further, that the Borrower may guaranty the obligations of a
Subsidiary so long as no Event of Default (or not event or occurrence which with
the passage of time or notice, or both, would become an Event of Default) has
occurred or will occur hereunder, taking into account such guaranty and
indebtedness.
5.12 Collateral. Neither the Borrower nor any Subsidiary shall incur or
permit to exist any mortgage, pledge, lien, security interest or other
encumbrance on the Collateral, except as permitted in the Security Agreement.
Subject to Section 5.4(b), the foregoing shall not be construed to prohibit the
Borrower or any Subsidiary from acquiring leased equipment in the ordinary
course of business. Without limiting the generality of the foregoing, the
Borrower covenants and agrees that it shall on request enforce for the benefit
of the Lenders and the holders of the Related Bank Debt, but at the sole expense
of the Borrower, any and all rights and remedies (including, without limitation,
rights to indemnity), that it may have with respect to the existence of any
liens, security interests or other encumbrances that may exist on the property
of the Borrower acquired from Broadcast Partners under the Purchase Agreement.
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Notwithstanding anything else to the contrary herein or in the Operative
Documents, Broadcast Partners shall have no right to share in the proceeds of
any such recovery which constitutes the proceeds of any indemnity claim by the
Borrower under the Purchase Agreement.
5.13 Name; Location. The Borrower shall give the Lenders ninety (90)
days notice prior to changing its name, identity or corporate structure, moving
its principal place of business, chief executive office or place where it keeps
its records concerning the Collateral.
5.14 Notice of Change in Ownership or Management. During the term of
this Agreement, the Borrower shall give the Lenders notice of the occurrence of
any of the following described events, which notice shall be given as soon as
the Borrower obtains notice or knowledge thereof:
(a) any change, directly or indirectly, in the existing
controlling interest in the Borrower; or
(b) any material adverse change in its management
personnel. A material adverse change in the
Borrower's management personnel shall be deemed to
have occurred if any one (1) of the following has
occurred with respect to two of the four (4)
individuals who are both officers and members of the
Board of Directors of the Borrower: (i) the
resignation, retirement, or voluntary or involuntary
termination of employment and/or status of such
persons as officers and directors of the Borrower;
(ii) any announcement, notice of intent, resolution
or similar advance notice with respect to the matters
referenced in the foregoing clause; or (iii) the
death, disability or legal incompetence of such
persons.
5.15. Interest Coverage. The ratio of Operating Cash Flow to interest
expense (as determined in accordance with generally accepted accounting
principles but excluding amortization of deferred offering costs and any fees
related to the Trigger Event in Section 2.2 of this Agreement) at the end of
each quarter during the term of this Agreement, as shown on the Quarterly
Compliance Report, shall not be less than 2.25 to 1.0.
5.16 Subordinated Debt. Neither the Borrower nor any Subsidiary shall
incur any subordinated debt or issue any preferred stock or warrants for
preferred stock except upon the prior written consent of the Lenders. Neither
the Borrower nor any Subsidiary shall make any voluntary or optional prepayment
on any subordinated debt without the prior written consent of the Lenders.
Similarly, the Borrower shall not amend its articles of incorporation or any
other documents or agreements relating to the issuance of subordinated debt,
preferred stock or warrants for preferred stock without the prior written
consent of the Lenders. The indebtedness to Broadcast Partners under the Notes
shall not be considered subordinated debt.
5.17 Subsidiaries. The Borrower shall give prompt written notice to the
Lenders of the Borrower's intent to acquire, or the Borrower's acquisition of,
any Subsidiary. Prior to the creation or acquisition of such Subsidiary, the
Borrower (i) shall cause a first security interest in the assets of such
Subsidiary to be perfected in favor of FNB-O, as agent for the Lenders and the
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holders of the Related Bank Debt, and (ii) shall cause the Subsidiary to enter
into a security Agreement, to execute and file such financing statements and to
provide opinions all in form satisfactory to the Lenders and the holders of the
Related Bank Debt, as to compliance with this section.
5.18 Amendments to Purchase Agreement. The Borrower shall not amend
the Purchase Agreement without the prior written consent of the Lenders.
5.19 Capital Expenditures. The Borrower shall not incur in any fiscal
year, commencing with the fiscal year beginning January 1, 1997, capital
expenditures, determined in accordance with generally accepted accounting
principles, of more than $1,000,000; provided, however, that capital
expenditures for (a) equipment to be used by subscribers of the Borrower, and
(b) telecommunications equipment, computer equipment, software and software
consulting shall not be counted for purposes of this annual limitation.
5.20 Acquisitions. The Borrower shall not acquire any stock, or any
equity interest in, or warrants therefor or securities convertible into the
same, or a substantial portion of the assets of, another entity without the
prior written consent of the Lenders; provided, however, that the Borrower shall
be permitted to make on a cumulative basis from and after the date of this
Agreement such acquisitions in an amount not to exceed Six Million Dollars
($6,000,000) in the aggregate without the consent of the Lenders if such
acquisitions are in or from entities which:
(a) are in the business of electronically communicating
time-sensitive information to subscribers;
(b) have their principal place of business in the United
States; and
(c) except for Market Communications Group, L.L.C., have
a positive operating cash flow, calculated in the
same method as is used to calculate the Borrower's
Operating Cash Flow for purposes of this Agreement.
VI. CONDITIONS PRECEDENT
6.1 Closing Conditions. Any and all obligations of the
Lenders hereunder are subject to satisfaction of the following conditions
precedent:
(a) FNB-O, as agent, shall have received an opinion of
counsel to the Borrower covering such matters as the
Lenders may request (including, without limitation,
corporate existence and good standing, corporate
authority, due authorization, execution and delivery
of the Operative Documents, the legal, valid, binding
and enforceable nature of the Operative Documents,
the perfection and priority of the security interest
in the Collateral granted to the Lenders, and the
Borrower's compliance with applicable state and
federal laws in connection with the equity offering
specified in Section 6.1(f) below), such opinion to
be satisfactory in form and substance to counsel to
FNB-O. To the extent that FNB-O agrees to accept a
post closing opinion from the Borrowers' counsel as
to security interest issues, the same shall be
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delivered no later than ten days after completion of
the necessary UCC searches, which shall be ordered
promptly after recording any UCC terminations
received by the Borrower upon closing of the Purchase
Agreement and in any event, such opinion shall be
delivered no later than 30 days after closing;
(b) FNB-O, as agent, shall have received such
certificates and documents as the Lenders may
reasonably request from the Borrower, including
articles of incorporation and bylaws, certificates
regarding good standing, incumbency, copies of other
corporate documents, and appropriate authorizing
resolutions;
(c) the Operative Documents shall have been duly
authorized and executed and shall be in full force
and effect, and such UCC financing statements shall
have been executed and filed in such offices as may
be appropriate to perfect the security interest of
FNB-O, as agent for the Lenders, in the Collateral,
it being understood, however, that certain UCC
amendments and terminations will be filed after
closing as directed by FNB-O;
(d) FNB-O, as agent, shall have received copies of the
Purchase Agreement, satisfactory in form and
substance to FNB-O;
(e) the closing of the Purchase Agreement shall occur
prior to or simultaneously with the closing of this
Agreement; and
(f) the Borrower shall have completed an offering of its
common stock and received proceeds therefrom in the
approximate amount of $15,010,000, satisfactory in
form and substance to the Banks.
VII. DEFAULTS AND REMEDIES
7.1 Events of Default. Any of the following shall be deemed an event of
default under this Agreement (an "Event of Default"):
(a) Any payment of principal required by any of the
Operative Documents shall not be paid when due.
(b) Any payment of interest or other fees due hereunder
or under any of the Operative Documents shall not be
paid within fifteen (15) calendar days after the date
on which such payment was invoiced or due.
(c) Any representation or warranty of the Borrower under
any of the Operative Documents, or any financial
reports or statements or certificates submitted
pursuant to this Agreement, shall prove to have been
false in any material respect when made.
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(d) A failure of the Borrower or any Subsidiary to comply
with any requirement or restriction applicable to
such entity and contained in Sections 5.1, 5.2, 5.3,
5.4, 5.7, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16, 5.19 or
5.20 of this Agreement.
(e) A failure of the Borrower or any Subsidiary to comply
with any requirement or restriction contained in any
provision of the Operative Documents not otherwise
specified in this Article VI, which failure remains
unremedied for ten (10) days following receipt of
notice from FNB-O on behalf of the Lenders.
(f) The occurrence of a default or a breach of any of the
obligations of the Borrower or any Subsidiary (other
than obligations of such Subsidiary to the Borrower)
under any note, loan agreement, preferred stock,
subordinated debt instrument or agreement, or any
other agreement evidencing an obligation to repay
borrowed money.
(g) The entry of a final judgment against the Borrower or
any Subsidiary for the payment of money, which is not
covered by insurance, and the expiration of thirty
(30) days from the date of such entry during which
the judgment is not discharged in full or stayed.
(h) The occurrence of any one or more of the following:
(1) The Borrower or any Subsidiary shall file a
voluntary petition in bankruptcy or an order
for relief shall be entered in a bankruptcy
case as to such entity or shall file any
petition or answer seeking or acquiescing in
any reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief for itself
under any present or future federal, state
or other statute, law or regulation relating
to bankruptcy, insolvency or other relief
for debtors; or shall seek or consent to or
acquiesce in the appointment of any trustee,
receiver or liquidator of such entity or of
all or any part of its property, or of any
or all of the royalties, revenues, rents,
issues or profits thereof, or shall make any
general assignment for the benefit of
creditors, or shall admit in writing its
inability to pay its debts or shall
generally not pay its debts as they become
due; or
(2) A court of competent jurisdiction shall
enter an order, judgment or decree approving
a petition filed against the Borrower or any
Subsidiary seeking any reorganization,
dissolution or similar relief under any
present or future federal, state or other
statute, law or regulation relating to
bankruptcy, insolvency or other relief for
debtors, and such order, judgment or decree
shall remain unvacated and unstayed for an
aggregate of thirty (30) days (whether or
not consecutive) from the first date of
entry thereof; or any trustee, receiver or
liquidator of the Borrower or any Subsidiary
or of all or any part of its property, or of
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any or all of the royalties, revenues,
rents, issues or profits thereof, shall be
appointed without the consent or
acquiescence of such entity and such
appointments shall remain unvacated and
unstayed for an aggregate of thirty (30)
days (whether or not consecutive); or
(3) A writ of execution or attachment or any
similar process shall be issued or levied
against all or any part of or interest in
the Collateral, or any judgment involving
monetary damages shall be entered against
the Borrower or any Subsidiary which shall
become a lien on the Collateral or any
portion thereof or interest therein and such
execution, attachment or similar process or
judgment is not released, bonded, satisfied,
vacated or stayed within thirty (30) days
after its entry or levy.
(i) Any event of default shall occur under any Operative
Document.
(j) A change shall occur after November 8, 1993,
directly or indirectly, in the ownership or control
of the Borrower; provided, however, that changes in
the ownership or control of, or new issuances of,
voting common stock which do not exceed,
cumulatively, 50% of the total issued and outstanding
shares of the Borrower as of September 30, 1993 shall
not be deemed an Event of Default under this Section
7.1(j); provided further, that acquisitions of
additional shares by members of the existing
executive management group of the Borrower shall not
be counted as changes in the ownership or control of
the Borrower under this Section 7.1(j). For purposes
of computing the total issued and outstanding shares
as of September 30, 1993, warrants and options for
such shares shall be included.
(k) An Event of Default shall occur under any Related
Bank Debt or the Related Loan Agreement and the
expiration of any applicable cure period thereunder.
(l) The Borrower shall be obligated to prepay all or any
portion of its subordinated debt as a result of a
Change of Control.
(m) The Borrower pays, or is determined to be obligated
to pay, any indemnity to Broadcast Partners under the
Purchase Agreement in excess of $1,000,000 in the
aggregate.
7.2 Remedies. If an Event of Default occurs and is continuing, upon the
election of the Lenders holding two-thirds of the then outstanding aggregate
Total Indebtedness of the Borrower to the Lenders (including under the Notes,
the Related Bank Debt and any similar indebtedness but excluding amounts due
under the Purchase Agreement), the entire unpaid principal amount under the
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Notes and all Related Bank Debt, together with interest accrued thereon, shall
become immediately due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and the Lenders
may exercise their rights under the other Operative Documents and the Related
Loan Agreements (and the operative documents with respect thereto), including,
without limitation, under the Security Agreement. For purposes of this Article
VII, the term Lenders includes First Bank, Boatmen's and . In addition, the
Lenders shall have such other remedies as are available at law and in equity.
Remedies under this Agreement, the Operative Documents, the Related Loan
Agreements (and the operative documents with respect thereto) are cumulative.
Any waiver must be in writing by the Lenders and no waiver shall constitute a
waiver as to any other occurrence which constitutes an Event of Default or as to
any party not specifically included in such written waiver.
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ARTICLE VIII. INTER-CREDITOR AGREEMENTS
8.1 FNB-O as Servicer. FNB-O will act as sole servicer of the loans
evidenced by the Notes issued hereunder and the Related Bank Debt (other than
interest rate protection agreements). For purposes of this Article VIII, the
term Lenders includes First Bank, Boatmen's and the term Event of Default means
any Event of Default hereunder or under any Related Bank Debt. FNB-O will
enforce, administer and otherwise deal with the loans made by the Lenders in
accordance with safe and prudent banking standards employed by FNB-O in the case
of the loan made by FNB-O. Without limiting the generality of the foregoing,
FNB-O will, on its own behalf and on behalf of the Lenders: (i) maintain
originals of the Operative Documents and the operative documents in connection
with the Related Loan Agreements; (ii) receive requests for advances from the
Borrower under the Related Loan Agreements and make such advances on behalf of
the revolving lenders in such agreements (provided that FNB-O is assured of
reimbursement therefor by the other revolving lenders for their pro rata
shares); (iii) receive payments and prepayments from the Borrower and apply such
payments as provided in Section 8.2; (iv) receive notices from the Borrower and
send copies thereof to the Lenders if FNB-O has reasonable cause to believe that
such Lenders have not received such notice from another source; and (v) advise
the Lenders of the occurrence of any Event of Default which FNB-O obtains actual
knowledge of. The Lenders agree not to attempt to take any action against the
Borrower under the Operative Documents, Related Bank Debt or with respect to the
indebtedness evidenced thereby without FNB-O's consent unless holders of
two-thirds of the then outstanding aggregate Total Indebtedness of the Borrower
to the Lenders (including under the Notes, the Related Bank Debt and any similar
indebtedness but excluding amounts due under the Purchase Agreement) shall have
requested FNB-O to take specific action against the Borrower and FNB-O shall
have failed to do so within a reasonable period after receipt of such request.
All actions, consents, waivers and approvals by the Lenders shall be deemed
taken or given and amendments hereto deemed agreed to if the holders of more
than two-thirds of the outstanding aggregate Total Indebtedness of the Borrower
to the Lenders shall have indicated their consent thereto. Notwithstanding the
foregoing, unanimous approval of the applicable Lenders under the Notes or the
Related Bank Debt shall be required for: (i) any reduction or compromise of the
principal loan amount of the Notes or the Related Bank Debt, the amount or rate
of interest accrued or accruing thereon or the fees due hereunder; and (ii)
extension of the date of any scheduled payment; and unanimous consent of all the
Lenders shall be required for (iii) permitting the sale of or releasing the
security interest of the Lenders in Collateral which comprises more than ten
percent (10%) net book value of fixed assets of the Borrower; and (iv) any
amendment of Sections 8.1 or 8.2 hereof. A Lender's commitment hereunder may not
be increased without the consent of such Lender, it being understood, however,
that increases in the total facility hereunder may be made with the consent of
the holders of more than two-thirds of the aggregate total outstanding
obligations of the Borrower to the Lenders under the Agreement, so long as such
increase does not result in the increase of any non-consenting Lender's
commitment hereunder.
8.2 Application of Payments. Until the earlier of the occurrence of an
Event of Default or any Lender's giving of notice to the others that it deems
itself insecure, payments or prepayments made by the Borrower may be applied to
the indebtedness designated by the Borrower or otherwise applied as follows:
(a) first, to pay interest to date on the revolving
credit due under the Revolving Credit Agreement and
fees due to the Lenders and holders of the Related
Bank Debt;
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(b) second, to make payments due but unpaid under any
of the Notes and Related Bank Debt; and
(c) third, pro rata to the Lenders, such pro rata share
to be determined as set forth below in subsection
(bb) of this Section 8.2.
After the occurrence of an Event of Default or any Lender's giving of notice
that it deems itself insecure, payments or prepayments on the Notes and Related
Bank Debt received by FNB-O or any of the Lenders and funds realized upon the
disposition of any of the Collateral shall be applied as follows:
(aa) first, to reimburse FNB-O for any costs, expenses,
and disbursements (including attorneys' fees) which
may be incurred or made by FNB-0: (i) in connection
with its servicing obligations; (ii) in the process
of collecting such payments or funds; or (iii) as
advances made by FNB-O to protect the Collateral
(provided, however, that FNB-O shall have no
obligation to make such protective advances); and
(bb) second, pari passu among the Lenders, based on their
respective pro rata shares of the funds to be
applied. Each Lender's pro rata share shall be equal
to a fraction, (x) the numerator of which shall be
the total principal loan amount then outstanding
which is owing to each such Lender under its Related
Bank Debt, and (y) the denominator of which shall be
the total principal loan amount then outstanding
which is owning to the Lenders under all Related Bank
Debt. As to any obligation of the Borrower to one or
more Lenders under an interest rate protection
contract, "principal loan amount then outstanding"
shall mean, as of the date of determination by FNB-O
of the Lenders' respective pro rata shares, the
amount, if any, of the unpaid Interest Rate
Protection Contract Amounts.
Except as specifically provided in this Section 8.2, FNB-O shall have no
obligation to repay or prepay any amount due from the Borrower to any of the
other Lenders nor shall FNB-O have any obligation to purchase all or a part of
any Note hereunder or any Note evidencing any Related Bank Debt or any advance
made by any Lenders, nor shall the Lenders have any recourse whatsoever against
FNB-O with respect to any failure of the Borrower to repay the indebtedness
referenced herein.
8.3 Liability of FNB-O. FNB-O shall not be liable to the Lenders for
any error of judgment or for any action taken or omitted to be taken by it
hereunder, except for gross negligence or willful misconduct. Without limiting
the generality of the foregoing, FNB-O, except as expressly set forth herein,
(a) may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (b) makes no representation or warranty with respect to,
and shall not be responsible for, the accuracy, completeness, execution,
legality, validity, legal effect or enforceability of this 1997 Term Credit
Agreement, the Notes, the Related Loan Agreements or the Related Bank Debt or
the other Operative Documents or the operative documents under any Related Bank
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Debt or the value or sufficiency of any Collateral given by the Borrower or the
priority of the Lenders' security interest therein or the financial condition of
the Borrower; and (c) shall not be responsible for the performance or observance
of any of the terms, covenants or conditions of the Operative Documents or the
operative documents under any Related Bank Debt on the part of the Borrower and
shall not have any duty to inspect the property (including, without limitation,
the books and records) of the Borrower.
8.4 Transfers. No Lender shall subdivide, transfer or grant a
participation in its respective Notes or notes evidencing any Related Bank Debt,
or in any advance hereunder or under any Related Bank Debt, without the prior
written consent of FNB-O which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Broadcast Partners shall be permitted to
subdivide, transfer or grant a participation in its respective Notes to any of:
Pioneer Hi-Bred International, Inc., Farmland Industries, Inc., Illinois
Agricultural Service Company, or the majority-owned or controlled subsidiaries
or affiliates of any of them. For purposes of this Section 8.4, "Related Bank
Debt" shall not include interest rate protection agreements.
8.5 Reliance. The Lenders acknowledge that they have been advised that
none of the Notes, the notes evidencing any Related Bank Debt nor any interest
therein or related thereto has been (i) registered under the Securities Act of
1933, as amended, nor (ii) insured by the Federal Deposit Insurance Corporation.
The Lenders acknowledge that they have received from the Borrower all financial
information and other data relevant to their decision to extend credit to the
Borrower and that they have independently approved the credit quality of the
Borrower.
8.6 Relationship of Lenders. The Lenders intend for the relationships
created by this Agreement to be construed as concurrent direct loans from each
Lender respectively to the Borrower. Nothing herein shall be construed as a loan
from any Lender to FNB-O or as creating a partnership or joint venture
relationship among them.
8.7 New Lenders. In the event that new Lenders are added to this
Agreement or to the Related Loan Agreements, such Lenders shall be required to
agree to the inter-creditor provisions of this Article VIII.
8.8 Broadcast Partners. As of the closing of the Second
Amendment on July 31, 1996, Broadcast Partners was removed from this Agreement
as a party.
ARTICLE IX. MISCELLANEOUS
9.1 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the subject matter hereof and may not
be effectively amended, changed, modified or altered, except in writing executed
by all parties. Notwithstanding the foregoing, it is understood that the
purchase and sale transaction between the Borrower and Broadcast Partners is
governed by the Purchase Agreement.
9.2 Governing Law. The Operative Documents shall be governed by
and construed pursuant to the laws of the State of Nebraska.
30
- 210 -
<PAGE>
9.3 Notices. Until changed by written notice from one party hereto to
the other, all communications under the Operative Documents shall be in writing
and shall be hand delivered or mailed by registered mail to the parties as
follows:
If to the Borrower:
DATA TRANSMISSION NETWORK CORPORATION
Suite 200
9110 West Dodge Road
Omaha, Nebraska 68114
Attention: Chief Financial Officer
If to the Lenders:
FIRST NATIONAL BANK OF OMAHA
One First National Center
Omaha, Nebraska 68102
Attention: Mr. James P. Bonham
Notices shall be deemed given when mailed, except that any notice by the
Borrower under Section 2.6 shall not be deemed given until received by FNB-O.
9.4 Headings. The captions and headings herein are for convenience only
and in no way define, limit or describe the scope or intent of any provisions or
sections of this Agreement.
9.5 Counterparts. This Agreement may be executed in several
counterparts and such counterparts together shall constitute one and the same
instrument.
9.6 Survival; Successors and Assigns. The covenants, agreements,
representations and warranties made herein, and in the certificates delivered
pursuant hereto, shall survive the execution and delivery to the Lenders of this
Agreement and shall continue in full force and effect so long as any Note or any
obligation to the Lenders under any of the Operative Documents is outstanding
and unpaid. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party, and all covenants, promises and agreements by or on behalf of the
Borrower which are contained in this Agreement shall bind the successors and
assigns of the Borrower and shall inure to the benefit of the successors and
assigns of the Lenders.
9.7 Severability. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
9.8 Assignment. The Borrower may not assign its rights or obligations
hereunder and any assignment in contravention of the terms hereof shall be void.
9.9 Amendments. Any amendment, modification or supplement to this
Agreement must be in writing and must be signed by the parties hereto.
IN WITNESS WHEREOF, the Borrower and the Lenders have caused this 1997
Term Credit Agreement to be executed by their duly authorized corporate officers
as of the day and year first above written.
31
- 211 -
<PAGE>
DATA TRANSMISSION NETWORK
CORPORATION
By
-------------------------------
Title:
32
- 212 -
<PAGE>
FIRST NATIONAL BANK OF OMAHA
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
33
- 213 -
<PAGE>
THE SUMITOMO BANK, LIMITED
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
34
- 214 -
<PAGE>
FIRST NATIONAL BANK, WAHOO,
NEBRASKA
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
35
- 215 -
<PAGE>
NBD BANK
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
36
- 216 -
<PAGE>
NORWEST BANK NEBRASKA, N.A.
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
37
- 217 -
<PAGE>
MERCANTILE BANK OF ST. LOUIS, N.A.
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
38
- 218 -
<PAGE>
FIRST BANK, NATIONAL ASSOCIATION
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
39
- 219 -
<PAGE>
BANK OF MONTREAL
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
40
- 220 -
<PAGE>
LASALLE NATIONAL BANK
By
-------------------------------
Title:
NOTICE: A credit Agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
--------
Borrower
41
- 221 -
<PAGE>
EXHIBIT A
TO 1997 TERM CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
FORM OF NOTES
42
- 222 -
<PAGE>
SECURED BUSINESS PROMISSORY NOTE
Omaha, Nebraska $
-------------------------------
May 3, 1996 December 31, 2002
(Note Date) (Maturity Date)
DATA TRANSMISSION NETWORK CORPORATION ("Maker") promises to pay
to the order of (Lender") at the offices of First National Bank of Omaha in
Omaha, Nebraska, the principal sum of . Interest on the unpaid principal balance
shall be due on the last day of each month, beginning May 31, 1996. The
principal sum shall become due and payable in seventy-two equal monthly
installments, with the first such installment due on January 31, 1997, or if
such day is not a Business Day, on the next succeeding Business Day, and
subsequent installments due on the last day of each consecutive month
thereafter, or, if such day is not a Business Day, on the next succeeding
Business Day. In any event, the total amount of all unpaid principal and accrued
interest hereunder shall be due and payable no later than December 31, 2002. All
capitalized terms not defined herein shall have the meanings set forth in that
certain 1996 Term Credit Agreement dated as of May 3, 1996 among Maker, Lender
and others (the "Agreement".)
Interest shall accrue on the principal outstanding through June 30,
1999, from time to time at the rate of % per annum; thereafter the interest rate
for the balance of the term shall be set on June 30, 1999, at two percent
(2.00%) above the yield on constant maturity Treasury Bonds with maturities of
three years, as quoted for the immediately preceding Business Day in the
applicable Release. Notwithstanding the foregoing, after an Event of Default has
occurred interest shall accrue on the entire outstanding balance of principal
and interest at a fluctuating rate equal to the Revolving Credit Rate, plus
4.00%. Interest shall be calculated on the basis of the actual number of days
outstanding and a 360-day year. Interest shall continue to accrue on the full
unpaid balance hereunder notwithstanding any permitted or unpermitted failure of
the Borrower to make a scheduled payment or the fact that a scheduled payment
day falls on a day other than a Business Day. If, any time during a Restricted
Quarter (including, without limitation, during any period in such quarter prior
to delivery of the Quarterly Compliance Certificate), the interest rate accruing
on this Note is less than seven and one-half percent (7.50%), a "Trigger Event"
shall be deemed to have occurred. Upon the occurrence of a Trigger Event, the
Maker shall be obligated to pay the following fees: (i) three-eighths of one
percent (.375%) of the outstanding principal balance of the Note as of the date
preceding the Trigger Event, which amount shall be payable promptly upon
invoicing; (ii) the same amount as computed in clause (i), payable on the
six-month anniversary of the Trigger Event; and (iii) the same amount as
computed in clause (i), payable on the twelve-month anniversary of the Trigger
Event.
Maker may prepay in full without penalty the unpaid balance hereunder,
provided that the Borrower contemporaneously prepays in full all other Notes (as
such term is defined in the Agreement), but only if such prepayment occurs on
June 30, 1999 and the Borrower has given Lender at least 30 days prior written
43
- 223 -
<PAGE>
notice of its intention to make such prepayment. In the event of any other
prepayment (regardless of whether such prepayment occurs before or after June
30, 1999), the Borrower shall pay to Lender, at Lender's option, either: (1) the
Make-Whole Premium (as such term is defined in the Agreement) due in respect of
such prepayment; or (2) a prepayment fee equal to one and one-half percent
(1.50%) of the amount of such prepayment.
Payment of this Note and the performance of Maker's obligations under
the Agreement ("Obligations") are secured by a security interest granted to
First National Bank of Omaha, as agent for the Lenders and others ("Agent"),
under the Security Agreement in:
All of Debtor's accounts, accounts receivable, chattel paper,
documents, instruments, goods, inventory, equipment, general
intangibles, contract rights, all rights of Debtor in deposits and
advance payments made to Debtor by its customers and subscribers,
accounts due from advertisers and all ownership, proprietary,
copyright, trade secret and other intellectual property rights in and
to computer software (and specifically including, without limitation,
all such rights in DTN transmission computer software used in the
provision of the Basic DTN Subscription Service and Farm Dayta Service
to Debtor's subscribers) and all documentation, source code,
information and works of authorship pertaining thereto, all now owned
or hereafter acquired and all proceeds and products thereof; and
such additional collateral as is more specifically described in the Security
Agreement.
Maker's liability under its Obligations shall not be affected by any of
the following:
Acceptance or retention by Lender or Agent of other property
or interests as security for the Obligations, or for the liability of
any person other than a Maker with respect to the Obligations;
The release of all or any of the Collateral or other security
for any of the Obligations to any Maker;
Any release, extension, renewal, modification or compromise of
any of the Obligations or the liability of any obligor thereon; or
Failure by Lender or Agent to resort to other security or any
person liable for any of the Obligations before resorting to the
Collateral.
Neither Lender nor Agent is required to take any action whatsoever in
respect of the Collateral. Impairment or destruction of the Collateral shall not
release Maker of its liability hereunder.
Maker represents, warrants and covenants as follows:
44
- 224 -
<PAGE>
Maker is authorized to grant to Agent a security interest in
the Collateral;
This Note, the Agreement and the Security Agreement have been
duly authorized, executed and delivered by the Maker and constitute legal, valid
and binding obligations of Maker;
This Note evidences a loan to acquire substantially all of the
assets of Broadcast Partners, a general partnership, with its principal place of
business at 11274 Aurora Avenue, Des Moines, Iowa 50322; and
Maker agrees to pay all costs of collection in connection with
this Note, the Agreement and the Security Agreement, including reasonable
attorneys' fees and legal expenses.
Upon the failure of Maker to make any payment of principal or interest
when due hereunder or the occurrence of any Event of Default, all of the
Obligations shall, at the option of Agent and without notice or demand, mature
and become immediately due and payable; and Agent shall have all rights and
remedies for default provided by the Uniform Commercial Code, any other
applicable law and/or the Obligations.
All costs and expenses incurred by Lender or Agent in enforcing its
rights under this Note or any mortgage, endorsement, surety Agreement, guaranty
relating thereto are the obligation of Maker and are immediately due and
payable. Interest shall accrue on such costs and expenses from the date of
incurrence at the rate specified herein for delinquent Note payments. Each
Maker, endorser, surety and guarantor hereby waives presentment, protest,
demand, notice of dishonor, and the defense of any statute of limitations.
Without affecting the liability of any Maker, endorser, surety or
guarantor, the holder or Agent may, without notice, renew or extend the time for
payment, accept partial payments, release or impair any Collateral or other
security for the payment of this Note or agree to sue any party liable on it.
Neither Lender nor Agent shall be deemed to have waived any of its
rights upon or under this Note, or under any mortgage, endorsement, surety
agreement or guaranty, unless such waivers be in writing and signed by Lender or
Agent, as the case may be. No delay or omission on the part of Lender or Agent
in exercising any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right on any future occasion. All rights and remedies of Lender or Agent
on liabilities or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly or
concurrently.
Maker, if more than one, shall be jointly and severally liable
hereunder and all provisions hereof regarding the liabilities or security of
Maker shall apply to any liability or any security of any or all of them. This
45
- 225 -
<PAGE>
Note shall be binding upon the heirs, executors, administrators, assigns or
successors of Maker; shall constitute a continuing Agreement, applying to all
future as well as existing transactions, whether or not of the character
contemplated at the date of this Note, and if all transactions between Lender
and Maker shall be at any time closed, shall be equally applicable to any new
transactions thereafter, provided that Lender's interest in the Collateral shall
be limited to the extent provided in the Security Agreement; shall benefit
Lender, its successors and assigns; and shall so continue in force
notwithstanding any change in any partnership party hereto, whether such change
occurs through death, retirement or otherwise.
All obligations of Maker hereunder shall be payable in immediately
available funds in lawful money of the United States of America at the principal
office of First National Bank of Omaha in Omaha, Nebraska or at such other
address as may be designated by Bank in writing.
This Note shall be construed according to the laws of the State of
Nebraska.
Unless the content otherwise requires, all terms used herein which are
defined in the Uniform Commercial Code shall have the meanings therein stated.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Executed as of this 3rd day of May, 1996.
DATA TRANSMISSION NETWORK
CORPORATION
By:
--------------------------------
Title:
-----------------------------
46
- 226 -
<PAGE>
<TABLE>
<CAPTION>
PROMISSORY NOTE SCHEDULE
Loan Advances and Payments of Principal
DATA TRANSMISSION NETWORK CORPORATION
REVOLVING NOTE ADVANCES AND PAYMENTS:
<S> <C> <C> <C> <C> <C>
Amount of Unpaid
Amount Principal Paid Amount of Principal Notation
Date of Advance or Prepaid Interest Paid Balance Made By
- ---- ---------- --------------- ------------- --------- ---------
</TABLE>
47
- 227 -
<PAGE>
TERM NOTE:
Date of Conversion:
------------------------------
Amount Due at Date of Conversion:
----------------
Fixed Rate Notice Date: Fixed Rate:
----------------- ----------------%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Unpaid
Amount Principal Paid Amount of Principal Notation
Date of Payment or Prepaid Interest Paid Balance Made By
- ---- ---------- -------------- ------------- --------- ---------
</TABLE>
48
- 228 -
<PAGE>
EXHIBIT B
TO 1997 TERM CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
OFFICER'S CERTIFICATE
49
- 229 -
<PAGE>
COMPLIANCE CERTIFICATE
DATA TRANSMISSION NETWORK CORPORATION
First National Bank of Omaha Date
-----------------------
Attn: James Bonham
16th & Dodge Streets
Omaha, Nebraska 68102
I certify that Data Transmission Network Corporation is in compliance with the
requirements set forth in the 1996 Term Credit Agreement restated as of December
27, 1996 among Data Transmission Network Corporation, First National Bank of
Omaha, First National Bank, Wahoo, Nebraska, NBD Bank, Norwest Bank Nebraska,
N.A., The Sumitomo Bank, Limited, Mercantile Bank of St.
Louis, N.A., First Bank, National Association, Bank of Montreal and LaSalle
National Bank.
The following calculations are as of (statement date) as
---------------------
required by section 5.1(d) of said Agreement:
Evaluations:
Total Indebtedness (TI): $
-----------------------
Operating Cash Flow: most recent month previous month
ending ending
----------- ---------
Net Income (loss) ----------------- ---------------
Interest Expense ----------------- ---------------
Depreciation ----------------- ---------------
Goodwill Amortization ----------------- ---------------
Deferred Income Taxes ----------------- ---------------
Non-Ordinary Non-Cash
Charges (Credits) ----------------- ---------------
Total a) ----------------- b) ---------------
Operating Cash Flow = OCF = (a+b)/2 =
------------------
Leverage Ratio (TI/OCF):
------------------
50
- 230 -
<PAGE>
Section 2.2
. Trigger Fee: If Total Indebtedness is greater than 36 times the
Operating Cash Flow, then a one time fee is due,
paid in three installments of 3/8% of the then
outstanding principal balances, on any of Notes
which have an interest rate less than 7.5%.
Position: A Trigger Event has/has not occurred.
Section 5.3
. Net Worth: A minimum Net Worth (exclusive of subordinated
debt) of $23,500,000 plus fifty percent (50%) of
the net income (but not losses) of the Borrower
for each fiscal year, commencing with the fiscal
year beginning January 1, 1997; provided, however,
solely for purposes of determining compliance with
the provisions of this Section 5.3, "Net Worth"
shall not include subordinated debt.
Position: Minimum Net Worth (exclusive of subordinated
debt)= $ .
-------------
Net Income Year Ending Addition (50%)
---------- ----------- --------------
$ 12/31/97 $
-------------
-------------
Total Minimum Net Worth: $
-------------
Total Net Worth (exclusive of subordinated
debt) $
-------------
Section 5.4
. Indebtedness: At no time will Total Indebtedness exceed 48 x OCF
Position: (48 x OCF) - Total Indebtedness =
- =
--------- ----------- ------------
51
- 231 -
<PAGE>
. Total At no time will Adjusted Total Indebtedness
Indebtedness exceed 60 x OCF
plus
subordinated
debt plus
guaranty
contingencies
(Adjusted
Total
Indebtedness or
ATI):
Position: Adjusted Total Indebtedness = $
--------------
(60 x OCF) - (ATI) = $
-----------------
Section 5.7
. Distributions: Neither the Borrower nor any Subsidiary shall
declare any dividends (other than dividends
payable in stock of the Borrower or dividends or
distributions from any consolidated Subsidiary) or
make any cash distribution in respect of any
shares of its capital stock or warrants of its
capital stock, without the prior written consent
of the Lenders; provided that the Borrower need
not obtain the Lenders' consent. With respect to
dividends in any one (1) year which are in the
aggregate less than 25% of the Borrower's Net
Operating Profit After Taxes on the previous four
(4) quarters, as reported to the Lenders pursuant
to Section 5.1.
. Position: Net Operating Profit
After Taxes for
last four (4) quarters =
--------------
x .25
Available for dividends
or distributions in the most
recent quarter plus the
Prior three (3) quarters =
--------------
Dividents and distributions (excluding dividends
payable solely in stock of the Borrower and
distributions from consolidated Subsidiaries)
declared or paid in the most recent quarter plus
the prior three
(3) quarters =
---------------
52
- 232 -
<PAGE>
The Borrower [is/is not] in compliance with
Section 5.7.
Section 5.15
. Interest The ratio of OCF to Interest Expense ("IE")
Coverage: at the end of each quarter will not be less than
2.25 to 1.0 (225%).
Position: OCF = $
-------------
IE = $
-------------
OCF/IE = %
-----------
Section 5.19
. Capital The Borrower shall not make capital expenditures
Expenditures: (other than permitted earning assets specified
in Section 5.19) in any fiscal year, commencing
with the fiscal year beginning January 1, 1997,
in excess of $1,000,000
Position: Capital Expenditures this fiscal year = $
--------.
The Borrower [is/not] in compliance with Section
5.19.
Section 5.20
. Acquisitions: The Borrower shall not make acquisitions which
in the aggregate exceed $6,000,000 except certain
permitted unlimited acquisitions.
Position: Acquisitions (other than permitted unlimited
acquisitions) in the aggregate since the date
of this Agreement = $
-----------.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal
Acquired Place of Line of
Date Amount Company Business Business
---- ------ -------- --------- --------
</TABLE>
The Borrower [is/is not] in compliance with
Section 5.20.
Additional Representations:
There have/have not been any sale(s) of assets which would require
prepayment of the Notes under Section 5.2.
There has/has not been:
(i) a Change of Control or a material adverse change in
management personnel as defined in Section 5.14 of the
Agreement; or
53
- 233 -
<PAGE>
(ii) a default under Section 7.1(j) or 7.1(l) regarding a
change in ownership or control of the Company.
(iii) an indemnity claim by Broadcast Partners under
Section 7.1(m).
Name of Borrower: Data Transmission Network Corporation
Signature:
--------------------------------------
Title:
--------------------------------------
54
- 234 -
<PAGE>
SCHEDULE A
TO 1997 TERM CREDIT AGREEMENT
among
DATA TRANSMISSION NETWORK CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
FIRST NATIONAL BANK, WAHOO, NEBRASKA,
NBD BANK,
NORWEST BANK NEBRASKA, N.A.,
THE SUMITOMO BANK, LIMITED,
MERCANTILE BANK OF ST. LOUIS, N.A.,
FIRST BANK, NATIONAL ASSOCIATION,
BANK OF MONTREAL
and
LASALLE NATIONAL BANK
PERMITTED ENCUMBRANCES
<TABLE>
<CAPTION>
Secured Party Financing Statements
Nebraska Secretary of State
- ---------------------------
<S> <C> <C> <C>
First National Bank of Omaha 12/28/87 #401690
10/13/92 #564918 Amendment
11/13/92 #568176 Continued
First National Bank of Omaha, as agent 5/8/96 #691938 Amendment
FirsTier, Lincoln 6/24/87 #384782
First National Bank of Omaha 2/03/88 #405477 Amendment
First National Bank, Wahoo 5/28/92 #553205 Continued
NBD, Detroit 10/13/92 #564919 Amendment
2/05/93 #576038 Amendment
11/10/93 #603168 Amendment
First National Bank of Omaha, as agent 5/8/96 #691936 Amendment
FirsTier, Lincoln 2/10/88 #406144
First National Bank of Omaha 10/13/92 #564917 Amendment
First National Bank, Wahoo 1/07/93 #572981 Continued
55
- 235 -
<PAGE>
NBD, Detroit 2/05/93 #576039 Amendment
11/10/93 #603169 Amendment
First National Bank of Omaha, as agent 5/8/96 #691937 Amendment
First Bank of Minneapolis 11/25/91 #534665
(Norstan) 8/24/92 #561090 Assignment
Douglas County Clerk, Nebraska
- ------------------------------
FirsTier, Lincoln 2/11/88 #000534
First National Bank of Omaha 10/15/92 #000534 Amendment
First National Bank, Wahoo 1/08/93 #0000054 Continued
NBD, Detroit 2/05/93 #000253 Amendment
11/17/93 #54 Amendment
First National Bank of Omaha, as agent 5/ /96 Amendment
Iowa Secretary of State
- -----------------------
FirsTier, Lincoln 2/10/88 H842023
First National Bank of Omaha 10/15/92 K395184 Amendment
First National Bank, Wahoo 1/08/93 K424887 Continued
NBD, Detroit 2/08/93 K434908 Amendment
11/15/93 K503145 Amendment
First National Bank of Omaha, as agent 5/6/96 K734148 Amendment
Kansas Secretary of State
- --------------------------
FirsTier, Lincoln 2/10/88 #1286572
First National Bank of Omaha 10/15/92 #1842986 Amendment
First National Bank, Wahoo 1/08/93 #1868482 Continued
NBD, Detroit 2/11/93 #1879069 Amendment
11/12/93 #1964342 Amendment
First National Bank of Omaha, as agent 7/18/96 #2265201 Amendment
Illinois Secretary of State
- ---------------------------
FirsTier, Lincoln 3/18/88 #2402370
First National Bank of Omaha 10/21/92 #3043202 Amendment
First National Bank, Wahoo 2/11/93 #3084199 Amendment
NBD, Detroit 2/25/93 #3089132 Continued
12/09/93 #3197498 Amendment
First National Bank of Omaha, as agent 7/9/96 #3562627 Amendment
56
- 236 -
<PAGE>
Michigan Secretary of State
- ---------------------------
FirsTier, Lincoln 2/12/88 #C034473
First National Bank of Omaha 10/16/92 #C646856 Amendment
First National Bank, Wahoo 1/08/93 #C672590 Continued
NBD, Detroit 3/01/93 #C689434 Amendment
11/15/93 #C778208 Amendment
First National Bank of Omaha, as agent 7/8/96 #D128002 Amendment
Wisconsin Secretary of State
- ----------------------------
FirsTier, Lincoln 2/18/88 #968701
First National Bank of Omaha 10/21/92 #1309942 Amendment
First National Bank, Wahoo 01/15/93 #1326550 Continued
NBD, Detroit 2/08/93 #1331412 Amendment
11/23/93 #1393268 Amendment
First National Bank of Omaha, as agent 7/23/96 #1602740 Amendment
Indiana Secretary of State
- --------------------------
FirsTier, Lincoln 2/11/88 #1454192
First National Bank of Omaha 10/21/92 #1808780 Amendment
First National Bank, Wahoo 1/11/93 #1822115 Continued
NBD, Detroit 2/08/93 #1827451 Amendment
11/12/93 #1878806 Amendment
First National Bank of Omaha, as agent 7/9/96 #2065412 Amendment
Minnesota Secretary of State
- ----------------------------
FirsTier, Lincoln 2/17/88 1#121648#00
First National Bank of Omaha 10/16/92 #1537269 Amendment
First National Bank, Wahoo 01/19/93 #1557397 Continued
NBD, Detroit 2/08/93 #1562125 Amendment
11/23/93 #1632156 Amendment
First National Bank of Omaha, as agent 9/5/96 #1875684 Amendment
South Dakota Secretary of State
- -------------------------------
FirsTier, Lincoln 2/10/88 880410802864
First National Bank of Omaha 10/16/92 #22901003596 Amend.
57
- 237 -
<PAGE>
First National Bank, Wahoo 1/08/93 #30081001734 Cont.
NBD, Detroit 2/09/93 #30391203308 Amend.
11/22/93 #33261003899 Amend.
First National Bank of Omaha, as agent 7/8/96 #961900902562 Amend.
Missouri Secretary of State
- ---------------------------
FirsTier, Lincoln 2/11/88 #1555991
First National Bank of Omaha 10/16/92 #2184193 Amendment
First National Bank, Wahoo 1/08/93 #2212473 Continued
NBD, Detroit 2/08/93 #2224113 Amendment
11/15/93 #2331876 Amendment
First National Bank of Omaha, as agent 7/8/96 #2684601 Amendment
Ohio Secretary of State
- -----------------------
FirsTier, Lincoln 2/12/88 #Y00095612
First National Bank of Omaha 10/19/92 #01097336 Amendment
First National Bank, Wahoo 1/11/93 #01119343901 Cont.
NBD, Detroit 2/09/93 #02099338901 Amend.
11/12/93 #1129331801 Amendment
First National Bank of Omaha, as agent 7/9/96 #07099607117 Amendment
Kentucky Secretary of State
- ----------------------------
First National Bank of Omaha 11/12/93 134318
First National Bank of Omaha, as agent 7/23/96 Amendment
Pennsylvania Department of State
- --------------------------------
First National Bank of Omaha 11/12/93 22571277
First National Bank of Omaha, as agent 7/8/96 25631529 Amendment
Oklahoma Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 059782
First National Bank of Omaha, as agent 7/8/96 035257 Amendment
58
- 238 -
<PAGE>
Mississippi Secretary of State
- ------------------------------
First National Bank of Omaha 11/12/93 0756092--
First National Bank of Omaha, as agent 7/8/96 01015782 Amendment
Colorado Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 932082461
First National Bank of Omaha, as agent 7/8/96 962051575 Amendment
California Secretary of State
- -----------------------------
First National Bank of Omaha 11/12/93 93229491
First National Bank of Omaha, as agent 7/5/96 96191C0067 Amendment
Washington Secretary of State
- -----------------------------
First National Bank of Omaha 11/15/93 933190075
First National Bank of Omaha, as agent 7/5/96 96-187-9060 Amendment
Montana Secretary of State
- --------------------------
First National Bank of Omaha 11/15/93 419540
First National Bank of Omaha, as agent 7/8/96 419540 Amendment
Arizona Secretary of State
- --------------------------
First National Bank of Omaha 11/15/93 765359
First National Bank of Omaha, as agent 7/8/96 765359 Amendment
North Carolina Secretary of State
- ---------------------------------
First National Bank of Omaha 11/15/93 050742
First National Bank of Omaha, as agent 7/8/96 1357308 Amendment
North Dakota Secretary of State
- -------------------------------
First National Bank of Omaha 11/16/93 93-380331
First National Bank of Omaha, as agent 7/8/96 96-608985 Amendment
59
- 239 -
<PAGE>
Florida Secretary of State
- --------------------------
First National Bank of Omaha 11/17/93 930000236992
First National Bank of Omaha, as agent 7/10/96 960000142090 Amendment
Texas Secretary of State
- ------------------------
First National Bank of Omaha 11/29/93 227591--
First National Bank of Omaha, as agent 7/8/96 96683548 Amendment
Alabama Secretary of State
- --------------------------
First National Bank of Omaha, as agent 6/27/95 B-95-26462FS
7/19/96 95-26462 Amendment
Arkansas Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/29/95 968722
7/10/96 968722 Amendment
New York Secretary of State
- ----------------------------
First National Bank of Omaha, as agent 6/26/95 130246
7/8/96 532973 Amendment
</TABLE>
60
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1997 SECURITY AGREEMENT
THIS 1997 SECURITY AGREEMENT (this "Security Agreement") is entered
into as of February 26, 1997, between DATA TRANSMISSION NETWORK CORPORATION, a
Delaware corporation having its principal place of business at Suite 200, 9110
West Dodge Road, Omaha, Nebraska 68114 (the "Debtor"), FIRST NATIONAL BANK OF
OMAHA, a national banking association having its principal place of business at
One First National Center, Omaha, Nebraska 68102 as agent ("Secured Party") for
itself and FIRST NATIONAL BANK, WAHOO, NEBRASKA, a national banking association
having its principal place of business at Wahoo, Nebraska 68066 ("FNB-W"), NBD
BANK, a bank organized under the laws of the State of Michigan having its
principal place of business at 611 Woodward Avenue, Detroit, Michigan 48226
("NBD"), NORWEST BANK NEBRASKA, N.A., a national banking association having its
principal place of business at 20th and Farnam Streets, Omaha, Nebraska 68102
("Norwest"), FIRST BANK, NATIONAL ASSOCIATION, a national banking association
having its principal place of business at 13th and M Streets, Lincoln, Nebraska
68508 ("First Bank") (it being acknowledged that First Bank is the successor in
interest to FirsTier Bank, National Association, Lincoln, Nebraska
("FirsTier")), the SUMITOMO BANK, LIMITED, a Japanese bank being represented by
its office at 200 North Broadway, Suite 1625, St. Louis, Missouri 63102 and
acting through its Chicago branch ("Sumitomo"), MERCANTILE BANK OF ST. LOUIS,
N.A., a national banking association having its principal place of business at
One Mercantile, 7th and Washington Streets, St. Louis, Missouri 63101
("Mercantile"), BANK OF MONTREAL, a Canadian bank being represented by its
office at 430 Park Avenue, New York, New York 10022 ("Montreal"), LASALLE
NATIONAL BANK, a national banking association being represented by its office at
One Metropolitan Square, 211 North Broadway, St. Louis, Missouri 63102
("LaSalle"), and THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a national banking
association having its principal place of business at One Boatmen's Plaza, 800
Market Street, P.O. Box 236, St. Louis, Missouri 63166-0236 ("Boatmen's").
WITNESSETH:
WHEREAS, Debtor and Secured Party are parties to a 1996 Restated
Security Agreement dated as of May 3, 1996 as amended by a First Amendment to
1996 Restated Security Agreement dated as of June 28, 1996, a Second Amendment
to 1996 Restated Security Agreement dated as of July 31, 1996, and a Third
Amendment to 1996 Restated Security Agreement dated as of December 27, 1996, (as
so amended and restated, the "1996 Restated Security Agreement");
WHEREAS, Debtor and Secured Party wish to further amend and restate the
1996 Restated Security Agreement;
WHEREAS, Debtor and Secured Party wish to have this 1997 Security
Agreement be the controlling agreement with respect to the matters set forth
herein, which shall supersede the 1996 Restated Security Agreement; and
WHEREAS, the Debtor and Secured Party do not intend for this 1997
Security Agreement to be deemed to extinguish any existing indebtedness of the
Debtor or to release, terminate or affect the priority of any security therefor;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is agreed as follows:
1
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<PAGE>
1. Grant of Security Interest. Debtor hereby grants to
Secured Party and reaffirms its prior grant of a security interest in the
Collateral. All capitalized terms not defined in this Security Agreement shall
have their respective meanings as set forth in the 1997 Revolving Credit
Agreement, as described in Section 3(i) below.
2. Collateral. The Collateral to which this Security
Agreement refers is described on Exhibit A.
3. Obligations Secured. The security interest granted
herein is given to secure all present and future obligations of Debtor: (i)
under the 1997 Revolving Credit Agreement dated as of February 26, 1997 as
amended from time to time between the Debtor and First National Bank of Omaha,
FNB-W, Norwest, NBD, First Bank, Sumitomo, Mercantile, Montreal, LaSalle and
Boatmen's; (ii) under the 1997 Term Credit Agreement, dated as of February 26,
1997, between the Debtor and First National Bank of Omaha, FNB-W, Norwest, NBD,
First Bank, Sumitomo, Mercantile, Montreal, LaSalle and Boatmen's, which
agreement further amends and restates the 1996 Term Credit Agreement dated as of
May 3, 1996 among such parties; (iii) under the 1996 Revolving Credit Agreement
dated as of June 28, 1996 as amended from time to time between the Borrower,
First National Bank of Omaha, FNB-W, Norwest, NBD, First Bank, Sumitomo,
Mercantile, Montreal, LaSalle and Boatmen's; (iv) under the 1995 Restated Loan
Agreement dated as of June 29, 1995, as amended from time to time between the
Borrower and First National Bank of Omaha, First National Bank, Wahoo, Nebraska,
FirsTier Bank, National Association, NBD Bank, Norwest Bank Nebraska, N.A., and
The Boatmen's National Bank of St. Louis; (v) under the 1993 Restated Loan
Agreement dated as of November 8, 1993, as amended from time to time, between
Debtor and First National Bank of Omaha, FirsTier Bank, National Association,
Lincoln, Nebraska, First National Bank, Wahoo, Nebraska, NBD Bank, N.A., Norwest
Bank Nebraska, N.A. and The Boatmen's National Bank of St. Louis; (vi) under the
Loan Agreement dated as of October 9, 1992, as amended from time to time,
between Debtor and First National Bank of Omaha, FirsTier Bank, National
Association, Lincoln, Nebraska and First National Bank, Wahoo, Nebraska, or
under any interest rate protection agreement entered into by Debtor with one or
more Lenders; (vii) under any and all Notes previously, now or hereafter made by
Debtor to the Lenders pursuant to any of the foregoing Loan Agreements and
interest rate protection agreements (all of which are referred to herein as the
"Loan Agreements") or any predecessor loan agreements, including, without
limitation, the Existing Term Notes and any notes given in extension, renewal or
substitution of the Notes; (viii) to reimburse the Secured Party for all sums,
if any, advanced to protect the Collateral; and (ix) to reimburse Secured Party
for all costs and expenses incurred in collection of the foregoing, including,
without limitation, costs of repossession and sale and reasonable attorneys'
fees. This Security Agreement shall not be deemed to extinguish existing
indebtedness of the Debtor under any of the agreements referenced in this
Section 3 or any of the notes issued thereunder or to release, terminate or
affect the priority of any security therefor.
4. Representations and Warranties. Debtor represents
and warrants:
(a) Debt. Debtor is justly indebted to the
Lenders for the obligations secured and has no set off or counterclaim with
respect thereto;
2
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<PAGE>
(b) Possession and Ownership. The Collateral is
or will be in Debtor's possession (except for equipment or inventory provided to
Debtor's Customers in the ordinary course of business) and Debtor has or will
acquire absolute title thereto and will defend the Collateral against the claims
and demands of all persons other than Secured Party. Debtor has full right and
power to grant the security interest herein to Secured Party.
(c) Liens and Encumbrances. No financing
statement covering the Collateral or other filing evidencing any lien or
encumbrance on the Collateral is on file in any public office and there is no
lien, security interest or encumbrance on the Collateral except for the security
interest held by Secured Party pursuant to this Security Agreement and for those
security interests described on Schedule B and other filings in favor of Secured
Party.
(d) Truth of Representations. All information,
statements, representations, and warranties made by Debtor herein and in any
financial or credit statement, application for credit, or any other writing
executed prior to or substantially contemporaneously herewith are true, accurate
and complete in all material respects.
(e) Location. Debtor has its chief executive
office, principal place of business and place where it keeps it records
concerning the Collateral at Suite 200, 9110 West Dodge Road, Omaha, Nebraska
68114. The Borrower also keeps certain of its records regarding the Collateral
at 11275 Aurora Avenue, Des Moines, Iowa 50322.
(f) Authority. Debtor has full authority to
enter into this Security Agreement and in so doing is not violating any law,
regulation, or agreement with third parties. This Security Agreement has been
duly and validly authorized by all necessary corporate action.
5. Covenants. Debtor covenants and agrees:
(a) Liens and Encumbrances. Except as other-
wise expressly allowed by the Loan Agreements, Debtor shall keep the Collateral
free and clear of liens, encumbrances, security interests, and other claims of
third parties and will, at Debtor's expense, defend the Collateral against the
claims and demands of all third parties. Debtor shall promptly pay and discharge
any indebtedness owing to any third party who, by reason of said indebtedness,
could obtain or become entitled to a lien or encumbrance on the Collateral,
other than such indebtedness being contested in good faith and with respect to
which adequate reserves have been established.
(b) Proceeds; Sale. Debtor shall not sell or
otherwise dispose of any Collateral without first obtaining the written consent
of Secured Party; provided, however, that Debtor may provide equipment or
inventory to customers and others in the ordinary course of business so long as:
(i) such equipment or inventory is not sold to customers; and (ii) the value of
equipment or inventory disposed of to others (e.g., for salvage purposes) does
not exceed, in aggregate, $100,000. Debtor shall at all times keep the
Collateral and the proceeds from any authorized or unauthorized disposition
thereof identifiable and separate from the other property of Debtor or any third
party; provided, however, that Debtor may commingle and use for general
corporate purposes up to $100,000 in aggregate net book value of the proceeds of
sale or other disposition of obsolete or
3
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<PAGE>
out-of-date equipment or inventory disposed of in accordance with clause (ii)
above in this Section 5(b).
(c) Protection of Value. Debtor shall use
the utmost care and diligence to protect and preserve the Collateral, and shall
not commit nor suffer any waste to occur with respect to the Collateral. In
pursuance of the foregoing, Debtor shall maintain the Collateral in good
condition and repair and shall take such steps as are necessary or as are
requested by Secured Party to prevent any impairment of the value of the
Collateral.
(d) Taxes. Debtor shall promptly pay and dis-
charge any and all taxes, levies and other impositions made upon the Collateral
which may give rise to liens upon the Collateral if unpaid or which are imposed
upon the creation, perfection, or continuance of the security interest provided
for herein, other than taxes being contested in good faith and with respect to
which adequate reserves have been established.
(e) Insurance. All risk of loss of, damage to,
or destruction of the Collateral shall at all times be on Debtor. Debtor shall
procure and maintain, at its own expense, insurance covering the Collateral
against all risks under policies and with companies acceptable to Secured Party,
for the duration of this Security Agreement (except for equipment provided to
Debtor's Customers in the ordinary course of business). Such policies shall be
written for and shall name Debtor and Secured Party as their interests may
appear, shall contain a standard loss payable clause in favor of Secured Party.
Proof of insurance shall be provided to Secured Party upon request. For purposes
of security, Debtor hereby assigns to Secured Party any and all monies
(including, without limitation, proceeds of insurance and refunds of unearned
premiums) due or to become due under any such policy. Debtor hereby directs the
issuer of any such policy to pay any such monies directly to Secured Party.
Secured Party may act as attorney for Debtor in obtaining, settling and
adjusting such insurance and in endorsing any checks or drafts paid thereunder.
(f) Secured Party as Payee. Debtor shall take
such steps as are necessary or as are requested by Secured Party to have Secured
Party named as a payee on any check, draft or other document or instrument which
Debtor may obtain or anticipate obtaining with respect to the Collateral.
Without limiting the generality of the foregoing, Secured Party shall be named
as a payee on all instruments from insurers of the Collateral. Notwithstanding
anything in the foregoing or in Subsection (e) above to the contrary, Secured
Party agrees that: (i) insurance proceeds may be paid to Debtor so long as no
event of default exists hereunder and such proceeds are, in aggregate, less than
$100,000; and (ii) Secured Party's rights hereunder are subject to the interests
of the parties identified on Schedule B.
(g) Records. Debtor shall keep accurate and
complete records pertaining to the Collateral and pertaining to Debtor's
business and financial condition, and shall allow Secured Party to inspect the
same from time to time upon reasonable request and shall submit such periodic
reports relating to the same to Secured Party from time to time as Secured Party
may reasonably request. Debtor shall provide that the Secured Party's interest
is noted on all chattel paper and that there is only one single original of any
chattel paper held by Debtor and created after the date hereof.
4
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<PAGE>
(h) Notice to Secured Party. Debtor shall
promptly notify Secured Party of any loss or damage to the Collateral, any
impairment of the value thereof, any claim made thereto by any third party, or
any adverse change in Debtor's financial condition which may affect its prospect
to pay or perform its obligations to Secured Party.
(i) Location. Except for equipment or inventory
provided to Debtor's customers in the ordinary course of business, Debtor will
not move the Collateral, its chief executive office, principal place of business
or places where it keeps its records concerning the Collateral from the
locations specified above without first obtaining the written consent of Secured
Party and shall not permit any Collateral to be located in any state in which a
financing statement covering the Collateral is required to be, but has not in
fact been, filed in order to perfect the security interest granted herein.
Debtor shall not change its name without giving Secured Party at least ninety
(90) days' prior notice thereof.
(j) Other Documents. Debtor shall execute
such further documents as may be requested by Secured Party to obtain and
perfect a security interest in the Collateral, including without limitation,
Uniform Commercial Code Financing Statements and amendments thereto. A carbon,
photographic or other reproduction of this Security Agreement or of any
financing statement signed by Debtor shall have the same force and effect as the
original for all purposes of a financing statement.
6. Default. Debtor shall be in default hereunder if any
of the following occurs:
(a) Event of Default. An Event of Default
occurs under any of the Notes or the Loan Agreements.
(b) Failure to Pay. Debtor fails to pay when
due or within the applicable cure period any of the obligations secured hereby.
(c) Misrepresentation. Any of the represen-
tations or warranties made by Debtor herein or in any of the documents referred
to herein or executed prior hereto or substantially contemporaneously herewith
are or become false or misleading in any material respect.
(d) Breach of Covenants. Debtor fails to perform
any of its covenants, agreements or obligations hereunder or under any document
referred to herein or executed prior hereto or substantially contemporaneously
herewith.
(e) Other Indebtedness. Any event occurs which
results in acceleration of the maturity of the indebtedness of Debtor under any
material agreement with any third party.
(f) Loss of Security. Collateral with an aggre-
gate value in excess of $100,000 is lost, damaged or destroyed.
(g) Business Failure. The death, dissolution,
termination of existence, business failure, appointment of a receiver of any
part of the property of, assignment for the benefit of creditors by, or
commencement of any proceeding in bankruptcy or insolvency by or against Debtor
or any principals of Debtor or any guarantor or surety for Debtor.
5
- 245 -
<PAGE>
7. Rights and Remedies of Secured Party. Secured Party
shall have all of the rights and remedies provided at law and in equity and in
the Uniform Commercial Code and in addition thereto and without limitation
thereon shall have the following rights which may be exercised singularly or
concurrently:
(a) Inspection. Secured Party may at any time,
with or without notice, enter upon Debtor's premises or any other place where
the Collateral is located to inspect and examine the same and, if Debtor is in
default, to take possession thereof.
(b) Performance by Secured Party. If Debtor
fails to perform any of its obligations hereunder, Secured Party may, at its
sole discretion, pay or perform such obligations for Debtor's account and may
add any cost or expense thereof to the obligations secured hereby.
(c) Acceleration. Upon default, Secured Party
may, without demand or notice to Debtor, accelerate all of the obligations
secured hereby and proceed to enforce payment of the same with or without first
resorting against the Collateral.
(d) Proceed Against Collateral. Subject to
applicable cure periods, if any, upon default, Secured Party may: require Debtor
to make the Collateral available to Secured Party at a place to be designated by
Secured Party; take possession of the Collateral, proceeding without judicial
process or by judicial process (without a prior hearing or notice thereof which
Debtor hereby expressly waives) and sell, retain or otherwise dispose of the
Collateral in full or partial satisfaction of the obligations secured hereby.
(e) Power of Attorney. Debtor hereby irrevo-
cably appoints (which appointment is coupled with an interest) Secured Party as
Debtor's true and lawful attorney, with full power of substitution, without
notice to Debtor and at such time or times as Secured Party in its sole
discretion may determine to: (i) create, prepare, complete, execute, deliver and
file such documents, instruments, financing statements, and other agreements and
writings as may be deemed appropriate by Secured Party to facilitate the intent
of this Security Agreement; (ii) notify account debtors and others with
obligations to Debtor to make payment of their obligations to Secured Party;
(iii) demand, enforce and receive payment of any accounts or obligations owing
to Debtor, by legal proceedings or otherwise; (iv) settle, adjust, compromise,
release, renew or extend any account or obligation owing to Debtor; (v) notify
postal authorities to change the address for delivery of mail to Debtor to such
address as Secured Party may designate; (vi) receive, open and dispose of all
mail addressed to Debtor; (vii) endorse Debtor's name on any check, note, draft,
instrument or other form of payment that may come into Secured Party's
possession; and (viii) send requests to Debtor's customers and account debtors
for verification of amounts due to Debtor. Secured Party covenants not to
exercise the foregoing rights prior to the occurrence of an event of default
hereunder.
6
- 246 -
<PAGE>
(f) Deficiency. Upon default, and after any
disposition of the Collateral, Secured Party may sue Debtor for any deficiency
remaining.
8. Obligations of Secured Party. Secured Party has
no obligations to Debtor hereunder except those expressly required herein.
Except as expressly provided in the Loan Agreements, Secured Party has not
agreed to make any further advance or loan of any kind to Debtor. Secured
Party's duty of care with respect to the Collateral in its possession shall be
deemed fulfilled if Secured Party exercises reasonable care in physically
safekeeping the Collateral or, in the case of Collateral in the possession of a
bailee or third party, exercises reasonable care in the selection of the bailee
or third party. Secured Party need not otherwise preserve, protect, insure or
care for the Collateral. Secured Party need not preserve rights the Debtor may
have against prior parties, realize on the Collateral in any particular manner
or order, or apply proceeds of the Collateral in any particular order of
application.
9. Miscellaneous.
(a) No Waiver. No delay or failure on the part
of Secured Party in the exercise of any right or remedy hereunder shall operate
as a waiver thereof and no single or partial exercise by Secured Party of any
right or remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy.
(b) Amendment and Termination. This Security
Agreement may be amended or terminated and the security interest granted herein
can be released only by an explicit written agreement signed by Debtor and
Secured Party.
(c) Choice of Law. This Security Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed in accordance with the laws of the State of Nebraska.
(d) Binding Agreement. This Security Agreement
shall be binding upon the parties hereto and their heirs, successors, personal
representatives and permitted assigns.
(e) Assignment. This Security Agreement may be
assigned by Secured Party only.
(f) Captions. Captions and headings herein are
for convenience only and in no way define, limit or describe the scope or intent
of any provision or section of the Security Agreement.
(g) Severability. If any provision of this
Security Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement.
(h) Notices. All notices to be given shall
be deemed sufficiently given if delivered or mailed by registered or certified
mail postage prepaid if to Debtor at Suite 200, 9110 West Dodge Road, Omaha,
Nebraska 68114; if to Secured Party at One First National Center, Omaha,
Nebraska 68102; or such other address as the parties may designate in writing
from time to time. Debtor shall promptly notify Secured Party of any changes in
Debtor's address.
7
- 247 -
<PAGE>
(i) Priorities. The security interest of a
Lender in any property of the Debtor (i) arising under and in connection with
the Agreement, this Security Agreement or any of the Related Loan Agreements and
(ii) granted to secure any obligation of the Debtor to such Lender, including,
without limitation, all Collateral, shall rank equally in priority with the
security interests of each of the other Lenders, if any, in such property of the
Borrower, irrespective of the time or order of attachment or perfection of such
security interest, or the time or order of filing, or the failure to file, and
regardless of the date any obligation of the Debtor to a Lender was incurred.
Any amounts or payments obtained upon disposition of any property securing an
obligation of the Debtor to a Lender shall be applied as provided in Article VII
of the 1997 Revolving Credit Agreement as in effect on February 26, 1997.
Unanimous approval of the Lenders shall be required for amendments to this
Section 9(i).
IN WITNESS WHEREOF, the undersigned have executed this 1997 Security
Agreement as of this 26th day of February, 1997.
DATA TRANSMISSION NETWORK
CORPORATION
By
--------------------------------------------------
Title
-----------------------------------------------
8
- 248 -
<PAGE>
FIRST NATIONAL BANK OF OMAHA,
as agent for itself, First Bank,
National Association, First
National Bank, Wahoo,
Nebraska, NBD Bank,
Norwest Bank Nebraska, N.A.,
The Boatmen's National Bank of
St. Louis, The Sumitomo Bank, Limited, Mercantile
Bank of St. Louis, N.A., Bank of Montreal, and
LaSalle National Bank
By
--------------------------------------------------
Title
-----------------------------------------------
9
- 249 -
<PAGE>
EXHIBIT A
TO 1997 SECURITY AGREEMENT
BY AND BETWEEN
FIRST NATIONAL BANK OF OMAHA, as Agent ("Secured Party")
AND
DATA TRANSMISSION NETWORK CORPORATION ("Debtor")
COLLATERAL
----------
All of Debtor's accounts, accounts receivable, chattel paper,
documents, instruments, goods, inventory, equipment, general intangibles,
contract rights, all rights of Debtor in deposits and advance payments made to
Debtor by its customers and subscribers, accounts due from advertisers and all
ownership, proprietary, copyright, trade secret and other intellectual property
rights in and to computer software (and specifically including, without
limitation, all such rights in DTN transmission computer software used in the
provision of the Basic DTN Subscription Service and/or Farm Dayta Service to
Debtor's subscribers) and all documentation, source code, information and works
of authorship pertaining thereto, all now owned or hereafter acquired by Debtor
and all proceeds and products thereof (including, without limitation, all such
assets acquired by Debtor from Broadcast Partners); and
Further including, without limiting the generality of the foregoing,
the following all now owned or hereafter acquired by the Debtor:
(a) all accounts, accounts receivable, chattel paper,
documents, instruments, goods, inventory, equipment, general
intangibles and contract rights that constitute, are due under or by
reason of, or are described in, subscription agreements or arrangements
between Debtor and its subscribers, and similar agreements or
arrangements purchased by Debtor from Broadcast Partners and including,
without limitation, all:
(i) equipment and inventory of Debtor, whether in its
possession or in the possession of its customers and subscribers (but
subject to such customers' and subscribers' rights therein), which
equipment and inventory may include, but not be limited to, computer
monitor screens, D-127, D-128, D-120, D-110 and 6001 or comparable
receivers, outdoor antennas, and satellite interfaces (collectively,
the "Equipment");
(ii) parts, accessories, attachments, additions,
substitutions, rents, profits, proceeds, products, and customer
deposits and advance payments related to or arising from the Equipment;
10
- 250 -
<PAGE>
(iii) chattel paper, instruments, general intangibles,
accounts, accounts receivable and contract rights in, arising from or
corresponding to the Equipment, which may include but not be limited
to, all rights of Debtor under Subscription Agreements between Debtor
and its customers and subscribers (collectively, the "Subscriptions");
and
(iv) accounts, accounts receivable, rents, profits,
modifications, renewals, extensions, substitutions, proceeds, and
products related to or arising from the Subscriptions; and
(b) all rights, remedies, privileges, claims and other
contract rights and general intangibles of Debtor arising under or
related to the Asset Purchase and Sale Agreement (including, without
limitation, rights to indemnity) between Debtor and Broadcast Partners
or the transactions contemplated thereby.
(c) all proceeds and products of the foregoing.
11
- 251 -
<PAGE>
SCHEDULE A
TO 1997 SECURITY AGREEMENT
BY AND BETWEEN
FIRST NATIONAL BANK OF OMAHA, as Agent ("Secured Party")
AND
DATA TRANSMISSION NETWORK CORPORATION ("Debtor")
EXISTING NOTES
(See Attached)
12
- 252 -
<PAGE>
SCHEDULE B
TO 1997 SECURITY AGREEMENT
BY AND BETWEEN
FIRST NATIONAL BANK OF OMAHA, as Agent ("Secured Party")
AND
DATA TRANSMISSION NETWORK CORPORATION ("Debtor")
PERMITTED ENCUMBRANCES
<TABLE>
<CAPTION>
Secured Party Financing Statements
Nebraska Secretary of State
<S> <C> <C> <C>
First National Bank of Omaha
- ----------------------------
12/28/87 #401690
10/13/92 #564918 Amendment
11/13/92 #568176 Continued
First National Bank of Omaha, as agent 5/8/96 #691938 Amendment
FirsTier, Lincoln 6/24/87 #384782
First National Bank of Omaha 2/03/88 #405477 Amendment
First National Bank, Wahoo 5/28/92 #553205 Continued
NBD, Detroit 10/13/92 #564919 Amendment
2/05/93 #576038 Amendment
11/10/93 #603168 Amendment
First National Bank of Omaha, as agent 5/8/96 #691936 Amendment
FirsTier, Lincoln 2/10/88 #406144
First National Bank of Omaha 10/13/92 #564917 Amendment
First National Bank, Wahoo 1/07/93 #572981 Continued
NBD, Detroit 2/05/93 #576039 Amendment
11/10/93 #603169 Amendment
First National Bank of Omaha, as agent 5/8/96 #691937 Amendment
First Bank of Minneapolis 11/25/91 #534665
(Norstan) 8/24/92 #561090 Assignment
Douglas County Clerk, Nebraska
- ------------------------------
FirsTier, Lincoln 2/11/88 #000534
First National Bank of Omaha 10/15/92 #000534 Amendment
First National Bank, Wahoo 1/08/93 #0000054 Continued
NBD, Detroit 2/05/93 #000253 Amendment
11/17/93 #54 Amendment
First National Bank of Omaha, as agent 5/ /96 Amendment
13
- 253 -
<PAGE>
Iowa Secretary of State
- -----------------------
FirsTier, Lincoln 2/10/88 H842023
First National Bank of Omaha 10/15/92 K395184 Amendment
First National Bank, Wahoo 1/08/93 K424887 Continued
NBD, Detroit 2/08/93 K434908 Amendment
11/15/93 K503145 Amendment
First National Bank of Omaha, as agent 5/6/96 K734148 Amendment
Kansas Secretary of State
- -------------------------
FirsTier, Lincoln 2/10/88 #1286572
First National Bank of Omaha 10/15/92 #1842986 Amendment
First National Bank, Wahoo 1/08/93 #1868482 Continued
NBD, Detroit 2/11/93 #1879069 Amendment
11/12/93 #1964342 Amendment
First National Bank of Omaha, as agent 7/18/96 #2265201 Amendment
Illinois Secretary of State
- ---------------------------
FirsTier, Lincoln 3/18/88 #2402370
First National Bank of Omaha 10/21/92 #3043202 Amendment
First National Bank, Wahoo 2/11/93 #3084199 Amendment
NBD, Detroit 2/25/93 #3089132 Continued
12/09/93 #3197498 Amendment
First National Bank of Omaha, as agent 7/9/96 #3562627 Amendment
Michigan Secretary of State
- ---------------------------
FirsTier, Lincoln 2/12/88 #C034473
First National Bank of Omaha 10/16/92 #C646856 Amendment
First National Bank, Wahoo 1/08/93 #C672590 Continued
NBD, Detroit 3/01/93 #C689434 Amendment
11/15/93 #C778208 Amendment
First National Bank of Omaha, as agent 7/8/96 #D128002 Amendment
14
- 254 -
<PAGE>
Wisconsin Secretary of State
- ----------------------------
FirsTier, Lincoln 2/18/88 #968701
First National Bank of Omaha 10/21/92 #1309942 Amendment
First National Bank, Wahoo 01/15/93 #1326550 Continued
NBD, Detroit 2/08/93 #1331412 Amendment
11/23/93 #1393268 Amendment
First National Bank of Omaha, as agent 7/23/96 #1602740 Amendment
Indiana Secretary of State
- --------------------------
FirsTier, Lincoln 2/11/88 #1454192
First National Bank of Omaha 10/21/92 #1808780 Amendment
First National Bank, Wahoo 1/11/93 #1822115 Continued
NBD, Detroit 2/08/93 #1827451 Amendment
11/12/93 #1878806 Amendment
First National Bank of Omaha, as agent 7/9/96 #2065412 Amendment
Minnesota Secretary of State
- ----------------------------
FirsTier, Lincoln 2/17/88 1#121648#00
First National Bank of Omaha 10/16/92 #1537269 Amendment
First National Bank, Wahoo 01/19/93 #1557397 Continued
NBD, Detroit 2/08/93 #1562125 Amendment
11/23/93 #1632156 Amendment
First National Bank of Omaha, as agent 9/5/96 #1875684 Amendment
South Dakota Secretary of State
- -------------------------------
FirsTier, Lincoln 2/10/88 880410802864
First National Bank of Omaha 10/16/92 #22901003596 Amend.
First National Bank, Wahoo 1/08/93 #30081001734 Cont.
NBD, Detroit 2/09/93 #30391203308 Amend.
11/22/93 #33261003899 Amend.
First National Bank of Omaha, as agent 7/8/96 #961900902562 Amend.
15
- 255 -
<PAGE>
Missouri Secretary of State
- ---------------------------
FirsTier, Lincoln 2/11/88 #1555991
First National Bank of Omaha 10/16/92 #2184193 Amendment
First National Bank, Wahoo 1/08/93 #2212473 Continued
NBD, Detroit 2/08/93 #2224113 Amendment
11/15/93 #2331876 Amendment
First National Bank of Omaha, as agent 7/8/96 #2684601 Amendment
Ohio Secretary of State
- -----------------------
FirsTier, Lincoln 2/12/88 #Y00095612
First National Bank of Omaha 10/19/92 #01097336 Amendment
First National Bank, Wahoo 1/11/93 #01119343901 Cont.
NBD, Detroit 2/09/93 #02099338901 Amend.
11/12/93 #1129331801 Amendment
First National Bank of Omaha, as agent 7/9/96 #07099607117 Amendment
Kentucky Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 134318
First National Bank of Omaha, as agent 7/23/96 Amendment
Pennsylvania Department of State
- --------------------------------
First National Bank of Omaha 11/12/93 22571277
First National Bank of Omaha, as agent 7/8/96 25631529 Amendment
Oklahoma Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 059782
First National Bank of Omaha, as agent 7/8/96 035257 Amendment
Mississippi Secretary of State
- ------------------------------
First National Bank of Omaha 11/12/93 0756092--
First National Bank of Omaha, as agent 7/8/96 01015782 Amendment
Colorado Secretary of State
- ---------------------------
First National Bank of Omaha 11/12/93 932082461
First National Bank of Omaha, as agent 7/8/96 962051575 Amendment
16
- 256 -
<PAGE>
California Secretary of State
- -----------------------------
First National Bank of Omaha 11/12/93 93229491
First National Bank of Omaha, as agent 7/5/96 96191C0067 Amendment
Washington Secretary of State
- -----------------------------
First National Bank of Omaha 11/15/93 933190075
First National Bank of Omaha, as agent 7/5/96 96-187-9060 Amendment
Montana Secretary of State
- --------------------------
First National Bank of Omaha 11/15/93 419540
First National Bank of Omaha, as agent 7/8/96 419540 Amendment
Arizona Secretary of State
- --------------------------
First National Bank of Omaha 11/15/93 765359
First National Bank of Omaha, as agent 7/8/96 765359 Amendment
North Carolina Secretary of State
- ---------------------------------
First National Bank of Omaha 11/15/93 050742
First National Bank of Omaha, as agent 7/8/96 1357308 Amendment
North Dakota Secretary of State
- -------------------------------
First National Bank of Omaha 11/16/93 93-380331
First National Bank of Omaha, as agent 7/8/96 96-608985 Amendment
Florida Secretary of State
- --------------------------
First National Bank of Omaha 11/17/93 930000236992
First National Bank of Omaha, as agent 7/10/96 960000142090 Amendment
Texas Secretary of State
- ------------------------
First National Bank of Omaha 11/29/93 227591--
First National Bank of Omaha, as agent 7/8/96 96683548 Amendment
17
- 257 -
<PAGE>
Alabama Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/27/95 B-95-26462FS
7/19/96 95-26462 Amendment
Arkansas Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/29/95 968722
7/10/96 968722 Amendment
New York Secretary of State
- ---------------------------
First National Bank of Omaha, as agent 6/26/95 130246
7/8/96 532973 Amendment
</TABLE>
18
- 258 -
SIXTH 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, a Fourth Amendment effective as of January 3, 1994, and a Fifth
Amendment effective as of January 4, 1995. 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 Sixth Amendment, capitalized terms used in this
Sixth Amendment shall have the meanings given to such terms in the Plan.
AMENDMENT
The Plan is hereby amended, effective as of February 29, 1996, as
follows:
1. 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 2,000 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:".
2. Except as specifically amended by this Sixth Amendment, the Plan,
as previously amended, shall remain in full force and effect and is hereby
ratified and confirmed.
- 259 -
SEVENTH 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, a Fourth Amendment effective as of January 3, 1994, a Fifth Amendment
effective as of January 4, 1995, and a Sixth Amendment effective as of February
29, 1996. 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 Seventh
Amendment, capitalized terms used in this Seventh Amendment shall have the
meanings given to such terms in the Plan.
AMENDMENT
The Plan is hereby amended, effective as of March 3, 1997, as follows:
1. 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 4,500 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:".
2. Except as specifically amended by this Seventh Amendment, the Plan,
as previously amended, shall remain in full force and effect and is hereby
ratified and confirmed.
- 260 -
Data Transmission Network Corporation (DTN(R)), an electronic information and
communication services company headquartered in Omaha, Nebraska, is a leader in
the electronic satellite delivery of time-sensitive information (NEWS...NOT
HISTORY(R)). DTN is committed to providing comprehensive, timely and affordably
priced information to our customers. DTN's services are tailored to meet our
subscribers' needs and are valuable tools in managing business and personal
affairs.
The Company began operations in 1984, went public in January 1987, and continues
to evolve into a full-service information provider and communication network.
DTN distributes information via small dish Ku-band satellite, FM radio side-band
channels, TV cable (VBI-vertical blanking interval), FAX, e-mail and the
Internet. Most subscribers utilize a DTN receiver capturing information around
the clock and converting it to text, graphics and audio.
Prior to 1992, DTN supported only a monochrome receiver system capable of
receiving and displaying information. In 1992, the Company introduced the
Advanced Communications EngineSM (ACE) receiver that expanded the information
and communication services provided by the Company. DTN receivers contain
multiple processors for capturing, manipulating and displaying high resolution
color video pictures, graphics and text. In addition, these processors provide
the ability to play audio clips and to utilize a phone modem. The ACE receiver
is equipped with an internal hard drive allowing processed information to be
stored, archived and then displayed by using the built-in control panel, a
keyboard or a mouse.
DTN's services reach 158,800 subscribers in the U.S. and Canada. The Company
provides services for the agricultural, automotive, energy, farm implement,
financial, mortgage, produce, golf, turf management, aviation, construction,
emergency management and other weather-related industries. The services include
DTN AgDaily(R) and DTN FarmDayta(R), targeted for agribusinesses; DTN Pro
SeriesSM and DTN FarmDayta Elite(R), advanced information services for
agribusinesses; DTNstant(R), for customers needing a real-time agricultural
ticker service; DTNironSM for the farm implement dealer; DTN PROduce for the
produce industry; DTN Weather Center, for the golf, turf management, aviation,
marine, forestry, travel and construction industries; DTN Real^Time, DTN Wall
Street and DTN SpectrumSM for the financial services industry; DTN FirstRate
for the mortgage industry; DTNergy for the petroleum and natural gas
industries; DTNautoSM for the auto auctions and auto dealers; DTN Missing
Children Information Center and joint ventures for the electrical equipment and
trucking industries.
Led by customer suggestions and demands, Data Transmission Network Corporation
has engineered growth and evolution from what we were--the first low-cost,
electronically delivered agricultural commodities information service--to what
we are today--a multi-faceted information provider utilizing a full-service
communication technology system delivering the most valuable of all commodities,
timely information (NEWS...NOT HISTORY).
Our Mission continues as we strive to provide the best information and analysis
available, as quickly as possible, at an affordable cost to our customers. Among
many things critical to successfully meeting those commitments, the three most
important are customer service, customer service, and customer service!
As fellow shareholders of the Company, DTN employees' number one goal is the
long-term enhancement of the value of our company.
1
- 261 -
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
Percent
1997 1996 Change
------------ ------------- -------
<S> <C> <C> <C>
For the Year
Revenues $126,374,352 $ 98,383,713 28 %
Operating cash flow1 54,698,708 40,377,428 35 %
Income (loss) before income taxes 3,407,081 (1,404,306) -
Net income (loss) 2,236,081 (958,306) -
Diluted income (loss) per share $ .19 $ (.09) -
At Year End
Total assets $162,430,898 $ 77,729,762 (9)%
Long-term debt and subordinated notes 72,891,370 97,747,823 (25)%
Stockholders' equity 32,196,173 28,290,289 14 %
Book value per share $ 2.89 $ 2.57 12 %
Key Indicators
Total subscribers at year-end 158,800 145,900 9 %
Subscriber retention rate 88.1 % 89.3 % (1)%
Net development costs2 $ 5,199,605 $ 5,344,261 (3)%
Operating cash flow from core services3 $ 59,701,141 $ 45,512,581 31 %
As a Percent of Revenue
Operating cash flow1 43.3 % 41.0 %
Operating cash flow from core services3 48.5 % 47.4 %
Depreciation and amortization 33.5 % 34.0 %
Interest 7.2 % 8.6 %
Net income (loss) before income taxes 2.7 % (1.4)%
<FN>
1 Operating income before depreciation and amortization expense.
2 Net Development Costs are defined as the sum of 1) market research activities,
2) hardware and software engineering,
research and development and 3) the negative operating cash flow (prior to
corporate allocations plus interest) of new services.
3 Core services are services no longer in the initial development process. Oper-
ating cash flow from core services as a percent of revenue is calculated on
core services revenue.
</FN>
</TABLE>
2
- 262 -
<PAGE>
<TABLE>
<CAPTION>
FIVE YEARS IN REVIEW
- --------------------------------------------------------------------------------
GRAPHS IN TABULAR FORM:
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Revenues
($ millions) 36.0 46.1 62.3 98.4 126.4
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Operating Cash Flow
($ millions) 12.9 15.8 23.2 40.4 54.7
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Operating Cash Flow
(percent of revenue) 36% 34% 37% 41% 43.3%
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Net Development Costs
($ millions) 2.7 4.3 3.7 5.3 5.2
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Subscribers At Year End
(thousands) 74.1 82.0 95.9 145.9 158.8
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Subscriber Retention Rate
(percent) 88.8 89.8 91.0 89.3 88.1
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Annual Revenue
Per Subscriber
($ based on average
subscribers) 507 591 700 775 830
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Annual Operating Cash
Flow Per Subscriber
($ based on average
subscribers) 123 202 260 318 359
</TABLE>
3
- 263 -
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
1997 was a very good year for DTN. Your company produced record revenues and
operating cash flow (operating income before depreciation and amortization),
known by analysts as EBITDA. The employees at DTN were kept busy with
integration of the Broadcast Partners acquisition, a few additional small
acquisitions, focusing on maintaining operating efficiencies, introduction of
new services, and the support and growth of existing services.
The following 1997 operating results are our leading economic indicators and are
what we use to quantify DTN's fiscal well being.
o Total subscribers increased 9% to 158,800, up from 145,900 in 1996.
o Revenues grew 28% to $126,374,352 compared to $98,383,713 in 1996.
o Operating cash flow increased 35% to $54,698,708, up from $40,377,428 in
1996.
o Net Income was $2,236,081 or $.19 per share in 1997 compared to a loss
of $958,306 or $(.09) per share in 1996.
o Operating cash flow as a percentage of revenue increased to 43%, up from
41% in 1996.
o Subscription revenue per subscriber per month for all subscribers was
$55.10 in 1997 compared to $49.24 in 1996.
o Subscription revenue per subscriber per month for all new subscription
sales was an all time high of $67.84 for 1997.
o Operating revenue per subscriber per month consisting of subscriptions,
additional services, communications and advertising increased to $66.29 for
1997, up from $60.92 in 1996.
During 1997, the Broadcast Partners acquisition recorded $25,257,700 of revenue
compared to $15,446,800 in 1996. In addition, this operation recorded
$15,687,800 of operating cash flow compared to $9,838,200 in 1996. This is
primarily the result of 1996 including approximately eight months of operating
results due to the closing on May 3, 1996, vs. twelve months of operating
results for 1997. During 1997, we made an effort to educate our shareholders on
why our percentage growth in revenue and cash flow is significantly higher than
our percentage growth in subscribers. Substantively our growth in operating
revenue per subscriber per month from $60.92 in 1996 to $66.29 in 1997 or 9% is
a key ingredient in these percentage growth differences. We expect revenue and
operating cash flow growth to continue to outdistance our percentage growth in
subscribers. We continue to review potential acquisitions that make sense for
DTN and here is a summary of those completed in 1997.
o In January, the Company acquired 500 real-time commodities subscribers from
Market Quoters and Northern Data for $750,000 cash.
o In March, the Company acquired 2,400 real-time commodities subscribers
from Market Communications Group LLC, a joint venture of Reuters America,
Inc. and Farmland Industries, Inc. for $3.6 million cash. Included, DTN
acquired preferred rights to distribute Reuters real-time news and information
to the commodities, energy and metals markets.
o In July, the Company acquired The Network, Inc., a cotton trading network
for $1,000,000 payable over five years. This enables DTN to generate revenues
from a transactional service which facilitates in the trading of cotton.
o In October, the Company acquired approximately 700 subscribers on the
ACRES agriculture system from the Arkansas Farm Bureau. DTN agreed to pay $600
per converted subscriber plus a $6.00 per month royalty to Arkansas for the
lesser of the life of the subscriber or ten years.
4
- 264 -
<PAGE>
In addition to growth from acquisitions, we are focused on growing the business
with the introduction of new services. The following is a quick review of the
services introduced in 1997.
o DTN Travel Center -- A weather, news, markets and sports information service
which includes special weather features on road condition forecasts and road
closed notices. Our initial target market for this service is for display in
the lobbies of the approximately 20,000 U.S. hotels and motels with 50 rooms
or more.
o DTN Marine -- Primarily a weather service with specialty weather features
which include coastal sea condition forecasts, marine buoy data for wind, tide
and water temperature and sea surface temperature maps. Our initial target
market is marinas and charter boats which total approximately 15,000.
o DTN Forestry Center -- Primarily a weather service which we developed with
help from the U.S. Forestry Service. Specialty weather features associated
with this product include a relative fire risk map, upper air analysis and
humidity and wind speed maps. Our initial target market is the approximately
5,000 District Forest Management offices located in the lower 48 U.S. states
and Canada.
o DTN Real^Time -- DTN Real^Time is our first venture into providing a service
which delivers instant securities quotes (vs. 15 minute delayed) on over
175,000 different stocks, options and commodities. DTN Real^Time delivers the
information via new generation of DTN proprietary hardware into a customer's
PC where it is captured and displayed through use of custom software.
Regarding DTN Real^Time, I opened in my 2nd Quarter, 1997 letter to share-
holders that "we believe the combination of our product quality, our very
competitive pricing strategies and our distribution capabilities will allow us
to succeed and maybe even excel in this marketplace." I still believe this to be
the case. From May of 1997 thru December of 1997, DTN Real^Time subscription
sales have grown steadily from 30 per month to approximately 300 per month.
Applying a western cliche for 1998, I would say that if "the good Lords willin'
and the creek don't rise", 1998 should be replete with some of our previous
successes.
As always, many thanks to our customers, shareholders, financiers and suppliers
for their support. And a special thanks to all of our employees and their
families for a successful 1997.
Very sincerely yours,
Roger Brodersen
Chairman and CEO
5
- 265 -
<PAGE>
INFORMATION TECHNOLOGY UPDATE
- --------------------------------------------------------------------------------
In last quarter's Report to Shareholders, I provided a summary covering DTN's
real-world experience with the Internet at the product level. While those
examples and quotations could be updated, the general analysis and conclusions
regarding the Internet remain fundamentally sound. In this update, I will be
providing you with more generalized information and comments pertaining to the
broader nature of information technology, the information marketplace, and DTN's
position within that marketplace. Many of my comments are in response to
questions or concerns communicated from our shareholders. (New shareholders may
wish to look at the Technology Updates in DTN's 1996 Annual Report and the first
and third quarters' 1997 Report to Shareholders. Copies of these updates may be
requested from Linda Grunberg--DTN Public Relations Director at (402)390-2328 or
seen at DTN's corporate web site, www.dtn.com, under Company Information.)
Updates Revisited
While the Internet has become a very useful and versatile tool, it is not the
only nor always the best tool for every situation. With its strengths come some
limitations and weaknesses. I do not contend that the Internet is broken (except
when parts of it occasionally are), nor unusable (except once in awhile), nor
anything but a revolution in progress. It is undoubtedly a revolution that is
changing the face of information technology and, indeed, the world. This is
taking place somewhat more slowly than the hype would lead you to believe, with
the change deepening and expanding over generations. Increasingly, the Internet
is finding its niches based, not on hype, but on its inherent strengths. So far,
these strengths focus on e-mail, entertainment, and research, with digital
telephony starting to come to the fore--none of which are particularly
competitive with DTN's orientation.
NOTE: While my observation is subjective, of late there
seems to be significantly more humility and somewhat less
hubris in Internet businesses at large. That in itself
is an indication of the maturing of this information tech-
nology and the companies that are involved in it.
Business Models...or, When Technology is not Enough!
Over the course of the last year, many new and exciting capabilities have come
to the Internet. But, in addition, a dawning sense of reality is intruding into
this sometimes-tangled web. Most interesting to me, both personally and
professionally, is that so much of this reality is due to limitations in the
various business models for providing Internet services as opposed to
limitations of any specific technology. Achieving a consistent and predictable
level of revenue, let alone profit, proves to be more of a challenge than
creating the specific technology needed. The dazzle and drama of new
technological advances no longer exist only on a utopian stage--where content is
free, bandwidth is free, everything always works, there is no human error, no
hardware failures, no need for customer service, and the world beats a path to
your door to give you money. (I'm reminded of the fine line between vision and
hallucination...)
6
- 266 -
<PAGE>
Some interesting examples showing that economic reality is setting in include:
USA TODAY runs a cover story, "More sites take first steps toward charging
users." Some of the more pertinent quotes include:
"People are realizing that the experimentation is over--'98 is about
making money."
--Jim Kinsella, MSNBC's general manager.
"But I've spent the last year and a half looking at the economics,
and we're nowhere even close. I don't believe that as the Web matures
for advertising that there will be enough revenue to support us."
--Roger Weed, Publisher of SLATE (Microsoft's news and
politics oriented webzine).
"The lesson everyone will have to learn is that no one model will
work."
--Rich Wiggens, WebReference.com (an online technical magazine).
INVESTOR'S BUSINESS DAILY (10/10/97) ran a front-page article, "WAS THE INTERNET
OVERHYPED?" According to this article:
About 60% of U.S. households still don't have a computer and about
85% don't have a modem.
"...companies, many of them sucked in by the hype, have invested
heavily in the Internet. Last year, they sank nearly $35 billion into
the Internet, including infrastructure, World Wide Web sites, and
data protection." --Zona Research. "So far, returns on that
investment have been low--a lot of glitter, but not much gold."
ZDNet, an online Web site that closely tracks technology and the Internet in
general, provides several interesting views:
"We've entered a period of Internet disappointment and
dissatisfaction. For instance, a survey by the Deloitte Consulting
group claims North American corporate executives are disillusioned
with the Internet. Some 69% of the respondents said Internet costs
are a `significant concern,' way up from 16% in 1995. As a result,
the number planning to increase Internet spending dropped to 31%,
less than half the previous figure of 65%."
--Jesse Berst (ZDNet AnchorDesk Editorial Director) 01/19/98.
"The Net traffic jam is for real."
--Randy Barrett (Inter@ctive Week Online.) 12/24/97.
As an entertaining side bar, I heard an industry speaker discuss a survey
directed towards new (less than 6 months online) Internet users. Only seven out
of ninety said they knew what a "browser" was. Two of the seven said it was
themselves. They were right!
Though I could add technology-oriented headlines to the above sampling, they
would serve only to cloud my point. Instead, the quotes above address day-to-day
issues that are far less sexy than is technology. They concern such mundane
issues as day-to-day operations, fundamental economics, revenues, and
returns--the basics of doing business. The challenge lies in making it all work
reliably while making money doing it.
Broadcast Data...or, Everything Old is New Again
While DTN has embraced the Internet where we think it is applicable and
profitable, we remain a company that is focused on exploiting a full spectrum of
data broadcasting technology. Pre-Internet, DTN found that broadcast data, using
one technology or another, was the only truly cost-effective and efficient means
of widespread data distribution. Today, technology advances, like the Internet,
have provided more choices for data delivery, but with each choice comes
limitations. DTN uses systems that send large volumes of data in a
point-to-multipoint, simultaneously-delivered, efficient, reliable, convenient,
and inexpensive manner--i.e., broadcast data. By its nature, different
permutations of the Internet can exhibit some of broadcast data's attributes,
but not all of them together. Until the promised land is indeed reached, where
bandwidth (throughput capacity) is unlimited and free and reliable, data
broadcast will have a fairly secure niche.
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While broadcast data's advantages are generally overlooked in the Internet stam-
pede, they are again being recognized. An article by J. William Gurley, a
regular commentator on the Internet, makes this point [(ABOVE THE CROWD on CNET,
a high profile web site at www.news.com on Monday, December 22, 1997), later
edited down into an article in FORTUNE magazine (01/12/98)
(pathfinder.com/fortune/digitalwatch/0112tec2.html)]. With all due respect, he
comes somewhat late to this realization and aims his conclusions toward the
future, being perhaps unaware that DTN built its business in this arena many
years ago. Highlights include:
"What would you think if I told you that the Internet would soon have
a competitor for broad-based data distribution? Could something as
mind-numbingly huge as the Internet see competition in such a short
time frame after its own burst of stardom?...The technology that
could cause such profound changes goes by the name of `data
broadcasting' and although it's been around for years, its time to
shine has finally come."
"So what is data broadcasting? Just what it sounds like: a system
that sends huge amounts of data to a huge number of people
simultaneously. This information could be anything that might appeal
to multiple users...stock prices, say, or sports scores. But isn't
the Internet supposed to do all this? Well, no. The Internet does
very well with one-to-one interactive applications like e-mail; it
does poorly in situations where it has to broadcast information to
many people at once. Applications like audio and video "streaming"
place severe strain on the Internet. This strain is compounded in
cases where a lot of people want to see that same information at
once, in the event of a stock market crash, for example, or any major
piece of news."
"The Internet was designed to facilitate one-to-one interactive
asynchronous (no time guarantee) communications. In the beginning,
Internet usage was primarily focused on this one-to-one type of
communication with applications such as e-mail or a single user
interacting with a Web page. Over time, we began to appreciate data
that might appeal to multiple users simultaneously."
Unrecognized in this article is one of the primary strengths of broadcast
data--because it is truly point-to-multipoint, it is irrelevant how many users
are on it (unlike the Internet!). One need only think back to last October's
wild market gyrations for a vivid example of what this can mean. DTN's
subscribers, unlike Internet users, kept receiving their data without a hitch.
That more people suddenly and unexpectedly used DTN's information more intensely
and for longer durations had zero impact on DTN's ability to reliably perform
under extreme market conditions. The Internet, on the other hand, was
effectively choked, either because the Information Provider's site proved
insufficient to handle the increased number of users or because the Internet
Backbone could not manage the increase in the cumulative load. A system most
likely to fail or be otherwise unreliable at the most critical times, failing
specifically because these are critical moments, is not what a serious business
model is built upon.
Also somewhat unrecognized is the nature of information content. Much of the
lure of the Internet is the sheer volume of information. Nearly any information
you might ever want is in there--somewhere. (This led to the descriptive term,
"Data Smog".) This superfluity becomes somewhat less thrilling the first time a
search is conducted that comes back with 80,000 sites to visit. As the Internet
expands, it becomes ever more complex and confusing until even the "insiders"
can't sort it out, let alone those in the broader consumer markets. However,
there is a growing awareness of the difference between abundance and relevance.
People are impressed by the former, but will pay for the latter. One of DTN's
primary advantages lies in the nature of our information content. It is highly
focused and kept relevant to the targeted market. It is consistently tailored to
be appropriate to the user's needs. Our content is vetted by a trusted
source--DTN. Being well organized, content is easily accessed through a simple
and consistent interface. This enhances the likelihood of frequent use, and thus
value.
DTN has used broadcast data for the last fourteen years. To paraphrase the
country western song--DTN was PUSH before PUSH was cool. As new variations of
broadcast-data-oriented technology become economical and reliable, DTN has the
years of experience to best take advantage of them. As many companies have
discovered, it's not as easy as it looks.
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The Information Appliance...or, Can't It Just Be There When I Need It?
A new holy grail is dreamed of in the information marketplace. It is referred to
as the "Information Appliance". This, once found, is dreamed of as the entry
vehicle into the non-computer-oriented mass market. This construct is generally
agreed to have the following attributes:
1) Targeted purpose: It is meant to do what it does well and with complete
reliability; therefore, it is not built to do everything under the sun.
Quality counts.
2) Connectionless: It is on and available at all times. It does not require
that a special connection be made each day or for each use.
3) Easy to use: It is simple, convenient, and intuitive. Virtually anyone
should be able to walk up and use it without training. There is already
too much intricacy and complexity in people's lives.
4) Affordable: This is subjective, but generally means that there is not
a large front-end load when getting the system or service.
5) Flexible: Can be modified to provide different uses in differing markets
for different user needs.
6) Transparency: The user is unaware of the internals of the computing;
i.e., by analogy, one need not understand the workings of the engine,
transmission, drive train, etc. in order to get in and drive a car.
While these are considered "new" concepts to much of the technology marketplace,
DTN has a fourteen-year history of successfully implementing them. Focusing on
niche markets with real profit potential has arguably kept DTN somewhat out of
the limelight. Meanwhile, we've long been drawing far ahead of our competition
in many ways. DTN has grown to dominate several niche markets, often against
major recognized name-brand competition. That we strive to incorporate the
attributes listed above helps to explain why. DTN uses technology that
works--including, when appropriate, the Internet.
Building Lasting Value...or, Feeding the Rat!
Many of us at DTN have been seeing various Web-oriented sites that are
technologically impressive. However, they often remind us of a battle of "bells
& whistles" representing software and site without a real business. One of the
problems with software, even very good software, is that, if you find a
successful niche, you will be copied or surpassed. In most instances, within the
world of the Internet, the latest technological advance provides little or no
long-term advantage or franchise. Legion are the companies that are on this rat
race of a developmental treadmill. Generally, without enough reliably-recurring
revenue to feed the rat, even venture capital runs out some time.
In short, the technology wars continue. With so many market niches to be served,
it is unlikely that there will ever be a single winner. Different tools are the
right tools for differing needs and different niches. Because of this, while the
Internet is a clear winner in many sectors, so are DTN's basic technology
choices. Technology, while oftentimes flashy and captivating our interest, does
not alone hold the key to long-term success. Instead, the full spectrum of a
coherent market-proven business model, well-implemented and flexibly maintained,
does. We at DTN strive to overlook no tool or technology that will continue to
support our successful business model and enhance the lasting value represented
by our company. See us at www.dtn.com and www.dayta.com.
Sincerely,
Robert S. Herman
Senior VP, Research & Product Development
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BUSINESS REVIEW
- --------------------------------------------------------------------------------
Data Transmission Network Corporation (DTN) began operations in April 1984 and
continues to provide comprehensive, time-sensitive information and communication
services for a variety of industries. DTN services grew to 158,800 subscribers
throughout the U.S. and Canada in 1997. The subscriber growth is attributed to
the high retention rate of existing services and the addition of several new
services in the agricultural, weather and financial service industries. A review
of these services and the year's highlights for each industry are discussed in
this report.
The Company's subscription services are targeted at niche business markets and
designed to be timely, simple to use, and convenient. The Company's distribution
technology provides an efficient means of sending data and information from
point to multi-point. The development of a cost-effective electronic satellite
delivery system, plus a total commitment to customer service and information
quality has enabled the Company to become a major player in the communications
industry. The Company continues to invest time and money developing and
enhancing its information distribution technology. These investments allow the
Company to take advantage of many engineering and software advancements in an
exciting and growing industry.
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INFORMATION DISTRIBUTION TECHNOLOGY
- --------------------------------------------------------------------------------
The Company is committed to
researching and developing distribution technologies that cost effectively
delivers the timely information that the Company's subscribers demand. DTN
supports several information distribution technologies allowing the distribution
(transmission) and receiving (capture, manipulation and display) of information.
These technologies include small dish Ku-band satellite (Ku), FM radio side-band
channels (FM), FAX, Cable TV (by using the vertical blanking interval, or VBI),
e-mail and the Internet.
The first technology used by the Company was FM radio side-band. The Ku
technology was added in 1989, providing the ability to reach customers outside
the geographic territory of the FM signal. FAX, VBI, e-mail and the Internet
were added to further expand our distribution network.
The Company provides all of the equipment necessary for subscribers to receive
their service based on FM, Ku and VBI. The exception is DTN's new service, DTN
Real^Time, where information is delivered via a new generation of proprietary
hardware into a personal computer (PC), owned by the subscriber. This equipment
includes a receiver, specifically built for the Company, a video monitor, FM
antenna or a small 30" Ku-band satellite dish. A keyboard, mouse and printer may
be provided depending on the service. DTN is responsible for the normal
maintenance and repair of the subscriber equipment.
Prior to 1992, the Company utilized a "page-based" receiver and monochrome
system. The monochrome system translates the Company's data stream into text and
is capable, depending on capacity, of receiving and displaying from 126 to 246
pages of information. The monochrome receiver is also capable of downloading
information to a printer or computer.
In 1992, the Company introduced the Advanced Communications Engine (ACE)
receiver, a color graphics receiver system, expanding the unit's ability to
provide information and communication services. The ACE receiver contains
multiple processors for capturing, manipulating and displaying high resolution
color pictures, graphics and text. A separate processor enables the unit to play
audio clips for weather forecasts, voice advertisements or audio alarms set for
when a futures contract reaches a pre-set price. In addition, this processor may
send and retrieve information by using an internal modem connected to a phone
line.
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The ACE receiver is also capable of downloading information to a printer or
computer. This receiver is equipped with an internal hard drive allowing
processed information to be stored, archived (versus frequent rebroadcasting)
and displayed. The receiver's built-in control panel, keyboard or mouse allows
subscribers to conveniently access this information.
One unique aspect of the Company's information distribution technology is the
computer software developed by the Company specifically for use with DTN
receivers. This software manages information from a wide array of input sources,
runs routines, sets priorities and then initiates transmissions to the
satellite. The software can individually address each receiver unit placed with
a subscriber, permitting the Company to transmit specific information to a
specific subscriber or group of subscribers. The Company leases FM radio
side-band channels, satellite channels and VBI space to deliver information to
the Company's receivers used by its subscribers. All information is up-linked
from Omaha to satellite (except Internet, FAX and other telephone delivery
technology) and down-linked from the satellite to the subscriber based on the
distribution technology.
FM monochrome subscribers receive their services from an FM antenna that
delivers the information via side-band signals transmitted from radio stations.
On December 31, 1997, 12,500 subscribers were receiving the Company's services
via FM distribution technology. The Ku subscribers utilize a 30" satellite dish,
a direct down-link, to receive their information. On December 31, 1997, 143,300
subscribers were receiving the Company's services via Ku distribution
technology.
Early in 1994, the Company began using a new cable TV distribution technology
involving vertical blanking intervals (VBI). The Company contracted with a major
cable TV superstation to transmit information along with the station's TV
signal. This technology eliminates the need for an FM antenna or satellite dish
and is available to businesses or residences that are wired for cable TV and
receive the superstation's service. On December 31, 1997, 2,000 subscribers were
receiving the Company's services by VBI distribution technology.
The Company has approximately 18,000 customers receiving information using FAX
technology. The e-mail business is primarily a subscriber (an e-mail source)
communicating specific messages to a group of subscribers. Currently, there are
over 900 e-mail sources delivering over 1,500 pages of information to
subscribers daily.
Currently, DTN offers services via the Internet in the agriculture, produce,
weather and finance service lines and plans to continue researching this
information distribution technology. On December 31, 1997, 1,000 subscribers
were receiving the Company's services by Internet distribution technology.
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SERVICES OFFERED
- --------------------------------------------------------------------------------
The Company's revenue is derived primarily from five categories: (1) monthly,
quarterly or annual subscriptions, (2) optional services, (3) communication
services, (4) advertising and (5) service initiation fees. The percentage of
total revenue for each category over the last three fiscal years was:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Subscriptions 80 % 76 % 74 %
Optional services 5 % 6 % 6 %
Communication services 8 % 9 % 11 %
Advertising 3 % 3 % 3 %
Service Initiation Fees 4 % 6 % 6 %
</TABLE>
Subscription revenue is generated from monthly, quarterly or annual subscription
fees for one of the Company's services. The Company offers a discount to
subscribers who pre-pay their subscriptions annually. A more detailed review of
each service is found later in this report.
Optional services are offered to subscribers on an "a la carte" basis, similar
to premium channels on cable TV. Information for these services is primarily
provided by a third party with DTN receiving a share of the subscription revenue
paid by the subscriber. Optional services revenue continues to grow in total
dollars at a rate commensurate with the overall growth of the Company due, in
part, to new technological innovations using the Internet, FAX and e-mail.
The Company sells communication services allowing companies to cost-effectively
communicate a large amount of timely information to their customers or field
offices. This category includes revenue generated from FAX and e-mail services.
Communication revenue continued to grow in total dollars and management believes
this area offers opportunities for future growth.
The Company sells advertising interspersed among the pages of news and
information, similar to a newspaper or magazine. The advantage of an electronic
advertisement over typical print media is the ability to change or replace the
advertising message quickly and as frequently as market conditions dictate.
Advertising revenue maintained the same percentage of total revenue due to rapid
subscriber and subscription revenue growth as well as the addition of new
services with available advertising space.
Service initiation fees are one-time charges for new subscriptions depending on
the service and the information distribution technology. DTN also charges an
initiation fee for subscribers converting to another service (ie: from a
monochrome FM to a Ku color service).
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<TABLE>
<CAPTION>
INDUSTRY SERVED AT A GLANCE
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY/SERVICE TRANSMISSION/RECEIVER PRICE
- --------------------------------------------------------------------------------- ----------------------------------- ---------
THE AGRICULTURAL INDUSTRY
DTN/AgDaily/DTN FarmDayta
<S> <C> <C>
Providing agricultural market information, delayed commodity futures and options FM-Side Band/Page Based-Monochrome $31
quotes, local cash grain and livestock prices, regional and world weather updates Ku-Band Satellite/Page Based-Mono. $37
and a variety of daily analysis, commentary and news affecting grain and live- Ku-Band Satellite/ACE Color System $46-$54
stock prices. Internet/Subscriber PC $25
Pro-SeriesSM/DTN FarmDayta Elite Plus
Providing services with advanced information sources for Ag producers, agri- Ku-Band Satellite/ACE Color System $67-$84
businesses and commodity traders requiring extensive information to be
customized for their specific needs.
DTNstant
Providing real-time futures and options quotes, headline commodity news and Ku-Band Satellite/ACE Color System $180
information. This service also includes all the information found on DTN AgDaily.
DTNironSM
Providing an equipment locator and inventory management service for the farm Ku-Band Satellite/ACE Color System $104
implement dealer. Designed to allow dealers to work together to locate, buy and
sell used farm equipment with other dealers/subscribers.
DTN Produce
Providing comprehensive weather, pricing, transportation and news information for Ku-Band Satellite/ACE Color System $65-$91
the growers, shippers, packers, brokers, retailers and institutions linked to Internet/Subscriber PC $53
the produce industry.
DTN Cotton Network
Providing an electronic marketing system for the cotton industry. The service Ku-Band/Satellite/ACE Color to a PC $.50/
allows gins, brokers, buyers, and warehouses to share data allowing fast and bale
accurate marketing and accounting of cotton offered and sold. listing
THE WEATHER INDUSTRY
DTN Weather Center
Providing a comprehensive weather information system to meet the weather infor- Ku-Band Satellite/ACE-Color $76
mation needs of many industries. Subscribers to DTN Weather Center rely on Internet/Subscribers' PC $35
accurate and easily accessible weather information as a critical ingredient in
operating planning and staffing decisions.
DTN Turf ManagerSM
Providing weather information to individuals and businesses involved in turf- Ku-Band Satellite/ACE Color System $84
related operations such as golf course, lawn maintenance, landscaping and sod
farms. The service provides news, weather and chemical information designed for
turf management.
DTN Aviation CenterSM
Providing comprehensive aviation weather specifically for pilots, airports and Ku-Band Satellite/ACE Color System $103-$152
Fixed Based Operators (FBO's). This service supplies airports, pilots and FBO's
with comprehensive flight-plan information found on premier "on-line" systems.
DTN Contractor DaytaSM
Providing construction businesses with industry news, association and industry Ku-Band Satellite/ACE Color System $82
information, construction news, bids and resources along with all the weather
information on DTN Weather Center.
DTN Travel CenterSM
Providing weather, news, markets and sports information to motel and hotel Ku-Band Satellite/ACE Color System $88
customers. This service is targeted at motels and hotels with 50+ rooms and
includes road condition forecasts and special notices for travelers.
DTN MarineSM
Providing specialty weather features including coastal sea condition forecasts, Ku-Band Satellite/ACE Color System $91
marine buoy data for wind and weather temperature and sea surface temperature
maps.
DTN ForestrySM
Providing specialty weather services targeted at the District Forest Management Ku-Band Satellite/ACE Color System $91
offices in the lower 48 U.S. states and Canada.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INDUSTRY/SERVICE TRANSMISSION/RECEIVER PRICE(1)
- --------------------------------------------------------------------------------- ------------------------------- -----------
THE FINANCIAL SERVICES INDUSTRY
DTN Real^Time
<S> <C> <C>
Providing instant quotes on over 175,000 different stocks, stock options and Ku-Band Satellite/ACE Color System $98-$138(2)
commodities. This service delivers the information via a new generation of DTN Subscribers' PC
proprietary hardware into a subscriber's PC when it is captured and displayed
through the use of customer software.
DTN Spectrum
Providing delayed quotes, business news, economic data and financial market Ku-Band Satellite/ACE Color System $68
information. This service is an enhanced version of DTN Wall Street that
includes customer programming.
DTN Wall Street
Providing exchange delayed financial quotes plus in-depth economic and business Ku-Band Satellite/Page-Based Mono. $44
news, financial information to independent brokers, financial advisors and Cable TV-VBI/Page-Based Monochrome $44
instructions.
DTN FirstRate
Providing wholesale price information in an easy-to-use standard format along Ku-Band Satellite/Page Based-Mono. $98
with intra day interest rate information. Cable TV-VBI/Page Based Monochrome $98
Ku-Band Satellite/ACE Color System $129
Cable TV-VBI/ACE Color $129
THE ENERGY INDUSTRY
DTNergy-Refined Fuels
Providing terminal prices, alerts, electronic fund transfer notifications and Ku-Band Satellite/Page Based-Mono. $40
other communication services from petroleum refiners to their customers (also Ku-Band Satellite/ACE Color System $79
DTN subscribers).
DTNergy-DTN Natural Gas and Electricity
Providing instant or delayed NYMEX energy options and futures quotes, weather Ku-Band Satellite/ACE Color System $40-$180
and industry information.
THE AUTOMOBILE INDUSTRY
DTNautoSM
Providing a communication and information vehicle for the automobile industry Ku-Band Satellite/ACE Color System $98-$120
including precise value trade-in information for dealerships, a used car inven-
tory locating service and direct communication services for auction companies
and manufacturers.
THE ELECTRICAL EQUIPMENT INDUSTRY
TracElectric
Providing an equipment locator service for the electric equipment industry with Ku-Band Satellite/Page Based-Mono. $100(3)
over 100 pages of new, remanufactured, surplus and used electrical equipment
listings.
THE FREIGHT TRANSPORTATION INDUSTRY
DAT Services
Providing an information communication system for the tracking industry that Ku-Band Satellite/ACE Color System $89(4)
provides load and truck matching on a data base of 30,000 listings updated
daily.
OTHER SERVICES
DTN Missing Information Center
Providing instant transmission of data regarding children in danger to local, Ku-Band Satellite/ACE Color System $ - (5)
regional, national and Canadian outlets.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Monthly subscription price. DTN offers discounts for annual prepayments.
(2) Plus exchange fees.
(3) DTN shares revenue with TracElectric.
(4) DTN receives this fee from DAT Services.
(5) Currently provided on all ACE Color systems.
</FN>
</TABLE>
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<PAGE>
THE AGRICULTURAL INDUSTRY
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DTN Agricultural Services Revenue
($ millions) 27 33.7 44 69.7 87.5
</TABLE>
The DTN Agricultural Services are DTN Ag Services, DTNstant, DTN PROduce and
DTNiron. Within DTN Ag Services are DTN AgDaily, DTN ProSeries, DTN FarmDayta
and DTN FarmDayta On Line.
New subscriptions are primarily sold by the Company's national sales force of
employee district sales representatives, in-house sales staff, and independent,
commission-only sales representatives. The Company obtains leads for the sales
force through telemarketing, direct mail, print media advertising and customer
referrals.
The main competition to these services is the combination of printed advisory
services, radio, television, telephone, other satellite information services,
online services and the changing of old information gathering habits.
There are over 200 optional services available to agricultural subscribers.
These services consist of advisory, informational and educational products as
well as newswire, association and additional free services. DTN subscribers can
customize their DTN unit to their specific needs by choosing from a broad mix of
these "a la carte" services. DTN is continually developing new optional services
to meet customer demands by listening closely to the marketplace and the
customer.
The Company markets these services through a combination of individual free
trials, system-wide trials, on-screen advertising, direct mail, invoice
stuffers, equipment stuffers and telemarketing. Optional Service subscriptions
increased in 1997 fueled by these marketing campaigns and the increase in total
DTN subscription sales. Optional service subscription prices range from $6 to
$1,200 per quarter with the average subscription price of $60/quarter.
Communication services (DTN InfoMail) plays an important role in providing a
cost effective means to reach a large number of targeted customers daily. At the
touch of a button, subscribers have instant access to messages 24 hours a day.
Currently, there are over 900 InfoMail customers receiving information tailored
to their specific needs. DTN InfoMail provides services for elevators, seed
sales reps, agronomists, chemical sales reps and technical advisors, commodity
brokers, processing plants, feedlots and anyone with a need to communicate to
DTN subscribers.
16
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<PAGE>
In 1997, the agricultural services sold over $3.7 million dollars in advertising
to major players in the ag industry, ag chemical and seed companies, equipment
and finance businesses. The color system capabilities, such as inter-activity
and animation, continue to entice new advertisers. Advertising research in 1997
confirmed that DTN is an important player in the agricultural media field.
DTN Ag Services
Approximately
80% of the Ag Services subscribers are farmers or livestock producers with the
balance consisting primarily of grain elevators, agribusinesses, and financial
institutions. Subscribers to DTN Ag Services farm nearly one third of the
nation's total cropland and market more than 50% of the nation's cattle and
hogs.
DTN ag management believes the trend toward consolidation into larger farms as
well as the government's move toward fewer agricultural price supports and an
open market system, expands the need for agricultural information services. This
expansion need provides for steady growth within DTN Ag Services.
AgDaily Service Review
DTN AgDaily is an agricultural market information, quote and weather service.
Subscribers receive delayed commodity futures and options quotes; local cash
grain and livestock prices; selected regional and world weather updates; and a
variety of daily analysis, commentary and news that affect grain and livestock
prices.
DTN AgDaily color graphics allows for an advanced weather segment with national
and regional radar maps (updated every 15 minutes), infrared satellite cloud
cover maps, precipitation, temperature, jet stream, surface wind and snow cover
maps, and much more. The subscriber can custom design high resolution charts
and/or select from a library that holds over 1,000 charts. The system is capable
of custom programming the futures quotes pages to display only the quotes
subscribers desire. The service also includes information segments for specific
crop and livestock enterprises as well as general, business, sports and
entertainment news.
The DTN AgDaily color service also offers crop liability insurance and livestock
profitability calculators by using the inter-activity feature allowing a
subscriber to search a comprehensive database.
Pro Series Service Review
DTN offers services with advanced features for the agricultural industry. The
Pro Series' enhanced functionality includes a high interest window to view
future or options quotes on any page, key word search that automatically
searches the news story database for articles affecting the user's operation, a
customized segment with up to five of the user's favorite pages, and a personal
library serving as a customized archive segment.
The DTN Pro Series includes six services: Weather Pro, News Pro, Chart Pro,
Intraday Pro, Stock Pro and DTN Premier.
Weather Pro is the "meteorological connection" to an array of current weather,
forecast and satellite radar information. This service allows subscribers to
choose from over 70 weather maps including detailed regional, state and zone
forecasts. The Weather Pro service gives subscribers 32 programmable pages for
creating their own unique weather information.
News Pro is the "broadcast connection" to timely
business, sports, entertainment, financial, and general news of the day. The
service also provides an audio summary of the day's agricultural news. News Pro
subscribers receive AP Online, a service of the Associated Press.
Chart Pro is the "graphic connection" bringing a variety of information to the
screen in an organized format allowing subscribers to analyze trends, patterns
and cycles. This service includes 40 pages for programmable charts allowing the
subscriber to create an extensive "chart book".
Intraday Pro is the "trading connection" to the first low-cost system available
with the ability to chart market sessions minute-by-minute during the trading
day. This service allows subscribers to choose time intervals for charting to
keep them abreast of the markets.
Stock Pro is the "market connection" providing access to prices for over 50,000
issues of stocks, bonds and funds. This service includes stock quotes using
either the quick quote feature or the programmable quotes pages. Additional
features include a personal library for storing news and information and the
high interest windows allowing subscribers to constantly monitor up to six
futures, options, stock or bond quotes.
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<PAGE>
DTN Premier combines Weather Pro, News Pro, Chart Pro and Intraday Pro into a
comprehensive ag marketing and information package. DTN Premier Plus adds Stock
Pro to the package targeting the farmer, rancher or agribusiness needing all the
market information available in one convenient location.
DTN FarmDayta Service Review
DTN FarmDayta was the principle asset acquired from the acquisition of Broadcast
Partners in May 1996. Its content is very similar to DTN AgDaily. In fact, since
its inception in 1990, DTN FarmDayta was the primary competition for DTN
AgDaily. FarmDayta gives the Company a fully integrated agricultural service
line with price entry points across a wide spectrum, expanding the marketing
horizons for all DTN agricultural services. The Company maintains the DTN
FarmDayta facilities, with nearly 100 employees, in Des Moines, Iowa.
DTN FarmDayta is an agricultural market information, quote and weather service
delivering delayed commodity futures and options quotes; local cash grain and
livestock prices; selected regional and world weather updates; and a variety of
daily analysis, commentary and news that affect grain and livestock prices.
DTN FarmDayta Elite is an advanced version of DTN FarmDayta. Features include
additional options quotes, charting, weather maps and a hard drive to store data
in the receiver which is critical to maintaining storage of information during a
power outage.
DTN FarmDayta Elite Plus is an advanced service that includes the DTN FarmDayta
Elite features and is similar in content to the DTN Pro Series. This service
includes more advanced news (Reuters Headline News), quotes, weather (including
motion and zoom capabilities) and programmable charts.
DTN FarmDayta On Line Service Review
The Company introduced its first agricultural Internet service, DTN FarmDayta On
Line, in 1996. DTN FarmDayta On Line is similar in content to DTN FarmDayta
Elite Plus and is designed for the producer preferring to use his or her
personal computer to receive information or is not able to utilize the
traditional satellite-based system supplied by DTN. The market for
subscription-based Internet services is relatively new yet FarmDayta On Line
closed the year with over 1,000 subscribers.
Information includes animated weather maps, satellite and summary maps, short
and long range forecast maps, news commentary and analysis as well as unlimited
access to futures and option quotes from all the major exchanges. Also available
is commodities for energy, financial, currency, metals and other exchanges as
well as instant access to daily, weekly and monthly commodity charts.
Customization capabilities allow for organization of the most often used
information for business decisions.
1997 DTN Ag Services Highlights
DTN Ag Services enjoyed another banner year in 1997, generating over 12,000 new
sales and maintaining a retention rate of over 90%. Ag Services exceeded
corporate expectations in sales, revenues and operating cash flow.
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DTN Pro Series continued to grow, increasing 21% in net subscribers. This growth
is an example of Ag Services' ongoing efforts to switch subscribers to enhanced
service lines, providing them with more information and DTN with higher revenue
per subscriber.
Integration of FarmDayta into DTN is complete. The FarmDayta service now
represents a significant percentage of Ag Services total sales and service
upgrades.
DTN FarmDayta On Line continues to grow with over 1,000 subscribers. Continued
enhancements to the Internet service is scheduled for 1998. The most significant
enhancement planned is the introduction of DTN AgDayta, an Internet service
featuring a combination of both AgDaily and FarmDayta providing the most
comprehensive ag service available.
In 1998 Ag Services will continue to seek opportunities for enhancing existing
services by strengthening the content and increasing the variety of information
provided.
DTNstant Service Review
DTNstant is a leader in providing satellite delivery of real-time futures and
options quotes from the major commodity exchanges and headline commodity news
from multiple sources such as the Associated Press, Futures World News and
Bridge. The service also provides market-leading cash information, in-depth
charting capabilities plus all the information available on the DTN AgDaily
color service.
In addition, the service provides information for the energy, metals, softs
(i.e., orange juice, coffee, cocoa), transportation and lumber industries.
DTNstant uses compatible software allowing the "pass thru" of data and graphics
into a computer's local area network (LAN). With this capability, a DTN ACE
receiver can feed information to multiple users/traders on the LAN. This "pass
thru" software opens new markets by utilizing information distribution within a
customer's LAN, enhancing analytical capabilities.
Other valuable features are user-programmable formulas for data analysis, high
interest windows to include news stories, and increased keyboard functionality.
DTNstant operates in a very competitive market with numerous national and
regional providers of instant commodity quotes. The primary subscribers are
commercial grain companies and elevators, feedlots, commodity brokers and
commodity speculators. No other service in the industry offers a more
comprehensive news and information service. Due to the character of this
industry, the Company provides on-site service and installation by professional
service technicians.
1997 DTNstant Highlights
DTNstant experienced substantial growth in 1997, in part, due to two synergistic
acquisitions. In February, DTN acquired 500 subscribers from Market Quoters and
Northern Data Services in Minnesota, the Dakotas and Iowa, mainly grain
elevators and brokers. In March, DTNstant acquired 2,400 subscribers from Market
Communications Group LLC (MCG).
The MCG acquisition made it possible to redistribute Reuters news, a renowned
leader, to DTNstant subscribers. The service now provides unparalleled
information and strategic news for commodity traders including access to
additional international information, news packages for softs (i.e., coffee,
sugar, cocoa and orange juice), metals and energy.
DTNstant subscribers and revenues grew 36% and 49%, respectively, in 1997
compared to 1996. This growth reflects the acquisitions as well as the continued
use of third party software for display of news, quotes and maps for increased
analytical capabilities and for access to subscribers through Local Area
Networks (LAN).
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DTNiron Service Review
DTNiron provides a cost-effective communication resource for the farm implement
industry. DTNiron is an equipment locator and inventory management service
providing a communication tool for farm implement dealers throughout the U.S and
Canada.
DTNiron provides detailed listings of farm implements and equipment for sale or
needed by dealers. A listing remains on the system for a minimum of 30 days,
renewable at the dealer's request. Subscribers receive industry news, financial
information, economic indicators and information from the DTN AgDaily service.
DTNiron also includes listings of construction equipment, trucks, trailers and
other equipment found in the agricultural industry. The service provides
listings for implement and equipment parts, especially hard to find parts. In
addition, the service sorts listings by regions and provides hourly updates
keeping information timely for DTN subscribers.
DTNiron includes the Combine and Tractor Demand Monitor which provides the first
widely distributed annual sales outlook for the tractor and combine
manufacturers. This monthly economic study released to all DTNiron subscribers
helps track the money-making trends in the industry. The Combine and Tractor
Demand Monitor is released to the trade and agricultural press one or two days
after release to DTNiron subscribers.
1997 DTNiron Highlights
In 1997, DTNiron added their retail equipment listings to its newly developed
website on the Internet (www.dtniron.com). This allows subscribers to gain
additional exposure for their listings at no additional charge. Internet users
easily locate equipment for sale by using a drill-down database search engine
directing them to DTNiron's complete Web listing. Dealers can also receive
e-mail from potential buyers or, if they are not e-mail enabled, DTN will call
or FAX the message to the dealer.
Also in 1997, dealer listings were added to DTN Pro Series increasing the
dealer's ability to reach an additional 50,000 plus high-income farmers.
DTN PROduce Service Review
DTN PROduce is an authority in providing the produce industry with the most
timely information available. There are four major components to the DTN PROduce
service. First is weather, the most critical information for the produce
industry. Second is immediate pricing updates, formatted by commodity, growing
area and terminal market. Third is transportation information with freight rates
and daily truck availability for the major growing areas. Finally, the service
provides a comprehensive news package including AP Online. Other key-industry
news sources are "The Packer" and "The Produce News" in addition to credit
information provided by the "Produce Reporter Company" and the "Red Book Credit
Service".
DTN PROduce maintains a price discovery network, DTNdexSM, that is the industry
standard. Competition in this industry continues to focus on older technology,
such as FAX machines.
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The entire produce food chain of growers, shippers, packers, brokers, retailers
and institutions benefit from information provided by this service. A custom
service for the produce grower is also available containing all the features of
DTN PROduce except for transportation information and AP Online news. DTN
PROduce expanded its service to the Internet in 1996 to accommodate seasonal and
international customers unable to utilize the satellite dish technology.
1997 DTN PROduce Highlights
DTN PROduce introduced Price Link in 1997. This service allows suppliers to use
the DTN system to FAX, e-mail and send messages in a more timely and cost
effective manner. Instead of phoning or faxing price lists, a supplier sends
lists through the DTN system. Prices can be changed or added quickly and
efficiently using this system. New software, Price Link Plus, allows users to
download price lists from the DTN system to their personal computer to
manipulate information in spreadsheets or to develop specialized screens for
individual needs.
DTN PROduce continues to provide the industry with the tools necessary to save
time, make money and communicate information, pricing and other information in a
fraction of the time of existing systems.
DTN Cotton Network Service Review
In July of 1997, DTN acquired the customer base and other assets of "The
Network", a cotton communications company based in Lubbock, Texas. DTN Cotton
Network is an electronic cotton marketing system designed to operate on a user's
personal computer using software developed specifically for cotton accounting
and marketing.
Users dial into a DTN data center via modem to upload bale ownership information
and to list cotton for broadcast to prospective buyers. Information is broadcast
via DTN Ku band satellite and passed through a serial port into personal
computers located at both buyer and seller locations.
1997 DTN Cotton Network Highlights
After acquiring "The Network", seven gins were added and DTN more than doubled
the number of buyers on the system to 46. At many sites, computer hardware was
upgraded and additional software enhancements made, providing more reliable
systems.
DTN Cotton Network subscribers are primarily located in West Texas and Oklahoma.
Expansion into other areas of the cotton belt are expected in the future. The
service handled over 569,000 bales during the 1997 crop year compared to the
previous crop year of only 452,000 bales.
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THE WEATHER INDUSTRY
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
DTN Weather Services Revenue
($ millions) .0 1.0 5.6 10.7
</TABLE>
DTN Weather Center Service Review DTN Weather Center is a comprehensive weather
information system designed to meet the weather information needs of many
industries. Markets specifically targeted by DTN Weather Center are golf
courses, turf management, emergency management, state transportation
departments, public works departments, construction and aviation.
DTN Weather Center introduced new products in 1997 designed especially for the
marine, forestry and travel industry. DTN Weather Center provides more than 100
weather maps, 20 regional radar maps, including NEXRAD radar and infrared
satellite photos and six satellite maps. The service provides short-range
(immediate to 48-hour) forecasts, long-range (3-90 day) outlooks, and 10-day
city forecasts for more than 550 cities in the U.S. and Canada. The service
includes programmable capabilities to customize maps, and an archival section
for saving maps.
Optional services, such as AP Online News, newswires, industry association news
and others are also available on all Weather Center services.
DTN Weather Center is a critical ingredient in operational planning and staff
decisions for industries where timely, accurate and accessible weather
information are vital.
DTN Turf Manager Service Review
DTN Weather Center Turf Manager is available to individuals and businesses
involved in turf-related operations such as golf courses, lawn maintenance,
landscaping and sod farms. This service provides the news, weather and chemical
information needed for effective turf management.
Chemical and Pesticide Press Turf Index is a unique feature providing an
information database of more than 275 turf pesticides. Material Safety Data
Sheets (MSDS) were recently added providing an even more valuable information
service for subscribers.
Thor Guard, the only lightning prediction system available, warns of lightning
strikes before they happen and is now available as an optional service.
Evapotranspiration Tables provide regional evaporation rates to plan for
watering and chemical applications.
ESPN Sports Ticker provides current golf related stories and results and AP
Online provides more than 300 current news stories from four chapters, General,
Business, Sports and Entertainment. The National Golf Course Directory includes
a database of locations, phone numbers, course pros and course superintendents
for all member courses.
These features, along with the comprehensive weather information, provides a
complete turf industry package.
DTN Aviation Center Service Review
DTN Aviation Center is a comprehensive aviation weather package specially
designed for pilots, airports and Fixed Base Operators (FBO's). DTN Aviation
Center supplies airports, pilots and FBO's with the extensive flight-plan
information found on many premier "online" systems.
This package includes U.S. and regional depiction maps, 24-hour low-level
significant weather prognosis, U.S. region winds and temperatures aloft and also
METAR and TAF information. Subscribers use DTN Aviation Center during flight
services to visualize current weather conditions while creating their flight
plans. This service also aids in determining alternate route destinations.
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Subscribers choose from the Level I service, designed for the local/regional
flyers up to 18,000 feet, or the Level II service, designed for pilots and
airports flying nationally up to 45,000 feet. The Level II service also provides
European flight information.
DTN Contractor Dayta Service Review
DTN Contractor Dayta is designed for the construction
industry and includes construction-related news and information providing a
competitive advantage for subscribers. This service provides valuable weather
information necessary for important day-to-day construction business decisions.
Industry specific information includes general information, association and
industry information, construction news, bids and resources and the contractor's
exchange. Additionally, subscribers receive sports scores, sports highlights and
financial indicators.
The service provides a practical tool contributing to labor and material cost
savings and effective management of scheduling and staffing for the construction
industry.
DTN Forestry Center Service Review
DTN Forestry Center combined efforts with the U.S. Forest Service to provide
critical forest fire information to subscribers. Previously, district forest
service offices relied on a modem network assembled in the late 1960's for
crucial information on forest fire locations and fire weather forecasts. With
DTN Forestry Center, forest service district managers quickly access fire
weather text bulletins along with a comprehensive set of weather maps.
Bulletins provided for the forest service market are: Forest Weather Forecasts;
Red Flag Warnings; Fire Danger Indexes; Fire Weather Observations; and Fire
Weather Notices. A special chapter of fire weather maps provides additional
information such as: Haines Fire Index; Current and Forecast Relative Humidity;
Current and Forecast Wind Speed & Direction; upper air analysis from 5,000 to
10,000 feet; and moisture index information from both the Crop Moisture Index
and Palmer Drought Index.
DTN Marine Center Service Review
DTN Marine Center is a provider of satellite-delivered weather information for
all areas of the marine industry.
The service provides information necessary for cost-effective, efficient
decision-making regarding towing, shipping, salvage, service and recreation. The
service includes Lake and Marine Text Bulletins, Buoy Reports, Lake and Marine
Maps and Tide Tables as well as general weather information and sea conditions.
Optional Services are also available as service add-ons providing additional
means for a more complete information and weather package.
DTN Travel Center Service Review
DTN Travel Center is an interactive hotel quest service designed for the
hospitality and travel industries. The service targets hotels and motels with
50+ rooms and includes NEXRAD Real-Time Radar Maps, travel forecasts and road
conditions, detailed city and national forecasts, national and world news,
sports and sports scores. In addition, the service provides business and
financial news and market quotes and indexes.
DTN Travel Center provides a comprehensive weather and news information package
for the traveler whether he or she is on business or vacationing.
1997 DTN Weather Services Highlights
DTN Weather Center increased its subscriber base in 1997 by more than 5,000
subscribers bringing the total subscriber count to 13,000. Golf courses,
aviation, governmental agencies (emergency management and state transportation
departments) and construction-related businesses are the leading industries for
DTN Weather Center.
In addition, DTN Weather Center continues to expand its sales and marketing
force and to add sales directors for new services when needed.
Other main highlights include the introduction of DTN Forestry Center, developed
in cooperation with the U.S. Forest Service and the Great Lakes Forest Fire
Compact. Also, the Illinois DOT awarded DTN Weather Center a bid to more than
double the number of Weather Center units in use in the maintenance facilities.
Development and promotion of special communications segments to transmit
pavement temperatures and site-specific forecasts continued.
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<PAGE>
THE FINANCIAL SERVICES INDUSTRY
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DTN Financial Services Revenue
($ millions) 4.1 5.1 6.1 8.6 10.3
</TABLE>
DTN Financial Services offers four services, DTN Real^Time, DTN SPECTRUM, DTN
Wall Street, and DTN FirstRate. There are a variety of Optional Services
available to Financial Service subscribers providing stock selection and timing
advice, earnings estimates, fundamental stock market data, U.S. Treasury quotes
and other financial market-related services.
DTN Financial Services revenue grew 20% during 1997, adding to its bullish 26%
compounded revenue growth for the past 5 years.
The main objective for Financial Services is providing comprehensive, in-depth
financial information at an affordable cost to its subscribers. This objective
is critical due to the highly competitive nature of the business. Contents of
all DTN Financial Services are broader in scope and cost less than competitive
services. The "a la carte" optional services offered to subscribers give them an
even greater variety of information. This combination allows the services to
maintain its competitive advantage in the market.
DTN Real^Time Service Review
DTN Real^Time delivers real-time stock and stock option quotes as well as
real-time futures quotes, fixed income government securities quotes, market
statistics and indicators, news, commentary and other time-sensitive financial
market information. The service is delivered at a rate of nearly 12,000
characters per second, roughly four times faster than a computer modem operating
at 28.8 kbs, the speed investors rely on to receive Internet-based quote
services. DTN Real^Time is two to more than four times faster than other
dedicated, competitive, real-time quote services.
DTN Real^Time is the first DTN service delivered directly via proprietary
hardware to a personal computer. Previously, DTN services displayed information
on the DTN proprietary systems or stand-alone units. If desired, text and data
are "passed thru" these units to a PC using various software packages.
Subscribers are offered, at no additional cost, the option of using DTN
Chameleon, an exclusive software package compatible with Windows 95(R) to
display market data, news and other financial information delivered by DTN
Real^Time. DTN Chameleon software also provides market condition alarms, news
alerts and archiving, charting and portfolio monitoring. There are several other
popular third-party software programs available for formatting, manipulating,
analyzing and displaying market data and news on a single PC or networked PC's.
DTN SPECTRUM Service Review
DTN SPECTRUM is an enhanced version of DTN Wall Street utilizing the ACE
technology. The service provides advanced quote selection and custom programming
along with alarms, news search and charting capabilities appealing to a broad
market of individual investors and investment professions.
DTN SPECTRUM is very well received by new subscribers as well as existing DTN
Wall Street subscribers choosing to "switch-up" to the advanced SPECTRUM
features.
An extension of DTN SPECTRUM is the DTN SPECTRUM R-T service. DTN SPECTRUM R-T
provides real-time futures and commodity quotes along with exchange delayed
stock quotes, news and other information.
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<PAGE>
DTN Wall Street Service Review
DTN Wall Street provides exchange-delayed quotes on stocks, bonds, mutual and
money market funds, futures, interest rates, currencies and real-time index
quotes. This service also provides in-depth economic, financial and business
news and other time-sensitive financial market information such as
company-specific news and earnings. The service allows subscribers to custom
program the system to track their selection of financial quotes.
The majority of subscribers to DTN Wall Street are individual investors,
independent brokers, financial advisors and financial institutions. The primary
competition for DTN Wall Street is satellite, TV cable (VBI), Internet and
dial-up quote services.
DTN FirstRate Service Review
DTN FirstRate is a service for the mortgage industry providing wholesale
mortgage rates in an easy-to-use standard format and intra day interest rate
information indicating the direction of mortgage loan rates. This service also
provides subscribers with snapshots of real-time rates from Fannie Mae and
Freddie Mac plus other news, commentary and analysis for mortgage lenders.
DTN FirstRate+ is an enhanced color version of DTN FirstRate. This service
provides additional features which are well-received by subscribers, such as
keyword search, quick quote, alarms and zoom capabilities for weather.
DTN FirstRate is marketed by DTN Financial Services' institutional sales group
(a select group within the National Sales Force).
1997 DTN Financial Services Highlights
The most noteworthy development for DTN Financial Services was the debut of DTN
Real^Time. DTN SPECTRUM sales also continued strong and prospects for increased
sales of DTN FirstRate is promising.
DTN Financial Services is now well-positioned in its market place and offers a
full line of exceptionally low-cost financial information services useful to
both individual investors and to higher-end professional and institutional
users. Plus subscribers can choose to use a proprietary DTN platform or
networked PC applications.
The release of DTN Real^Time created greater opportunities within the
institutional marketplace. Results are achieved through the National Sales Force
and a subset of financial specialists located in key metropolitan markets. Sales
to individual investors also expanded driven by direct response marketing,
utilizing an inside sales staff.
The importance of relationships with third party software developers was
heightened as subscribers to DTN Real^Time relied on their PC to display and
manipulate quotes and news. Several relationships were strengthened or
established for the first time, allowing subscribers to utilize a wider variety
of analytical tools than those provided with Chameleon software.
An increased emphasis was placed on sales to financial institutions (banks,
money managers, brokerage firms, etc.). In 1997 this effort relocated from Salt
Lake City to Omaha to take advantage of economies of scale and to improve
communication.
In order to streamline service offerings and create less confusion for
prospective customers, two previous financial services, Broker+ and GovRate+,
were folded back into the SPECTRUM brand. The same content is available, but
through add-on modules rather than a bundled basis.
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<PAGE>
THE ENERGY INDUSTRY
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DTN Energy Services Revenue
($ millions) 4.9 7.2 10.0 12.2 14.3
</TABLE>
Energy related services include DTNergy for the refined fuels, natural gas
industries and electric industries.
DTNergy Service Review
DTNergy provides pricing information and communication services for the refined
fuels industry. This service consists of several pages of delayed energy futures
and options quotes plus selected news and financial information.
DTNergy is designed to connect refiners (producers of refined fuels) to
wholesalers (distributors of refined fuels). The refiner sends refined fuel
prices to wholesalers authorized to receive this information. The refiner is
also capable of sending terminal alerts, electronic funds transfer
notifications, invoices, and other communications to the wholesaler. The DTNergy
system carries more than two million messages a month for this industry.
Subscribers also select from a variety of optional services providing even more
prices or news related to the petroleum industry.
The strength of the DTNergy Refined Fuel service is the ability to deliver,
within seconds, accurate refiner terminal prices and other vital communications
to the wholesalers. This service is more reliable, timely and less expensive
than the competition, which utilize telephone-delivered printer-only systems and
FAX services.
DTNergy generates revenue from two primary sources, the wholesaler and the
refiner. Wholesalers currently pay a monthly subscription fee of $40.00 for the
monochrome Ku-band satellite service. Refiners pay fees based on the number and
length of communications sent to wholesalers.
DTNergy also provides an information service for the natural gas and electric
industries. Subscribers receive instant or delayed NYMEX energy futures and
options quotes, a comprehensive weather package and industry specific news and
market information. This service targets energy producers and generators,
transporters, marketers, utilities and larger energy consumers.
1997 DTNergy Highlights
1997 revenues for DTNergy grew 18% over 1996, making 1997 the seventh
consecutive year for increased revenue growth. DTN remains the dominant player
in the refined fuels market with virtually all major U.S. refiners and their
customers receiving DTNergy information.
These refiners continue to find new uses for the DTNergy communications link to
their wholesalers, such as the implementation of EDI (Electronic Data
Interchange) fuel invoices. EDI/VAN services help automate customers' business
processes by converting refiner text invoices into an industry standard format.
Once these invoices are in a standard format, invoice data is seamlessly
transferred into a customer's accounting system from the ACE unit.
DTNergy is also developing a number of Internet services slated for introduction
in 1998.
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<PAGE>
THE AUTO INDUSTRY
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
DTN Auto Services Revenue
($ millions) 0.0 0.7 1.4 1.9
</TABLE>
DTNauto Service Review
DTNauto is a communication and information service for the automobile industry.
This service offers automobile dealers precision information for valuing
trade-ins and locating used car inventory. DTNauto provides a host of convenient
features for the industry such as the ability for automobile auction companies
and manufacturers to communicate directly with the dealers.
DTNauto provides information on more than 125 pre-auction automobile listings
(AuctionNet), results of past auctions, new and used car industry news, weather
and other news. The service allows subscribers to perform searches of upcoming
and past auction listings for specific automobile information.
DTNauto offers a variety of optional services providing information on credit
reporting (CREDCO), vehicle histories (CARFAX), warranty information (The
Warranty Guide) and residual value of leased vehicles (Lease Guide). CARFAX and
CREDCO optional services extensively utilize the internal modem to send and
receive information. These services create a comprehensive information service
placing the "subscriber in the driver's seat".
DTNauto is marketed by DTNauto sales specialists (a select group within the
National Sales Force).
1997 DTNauto Highlights
In 1997, DTNauto introduced the "Autos Wanted" listing service. "Autos Wanted"
consists of a list of new and used car buyers who provide a description of a
vehicle or vehicles they are interested in purchasing. These leads are posted on
"Autos Wanted" for 5 days. Dealers subscribing to this service review the list
daily to match inventory with the sales lead. Potential car buyers learn of this
service from print media ads in newspapers and trade publications, the Internet,
TV commercials and ads on select DTN services. Feedback from dealers utilizing
this feature is very positive.
Providing current vehicle wholesale prices and the pre-auction listings of used
cars remains the driving force behind the DTNauto service.
DTN JOINT VENTURE SERVICES
- --------------------------------------------------------------------------------
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
DTN Joint Services Revenue
($ millions) 0.1 0.3 0.9 1.7
</TABLE>
DTN joined forces with several companies to market their services using DTN
technology. These services are TracElectric, DAT Transportation Terminal and DTN
Missing Children Information Center (MCIC).
Trac Electric Service Review
TracElectric is an equipment locator service for the electrical equipment
industry. This service provides over 100 pages of new, remanufactured, surplus
and used electrical equipment listings. The service connects buyers and sellers
throughout the U.S. and Canada.
DAT Service Review
The DAT (Dial-A-Truck) Transportation Terminal service, located in Beaverton,
Oregon, is an information communication system for the trucking industry. The
service provides load and truck matching performed on a database of 50,000
listings updated daily.
DAT allows subscribers to input listings into the DTN receiver and send this
information to a database using the internal modem. The service provides
subscribers with the ability to perform extensive searches to locate loads and
trucks and to set alarms alerting users of a match.
The service also provides regional radar maps of major highways and interstate
systems, transportation news, diesel fuel prices and other financial information
related to the trucking industry.
DAT targets all freight brokers and carriers throughout the U.S. and Canada.
DTN Missing Children Information Center Service Review
DTN Missing Children Information Center (MCIC) provides instant transmission of
data regarding children in danger to local, regional, national and Canadian
outlets.
In an effort to assist parents, police and the National Center for Missing and
Exploited Children locate missing children and the criminals involved, photos
and information regarding these children are posted as a public service on all
DTN color systems.
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<PAGE>
<TABLE>
<CAPTION>
PIE GRAPHS IN TABULAR FORM:
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues
DTN Ag Services 69% 71% 71%
DTN Weather Services 8% 6% 2%
DTN Financial Services 8% 9% 10%
DTN Energy Services 11% 12% 16%
Other Services 4% 2% 1%
Subscribers At Year End
DTN Ag Services 76% 80% 78%
DTN Weather Services 8% 5% 3%
DTN Financial Services 8% 8% 10%
DTN Energy Services 5% 5% 8%
Other Services 3% 2% 1%
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
For the Year:
<S> <C> <C> <C> <C> <C>
Revenues ........................ $126,374,352 $ 98,383,713 $ 62,287,989 $ 46,109,789 $ 35,992,754
Operating income ................ 12,383,403 6,920,791 4,343,252 694,560 2,408,868
Income (loss) before income taxes 3,407,081 (1,404,306) ( 397,076) (2,422,738) 1,020,831
Net income (loss) ............... 2,236,081 ( 958,306) ( 283,076) (1,602,738) 663,831
Basic income (loss) per share . .
Diluted income (loss) per share . .20 (.09) (.03) (.16) .07
Dividends per share ............. .19 (.09) (.03) (.16) .07
- ---------------------------------------------------------------------------------------------------------------
At Year End:
Total assets .................... $162,430,898 $177,729,762 $ 92,672,050 $ 71,459,356 $ 57,242,313
Long-term debt and
subordinated notes ........... 72,891,370 97,747,823 47,020,527 33,982,814 25,375,000
Stockholders equity ............. 32,196,173 28,290,289 12,876,965 12,706,978 12,780,477
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
General Overview
The equipment used by subscribers is a large capital investment for the Company.
The cost, net of depreciation, of this equipment accounts for approximately 64%
of the Company's total assets.
The Company has financed a majority of the investment in subscriber equipment
with long-term debt and plans to continue using long-term debt financing until
cash provided by operating activities is sufficient to cover these investments.
The Company made significant investments during 1995, 1996 and 1997 to purchase
the assets, including subscribers, of several businesses. The Company recorded
these transactions as asset purchases and the net intangible assets (goodwill)
are approximately 21% of the Company's total assets. The Company's acquisition
strategy focuses on businesses that management believes will enhance the
operating performance and financial condition of the Company.
The Company's overall financing strategy is simple, use long-term debt financing
versus equity, whenever possible, to prevent the dilution of shareholder value.
Net Cash Provided by Operating Activities
Net cash provided by operating activities in 1997 was $47,543,395 compared to
$33,777,467 in 1996. This increase of $13,765,928 was primarily the result of
the $14,321,280 increase in operating cash flow plus the $168,687 of additional
cash generated from the change in assets and liabilities. The increase in
operating cash flow and additional cash from the change in assets and
liabilities was offset by the $665,961 increase in interest expense related to
the Company's investing activities for subscriber equipment and acquisitions.
Net Cash Used by Investing Activities
Net cash used by investing activities in 1997 was $30,191,998 compared to
$106,290,603 in 1996. This decrease is primarily due to a reduction in the
purchase of equipment used by subscribers in 1997 and the purchase of Broadcast
Partners in May of 1996. The majority of expenditures on equipment used by
subscribers are for color receivers, monitors, and satellite dishes including
LNB's. The decrease in purchases on equipment used by subscribers is due to
lower net subscriber growth and the reduction of inventory levels.
The majority of the investment in equipment used by subscribers is a direct
result of the growth in the Company's subscriber base. The Company's marketing
efforts to obtain new subscribers includes investing in subscriber equipment for
trial and complimentary subscriptions. In addition, approximately 3,000
monochrome system (FM and Ku) and DTN FarmDayta subscribers upgraded service
requiring the color Ku-band system with 54% of these conversions involving DTN
AgDaily subscribers. The remaining 46% involved DTN Financial Services and
DTNergy subscribers. The conversion of approximately 1,700 subscribers from DTN
AgDaily on the color Ku-band system to other more advanced Ku-band services such
as DTN Pro Series, DTNstant, DTNiron, DTN PROduce and DTN Weather Center
resulted in upgraded equipment. During 1997, the acquisition of Market Quoters,
Northern Data and Arkansas Farm Bureau subscribers resulted in approximately
1,000 systems being installed to convert these subscribers to DTN systems.
DTN decreased it inventory of color receivers and components to build color
receivers during 1997. At December 31, 1997 the Company had approximately
$7,000,000 of this inventory compared to $10,000,000 in 1996. The build up of
inventory in 1996 occurred due to advance commitments on inventory purchases.
The Company adjusted production schedules during the fourth quarter of 1996 and
reduced the inventory to a level adequate to supply forecasted sales activity.
The reduced production of color systems reduced borrowing requirements in the
first half of 1997.
The Company had approximately 30,000 monochrome customers at December 31, 1997.
The Company utilizes monochrome receiver equipment coming in from conversions
for new DTN AgDaily, DTN Wall Street and DTNergy subscribers. DTN will continue
to research new markets for monochrome system services but at this time the
Company's management believes the prospects are more favorable for color
services.
As it relates to the Company's investing activities, the Company had negative
working capital of $21,520,377 at December 31, 1997, compared to $14,748,094 in
1996. The increase in the working capital deficiency was primarily due to the
growth in the current portion of long term debt of $6,718,750 from increased
term debt needed to finance acquisitions and converting $38,000,000 of revolving
debt to term notes in the first quarter of 1997.
The working capital deficiency also increased due to a reduction of current
assets of $1,158,119 offset by a decrease in accounts payable and accrued
expenses of $1,104,586 from December 31,1996 to 1997. The reduction in accounts
receivable was due to aligning receivable recognition methods of acquired
operations with the Company's. The decrease in accrued
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<PAGE>
expenses is due to a reduction of startup costs related to the Broadcast
Partners operations.
On July 26, 1995, the Company entered into an agreement with Knight Ridder
Financial (KRF) to acquire 2,900 Knight Ridder Commodity News Service
subscribers. The Company agreed to pay KRF approximately $4,970,000 for these
subscribers over two years. The Company agreed to pay $1,500,000 at closing and
$1,500,000 on the first anniversary of the closing. The remaining $1,970,000 was
based on company estimates of future revenue sharing. This payment was scheduled
to be paid quarterly during the first two years of the agreement and was
completed during 1997. The Company capitalized $4,970,000 as an intangible asset
(goodwill) and is amortizing this cost using the straight-line method over eight
years.
On May 3, 1996, the Company acquired substantially all the assets of Broadcast
Partners, an electronic information and communication services company providing
similar services as DTN AgDaily in the agricultural industry. The Company paid
$63.5 million cash and assumed certain "non-interest" bearing liabilities of
approximately $9.8 million. The Company received 39,000 agricultural subscribers
in this acquisition.
The $63.5 million cash paid for the Broadcast Partners acquisition was financed
with a combination of $15 million of privately placed common stock equity and
$48.5 million of six year term debt (see note 3). As part of the acquisition,
the Company capitalized approximately $38.2 million of equipment. The Company is
depreciating this equipment using the straight-line method over five years. The
Company capitalized approximately $34.8 million as an intangible asset
(goodwill) and is amortizing this cost using the straight-line method over three
to eight years.
During the first quarter of 1997, the Company acquired 2,900
real-time commodity subscribers through two separate acquisitions. Approximately
500 of the subscribers were acquired from Market Quoters and Northern Data
Services for $750,000 cash. The remaining 2,400 subscribers were acquired from
Market Communications Group, LLC (MCG), a joint venture between Reuters America,
Inc., and Farmland Industries, Inc. The Company paid $3.6 million cash for the
2,400 subscribers, certain assets and assumed certain liabilities. In total, the
Company capitalized approximately $4.5 million as an intangible asset (goodwill)
and is amortizing this cost using the straight line method over three to eight
years. The MCG acquisition included the preferred rights to distribute relevant
Reuters real-time news and information to the commodities, energy and metals
markets.
On July 1, 1997, the Company acquired the assets of The Network, Inc., an
electronic cotton trading network service. The Company agreed to pay $1,000,000
cash over five years. The Company paid $200,000 cash in 1997 and will pay
$200,000 cash on each of the next four anniversary dates. The Company has the
option to terminate the agreement at any time and cease all payments and return
the assets to the original owner. The Company is capitalizing the $200,000
payments when made as an intangible asset (goodwill) and amortizing this cost
using the straight-line method over 12 months. In effect, if all payments are
made, the Company is amortizing the $1,000,000 purchase price over five years.
On October 24, 1997 the Company agreed to acquire the 700 subscribers on the
ACRES platform from the Arkansas Farm Bureau (AFB). The Company agreed to pay
$600 for each subscriber that converts to a DTN service. The Company believes
the majority will convert to a DTN service. In addition, the Company will pay
the AFB a $6 monthly residual for the lesser of the life of the subscriber or
ten years for those subscribers converting to a DTN service. The Company will
capitalize the $600 acquisition payment per subscriber as an intangible asset
(goodwill) and amortize this cost using the straight-line method over eight
years. No payments were made in 1997.
Net Cash Provided (Used) by Financing Activities
Net cash used by financing activities of $17,222,280 was primarily the result of
a decrease in total debt outstanding (current and long-term) of $18,217,083. The
decrease in debt outstanding was primarily due to $22,217,083 of principal
payments during 1997. The Company was able to pay down debt due to the increase
in cash provided by operating activities and using subscriber equipment
inventory for new subscribers during the first half of 1997. The Company made
$9,036,459 of principal payments on bank term debt during 1996.
Factors that may Affect Future Results
Competition -- The Company operates in a highly competitive environment,
competing with information and communication services utilizing various types of
electronic media including satellite delivery, TV Cable delivery, the Internet,
electronic bulletin boards, television, radio, cellular, and telephone
communications. In addition to the various electronic publishers, the Company
competes with print media and "old information gathering habits". Many of the
Company's actual and potential competitors have substantially greater resources
than the Company.
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Inflation -- The Company believes that inflationary trends have a limited effect
on the business. However, since a large percentage of the Company's subscribers
and revenues are related to the agricultural industries, the general state of
the agricultural economy may impact the Company's business operations and
financial condition.
Indebtedness -- The Company anticipates that internally generated cash flow and
its bank credit lines will be sufficient to fund operating activities, capital
expenditures and principal payments on long-term debt.
Technology -- Although the business of the Company is subject to the continuous
changes in technology, the Company is currently unaware of any new technology
which is likely to replace its present electronic delivery systems, equipment
and the business applications these systems and equipment are designed to
provide at a competitive price.
Year 2000 -- The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000 Issue.
The company plans to use internal resources to perform the review and make
programming changes or replacements as necessary. The Company is pursuing Year
2000 compliance statements from all vendors that provide services or products
critical to the operation of the Company's systems. The Company does not expect
the cost of making the necessary changes to be significant. The Company expects
its year 2000 conversion project to be completed on a timely basis, however,
failure to do so or failure on the part of third parties with whom the Company
does business could materially impact operations and financial results.
RESULTS OF OPERATIONS
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Cash Flow
($ millions) 12.9 15.8 23.2 40.4 54.7
</TABLE>
General Overview
The financial dynamics
of DTN's business operations are similar to businesses that sell monthly
subscriptions such as electronic publications and communications and cable TV
companies. The financial dynamics are similar because DTN makes an initial
investment of variable marketing costs to obtain new subscribers (generally a
one year subscription agreement) and the Company makes a capital expenditure to
provide the subscriber with the necessary equipment to receive the Company's
services.
In addition, DTN has a level of fixed costs, such as FM and Ku satellite leases,
certain news and weather, quotes, information providers and administrative
expenses, not directly affected by the number of subscribers receiving the
Company's services.
DTN's operating cash flow (operating income before depreciation and amortization
expense), a key indicator monitored by DTN management, has increased at a
compounded rate of 41% from 1992 to 1997. This trend is primarily the result of
a growing base of subscribers covering the Company's fixed expenses. The
following graph details the trend in operating cash flow as a percentage of
revenue to illustrate operating leverage.
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Cash Flow
(percent of revenue) 36 34 37 41 43.3
</TABLE>
The Company has operating leverage due to low variable costs per subscriber.
This leverage is present when a growth in subscribers and related revenues has a
direct impact on operating cash flow. This leverage, as seen in the 1993 and
1994 periods, can be negatively impacted by the Company increasing the amount
committed to research and development activities.
DTN accumulates research and development activities as "Net Development Costs".
The Company defines "Net
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<PAGE>
Development Costs" as 1) market research activities, 2) hardware and software
engineering, research and development, and 3) the negative operating cash flow
(prior to corporate allocations plus interest) of new services. The Company
includes new services in the "Net Development Costs" classification until the
service shows positive operating cash flow prior to corporate allocations plus
interest for a full quarter. The service becomes a core service after reaching
this level in the developmental process.
During the 1993 and 1994 periods, the Company was expanding development
activities (see chart on page 3) quite rapidly, therefore, negatively impacting
operating cash flow on a total and percentage basis.
During 1995, the success of subscription sales of the new developmental services
decreased net development costs. While the overall developmental expenses
increased, the growth rate of developmental related expenses declined in 1995
compared to 1994. The result, operating cash flow as a percentage of revenue
increased to 37% in 1995 compared to 34% in 1994. Core services revenue improved
to 44.4% in 1995 compared to 43.8% in 1994.
During 1996, DTN expanded it developmental activities with net development costs
growing from $3.7 million in 1995 to $5.3 million in 1996. The Company's
increased efficiencies on a per subscriber per month basis and the acquisition
of subscribers from Broadcast Partners contributed to an increase in operating
cash flow as a percentage of revenue from 37% in 1995 to 41% in 1996. Operating
cash flow as a percentage of revenue, excluding the acquisition of Broadcast
Partners, was 37% in 1996. The expansion of developmental activities was offset
by increased efficiencies on a per subscriber per month basis. Core services
operating cash flow as a percentage of core services revenue improved to 47.4%
in 1996 compared to 44.4% in 1995. Core services operating cash flow as a
percentage of core services revenue, excluding Broadcast Partners operating
results, was 43.4% in 1996 compared to 44.4% in 1995.
Finally, during 1997, the Company's developmental activities were relatively
flat at $5.2 million compared to $5.3 million in 1996. The efficiencies gained
in 1996 carried over into 1997 and contributed to operating cash flow as a
percentage of revenue growing from 41% in 1996 to 43.3% in 1997. Core services
operating cash flow as a percentage of core services revenue improved to 48.5%
in 1997 compared to 47.4% in 1996. Core services operating cash flow as a
percentage of core services revenue, excluding Broadcast Partners operating
results, was 45.0% in 1997 compared to 43.4% in 1996.
1997 COMPARED TO 1996
The growth in subscribers, revenues and operating cash flow during 1997
highlighted another very good year for the Company. The operating results for
1997 include twelve months of the Broadcast Partners operations compared to
approximately eight months in 1996. Operating income improvement combined with
lower interest expense as a percentage of revenue resulted in positive earnings
for the year.
<TABLE>
<CAPTION>
Percent
In Thousands 1997 1996 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Subscribers 158.8 145.9 9%
Revenues $126,374 $98,384 28%
Operating cash flow 54,699 40,377 35%
Operating income 12,383 6,921 79%
Net income (loss) 2,236 (958) -
</TABLE>
Total revenue increased 28% in 1997 compared to 1996 and all operating revenue
categories made good contributions to this increase. Operating revenues
consisting of subscriptions, additional services, communications and advertising
increased to $66.29 per subscriber per month in 1997 compared to $60.92 in 1996.
A 9% growth in total subscribers, the mix of higher priced services,
inflationary price increases and acquisitions led to 35% growth in subscription
revenue. Subscription revenue related to the Broadcast Partners operations
accounted for 35% of the $27,990,639 total revenue growth in 1997 compared to
1996. At December 31, 1997, 90% of total subscribers were receiving service via
Ku-band satellite transmission compared to 88% in 1996. All acquired subscribers
were receiving service via Ku-band satellite transmission. Subscription revenue
on a per subscriber per month basis increased to $55.10, compared to $49.24 in
1996.
The price of Ku-band satellite delivered services ranged from $37 for monochrome
DTN AgDaily to $170 for the color DTNstant service during 1997. The price of
Ku-band satellite delivered services ranged from $35 for monochrome DTN AgDaily
to $160 for color DTNstant service during 1996. The price of the monochrome FM
delivered DTN AgDaily (the only FM service) was $29 in 1997 and $27 in 1996.
The subscribers converting to higher priced services includes those that
switched from the monochrome FM or Ku-band satellite DTN AgDaily priced at $52
in 1997 and $50 in 1996 ($46 prior to June 1, 1996). Subscribers continued to
convert from the color Ku-band satellite DTN AgDaily service to the color
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<PAGE>
Ku-band satellite DTN Pro Series which ranged in price from $63 ($59 prior to
June 1, 1996), for one Pro Series service, to $79 ($74 prior to June 1, 1996),
for all four Pro Series services (DTN Premier), in both 1997 and 1996. The DTN
Premier and Stock Pro, DTN Premier Plus, was priced at $82 a month in 1997 and
$82 a month in 1996 ($78 prior to June 1, 1996)
The Company increased the number of information services through "a la carte"
optional services (200 in 1997 versus 180 in 1996). The growth in services
combined with growth of total subscribers and the acquisition of Broadcast
Partners resulted in a 16% increase in additional services revenue. Additional
services revenue related to the Broadcast Partners operations accounted for 38%
of the $901,955 growth in 1997 compared to 1996. The revenue decreased on a per
subscriber per month basis to $3.65 in 1997 compared to $3.80 in 1996.
The growth in communications revenue was primarily in the DTNergy service. The
DTNergy service transmits refiner prices and communications to
wholesaler/subscribers. The number of refiner communications increased and
produced a revenue growth of 14% over 1996. The revenue decreased on a company
wide per subscriber per month basis to $5.47, down from $5.78 in 1996. This
decrease is due to spreading communications revenue over a larger base of
subscribers, with the largest increase coming from the acquisition of Broadcast
Partners in 1996.
Advertising revenue grew 19% to $3,809,748 in 1997 compared to $3,198,321 in
1996. This growth was due to an increase in the acceptance of the color system
as an electronic medium, the acquisition of Broadcast Partners and less
discounting due to the increased subscriber base associated with the
acquisition. Advertising revenue related to the Broadcast Partners operations
accounted for 81% of the $611,427 growth in 1997 compared to 1996. Advertising
revenue remained flat on a company wide per subscriber per month basis at $2.07
in 1997, compared to $2.10 in 1996.
Service initiation fees, the Company's up-front one-time charges to new
subscribers ranged from $150 to $495 in 1997 and 1996 depending on the service
and information distribution technology. Initiation fees for subscribers that
convert to another service or change delivery technology (such as FM to Ku)
ranged from $50 to $100 depending on the service in 1996 and 1997. The total
fees collected decreased 17% in 1997 to $4,625,487 compared to $5,560,049 in
1996. The increased sales volume in 1997 compared to 1996 was offset by the
recognition of deferred revenues during 1996 for initiation fees received in the
prior year. Service initiation fees are recognized in income since these fees
are less than the marketing and setup costs related to a new subscriber.
Total operating expenses increased 25% in 1997 over 1996. This increase was due
to a 26% increase in selling, general and administrative costs, a 9% increase in
sales commissions and a 26% increase in depreciation and amortization. These
expenses (excluding the sales commission costs) increased on a per subscriber
per month basis to $56.69 in 1997 compared to $54.07 in 1996.
Selling, general and administrative expenses on a per subscriber per month basis
increased to $33.65, up from $32.12 in 1996. These costs were up modestly due to
efficiency gains from spreading costs over a larger base of subscribers obtained
from increased sales from expanding the sales force and acquisitions. Selling,
general and administrative expenses as a percentage of revenue decreased from
50% in 1996 to 49% in 1997. Selling, general and administrative expenses growth,
excluding the selling, general and administrative expenses related to Broadcast
Partners, was 20% in 1997 compared to 1996.
Sales commissions are generated from new subscriptions sales and cash flows
related to the DTNergy service. Sales commissions increased 9% during 1997
compared to 1996. This increase is due to higher subscriptions sales, incentive
programs to the national sales force and sales management related to an
expanding sales force and higher cash flows in DTNergy. Sales commissions
growth, excluding sales commissions related to Broadcast Partners, was 10% in
1997 compared to 1996.
Depreciation and amortization expense increased primarily due to the purchase of
$21,137,267 of new equipment used by subscribers and the acquisition of
Broadcast Partners. On May 3, 1996, the Company acquired and capitalized
approximately $38.2 million of equipment and $34.8 million of intangible
assets (goodwill) related to the acquisition. The Company began using a six year
life for depreciating subscriber equipment in July of 1992 compared to an eight
year life prior to the change. The Company is depreciating the equipment
acquired in the acquisition of Broadcast Partners using the straight-line method
over five years and is amortizing the intangible assets (goodwill) using the
straight-line method over three to eight years beginning in May of 1996.
Operating income increased 79% to $12,383,403, up from $6,920,791 in 1996 as a
result of the growth in revenues and expenses discussed above. Operating cash
flow grew 35% to $54,698,708, up from $40,377,428 in 1996.
33
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<PAGE>
Interest expense increased 8% in 1997 compared to 1996. This increase is related
to the increase in total long-term debt outstanding to finance equipment used by
subscribers and acquisitions. The Company borrowed $48,490,000 in 1996 to
acquire Broadcast Partners. The Company decreased the revolving credit line
borrowing from $38,500,000 at December 31, 1996 to $4,500,000 at December 31,
1997. This decrease was primarily the result of the Company converting
$38,000,000 of revolving debt to term debt at the end of the first quarter of
1997.
The Company's federal and state effective tax rate was 34% and 32% for 1997 and
1996, respectively.
1996 COMPARED TO 1995
DTN'S management team remained focused on growing subscribers, revenues and
operating cash flow during 1996. The acquisition of Broadcast Partners and a
focus on improving subscriber efficiencies led to outstanding operating results
as compared to the prior year. Operating income improved but higher interest
expense linked to the expansion of the business and the acquisition of Broadcast
Partners resulted in a loss for the year.
<TABLE>
<CAPTION>
Percent
In Thousands 1996 1995 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Subscribers 145.9 95.9 52%
Revenues $98,384 $62,288 58%
Operating cash flow 40,377 23,154 74%
Operating income 6,921 4,343 59%
Net Loss (958) (283) (239%)
</TABLE>
Total revenue increased 58% in 1996 compared to 1995 and all operating revenue
categories made significant contributions to this increase. Operating revenues
consisting of subscriptions, additional services, communications and advertising
increased to $60.92 per subscriber per month in 1996 compared to $55.70 in 1995.
A 52% growth in total subscribers and subscribers upgrading to higher priced
services led to a 63% growth in subscription revenue. On May 3, 1996, the
Company acquired 39,000 subscribers from Broadcast Partners receiving
agricultural information and communications services. The subscriber growth for
DTN without the acquisition of Broadcast Partners was 11,000 subscribers, a
growth of 11.5%, and subscription revenue related to this subscriber growth was
up 34% in 1996 compared with 1995. At December 31, 1996, 88% of total
subscribers were receiving service via Ku-band satellite transmission compared
to 77% in 1995. All acquired subscribers were receiving service via Ku-band
satellite transmission. Subscription revenue on a per subscriber per month basis
increased to $49.24, in 1996 compared to $43.60 in 1995.
The price of Ku-band satellite delivered services ranged from $35 for monochrome
DTN AgDaily to $160 for the color DTNstant service during 1996. The price of
Ku-band satellite delivered services ranged from $33 for monochrome DTN AgDaily
to $160 for the color DTNstant service during 1995. The price of the monochrome
FM delivered DTN AgDaily (the only FM service) was $27 in 1996 and $26 in 1995.
The subscribers converting to higher priced services includes those that
switched from the monochrome FM or Ku-band satellite DTN AgDaily service to the
color Ku-band satellite DTN AgDaily, priced at $50 in 1996 ($46 prior to June 1,
1996) and $46 in 1995. Subscribers continued to convert from the color Ku-band
satellite DTN AgDaily service to the color Ku-band satellite DTN Pro Series
which ranged in price from $63 ($59 prior to June 1,1996), for one Pro Series
service, to $79 ($74 prior to June 1,1996), for all four Pro Series services
(DTN Premier), in both 1996 and 1995. The DTN Premier and Stock Pro, DTN Premier
Plus, was priced at $82 a month in 1996 ($78 prior to June 1, 1996) and $78 a
month in 1995.
The Company increased the number of information services through "a la carte"
optional services (180 in 1996 versus 100 in 1995). The growth in services
combined with the growth of total subscribers and the acquisition of Broadcast
Partners resulted in a 48% increase in additional services revenue. The
additional services revenue growth, excluding the acquisition of Broadcast
Partners, was 30% in 1996. The revenue increased on a per subscriber per month
basis to $3.80 in 1996 compared to $3.70 in 1995.
The growth in communications revenue was primarily in the DTNergy service. The
DTNergy service transmits refiner prices and communications to
wholesaler/subscribers. The number of refiner communications continued to rise
and produced a revenue growth of 28% over 1995 levels. The revenue decreased on
a company wide per subscriber per month basis to $5.78, down from $6.49 in 1995.
This decrease is due to spreading communications revenue over a larger base of
subscribers, with the largest increase coming from the acquisition of Broadcast
Partners.
34
- 294 -
<PAGE>
Advertising revenue grew 58% to $3,198,321 in 1996 compared to $2,022,440 in
1995. This growth was due to an increase in the acceptance of the color system
as an electronic medium, the acquisition of Broadcast Partners and less
discounting due to the increased subscriber base associated with the
acquisition. Advertising revenue growth, excluding the acquisition of Broadcast
Partners, was 30% in 1996. Advertising revenue increased on a company wide per
subscriber per month basis to $2.10 in 1996, up from $1.89 in 1995.
Service initiation fees, the Company's up-front one-time charges to new
subscribers ranged from $150 to $495 in 1996 and from $150 to $295 in 1995
depending on the service and information distribution technology. Initiation
fees for subscribers that convert to another service or change delivery
technology (such as FM to Ku) ranged from $50 to $100 depending on the service
in 1995 and 1996. The total fees collected increased 66% in 1996 to $5,560,049
compared to $3,357,311 in 1995. The increase was due to increased sales activity
related to the expansion of the national sales force, reduced discounting in the
agricultural related services and an increase in conversions from DTN Wall
Street to DTN SPECTRUM. Service initiation fee revenue, excluding the
acquisition of Broadcast Partners, was 53% in 1996.
Total operating expenses increased 58% in 1996 over 1995. This increase was due
to a 45% increase in selling, general and administrative costs, a 71% increase
in sales commissions and a 78% increase in depreciation and amortization. These
expenses (excluding the sales commission costs) increased on a per subscriber
per month basis to $54.07 in 1996 compared to $49.75 in 1995.
Selling, general and administrative expenses on a per subscriber per month basis
increased to $32.12, up slightly from 31.97 in 1995. These costs were flat due
to efficiency gains from spreading costs over a larger base of subscribers
obtained from an expanded sales force and from acquisitions. Selling, general,
and administrative expenses as a percentage of revenue decreased from 54% in
1995 to 50% in 1996. Selling, general and administrative expenses as a
percentage of revenue, excluding the acquisition of Broadcast Partners,
decreased to 53%.
Sales commissions are generated from new subscription sales and revenues related
to the DTNergy service. Sales commissions increased 71% during 1996 compared to
1995. This increase is due to higher subscription sales, incentive programs to
the national sales force and sales management related to the rapid expansion and
22% higher revenues in DTNergy. Sales commissions growth, excluding the
acquisition of Broadcast Partners, was 60% in 1996.
Depreciation and amortization expense primarily increased due to the purchase of
$37,424,684 of new equipment used by subscribers and the acquisition of
Broadcast Partners. The Company acquired and capitalized approximately $38.2
million of equipment and $34.8 million of intangible assets related to the
acquisition. The Company began using a six year life for depreciating subscriber
equipment in July of 1992 compared to an eight year life prior to the change.
The Company is depreciating the equipment acquired in the acquisition of
Broadcast Partners over a five year life and is amortizing the intangible assets
from this acquisition over a three to eight year life beginning in May of 1996.
Operating income increased 59% to $6,920,791, up from $4,343,252 in 1995 as a
result of the growth in revenues and expenses discussed above. Operating cash
flow grew 74% to $40,377,428, up from $23,154,402 in 1995.
Interest expense increased 76% in 1996 compared to 1995. The increase is related
to borrowings to finance new subscriber equipment and the acquisition of
Broadcast Partners. The Company increased the revolving credit line borrowings
from $21,250,000 at December 31, 1995 to $38,500,000 at December 31, 1996. The
Company borrowed $48,490,000 to acquire Broadcast Partners.
The Company's federal and state effective tax rate was 32% and 29% for 1996 and
1995, respectively.
35
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<PAGE>
NOTES
- --------------------------------------------------------------------------------
36
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<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To Our Stockholders:
The management of Data Transmission Network Corporation is responsible for the
preparation, integrity and objectivity of the accompanying financial statements
and related notes. To meet these responsibilities, we maintain a system of
internal controls to provide reasonable assurance that assets are safeguarded
and transactions are properly authorized and recorded.
The financial statements have been prepared in conformity with generally
accepted accounting principles and include amounts based upon our estimates and
judgments, as required. The financial statements have been audited by Deloitte &
Touche LLP who have expressed their opinion, presented below, with respect to
the fairness of the statements. Their audit included a review of the system of
internal control and tests of transactions to the extent they considered
necessary to render their opinion. The Audit Committee of the Board of Directors
is composed solely of outside directors.
The Audit Committee meets periodically with our independent auditors and
management to review accounting, auditing, internal control and financial
reporting matters.
Roger R. Brodersen Brian L. Larson
Chairman of the Board Vice President
Chief Executive Officer Chief Financial Officer
Secretary and Treasurer
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
Board of Directors and Stockholders
Data Transmission Network Corporation
We have audited the accompanying balance sheets of Data Transmission Network
Corporation as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Data Transmission Network Corporation as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP, Omaha, Nebraska
February 6, 1998
37
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<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
- ---------------------------------------------------------------------------------------------
Data Transmission Network Corporation
As of December 31, 1997 and 1996
1997 1996
- ---------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 837,170 $ 708,053
Accounts receivable, net of allowance for
doubtful accounts of $810,000 and $520,000 7,629,296 9,653,766
Prepaid expenses 825,577 583,985
Deferred commission expense 3,302,972 2,807,330
----------------------------
Total Current Assets 12,595,015 13,753,134
Property and Equipment
Equipment Used By Subscribers 224,620,148 203,310,661
Equipment and Leasehold Improvements 23,155,237 19,702,330
----------------------------
247,775,385 223,012,991
Less: Accumulated Depreciation 135,265,090 98,564,288
----------------------------
Net Property and Equipment 112,510,295 124,448,703
Intangible Assets From Acquisitions, net of accumulated
amortization of $9,728,684 and $3,871,956 34,764,802 36,517,799
Other Asset 2,560,786 3,010,126
----------------------------
$162,430,898 $177,729,762
- ---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 6,985,053 $ 7,485,517
Accrued expenses 5,319,506 5,923,628
Current portion of long-term debt 21,810,833 15,092,083
----------------------------
Total Current Liabilities 34,115,392 28,501,228
Long-Term Debt 58,248,540 83,184,373
Subordinated Long-Term Notes, net of unamortized
discount of $357,170 and $436,550 14,642,830 14,563,450
Equipment Deposits 484,017 515,142
Unearned Revenue 22,743,946 22,675,280
Stockholders Equity:
Common stock, par value $.001, authorized
20,000,000 shares, issued 11,148,052
and 11,074,224 11,148 11,074
Paid-in capital 31,326,683 14,302,689
Retained earnings (deficit) 858,342 (1,404,602)
Treasury stock, at cost, 0 and 45,919 shares - (342,173)
----------------------------
Total Stockholders Equity 32,196,173 28,290,289
----------------------------
$162,430,898 $177,729,762
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
38
- 298 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------------------
Data Transmission Network Corporation
Years ended December 31, 1997, 1996 and 1995
1997 1996 1995
- -------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Subscriptions $101,194,290 $ 75,019,826 $ 46,126,332
Additional services 6,694,754 5,792,799 3,917,631
Communication services 10,050,073 8,812,718 6,864,275
Advertising 3,809,748 3,198,321 2,022,440
Service initiation fees 4,625,487 5,560,049 3,357,311
---------------------------------------------
126,374,352 98,383,713 62,287,989
EXPENSES
Selling, general and administrative 61,790,861 48,944,027 33,827,282
Sales commissions 9,884,783 9,062,258 5,306,305
Depreciation and amortization 42,315,305 33,456,637 18,811,150
---------------------------------------------
113,990,949 91,462,922 57,944,737
---------------------------------------------
OPERATING INCOME 12,383,402 6,920,791 4,343,252
Interest expense 9,098,231 8,432,270 4,798,112
Other income, net 121,909 107,173 57,784
---------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 3,407,081 (1,404,306) (397,076)
Income tax expense (benefit) 1,171,000 (446,000) (114,000)
---------------------------------------------
NET INCOME (LOSS) $ 2,236,081 $ (958,306) $ (283,076)
- -------------------------------------------------------------------------------------------
BASIC INCOME (LOSS) PER SHARE $ 0.20 $ (0.09) $ (0.03)
- -------------------------------------------------------------------------------------------
DILUTED INCOME (LOSS) PER SHARE $ 0.19 $ (0.09) $ (0.03)
- -------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
39
- 299 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Data Transmission Network Corporation
Years ended December 31, 1995, 1996 and 1997
RETAINED TOTAL
COMMON PAID -IN EARNINGS TREASURY STOCKHOLDERS
STOCK CAPITAL (DEFICIT) STOCK EQUITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $ 3,375 $ 14,302,689 $ (217,501) $(1,381,585) $12,706,978
Treasury stock issued on exercise of
employee stock options - - 2,890 330,173 333,063
Tax benefit related to exercise of
employee stock options - 120,000 - - 120,000
Net loss - - (283,076) - (283,076)
--------------------------------------------------------------------------
Balance, December 31, 1995 $ 3,375 $ 14,422,689 $ (497,687) $(1,051,412) $12,876,965
Treasury stock issued on exercise of
employee stock options - - 51,391 709,239 760,630
Tax benefit related to exercise of
employee stock options - 634,000 - - 634,000
Issuance of common stock 316 14,976,684 - - 14,977,000
Three-for-one stock split 7,383 (7,383) - - -
Net loss - - (958,306) - (958,306)
--------------------------------------------------------------------------
Balance, December 31, 1996 $ 11,074 $ 30,025,990 $(1,404,602) $ (342,173) $28,290,289
Treasury stock issued on exercise of
employee stock options - - 26,863 342,173 369,036
Tax benefit related to exercise of
employee stock options - 675,000 - - 675,000
Issuance of common stock 74 625,693 - - 625,767
Net income - - 2,236,081 - 2,236,081
--------------------------------------------------------------------------
Balance, December 31, 1997 $ 11,148 $ 31,326,683 $ 858,342 $ - $32,196,173
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
40
- 300 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------------
Data Transmission Network Corporation
Years ended December 31, 1997, 1996 and 1995
1997 1995 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 2,236,081 $ (958,306) $ (283,076)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 42,315,305 33,456,637 18,811,150
Amortization of debt issue costs and discount 147,880 139,694 128,760
Deferred income taxes 1,056,000 (480,000) (239,000)
Change in assets and liabilities:
Accounts receivable (1,278,437) (63,634) (3,178,803)
Prepaid expenses (180,068) (21,839) (284,803)
Deferred commission expense (400,469) (310,792) (1,446,337)
Deferred debt issuance costs - (112,078) -
Other assets - - (1,029,433)
Accounts payable 518,361 (1,947,116) 604,791
Accrued expenses (1,113,749) (149,687) 739,453
Equipment deposits (51,175) (26,578) (382)
Unearned revenue 4,293,666 4,251,166 2,800,990
---------------------------------------------
Net Cash Provided By Operating Activities 47,543,395 33,777,467 16,623,310
Cash Flows From Investing Activities
Capital expenditures:
Equipment used by subscribers (21,137,267) (37,424,684) (23,746,086)
Equipment and leasehold improvements (3,367,535) (3,120,125) (3,914,442)
Acquisition of Subscribers (5,687,196) (65,745,794) (1,767,420
---------------------------------------------
Net Cash Used By Investing Activities (30,191,998) (106,290,603) (29,427,948)
Cash Flows From Financing Activities
Proceeds from term debt agreement - 48,490,000 -
Principal payments on long-term debt (22,217,083) (9,036,459) (8,718,750)
Proceeds from revolving credit agreement 4,000,000 17,250,000 21,250,000
Proceeds from the exercise of stock options 994,803 760,630 333,063
Proceeds from the issuance of common stock - 14,977,000 -
---------------------------------------------
Net Cash Provided (Used) By Financing Activities (17,222,280) 72,441,171 12,864,313
---------------------------------------------
Net Increase (Decrease) in Cash 129,117 (71,965) 59,675
Cash at Beginning of Period 708,053 780,018 720,343
---------------------------------------------
Cash at End of Period $ 837,170 $ 708,053 $ 780,018
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
41
- 301 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Data Transmission Network Corporation
Years ended December 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Revenue Recognition
The Company provides its subscribers with equipment to receive information and
communications service. DTN charges a recurring subscription fee and in most
instances a one-time service initiation fee. The subscriptions are contracted
for an initial period of one year and are generally billed quarterly in advance.
Payments received in advance for subscriptions, additional services and
advertising are deferred and recognized as the services are provided to the
subscribers. Service initiation fees are recognized in income since these fees
are less than the marketing and setup costs related to a new subscriber.
Communication services are generally billed monthly in arrears based on the
number and length of the messages delivered to subscribers.
Deferred Commission Expense
Commissions and bonuses which are paid at the time of the initial subscription
to sales representatives, to company representatives, or to subscribers for
successful customer referrals, are deferred and expensed over the initial
twelve-month subscription period.
Equipment Used By Subscribers
Equipment used by subscribers to receive the Company's electronically
transmitted information and communication services is stated at cost less
accumulated depreciation. Depreciation is calculated using the straight-line
method over a useful life of three to eight years for assets placed in service
prior to July 1, 1992, and three to six years for assets placed in service
subsequent to July 1, 1992.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which range from two to seven years, or
the related lease, which range from five to ten years.
Intangible Assets
Intangible assets for acquisitions are stated at cost less accumulated
amortization. These costs are amortized using the straight-line method over
three to eight years. The carrying value of intangible assets is periodically
assessed by the Company by reviewing the recoverability of the assets over the
amortization period based on the projected undiscounted future cash flows of the
related business unit. Cash flow projections are based on trends of historical
performance and management's estimate of future performance, giving
consideration to existing and anticipated competition and economic conditions.
Income Taxes
Income taxes are computed in accordance with the provisions of Statement of
Financial Accounting Standard 109, "Accounting for Income Taxes" (SFAS 109). The
objective of the statement is to recognize the amount of taxes payable or
refundable in the current year and to recognize deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in
the financial statements or tax returns.
Earnings (Loss) Per Share
The Financial Accounting Standards Board (FASB) issued statement No. 128,
"Earnings Per Share", which is effective for 1997 financial statements. FASB No.
128 requires dual presentation of Basic and Diluted earnings per share for all
periods for which an income statement is presented. Basic earnings per share
data are based on the weighted average outstanding common shares during the
period. Diluted earnings per share data are based on the weighted average
outstanding common shares and the effect of all dilutive potential common
shares, including stock options and warrants. All prior periods earnings per
share data have been restated in accordance with FASB No. 128.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents. During the periods ended December 31, 1997, 1996 and 1995, the
Company made interest payments of $8,983,000, $8,555,000 and $4,386,000,
respectively. Capital expenditures for subscriber equipment included in accounts
payable at year end totalled $1,105,000 $1,394,000 and $2,191,000 at December
31, 1997, 1996 and 1995, respectively. The Company paid $1,146,000 of federal
income taxes in 1995 relating to recoverable Alternative Minimum Taxes (AMT) for
prior periods which is included in other assets. The Company paid no federal
income taxes during 1997 or 1996. At December 31, 1996, $931,700 of the purchase
price for acquired subscribers was due in future periods and was included in
accounts payable.
Research and Development
Research and development costs are charged to earnings as incurred and
approximated $3,059,000, $2,263,000 and $1,596,000 for the periods ended
December 31, 1997, 1996, and 1995.
42
- 302 -
<PAGE>
Stock-Based Compensation
The Company accounts for its stock-based compensation under the provisions of
Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees
(APB 25).
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Fair Value of Financial
Instruments Because of their maturities and/or interest rates, the Company's
financial instruments have a fair value approximating their carrying value.
These instruments include accounts receivable, revolving credit and term
borrowings, subordinated debt, commercial paper, and trade payables.
Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income". This statement establishes for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
This statement is effective for 1998 financial statements.
Also in June 1997, the FASB issued statement No. 131, "Disclosure about segments
of an Enterprise and Related Information", which will be effective in 1998. FASB
No. 131 establishes standards for the way public enterprises report information
about operating segments. The Company has not yet completed its analysis of this
statement to determine if additional disclosure will be required beginning in
1998.
2. ACQUISITIONS
- --------------------------------------------------------------------------------
Knight-Ridder
On July 26, 1995, the Company entered into an agreement with Knight Ridder
Financial (KRF) to acquire 2,900 Knight Ridder Commodity News Service
subscribers. The Company agreed to pay KRF approximately $4,970,000 for these
subscribers over two years. The Company agreed to pay $1,500,000 at closing and
$1,500,000 on the first anniversary of the closing. The remaining $1,970,000 was
based on company estimates of future revenue sharing. This payment was scheduled
to be paid quarterly during the first two years of the agreement and was
completed during 1997. The Company capitalized $4,970,000 as an intangible asset
(goodwill) and is amortizing this cost using the straight-line method over eight
years.
Broadcast Partners
On May 3, 1996, the Company acquired substantially all the assets of Broadcast
Partners, an electronic information and communication services company providing
similar services as DTN AgDaily in the agricultural industry. The Company paid
$63.5 million cash and assumed certain "non-interest" bearing liabilities of
approximately $9.8 million. The Company received 39,000 agricultural subscribers
in this acquisition.
The $63.5 million cash paid for the Broadcast Partners acquisition was financed
with a combination of $15 million of privately placed common stock equity and
$48.5 million of six year term debt (see note 3). The Company acquired and
capitalized approximately $38.2 million of equipment. The Company is
depreciating this equipment using the straight-line method over five years. The
Company capitalized approximately $34.8 million as an intangible asset
(goodwill) and is amortizing this cost using the straight-line method over three
to eight years.
The following unaudited pro forma information sets forth the results of
operations as though the acquisition of Broadcast Partners had occurred at
January 1, 1995:
<TABLE>
<CAPTION>
Proforma December 31, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 106,646,073 $ 84,018,887
Net Loss $ (1,303,509) $ (2,992,648)
Loss Per Share $ ( 0.12) $ ( 0.27)
</TABLE>
This unaudited pro forma information is based on historical results of
operations as if the acquisition took place on January 1, 1995 adjusted for
acquisition costs, realized efficiencies and in the opinion of Management, is
not necessarily indicative of what the results would have been had the Company
operated with the acquisition since the beginning of 1995.
Market Quoters, Northern Data and Market Communications Group LLC
During the first quarter of 1997, the Company acquired 2,900 real-time commodity
subscribers through two separate acquisitions. Approximately 500 of the
43
- 303 -
<PAGE>
subscribers were acquired from Market Quoters and Northern Data Services for
$750,000 cash. The remaining 2,400 subscribers were acquired from Market
Communications Group, LLC (MCG), a joint venture between Reuters America, Inc.,
and Farmland Industries, Inc. The Company paid $3.6 million cash for the 2,400
subscribers, certain assets and assumed certain liabilities. In total, the
Company capitalized approximately $4.5 million as an intangible asset (goodwill)
and is amortizing this cost using the straight line method over three to eight
years. The MCG acquisition included the preferred rights to distribute relevant
Reuters real-time news and information to the commodities, energy and metals
markets.
The Network, Inc.
On July 1, 1997, the Company acquired the assets of The Network, Inc., an
electronic cotton trading network service. The Company agreed to pay $1,000,000
cash over five years. The Company paid $200,000 cash in 1997 and will pay
$200,000 cash on each of the next four anniversary dates. The Company has the
option to terminate the agreement at any time and cease all payments and return
the assets to the owner. The Company is capitalizing the $200,000 payments when
made as an intangible asset (goodwill) and amortizing this cost using the
straight-line method over 12 months. In effect, if all payments are made, the
Company is amortizing the $1,000,000 purchase price over five years.
Arkansas Farm Bureau ACRES Service
On October 24, 1997 the Company agreed to acquire the approximately 700
subscribers on the ACRES platform from the Arkansas Farm Bureau (AFB). The
Company agreed to pay $600 for each subscriber that converts to a DTN service.
The Company believes the majority will convert to a DTN service. In addition,
the Company will pay the AFB a $6 monthly residual for the lesser of the life of
the subscriber or ten years for those subscribers converting to a DTN service.
The Company will capitalize the $600 acquisition payment per subscriber as an
intangible asset (goodwill) and amortize this cost using the straight-line
method over eight years. No payments were made in 1997.
3. LONG TERM DEBT AND LOAN AGREEMENTS
- --------------------------------------------------------------------------------
The Company has a revolving credit agreement, as amended, with a group of banks
(the "Revolving Credit Agreement"). The Revolving Credit Agreement, which
expires June 30, 1999 unless extended, provides for a total commitment of up to
$33,000,000 in new borrowings. As of December 31, 1997, $4,500,000 of the total
commitment had been borrowed, with the remaining $28,500,000 available to the
Company subject to certain restrictions as discussed below.
<TABLE>
<CAPTION>
December 31, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Revolving Credit Agreement
Revolving credit line $ 4,500,000 $ 38,500,000
Term notes 35,151,040 10,786,456
Term Credit Agreement
Term notes 40,408,333 48,490,000
Stock Repurchase Agreement
Term notes - 500,000
- --------------------------------------------------------------------------------
Total Loan Agreements 80,059,373 98,276,456
- --------------------------------------------------------------------------------
Less current portion 21,810,833 15,092,083
- --------------------------------------------------------------------------------
Total Long-Term Debt $ 58,248,540 $ 83,184,373
</TABLE>
Additional borrowings under the Revolving Credit Agreement are available to the
Company, as long as at the time of the advance, no default exists with any of
the Company loan agreements or the subordinated notes agreement (see Note 4),
and total debt outstanding (including term notes outstanding but excluding
long-term subordinated debt) does not exceed thirty-six times monthly operating
cash flow (as defined). As of December 31, 1997 based on current operating cash
flow, the Company would be able to borrow all of the remaining $28,500,000
commitment available.
In addition to the restrictions mentioned above with respect to advances, total
debt outstanding (excluding long-term subordinated debt) is limited to
forty-eight times monthly operating cash flow. Additionally, total debt
outstanding (including subordinated debt) is limited to sixty times monthly
operating cash flow. The Company is required to maintain total stockholders'
44
- 304 -
<PAGE>
equity of at least $23,500,000 plus fifty percent (50%) of net income (but not
losses) at fiscal year end through June 30, 1999. The minimum stockholders'
equity required to be maintained is $24,618,040 as of December 31, 1997. The
Company is required to maintain a ratio of quarterly operating cash flow to
interest expense (as defined) of at least 2.25 to 1. The Company is permitted to
pay cash dividends in any one year, which are, in the aggregate, less than 25%
of the Company's net operating profit after taxes in the previous four quarters.
Interest on the outstanding borrowings (prior to when the borrowings might be
converted to term loans, as discussed below) is at a variable rate, depending on
the ratio of the Company's total borrowings (excluding long-term subordinated
debt) to operating cash flow (the "Leverage Ratio"). The following table
outlines the "Leverage Ratio", the applicable Margin, Unused Commitment Fees and
Fixed Note Margin to be discussed below.
<TABLE>
<CAPTION>
UNUSED FIXED
COMMITMENT NOTE
LEVERAGE RATIO MARGIN FEE MARGIN
- --------------------------------------------------------------------
<S> <C> <C> <C>
More than 42 .250% .375 2.25%
More than 36 and less than 42 .500% .250% 2.25%
More than 30 and less than 36 .750% .250% 2.00%
More than 24 and less than 30 1.000% .250% 2.00%
More than 18 and less than 24 1.250% .125% 1.75%
Less than 18 1.375% .125% 1.75%
</TABLE>
The Revolving Credit Rate is the First National Bank of Omaha's "National Base
Rate", minus the applicable Margin. The base rate is adjusted monthly, with the
interest rate margin (as defined above) changed quarterly. As of December 31,
1997, the Revolving Credit Rate is 7.25%.
The Company has the option to convert the outstanding revolving credit
borrowings to term loans at any time, payable in forty-eight fixed principal
installments, plus interest. Interest on the converted term loans is at the
Company's option, a variable interest rate of 1/4% over the Revolving Credit
Rate or at a fixed rate of 1/2% over the Revolving Credit Rate or the applicable
Fixed Note Margin (based on the "Leverage Ratio") over the average of the 3 and
5 year U. S. treasury securities, as quoted in the prior month "Federal Reserve
Statistical Release", whichever is greater. As of December 31, 1997, $4,500,000
of the total borrowings outstanding had not been converted to term loans. As of
December 31, 1997, $35,151,040 of term loans were outstanding with monthly
installments due up through 2001 having interest rates ranging from 7.865% to
9.25%.
The Company pays a commitment fee of 1/8 - 3/8% on the unused portion of the
total revolving credit commitment based on the "Leverage Ratio". As of December
31, 1997 the commitment fee was 1/8% on all unused revolving credit commitment.
Additionally, if total borrowings (excluding long-term subordinated debt) exceed
36 times the Operating Cash Flow (as defined), the Company will be required to
pay a closing fee of 1/2% on all new borrowings made after that point in time.
In the event the total borrowings exceed 36 times Operating Cash Flow, any term
note accruing interest at less than 7.5% is included in a "Trigger Event". The
Company is obligated to pay the holders of such term notes a fee of 0.375% of
the outstanding balance of the notes upon the occurrence of the Trigger Event
and like amounts on the six month anniversary and the twelve month anniversary
of the Trigger Event.
The Company has a Term Credit Agreement dated February 26, 1997, with a group of
banks providing for an aggregate principal amount of $48,490,000 to be repaid in
72 fixed principal installments beginning January 31, 1997. As of December
31,1997, the principal balance was $40,408,333 with $21,157,500 accruing at a
variable interest rate of NY prime rate less one-half of one percent, or 8.00%
and the remaining $19,250,833 accruing at fixed interest rates ranging from
8.25% to 8.36%.
During 1992, the Company entered into a loan agreement and borrowed $2,000,000
solely for the repurchase of the Company's outstanding common stock (the "Stock
Repurchase" Agreement). As of December 31, 1997, the amounts borrowed under the
Stock Repurchase Agreement, have been fully repaid.
<TABLE>
<CAPTION>
MINIMUM PRINCIPLE MATURITIES OF LONG-TERM DEBT*
- --------------------------------------------------------------------------------
Year ending December 31,
<S> <C>
1998 $ 21,810,833
1999 17,628,540
2000 17,581,667
2001 10,456,667
2002 and after 8,081,666
- --------------------------------------------------------------------------------
Total $ 75,559,373
<FN>
* Excluding revolving credit line.
</FN>
</TABLE>
The revolving credit lines are classified as long-term debt since the Company
has the ability and the intent to maintain these obligations for longer than one
year. Substantially all of the Company's assets are pledged as collateral under
the Company's long-term debt and loan agreements.
4. SUBORDINATED LONG-TERM NOTES
- --------------------------------------------------------------------------------
On June 30, 1994, the Company sold to one investor $15,000,000 of its 11.25%
subordinated long-term notes in a private placement transaction (the
"subordinated debt"). The subordinated debt is subordinated in right of payment
to all current and future senior debt. Interest on the subordinated debt is
scheduled to be paid quarterly, with principle due in five equal annual
installments beginning on June 30, 2000.
The Company has the option to prepay the subordinated debt on any date after
June 30, 1997 at a premium beginning at
45
- 305 -
<PAGE>
7.5% of the principal prepaid, and decreasing by 1.5% per year until June 30,
2002 when no premium is required. There are also provisions for mandatory
prepayment upon a change in ownership control (as defined), at a premium
beginning at 12.0% of the principal prepaid during the period ended June 30,
1995 and decreasing by 1.5% per year until June 30, 2002 when no premium is
required.
The subordinated debt agreement contains a cross-acceleration clause, whereby
the subordinated debt will become immediately due and payable upon a payment
default on the revolving and term credit agreements. Other subordinated debt
financial covenants and restrictions are generally less restrictive than those
of the other loan agreements.
The Company also issued a warrant to the investor to purchase 75,000 shares of
the Company's $.001 par value common stock at $7.39 per share (as adjusted after
the three-for-one stock split) on or before June 30, 2004. In connection with
the issuance of the warrant to purchase common stock, the Company recorded a
$635,000 credit to additional paid-in capital and a related debt discount, which
represented an estimate of the fair value of the warrant issued.
5. INCOME TAXES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Components of the income tax (benefit) provision are as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 115,000 $ 34,000 $ 125,000
Deferred 1,056,000 (480,000) (239,000)
- --------------------------------------------------------------------------------
$ 1,171,000 $ (446,000) $ (114,000)
</TABLE>
The income tax (benefit) provision differs from the (benefit) provision at
federal statutory rates for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 1,158,000 $ (477,000) $ (139,000)
State taxes 68,000 (28,000) 1,000
Other (55,000) 59,000 24,000
- --------------------------------------------------------------------------------
$ 1,171,000 $ (446,000) $ (114,000)
</TABLE>
The components of deferred tax liability (asset) are as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 6,573,000 $ 6,411,000
Net operating loss carryforwards (8,101,000) (8,301,000)
Other 182,000 282,000
- --------------------------------------------------------------------------------
Net Deferred Asset $ (1,346,000) $ (1,608,000)
</TABLE>
The Company had approximately $22,500,000 of unused net operating loss (NOL)
carryforwards at December 31, 1997. The NOL carryforwards will expire in the
years 2002 to 2012. In addition, the Company is reflecting in the Other Assets
approximately $911,000 relating to pending IRS refund claims.
6. CAPITAL STOCK
- --------------------------------------------------------------------------------
The Company's articles of incorporation provide for the authorization of
1,000,000 shares of $.50 par value per share preferred stock. The preferred
stock, none of which has been issued, presently has no voting rights or other
features, although the articles of incorporation contain provisions to adopt
various features or privileges at the discretion of the Board of Directors
In September 1992, the Company's Board of Directors authorized the repurchase of
up to 350,000 shares of the Company's outstanding common stock. The purchases
are to be made from time to time in the open market or in arranged transactions
at such price or prices as company officers may deem advisable. The Company has
purchased 150,000 shares of outstanding common stock since September 1992. The
common stock repurchased may be used to provide shares for the Company's
existing stock options and warrants outstanding.
As part of the May 3, 1996 acquisition of Broadcast Partners, the Company sold
948,000 (split adjusted) shares through a private placement transaction.
During the second quarter of 1996, the Company effectuated a three-for-one
common stock split, payable June 28, 1996 to stockholders of record June 14,
1996. The stated par value of each share was not changed from $.001. A total of
$7,383 was reclassified from the Company's additional paid in capital account to
the Company's common stock account.
7. BENEFIT PLAN
- --------------------------------------------------------------------------------
The Company has a defined contribution plan under provisions of Internal Revenue
Code Section 401(k). All employees with at least one year of service may
participate in the plan. The Company matches the employee's contribution up to
4% of the employee's compensation, and may make additional discretionary
contributions. During 1997, 1996 and 1995, the Company contributed $848,000,
$671,000 and $482,000, respectively, to the plan as matching contributions.
46
- 306 -
<PAGE>
8. STOCK-BASED COMPENSATION
- --------------------------------------------------------------------------------
The Company has employee and director stock option plans with aggregate limits
of 2,800,000 shares for the employee plan and 210,000 shares for the
non-employee director plan. The exercise price of the stock options is equal to
the market value of the Company's common stock on the date of grant. The options
are exercisable for a period of up to ten years from the date of grant and
generally vest equally over a period of three years.
At December 31, 1997, shares of the Company's authorized but unissued common
stock were reserved for issuance as follows:
<TABLE>
<CAPTION>
SHARES
- -----------------------------------------------
<S> <C>
Employee stock option plan 880,663
Non-employee director plan 100,503
- -----------------------------------------------
Total 981,166
</TABLE>
The Company accounts for its stock-based compensation plans under the provisions
of APB 25. Accordingly, no compensation cost has been recognized for its fixed
stock option plans.
The effect on 1997, 1996 and 1995 net income (loss) and income (loss) per share
of accounting for stock-based compensation based on the fair value method at the
grant dates consistent with the method of FASB Statement 123, Accounting for
Stock-Based Compensation, are shown in the pro forma information below:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income (Loss)
As Reported $ 2,236,081 $ (958,306) $ (283,076)
Proforma $ 920,827 $(2,452,206) $ (675,125)
Diluted Income (Loss) per share
As Reported $ 0.19 $ (0.09) $ (0.03)
Proforma $ 0.08 $ (0.23) $ (0.07)
- --------------------------------------------------------------------------------
Fair Value $ 11.56 $ 8.22 $ 3.21
</TABLE>
The fair value for options granted under the above mentioned plans was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.5 % 5.4 % 7.8 %
Dividend yield 0.0 % 0.0 % 0.0 %
Expected volatility 51.0 % 56.0 % 54.0 %
Expected life (years) 5.60 4.75 4.25
</TABLE>
The following table summarizes the stock options as of December 31, 1997, 1996,
1995:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,520,810 $ 9.04 1,276,959 $ 5.79 988,185 $ 5.57
- -----------------------------------------------------------------------------------------------------------------------
Granted 207,350 $ 21.60 538,800 $ 15.64 401,250 $ 6.23
Exercised (119,644) $ 8.33 (134,878) $ 5.64 (70,224) $ 4.74
Cancelled (62,084) $ 14.23 (160,071) $ 7.93 (42,252) $ 6.32
- -----------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 1,546,432 $ 10.55 1,520,810 $ 9.04 1,276,959 $ 5.79
- -----------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 968,834 $ 7.25 741,409 $ 5.67 629,811 $ 5.08
</TABLE>
The following table summarizes the stock options outstanding as of December 31,
1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------------------------------------
Shares Weighted-Average Weighted-Average Shares Weighted-Average
Range of Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 0.00 - $ 4.67 432,629 4.0 years $ 4.30 428,129 $ 4.34
$ 4.75 - $ 8.83 451,983 6.1 years $ 6.60 375,335 $ 6.82
$ 9.67 - $ 14.42 2,050 7.7 years $ 11.67 1,950 $ 11.53
$ 15.50 - $ 31.50 659,770 8.3 years $ 17.36 163,420 $ 15.81
- ------------------------------------------------------------------------------------------------------------------
$ 0.00 - $ 31.50 1,546,432 6.5 years $ 10.55 968,834 $ 7.25
</TABLE>
47
- 307 -
<PAGE>
9. EARNINGS PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The following table provides a reconciliation between basic and diluted earnings per share.
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Per-Share Per-Share Per-Share
Income Shares Amount Income Shares Amount Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income (Loss) $ 2,236,081 11,100,684 $ 0.20 $ (958,306) 10,657,893 $ (0.09) $ (283,076) 9,908,592 $(0.03)
Effect of Dilutive Securities
Stock Options and Warrants - 981,872 - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted EPS $ 2,236,081 12,082,556 $ 0.19 $ (958,306) 10,657,893 $ 0.09) $ (283,076) 9,908,592 $(0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10. LEASES
- --------------------------------------------------------------------------------
The Company leases the right to subsidiary channel authorizations from FM radio
stations and satellite network transmission capacity to broadcast the Company's
information service to its subscribers. These leases are accounted for as
operating leases and are for varying periods of one to ten years and contain
annual renewal options for periods of up to five years.
The Company also has various operating leases for office space, warehouse
facilities and equipment. These leases expire on various dates through 2005 and
generally provide for renewal options at the end of the lease. The Company is
generally obligated to pay the cost of property taxes, insurance, utilities and
maintenance on the leases.
Future minimum lease payments under all non-cancelable operating leases at
December 31, 1997 are as follows:
Year ending December 31,
- --------------------------------------------------
1998 $ 4,898,000
1999 4,090,000
2000 3,846,000
2001 3,062,000
2002 2,156,000
2003 and after 4,100,000
- --------------------------------------------------
Total future minimum lease payments $ 22,152,000
Total rent expense on all operating leases was $4,842,000, $3,459,000 and
$2,712,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
48
- 308 -
<PAGE>
NOTES
- --------------------------------------------------------------------------------
49
- 309 -
<PAGE>
NOTES
- --------------------------------------------------------------------------------
50
- 310 -
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY DATA (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
Data Transmission Network Corporation
OPERATING PRE-TAX NET INCOME (LOSS) TOTAL
--------------------------
REVENUES CASH FLOW1 INCOME (LOSS) AMOUNT DILUTED EPS2 SUBSCRIBERS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1997
First $ 29,466,873 $ 13,141,205 $ 566,619 $ 361,619 $ .03 151,800
Second 31,391,287 13,508,667 757,061 485,561 .04 153,700
Third 32,216,238 13,770,835 891,300 571,800 .05 155,700
Fourth 33,299,954 14,278,001 1,192,101 817,101 .07 158,800
- --------------------------------------------------------------------------------------------------------------------
Year $ 126,374,352 $ 54,698,708 $ 3,407,081 $ 2,236,081 $ .19 158,800
- --------------------------------------------------------------------------------------------------------------------
Fiscal 1996
First $ 19,113,017 $ 6,502,483 $ (557,991) $ (356,991) $(.04) 99,600
Second 24,194,864 9,592,827 (701,346) (447,346) (.04) 142,000
Third 27,141,339 11,759,893 (328,503) (260,003) (.02) 144,100
Fourth 27,934,493 12,522,225 183,534 106,034 .01 145,900
- --------------------------------------------------------------------------------------------------------------------
Year $ 98,383,713 $ 40,377,428 $(1,404,306) $ (958,306) $ (.09) 145,900
<FN>
1 Operating income before depreciation and amortization expense.
2 Net income per share for each of the four quarters may not agree to net income
per share for the year due to rounding.
</FN>
</TABLE>
<TABLE>
<CAPTION>
TRADING INFORMATION
- --------------------------------------------------------------------------------
MARKET PRICE 1997 MARKET PRICE 1996
-------------------------- ---------------------------
QUARTER ENDED HIGH LOW LAST HIGH LOW LAST
<S> <C> <C> <C> <C> <C> <C>
March 31 28 3/4 21 1/4 26 1/4 16 5/8 13 5/8 15 3/8
June 30 33 1/4 22 3/4 31 3/4 23 15 5/8 21 3/8
September 30 32 1/2 27 1/4 29 1/2 26 1/2 17 21
December 31 32 5/8 25 3/4 28 23 19 3/4 22 1/4
</TABLE>
The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock MarketSM under the symbol: DTLN. On December 31, 1997, there were
approximately 500 stockholders of record, not including beneficial holders whose
shares are held in names other than their own.
51
- 311 -
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Data Transmission Network Corporation
Roger R. Brodersen
Chairman of the Board
Chief Executive Officer
Data Transmission Network Corp.
Robert S. Herman
Senior Vice President
Data Transmission Network Corp.
David K. Karnes
President
Chief Executive Officer
The Fairmont Group Inc.
Of Counsel, Kutak Rock law firm
J. Michael Parks
President
Chief Executive Officer
Alliance Data Systems
Jay E. Ricks
Chairman of the Board
Douglas Communications Corp.
Greg T. Sloma
President
Chief Operating Officer
Data Transmission Network Corp.
Roger W. Wallace
Senior Vice President
Data Transmission Network Corp.
CORPORATE OFFICERS
- --------------------------------------------------------------------------------
Data Transmission Network Corporation
Roger R. Brodersen
Chairman of the Board
Chief Executive Officer
Greg T. Sloma
President
Chief Operating Officer
Robert S. Herman
Senior Vice President
Research and Technology
James J. Marquiss
Senior Vice President
Co-President, Ag Division
Roger W. Wallace
Senior Vice President
Co-President, Ag Division
Charles R. Wood
Senior Vice President
President, Financial Services
Keith A. Cook
Vice President
Auto Services
William R. Davison
Vice President
President, Ag Services
Scott Fleck
Vice President
Director of Engineering
H. Wade German
Vice President
Business Research
Brian L. Larson
Vice President
Chief Financial Officer
Secretary and Treasurer
Gordon R. Lundy
Vice President
President, Energy Services
James G. Payne
Vice President
Services Support and Special Projects
52
- 312 -
<PAGE>
INVESTOR INFORMATION
- --------------------------------------------------------------------------------
CORPORATE HEADQUARTERS
Data Transmission Network Corporation
9110 West Dodge Road, Suite 200
Omaha, NE 68114
(402) 390-2328
www.dtn.com
INDEPENDENT AUDITORS
Deloitte & Touche LLP
STOCK TRANSFER AGENT
First National Bank of Omaha
Attn: Corporate Trust Services
One First National Center
Omaha, Nebraska 68102
ANNUAL SHAREHOLDERS MEETING
The annual shareholders meeting will be held on:
Wednesday, April 22, 1998 at 10:00 A.M.,
at the Best Western Regency West, 909 South 107 Avenue, Omaha, Nebraska.
FORM 10-K
A copy of the company's form 10-K filed with the securities and exchange
commission is available without charge upon written request to:
Secretary
Data Transmission Network Corporation
9110 West Dodge Road, Suite 200
Omaha, Nebraska 68114
DIVIDENDS
The Company has never paid any dividends and has no present intention of so
doing. Payment of cash dividends in the future, if any, will be determined by
the Board of Directors in light of the Company's earnings, financial condition
and other relevant considerations.
53
- 313 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 837,170
<SECURITIES> 0
<RECEIVABLES> 8,439,296
<ALLOWANCES> 810,000
<INVENTORY> 0
<CURRENT-ASSETS> 12,595,015
<PP&E> 247,775,385
<DEPRECIATION> 135,265,090
<TOTAL-ASSETS> 162,430,898
<CURRENT-LIABILITIES> 34,115,392
<BONDS> 72,891,370
0
0
<COMMON> 11,148
<OTHER-SE> 32,185,025
<TOTAL-LIABILITY-AND-EQUITY> 162,430,898
<SALES> 126,374,352
<TOTAL-REVENUES> 126,374,352
<CGS> 0
<TOTAL-COSTS> 113,990,949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,098,231
<INCOME-PRETAX> 3,407,081
<INCOME-TAX> 1,171,000
<INCOME-CONTINUING> 2,236,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,236,081
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 780,018 708,053
<SECURITIES> 0 0
<RECEIVABLES> 6,776,576 10,173,766
<ALLOWANCES> 300,000 520,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,806,991 13,753,134
<PP&E> 144,218,965 223,012,991
<DEPRECIATION> 67,909,419 98,564,288
<TOTAL-ASSETS> 92,672,050 177,729,762
<CURRENT-LIABILITIES> 20,278,929 28,501,228
<BONDS> 47,020,527 97,747,823
0 0
0 0
<COMMON> 3,375 11,074
<OTHER-SE> 12,873,590 28,279,215
<TOTAL-LIABILITY-AND-EQUITY> 92,672,050 177,729,762
<SALES> 62,287,989 98,383,713
<TOTAL-REVENUES> 62,287,989 98,383,713
<CGS> 0 0
<TOTAL-COSTS> 57,944,737 91,462,922
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,798,112 8,432,270
<INCOME-PRETAX> (397,076) (1,404,306)
<INCOME-TAX> (114,000) (446,000)
<INCOME-CONTINUING> (283,076) (958,306)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (283,076) (958,306)
<EPS-PRIMARY> (0.03) (0.09)
<EPS-DILUTED> (0.03) (0.09)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 APR-01-1996 JUL-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 210,182 208,649 728,107
<SECURITIES> 0 0 0
<RECEIVABLES> 6,377,342 9,983,782 10,249,756
<ALLOWANCES> 300,000 520,000 520,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 9,537,439 13,842,363 14,168,547
<PP&E> 156,489,960 206,881,459 215,947,849
<DEPRECIATION> 73,667,601 81,160,966 89,700,096
<TOTAL-ASSETS> 98,953,156 180,991,574 181,243,202
<CURRENT-LIABILITIES> 20,427,560 32,175,739 28,720,168
<BONDS> 52,519,539 100,927,092 102,451,520
0 0 0
0 0 0
<COMMON> 3,375 11,074 11,074
<OTHER-SE> 12,756,834 27,538,830 28,031,651
<TOTAL-LIABILITY-AND-EQUITY> 98,953,156 180,991,574 181,243,202
<SALES> 19,113,017 24,194,864 27,141,339
<TOTAL-REVENUES> 19,113,017 24,194,864 27,141,339
<CGS> 0 0 0
<TOTAL-COSTS> 18,356,062 22,786,356 24,992,836
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,345,245 2,130,222 2,498,561
<INCOME-PRETAX> (557,991) (701,346) (328,503)
<INCOME-TAX> (201,000) (254,000) (68,500)
<INCOME-CONTINUING> (356,991) (447,346) (260,003)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (356,991) (447,346) (260,003)
<EPS-PRIMARY> (0.04) (0.04) (0.02)
<EPS-DILUTED> (0.04) (0.04) (0.02)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997 JUL-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 890,397 222,675 241,069
<SECURITIES> 0 0 0
<RECEIVABLES> 6,943,759 7,323,414 8,852,783
<ALLOWANCES> 520,000 520,000 520,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 10,987,705 10,878,736 12,919,335
<PP&E> 227,939,358 235,010,843 242,378,197
<DEPRECIATION> 107,488,846 116,527,998 125,794,785
<TOTAL-ASSETS> 173,965,335 170,155,107 168,512,639
<CURRENT-LIABILITIES> 38,376,382 38,981,226 39,025,542
<BONDS> 84,169,127 78,215,430 75,511,733
0 0 0
0 0 0
<COMMON> 11,074 11,103 11,137
<OTHER-SE> 28,987,769 29,718,063 30,607,775
<TOTAL-LIABILITY-AND-EQUITY> 173,965,335 170,155,107 168,512,639
<SALES> 29,466,873 31,391,287 32,216,238
<TOTAL-REVENUES> 29,466,873 31,391,287 32,216,238
<CGS> 0 0 0
<TOTAL-COSTS> 26,537,639 28,341,710 29,102,161
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2,394,864 2,324,826 2,229,420
<INCOME-PRETAX> 566,619 757,061 891,300
<INCOME-TAX> 205,000 271,500 319,500
<INCOME-CONTINUING> 361,619 485,561 571,800
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 361,619 485,561 571,800
<EPS-PRIMARY> 0.03 0.04 0.05
<EPS-DILUTED> 0.03 0.04 0.05
</TABLE>
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 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):
[ ] $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
- 319 -
<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 22, 1998
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 Best Western Regency West, 909 South 107th Avenue, Omaha,
Nebraska on Wednesday, April 22, 1998 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 ratify the appointment
of Deloitte & Touche LLP independent auditors for the Company
for the 1998 fiscal year.
3. 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 2, 1998, 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 9, 1998 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
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<PAGE>
DATA TRANSMISSION NETWORK CORPORATION
Proxy Statement
<TABLE>
<CAPTION>
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........................................................ 7
Compensation Committee Report on Executive Compensation...................... 10
Approval of Appointment of Auditors.......................................... 12
Transactions With Management................................................. 12
Compensation Committee Interlocks and Insider Participation.................. 12
Stockholder Proposals for 1999 Annual Meeting................................ 12
Section 16(a) Beneficial Ownership Reporting Compliance...................... 12
Other Matters................................................................ 13
Miscellaneous................................................................ 13
</TABLE>
4
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<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1998
- --------------------------------------------------------------------------------
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 Best Western Regency West, 909
South 107th Avenue, Omaha, Nebraska on Wednesday, April 22, 1998, at 10:00 A.M.
Omaha time. Stockholders of record at the close of business on March 2, 1998 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 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 16, 1998.
VOTING SECURITIES
At March 2, 1998, the Company had issued and outstanding 11,200,549
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 and entitled to vote at the Meeting is required
for approval of all other matters 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 voting on the proposal to
ratify the appointment of auditors are treated as votes against such proposal.
Broker non-votes on the proposal 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.
1
- 322 -
<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 1999 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, Scott A. Fleck, David K. Karnes, J. Michael Parks, Jay E. Ricks,
Greg T. Sloma and Roger W. Wallace. All of the nominees, except Scott A. Fleck,
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 2, 1998, 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 52 Chairman of the Board, Chief 1984
Executive Officer and Director
Scott A. Fleck 30 Vice President and Nominee -
David K. Karnes 49 Director 1989
J. Michael Parks 47 Director 1990
Jay E. Ricks 65 Director 1995
Greg T. Sloma 46 President, Chief Operating 1993
Officer and Director
Roger W. Wallace 41 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. Fleck has served as Vice President of the Company since 1997. He
has served as Director of Engineering of the Company since 1996. Prior to
becoming Director of Engineering, Mr. Fleck held the position of Director of
Software and Hardware Development since joining the Company in 1991.
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.
Mr. Parks has served as President and Chief Executive Officer of
Alliance Data Systems, a provider of data processing services, since 1997. He
served as President and Chief Operating Officer of First Data Resources Inc.
from 1993 to 1994 and President of the Merchant Services Group of First Data
Resources Inc. from 1991 to 1993. He also served as President and Chief
Executive Officer of Call Interactive, an
2
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<PAGE>
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 Amtera Technologies, Inc., a communications software company.
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. Sloma
has served as a Director of West TeleServices Corporation since 1997.
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, 1997. During fiscal 1997, 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 1997, 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 twice during fiscal
1997, are David K. Karnes, J. Michael Parks, Jay E. Ricks and Greg T. Sloma.
Directors Compensation
- ----------------------
During fiscal 1997, each member of the Board of Directors who was not
an employee of the Company received $1,500 for each Board of Directors meeting
attended, $600 for each Audit Committee meeting attended, $600 for the first
Compensation Committee meeting attended and $1,500 for the second 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 1997, David K.
Karnes, J. Michael Parks and Jay E. Ricks each received an option to purchase
4,500 shares of the Company's common stock at an exercise price of $24.00 per
share. The Non-Employee Directors Plan has been amended for fiscal year 1998 to
reduce from 4,500 to 3,500 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
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<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
2, 1998, 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 1,634,744 (1) 14.6%
16705 Ontario Plaza
Omaha, NE 68130
Wanger Asset Management, L.P., 1,533,800 (2) 13.7%
Wanger Asset Management Ltd.,
and Ralph Wanger
227 West Monroe, Suite 3000
Chicago, IL 60606
Furman Selz Incorporated 1,124,300 (3) 10.0%
230 Park Avenue
New York, NY 10169
Acorn Investment Trust, 819,000 (4) 7.3%
Series Designated Acorn Fund
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Peter H. Kamin and Peak Investment 591,600 (5) 5.3%
Limited Partnership as a group
One Financial Center, Suite 1600
Boston, MA 02111
- -------------------------------
<FN>
(1) This includes 163,334 shares subject to options exercisable within 60
days of March 2, 1998, 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 19,391 shares allocated to Mr. Brodersen
through his participation in the Company's 401(k) Savings Plan.
(2) According to a Schedule 13G dated February 5, 1998, 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 819,000 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.
(3) According to a Schedule 13G dated February 11, 1998, Furman Selz
Incorporated has sole voting and sole dispositive power over such
shares.
</FN>
</TABLE>
4
- 325 -
<PAGE>
4) According to a Schedule 13G dated February 5, 1998, 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.
(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 February 10, 1998, Peak Investment Limited Partnership
("Peak") is the beneficial owner of 591,600 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 591,600 shares.
The following table sets forth information as to the shares of common
stock of the Company beneficially owned as of March 2, 1998, 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 7, 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 1,634,744 ( 3) 14.6%
Scott A. Fleck 3,022 ( 4) *
Robert S. Herman 327,168 ( 5) 2.9%
David K. Karnes 63,435 ( 6) *
James J. Marquiss 146,390 ( 7) 1.3%
J. Michael Parks 46,499 ( 8) *
Jay E. Ricks 18,000 ( 9) *
Greg T. Sloma 166,570 (10) 1.5%
Roger W. Wallace 283,922 (11) 2.5%
All directors and executive officers
as a group (16 persons) 2,893,154 (12) 25.8%
- ------------------------------------
<FN>
* Less than 1.0%
( 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.
5
- 326 -
<PAGE>
2) Shares subject to options exercisable within 60 days of March 2, 1998
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 163,334 shares subject to options exercisable within 60 days
of March 2, 1998, 39,150 shares which are held in trust for Mr.
Brodersen's children, 36,999 shares beneficially owned by Mr.
Brodersen's spouse, and 19,391 shares allocated to Mr. Brodersen
through his participation in the Company's 401(k) Savings Plan.
(4) Includes 1,234 shares subject to options exercisable within 60 days
of March 2, 1998 and 1,788 shares allocated to Mr. Fleck through his
participation in the Company's 401(k) Savings Plan.
( 5) Includes 101,415 shares subject to options exercisable within 60
days of March 2, 1998 and 16,071 shares allocated to Mr. Herman through
his participation in the Company's 401(k) Savings Plan.
( 6) Includes 33,999 shares subject to options exercisable within 60 days of
March 2, 1998.
( 7) Includes 71,374 shares subject to options exercisable within 60 days of
March 2, 1998 and 15,016 shares allocated to Mr. Marquiss through his
participation in the Company's 401(k) Savings Plan.
( 8) Includes 32,499 shares subject to options exercisable within 60 days of
March 2, 1998.
( 9) Includes 15,000 shares subject to options exercisable within 60 days of
March 2, 1998.
(10) Includes 135,334 shares subject to options exercisable within 60 days
of March 2, 1998, 4,212 shares beneficially owned by Mr. Sloma's
children and 22,874 shares allocated to Mr. Sloma through his
participation in the Company's 401(k) Savings Plan.
(11) Includes 101,415 shares subject to options exercisable within 60 days
of March 2, 1998, 4,500 shares beneficially owned by Mr. Wallace's
spouse, and 16,157 shares allocated to Mr. Wallace through his
participation in the Company's 401(k) Savings Plan.
(12) Includes 802,928 shares subject to options exercisable within 60 days
of March 2, 1998, 39,150 shares held in trust for the children of
executive officers and directors, 45,711 shares owned beneficially by
spouses or children of executive officers and directors, and 110,102
shares allocated to executive officers through their participation in
the Company's 401(k) Savings Plan.
</FN>
</TABLE>
6
- 327 -
<PAGE>
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, 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
-------------------------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
----- ---- -------- --------- --------- ------------ ---------
Other Securities
Annual Underlying All Other
Name and Principal Compen- Options Compen-
Position Year Salary Bonus sation(1) (shares) sation(2)
---------- ---- -------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen Chairman & 1997 $195,744 $ 137,304 $ 0 10,000 $ 6,400
Chief Executive Officer 1996 179,172 112,178 0 240,000(3) 9,500
1995 172,000 147,897 0 30,000 9,240
Greg T. Sloma 1997 172,593 121,312 0 10,000 6,400
President & Chief Operating 1996 145,996 147,707 0 16,500 9,500
Officer 1995 140,000 131,466 0 18,000 9,240
Robert S. Herman 1997 143,628 109,112 0 5,600 6,400
Senior Vice President 1996 120,865 97,707 0 7,500 8,743
1995 115,000 131,466 0 15,000 9,240
Roger W. Wallace 1997 143,628 123,498 0 5,600 6,400
Senior Vice President 1996 120,858 108,390 0 7,500 9,170
1995 115,000 126,227 0 15,000 9,240
James J. Marquiss 1997 135,936 125,401 0 4,500 6,400
Senior Vice President 1996 120,858 108,390 0 6,000 9,170
1995 115,000 125,843 0 12,000 9,240
<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 during 1996 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 Employee Stock Option Plan. The surrendered options
exercisable for 117,999 shares were considered for tax purposes as
incentive stock options, 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.
</FN>
</TABLE>
7
- 328 -
<PAGE>
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 1997.
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
Underlying Percent of Total
Options Options Granted Grant Date
Granted to Employees In Exercise Price Expiration Present
Name (shares) (1) Fiscal 1997 (Per share) Date Value (2)
- ------------------ ------------ ---------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen 10,000 5.2% $ 21.38 1-02-07 $114,400
Greg T. Sloma 10,000 5.2% 21.38 1-02-07 114,400
Robert S. Herman 5,600 2.9% 21.38 1-02-07 64,100
Roger W. Wallace 5,600 2.9% 21.38 1-02-07 64,100
James J. Marquiss 4,500 2.3% 21.38 1-02-07 51,500
<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 2, 1997 under the Company's Employee Stock Option
Plan.
(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>
8
- 329 -
<PAGE>
The following table provides information on option exercises in fiscal
1997 and the value of unexercised options at December 31, 1997 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 Value
- -----------------------------------------------------------------------------------------------------------------------------------
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 80,000 170,000 $ 960,000 $ 1,981,200
Greg T. Sloma 2,500 54,375 123,000 27,000 2,665,200 298,600
Robert S. Herman - 0 92,048 15,600 2,025,100 204,300
Roger W. Wallace - 0 92,048 15,600 2,025,100 204,300
James J. Marquiss - 0 63,874 12,500 1,406,200 163,500
<FN>
(1) The closing "bid" price of the Company's common stock as quoted by
NASDAQ on December 31, 1997 was $27.50. 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, 1992.
GRAPH IN TABULAR FORM:
<TABLE>
<CAPTION>
Nasdaq
Nasdaq Total Telecommunications
Year DTN Return Index Industry Index
- ---- --- ------------ ------------------
<S> <C> <C> <C>
1992 100 100 100
1993 186 115 154
1994 120 112 129
1995 349 159 169
1996 473 195 172
1997 595 240 254
</TABLE>
9
- 330 -
<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:
. Provide a competitive total compensation package that allows the
Company to attract and retain the best people possible.
. The Company pays for performance. Employees are rewarded based
upon corporate performance, business unit performance and
individual performance.
. 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. Increases in base salary were recommended by senior
management for fiscal 1997 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.
Variable Incentive Compensation - The large majority of the Company's
employees, including the executive officers, participate in an annual incentive
award plan. The amount of incentive compensation is based upon the Company's
achievement of goals established at the beginning of the fiscal year by the
Committee. For fiscal 1997, the incentive plans were tied to sales and income
before income taxes, depreciation and amortization expenses. The incentive was
awarded approximately 50% based on sales and 50% based on income before income
taxes and depreciation and amortization expense.
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.
10
- 331 -
<PAGE>
CEO Compensation
- ----------------
The factors and criteria upon which Mr. Brodersen's compensation was
based for fiscal year 1997 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 March 3, 1997 for the period of April 1, 1997 to
March 31, 1998. 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 1997 fiscal year incentive cash compensation was based on the
actual financial performance of the Company. His annual cash incentive award was
based on the incentive plan described above.
An option grant for 10,000 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.
Compensation Committee
of the Board of Directors
-------------------------
David K. Karnes
J. Michael Parks
Jay E. Ricks
Greg T. Sloma
11
- 332 -
<PAGE>
PROPOSAL NO. 2
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, 1998, subject to
ratification by the stockholders of the Company. Deloitte & Touche LLP served as
the Company's auditors for the 1997 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 1997 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 1999 ANNUAL MEETING
Proposals of stockholders for which consideration is desired at the
1999 Annual Meeting of Stockholders must be received by the Company no later
than December 31, 1998, 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, 1997, its
executive officers, directors and holders of more than 10% of the Company's
common stock complied with all Section 16(a) filing requirements, except that
Mr. Herman filed one late report covering one transaction. In addition, Mr.
Brodersen filed a Form 5 reporting three transactions which he inadvertently
failed to report or incorrectly reported in 1991, 1994 and 1996. In making these
statements, the Company has relied solely upon a review of Forms 3 and 4 fur-
nished 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 represen-
tations from reporting persons that no Form 5 was required.
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OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this 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
judgment.
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, telephone or other means 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 2, 1998. 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 9, 1998
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.
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DATA TRANSMISSION NETWORK CORPORATION
9110 West Dodge Road, Suite 200
Omaha, NE 68114
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<PAGE>
DATA TRANSMISSION NETWORK CORPORATION PROXY
Annual Meeting of Stockholders To Be Held April 22, 1998
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 2, 1998 at the Annual Meeting of Stockholders to be
held on April 22, 1998 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 Scott A. Fleck David K. Karnes J. Michael Parks
Jay E. Ricks Greg T. Sloma Roger W. Wallace
2. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors of the Corporation for fiscal year ending December 31, 1998.
FOR 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 22, 1998 and the Proxy
Statement for such meeting.
Dated , 1998
--------------------------- -----------------------------------
-----------------------------------
(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.
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