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
<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
<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
<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
<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
<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
<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
<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
<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
<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
<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
<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.
<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
<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
<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
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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.
12
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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.
13
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DATA TRANSMISSION NETWORK CORPORATION
9110 West Dodge Road, Suite 200
Omaha, NE 68114
14
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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.
-15-
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