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 28, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Data
Transmission Network Corporation, a Delaware corporation (the "Company"), will
be held at the Holiday Inn-Old Mill, 655 North 108th Avenue, Omaha, Nebraska on
Wednesday, April 28, 1999 at 10:00 A.M. Omaha time for the following purposes,
as more fully described in the accompanying Proxy Statement:
1. To elect seven directors to the Board of Directors.
2. To consider and vote upon a proposal to approve the Company's 1999
Stock Incentive Plan.
3. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as independent auditors of the Company for the
1999 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Any action may be taken on any one of the foregoing proposals at the
meeting on the date specified above, or on any date or dates to which the
meeting may be adjourned. The Board of Directors of the Company has fixed the
close of business on March 1, 1999, 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 25, 1999 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.
1
<PAGE>
DATA TRANSMISSION NETWORK CORPORATION
Proxy Statement
Index
Page
Proxy Statement...............................................................1
Proxies.......................................................................1
Voting Securities.............................................................1
Election of Directors.........................................................2
Ownership by Certain Beneficial Owners and Management.........................5
Executive Compensation........................................................8
Compensation Committee Report on Executive Compensation......................11
Proposal for 1999 Stock Incentive Plan.......................................13
Approval of Appointment of Auditors..........................................19
Transactions with Management.................................................19
Compensation Committee Interlocks and Insider Participation..................19
Stockholder Proposals for 2000 Annual Meeting................................19
Section 16(a) Beneficial Ownership Reporting Compliance......................20
Other Matters................................................................20
Miscellaneous................................................................20
Exhibit 1 to Proxy Statement - 1999 Stock Incentive Plan.....................22
2
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Data Transmission Network Corporation, a
Delaware corporation (the "Company"), to be used at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Holiday Inn-Old Mill, 655 North
108th Avenue, Omaha, Nebraska on Wednesday, April 28, 1999, at 10:00 A.M. Omaha
time. Stockholders of record at the close of business on March 1, 1999 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 April 1, 1999.
VOTING SECURITIES
At March 1, 1999, the Company had issued and outstanding 11,625,320 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
approve the 1999 Stock Incentive Plan or to ratify the appointment of auditors
are treated as votes against such proposal. Broker non-votes on the proposal to
approve the 1999 Stock Incentive Plan or to ratify the appointment of auditors
are treated as shares as to which voting power has been withheld by the
beneficial holders of those shares and, therefore, as shares not entitled to
vote on the proposal.
3
<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 2000 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: Peter H.
Kamin, Jay H. Golding, Anthony S. Jacobs, David K. Karnes, Joseph F. Mazzella,
Greg T. Sloma and Roger W. Wallace. All of the nominees presently are serving as
directors of the Company. Proxies may be voted for seven directors.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the By-Laws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
Set forth below is certain information as of March 25, 1999, 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>
Jay H. Golding 53 Director March 1999
Anthony S. Jacobs 68 Director March 1999
Peter H. Kamin 37 Director 1998
David K. Karnes 50 Director 1989
Joseph F. Mazzella 46 Director March 1999
Greg T. Sloma 47 President, Chief Operating Officer and 1993
Director
Roger W. Wallace 42 Senior Vice President and Director 1984
</TABLE>
Mr. Golding founded and was President of Products Industries Corporation
("PIC") from 1974 until May 20, 1981. PIC was an international trading company
with offices in eleven Southeast Asian countries, distributing chemicals and
synthetic resins to major manufacturers. In 1979, Mr. Golding founded Khampak
Industries, Inc., a company engaged in custom packaging of synthetic resins and
plastics. In May of 1981, Mr. Golding merged both companies into Hi-Port
Industries, Inc., and served as President until January of 1985 when he was
elected by the Board of Directors to Chairman of the Board and Chief Executive
Officer. Hi-Port became the largest contract manufacturer of chemical based
aerosol, soft stick, and liquid consumer products in North America. The company
was acquired by CCL Industries of Toronto, Canada in November of 1989. Mr.
Golding is presently a director of Bogan Aerotech, a joint venture partner of
Bell Helicopter Textron, Inc. He is also Chairman and CEO of American
International Partners, L.L.C.
Mr. Jacobs served as Chairman of the Board of Wessel Group from 1976 to
1995 and has been a private investor since 1995.
4
<PAGE>
Mr. Kamin has served as President of Peak Management, Inc., a General
Partner of Peak Investment Limited Partnership, since 1992. Mr. Kamin served as
co-manager of the U.S. private and public equity market activities for The
Morningside Group (an offshore family trust) from 1987 to 1992. He served as
Assistant Portfolio Manager for the Fidelity Magellan Fund and the Fidelity
Over-The-Counter Fund from 1986 to 1987. He was an Equity Analyst at Fidelity
Management and Research from 1983 to 1986. As more fully disclosed in the Proxy
Statement, as of the record date Mr. Kamin and Peak Investment Limited
Partnership are the beneficial owners of 546,200 shares of DTN common stock.
Such shares represent approximately 4.7% of the Company's outstanding shares of
common stock.
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. Mazzella has been a partner in the law firm of Lane, Altman & Owens in
Boston, Massachusetts, since 1985. He is currently a director of Alliant
Techsystems, Inc. (NYSE:ATK) and Insurance Auto Auctions, Inc. ("NASDAQ:IAAI).
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.
Messrs. Golding, Jacobs and Mazzella were selected to serve as directors of
the Company pursuant to discussions held between Mr. Kamin and the Company's
former Chairman of the Board and Chief Executive Officer, Roger R. Brodersen,
which discussions preceded the resignations of Mr. Brodersen, Scott A. Fleck,
Richard R. Jaros, J. Michael Parks and Jay E. Ricks as directors of the Company
on March 24, 1999.
Board Meetings and Committees
The Board of Directors met twelve times (four regular and eight special
meetings) during the fiscal year ended December 31, 1998. During fiscal 1998,
with the exception of Mr. Parks and Mr. Robert Herman (former Director of the
Company) who were not present at one meeting of the Board of Directors, all
directors attended all of the meetings of the Board of Directors, and related
committees on which they served. The Company does not have a Standing Nominating
Committee.
The Audit Committee recommends the selection of the independent auditors,
reviews the scope of the audits performed by them and reviews their audit report
and any recommendations made by them relating to internal financial controls and
procedures. Members of the Audit Committee met twice during fiscal 1998. David
K. Karnes, Peter H. Kamin and Jay E. Ricks were members of the 1998 Audit
Committee, with Mr. Ricks acting as the Chairman. The current members of the
Audit Committee are Peter H. Kamin (Chairman), David K.
Karnes and Jay H. Golding.
5
<PAGE>
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 1998 Compensation Committee, which met once during fiscal 1998, were
Richard R. Jaros, David K. Karnes, J. Michael Parks, Jay E. Ricks and Greg T.
Sloma, with Mr. Karnes acting as the Chairman of the Compensation Committee and
Mr. Jaros acting as Chairman of the Stock Option Plan Subcommittee. The current
members of the Compensation Committee are Mr. Karnes (Chairman) and Messrs.
Kamin, Jacobs, Mazzella and Sloma.
At the Annual Meeting of the Board of Directors of the Company, held May
21, 1998, the Board established a committee of its members (the "Special
Committee") to explore alternatives to produce greater value for the Company's
shareholders. Members of the 1998 Special Committee, which met three times
during the fiscal year ended December 31, 1998, were Roger R. Brodersen, Jay E.
Ricks, Peter H. Kamin and Richard R. Jaros, with Mr. Kamin acting as Chairman
for the meetings. The current members of the Special Committee are Peter H.
Kamin (Chairman), Joseph F. Mazzella and Anthony S. Jacobs.
Directors Compensation
During fiscal 1998, each member of the Board of Directors who was not an
employee of the Company received $2,500 for each regular Board of Directors
meeting attended, $5,000 for the eight special Board of Directors meetings
attended, $600 for each Audit Committee meeting attended, $1,500 for the
Compensation Committee meeting attended and $1,500 for the three Special
Committee meetings 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 1998, Richard R.
Jaros, Peter H. Kamin, David K. Karnes, J. Michael Parks and Jay E. Ricks each
received an option to purchase 3,500 shares of the Company's common stock at an
exercise price of $41.75 per share. The Non-Employee Directors Plan had 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.
6
<PAGE>
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of the Company's common stock by each person or group who, as of March 1, 1999,
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> <C>
Roger R. Brodersen 1,719,641 (1) 14.8%
16705 Ontario Plaza
Omaha, NE 68130
Wanger Asset Management, L.P., 1,539,800 (2) 13.2%
Wanger Asset Management Ltd.,
and Ralph Wanger
227 West Monroe, Suite 3000
Chicago, IL 60606
Wallace R. Weitz & Company 1,164,100 (3) 10.0%
1125 South 103rd Street
Suite 600
Omaha, NE 68124
Acorn Investment Trust, 1,028,100 (4) 8.8%
Series Designated Acorn Fund
227 West Monroe Street, Suite 3000
Chicago, IL 60606
- -----------------------------------
<FN>
(1) This includes 249,167 shares subject to options exercisable within 60
days of March 1, 1999, 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 18,455 shares allocated to Mr. Brodersen
through his participation in the Company's 401(k) Savings Plan.
(2) According to a Schedule 13G dated February 23, 1999, 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 1,028,100 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 10, 1999, Wallace R. Weitz
& Company has sole voting and shared dispositive power over such
shares.
7
<PAGE>
(4) According to a Schedule 13G dated February 23, 1999, 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.
</FN>
</TABLE>
The following table sets forth information as to the shares of common stock
of the Company beneficially owned as of March 1, 1999, 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
8, and by all directors and executive officers of the Company (including Roger
R. Brodersen) as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent of
Beneficial Owner of Ownership ( 1) Class ( 2)
<S> <C> <C> <C>
Roger R. Brodersen 1,719,641 (3) 14.8%
Anthony S. Jacobs 145,500 1.3%
Peter H. Kamin 546,200 4.7%
David K. Karnes 64,935 (4) *
James J. Marquiss 147,382 (5) 1.3%
Greg T. Sloma 175,857 (6) 1.5%
Roger W. Wallace 282,985 (7) 2.4%
Charles R. Wood 48,353 (8) *
All directors and executive officers
as a group (
18 persons) 3,292,295 (9) 28.3%
*Less than 1.0%
- ---------------------
<FN>
(1) The number of shares in the table include interests of the named
persons, or of members of the directors and executive officers as a
group, in shares held by the trustee of the Company's 401(k) Savings
Plan. The beneficial owners have sole investment power over these
shares but do not have sole voting power.
(2) Shares subject to options exercisable within 60 days of March 1, 1999
("Presently Exercisable Options") 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.
8
<PAGE>
(3) Includes 249,167 shares subject to Presently Exercisable Options,
39,150 shares which are held in trust for Mr. Brodersen's children,
36,999 shares beneficially owned by Mr. Brodersen's spouse, and 18,455
shares allocated to Mr. Brodersen through his participation in the
Company's 401(k) Savings Plan.
(4) Includes 35,499 shares subject to Presently Exercisable Options.
(5) Includes 72,999 shares subject to Presently Exercisable Options and
14,383 shares allocated to Mr. Marquiss through his participation in
the Company's 401(k) Savings Plan.
(6) Includes 131,677 shares subject Presently Exercisable Options, 4,212
shares beneficially owned by Mr. Sloma's children and 21,728 shares
allocated to Mr. Sloma through his participation in the Company's
401(k) Savings Plan.
(7) Includes 101,182 shares subject to Presently Exercisable Options,
4,500 shares beneficially owned by Mr. Wallace's spouse, and 15,453
shares allocated to Mr. Wallace through his participation in the
Company's 401(k) Savings Plan.
(8) Includes 3,758 shares subject to Presently Exercisable Options and
7,932 shares allocated to Mr. Wood through his participation in the
Company's 401(k) Savings Plan.
(9) Includes 680,538 shares subject to Presently Exercisable Options,
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 92,727 shares allocated to
executive officers through their participation in the Company's 401(k)
Savings Plan.
</FN>
</TABLE>
9
<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, 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
------- ------- ------- ------ ------ ----- -----
Other Securities
Annual Underlying
Name and Principal Compen- Options All Other
Position Year Salary Bonus sation(1) (shares) Compensation(2)
- ------------------ ------ ------ ----- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger R. Brodersen 1998 $200,000 $122,518 $0 $ 7,500 $6,400
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
Greg T. Sloma 1998 180,000 110,115 0 7,500 6,400
President & 1997 172,593 121,312 0 10,000 6,400
Chief Operating Officer 1996 145,996 147,707 0 16,500 9,500
Roger W. Wallace 1998 150,000 103,730 0 4,200 6,400
Senior Vice President 1997 143,628 123,498 0 5,600 6,400
1996 120,858 108,390 0 7,500 9,170
James J. Marquiss 1998 140,000 97,711 0 3,375 6,400
Senior Vice President 1997 135,936 125,401 0 4,500 6,400
1996 120,858 108,390 0 6,000 9,170
Charles R. Wood 1998 136,538 55,210 0 3,375 6,400
Senior Vice President 1997 120,385 59,327 0 3,400 6,400
1996 101,346 41,374 0 4,500 5,709
<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>
10
<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 1998. The Company does not grant any stock
appreciation rights.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
---------------------------------
Individual Grants
-------------------------------
(a) (b) (c) (d) (e) (f)
- ---------- ---------- ----------- ---------- -------- -------
Number of
Securities Percent of
Underlying Total Options
Options Granted to Exercise Grant Date
Granted Employees In Price Expiration Present
Name (shares) (1) Fiscal 1998 (Per share) Date Value (2)
- ------------------- ------------- -------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Roger R. Brodersen 7,500 3.2% $27.50 1-01-08 $106,800
Greg T. Sloma 7,500 3.2% 27.50 1-01-08 106,800
Roger W. Wallace 4,200 1.8% 27.50 1-01-08 59,800
James J. Marquiss 3,375 1.4% 27.50 1-01-08 48,100
Charles R. Wood 3,375 1.4% 27.50 1-01-08 48,100
<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
Subcommittee on January 1, 1998 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>
11
<PAGE>
The following table provides information on option exercises in fiscal 1998
and the value of unexercised options at December 31, 1998 for the Chief
Executive Officer and the four remaining most highly compensated executive
officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
Number of Securities
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 - 0 163,334 94,166 $2,165,800 $1,130,700
Greg T. Sloma 15,000 382,500 122,834 19,666 2,694,800 120,600
Roger W. Wallace - 0 101,415 10,433 2,316,500 67,200
James J. Marquiss - 0 71,374 8,375 1,625,800 53,900
Charles R. Wood 36,288 1,327,000 0 7,141 0 41,700
<FN>
(1) The closing "bid" price of the Company's common stock as quoted by
NASDAQ on December 31, 1998 was $28.88. The values shown are computed
based upon the difference between this price and the exercise price of
the underlying options.
</FN>
</TABLE>
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, 1993.
<TABLE>
<CAPTION>
Nasdaq
Nasdaq Total Telecommunications
Year DTN Return Index Industry Index
---- --- ------------ ------------------
<S> <C> <C> <C> <C>
1993 100 100 100
1994 65 98 83
1995 188 138 109
1996 254 170 112
1997 320 209 165
1998 326 293 270
</TABLE>
12
<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 Compensation 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 1998 for the Chief Executive Officer and the other
executive officers named in the Summary Compensation Table, and the Compensation
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
Compensation Committee. For fiscal 1998, 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.
13
<PAGE>
CEO Compensation
The factors and criteria upon which Mr. Brodersen's compensation was based
for fiscal year 1998 are the same as those considered by the Compensation
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 Compensation Committee on December 18, 1997 for
the period of April 1, 1998 to March 31, 1999. The Compensation 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 1998 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 7,500 shares was awarded to Mr. Brodersen under the
Company's Employee Stock Option Plan based upon his performance and leadership
with the Company.
1998 Compensation Committee of the Board of Directors
David K. Karnes - Chairman
J. Michael Parks
Jay E. Ricks
Greg T. Sloma
Richard R. Jaros
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PROPOSAL NO. 2
1999 STOCK INCENTIVE PLAN
Proposed Plan and Purposes
At the Meeting, the stockholders will be asked to approve the Company's
1999 Stock Incentive Plan (the "1999 Plan"), as adopted by the Board on February
25, 1999. If approved by stockholders, the 1999 Plan will replace the Company's
existing employee Stock Option Plan of 1989 (the "1989 Plan") and the Company
will not grant any new awards under the 1989 Plan. Stock options outstanding
under the 1989 Plan will continue to be governed by that plan.
As of March 1, 1999, options for approximately 1,577,000 shares of Common
Stock were outstanding under the 1989 Plan, and approximately 353,000 shares of
Common Stock remained available for future option grants under that plan. The
Board of Directors is not requesting any additional shares not otherwise
available under the 1989 Plan. The 1999 Plan authorizes for option grants or
other awards to eligible full-time employees of the Company or any subsidiary of
the Company (i) the 353,000 shares which remained available for future option
grants under the 1989 Plan, plus (ii) the number of shares subject to stock
options outstanding under the 1989 Plan which expire or terminate unexercised as
to such shares. It is not possible to state the terms or types of any options or
other awards that may be granted to executive officers of the Company or other
persons under the 1999 Plan at a future time or to identify the persons to whom
such future grants may be made.
The 1999 Plan is intended to foster and promote the long-term financial
success of the Company and its subsidiaries and thereby increase stockholder
value by providing incentives to those full-time employees who are likely to be
responsible for achieving such success. The Company anticipates that the 1999
Plan will assist it in recruiting and retaining key employees in the highly
competitive communications/information industry. The Company also believes that
participation in the 1999 Plan by full-time employees will strengthen their
commitment to the Company and more closely align the interests of such persons
with the interests of the Company's stockholders.
Required Vote
Approval of the 1999 Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by proxy at the
Annual Meeting and entitled to vote at the Annual Meeting.
The Board of Directors Recommends a vote FOR approval of the 1999 Stock
Incentive Plan.
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Description of the 1999 Stock Incentive Plan
The following summary of the 1999 Plan does not purport to be complete and
is subject to and qualified in its entirety by the full terms of the 1999 Plan,
which appears as Exhibit 1 to this Proxy Statement.
The 1999 Plan authorizes the grant of (i) incentive stock options under the
Internal Revenue Code of 1986 (as amended from time to time, the "Code"), (ii)
non-qualified stock options, (iii) stock appreciation rights, (iv) performance
unit awards, (v) restricted stock awards, and (vi) stock bonus awards to
full-time employees of the Company or any subsidiary of the Company who are
responsible for or contribute to, or are likely to be responsible for or
contribute to, the growth and success of the Company or such subsidiary. The
Company and its subsidiaries currently have approximately 1,100 full-time
employees who potentially are eligible to receive such a grant.
The shares of Common Stock available for issuance pursuant to the 1999 Plan
may be authorized and unissued shares or treasury shares. If there is a stock
dividend, stock split, or other relevant change in the outstanding shares of
Common Stock, then the Stock Option Plan Subcommittee (the "Committee") of the
Board will make appropriate adjustments in (a) the aggregate number of shares of
Common Stock (i) reserved for issuance under the 1999 Plan, (ii) for which
grants or awards may be made to an individual grantee, and (iii) covered by
outstanding awards or grants, (b) the exercise or other applicable price
relating to outstanding awards or grants, and (c) the appropriate fair market
value and other price determinations relevant to outstanding awards or grants.
Any shares subject to an option or right which expires or terminates unexercised
as to such shares will again be available for the grant of awards or options
under the 1999 Plan. If any shares of Common Stock which have been pledged as
collateral for indebtedness incurred by an optionee in connection with an option
exercise are returned to the Company in satisfaction of such indebtedness, then
such shares will again be available for the grant of awards or options under the
1999 Plan.
No award or grant under the 1999 Plan may be assigned or transferred by the
recipient except by will, the laws of descent and distribution, or, in the case
of awards or grants other than incentive stock options, pursuant to a qualified
domestic relations order or by such other means as the Committee may approve.
Administration
The 1999 Plan is administered by the Committee, which is composed of four
directors of the Company who are not employees of the Company or any of its
subsidiaries. The Committee has authority to interpret the 1999 Plan, to select
the full-time employees to whom awards or options will be granted, to determine
whether and to what extent awards and options will be granted under the 1999
Plan, to determine the types of awards and options to be granted and the amount,
size, terms, and conditions of each award or grant, and to make other relevant
determinations and administrative decisions. In general, all decisions and
determinations made by the Committee pursuant to the 1999 Plan are final and
binding on all persons.
The Committee may delegate to any officer or officers of the Company any of
the Committee's duties, powers, and authorities under the 1999 Plan upon such
conditions and with such limitations as the Committee may determine; provided,
that only the Committee may select for awards or options under the 1999 Plan,
and make grants of awards or options under the 1999 Plan to, full-time employees
of the Company or any subsidiary of the Company who are subject to Section 16 of
the Securities Exchange Act of 1934 at the time of such selection or the making
of such a grant.
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Awards and Grants
Stock Options. The Committee may grant incentive stock options under the
Code and non-qualified stock options. The option price per share may not be less
than the fair market value of the Common Stock on the date of the grant. The
Committee will fix the term of each option at the time of its grant, but such
term may not be more than ten years after the date of the grant. The Committee
may determine when an option becomes exercisable and may accelerate previously
established exercise rights. The Committee may permit payment of the option
exercise price in cash or in shares of Common Stock valued at their fair market
value on the exercise date. The Committee also may permit the exercise price to
be paid by the optionee's delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of the applicable sale or loan proceeds required to pay the
exercise price.
If an optionee's employment terminates for any reason other than death or
disability, then the optionee generally may exercise an option to the extent it
was exercisable at the time of the termination for a period of six months after
the termination (but not after the expiration date of the option). However, the
Committee has the power to terminate an optionee's rights under an outstanding
option if the Committee determines that the optionee's employment was terminated
for cause. If an optionee's employment terminates by reason of disability, then
the optionee's options generally will be exercisable for twelve months after the
termination to the extent that the exercise was permitted prior to or upon the
termination (but not after the expiration date of the option). If an optionee
dies while in the employ of the Company or a subsidiary, then the optionee's
options generally will be exercisable by the optionee's personal representative
or other successor for twelve months after the date of death to the extent that
the exercise was permitted prior to or upon the optionee's death (but not after
the expiration date of the option).
Stock Appreciation Rights. The Committee may grant stock appreciation
rights ("SAR's") which entitle the grantee to receive, upon the exercise of an
SAR, an award equal to all or a portion of the excess of (i) the fair market
value of a specified number of shares of Common Stock at the time of the
exercise over (ii) a specified price not less than the fair market value of the
Common Stock at the time the SAR was granted. An SAR may be granted
independently or in connection with a stock option grant. Upon the exercise of
an SAR, the applicable award may be paid in cash or in shares of Common Stock
(or a combination thereof) as the Committee may determine. The Committee will
fix the term of an SAR at the time of its grant, but such term may not be more
than ten years after the date of the grant. The Committee may determine when an
SAR becomes exercisable and may accelerate previously established exercise
rights.
The provisions of the 1999 Plan relating to exercisability of SAR's upon
the termination of a grantee's employment are similar to those discussed above
in connection with stock options.
Performance Unit Awards. The Committee may grant performance unit awards,
which entitle the grantees to receive future payments based upon and subject to
the achievement of preestablished long-term performance targets. In connection
with such awards, the Committee is required to establish (i) performance periods
of not less than two nor more than five years, (ii) the value of each
performance unit, and (iii) maximum and minimum performance targets to be
achieved during the performance period. The Committee may adjust previously
established performance targets or other terms and conditions of a performance
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unit award to reflect major unforeseen events, but such adjustments may not
increase the payment due upon attainment of the previously established
performance targets. Performance unit awards, to the extent earned, may be paid
in cash or shares of Common Stock (or a combination thereof) as the Committee
may determine.
If the employment of a grantee of a performance unit award terminates prior
to the end of an applicable performance period other than by reason of
disability or death, then the award generally terminates. However, the 1999 Plan
permits the Committee to make partial payments of performance unit awards if the
Committee determines such action to be equitable. If the employment of a grantee
of a performance unit award terminates as a result of the grantee's disability
or death prior to the end of an applicable performance period, then the
Committee may authorize the payment of all or a portion of the performance unit
award (to the extent earned in the case of disability) to the grantee or the
grantee's legal representative.
Restricted Stock Awards. The Committee may grant restricted stock awards
consisting of shares of Common Stock restricted against transfer, subject to a
substantial risk of forfeiture and to other terms and conditions established by
the Committee. The Committee must determine the restriction period applicable to
a restricted stock award and the amount, form, and time of payment (if any)
required from the grantee of a restricted stock award in consideration of the
issuance of the shares covered by such award. The Committee in its discretion
may provide for the lapse in installments of the restrictions applicable to
restricted stock awards and may waive the restrictions in whole or in part.
If the employment of a grantee of a restricted stock award terminates for
any reason while some or all of the shares covered by such award are still
restricted, the grantee's rights with respect to the restricted shares generally
terminate. However, the Committee has the discretion to provide for complete or
partial exemptions to such employment requirement.
Stock Bonus Awards. The Committee may grant a stock bonus award based upon
the performance of the Company, a subsidiary, or a segment thereof in terms of
preestablished objective financial criteria or performance goals or, in
appropriate cases, such other measures or standards of performance (including
but not limited to performance already accomplished) as the Committee may
determine. The Committee may adjust preestablished financial criteria or
performance goals to take into account unforeseen events or changes in
circumstances, but such adjustments may not increase the amount of a stock bonus
award. The Committee, in its discretion, may impose additional restrictions upon
the shares of Common Stock which are the subject of a stock bonus award.
Miscellaneous Provisions
Unless the 1999 Plan is sooner terminated by the Board, the 1999 Plan will
terminate on February 24, 2009. Awards or options outstanding at the time of the
termination of the 1999 Plan will remain in effect in accordance with their
terms. The Board may amend the 1999 Plan at any time; however, stockholder
approval must be obtained for any amendment for which such approval is required
by Rule 16b-3 under the Securities Exchange Act of 1934 or Sections 162(m) or
422 of the Code. The Company's obligation to deliver shares of Common Stock or
make cash payments under the 1999 Plan is subject to applicable tax withholding
requirements; in the discretion of the Committee, required tax withholding
amounts may be paid by the grantee in cash or shares of Common Stock having a
fair market value equal to the required tax withholding amount.
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Certain Federal Income Tax Consequences
The following brief description of certain federal income tax consequences
is based upon present federal income tax laws and regulations and does not
purport to be a complete description of the federal income tax consequences of
the 1999 Plan.
Incentive Stock Options. The grant of an incentive stock option under the
1999 Plan will not result in taxable income to the grantee or a tax deduction
for the Company. If the grantee holds the shares purchased upon the exercise of
an incentive stock option for at least one year after the purchase of the shares
and until at least two years after the option was granted, then the grantee's
sale of the shares will result in a long-term gain or loss (depending upon the
grantee's holding period), and the Company will not be entitled to any tax
deduction. If the grantee sells or otherwise transfers the shares before such
holding periods have elapsed, then the grantee generally will recognize ordinary
income and the Company would be entitled to a tax deduction in an amount equal
to the lesser of (i) the fair market value of the shares on the exercise date
minus the option price or (ii) the amount realized upon the disposition minus
the option price. Any gain in excess of such ordinary income portion would be
taxable as long-term or short-term capital gain depending upon the grantee's
holding period for the shares. The excess of the fair market value of the shares
received on the option exercise date over the option price is an item of tax
preference, potentially subject to the alternative minimum tax.
Non-Qualified Stock Options. The grant of a non-qualified stock option
under the 1999 Plan will not result in taxable income to the grantee or a tax
deduction for the Company. Upon the exercise of a non-qualified stock option,
the grantee will be taxed at ordinary income rates on the excess of the fair
market value of the shares received over the option exercise price, and the
Company generally will be entitled to a tax deduction in the same amount. The
exercise price of the non-qualified stock option plus the amount included in the
grantee's income as a result of the option exercise will be treated as the
grantee's basis in the shares received, and any gain or loss on the subsequent
sale of the shares will be treated as long-term or short-term capital gain or
loss depending upon the grantee's holding period for the shares. The grantee's
sale of shares acquired upon the exercise of a non-qualified stock option will
have no tax consequences to the Company.
Stock Appreciation Rights and Performance Unit Awards. The grant of an SAR
or a performance unit award under the 1999 Plan will not result in taxable
income to the grantee or a tax deduction for the Company. Upon the exercise of
an SAR or the receipt of cash or shares of Common Stock upon the payment of a
performance unit award, the grantee will recognize ordinary income and the
Company generally will be entitled to a tax deduction in an amount equal to the
fair market value of the shares plus any cash received.
Restricted Stock Awards. The grant of a restricted stock award should not
result in taxable income for the grantee or a tax deduction for the Company if
the shares of Common Stock transferred to the grantee are subject to
restrictions which create a substantial risk of forfeiture of the shares by the
grantee if certain conditions prescribed at the time of the grant are not
subsequently satisfied. However, the grantee may elect within 30 days after the
acquisition of the shares to recognize ordinary income on the date of the
acquisition in an amount equal to the excess (if any) of the fair market of the
shares on the date of the grant, determined without regard to the restrictions
imposed on such shares (other than restrictions which by their terms will never
lapse), over the amount (if any) paid for the shares. If the grantee does not
make the election referred to in the preceding sentence, then, when the
restrictions imposed upon the shares lapse or otherwise terminate, the grantee
of the shares will recognize ordinary income in an amount equal to the excess
(if any) of the fair market value of the shares on the date of such lapse or
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other termination over the amount (if any) paid for the shares. If and when the
grantee of a restricted stock award recognizes ordinary income with respect to
the shares covered by such award, the Company generally will be entitled to a
tax deduction in the same amount. The amount paid by the grantee for restricted
shares plus any amount recognized by the grantee as ordinary income under the
rules described above will be treated as the grantee's basis in the shares; when
the grantee sells the shares covered by a restricted share award following the
lapse or other termination of the restrictions, any gain or loss on such sale
will be treated as long-term or short-term capital gain or loss depending upon
the grantee's holding period. Any dividends paid to the grantee of restricted
shares while the shares are still subject to the restrictions would be treated
as compensation for federal income tax purposes.
Stock Bonus Awards. When a stock bonus award is paid to a grantee by the
delivery of shares of Common Stock, the grantee will recognize ordinary income
and the Company generally will be entitled to a tax deduction in an amount equal
to the fair market value of such shares at the time of such delivery. If,
however, such shares are subject to any restrictions, which create a substantial
risk of forfeiture, then the tax rules described above with respect to
restricted stock awards would be applicable.
Market Price
The closing price of the Common Stock on the Nasdaq Stock Market on March
1, 1999, was $22.25 per share.
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PROPOSAL NO. 3
APPROVAL OF APPOINTMENT OF AUDITORS
The Board of Directors has, upon the recommendation of the Audit Committee,
appointed the firm of Deloitte & Touche LLP to audit the Company's financial
statements for the fiscal year ending December 31, 1999, subject to ratification
by the stockholders of the Company. Deloitte & Touche LLP served as the
Company's auditors for the 1998 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 1998 between the Company
and its officers and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the 1998 Compensation Committee of the
Company's Board of Directors: Richard R. Jaros, 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. Jaros, Mr. Karnes, Mr. Parks and Mr. Ricks were
members of the 1998 Stock Option Plan Subcommittee of the Compensation Committee
which administered the Company's Stock Option Plan of 1989.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders for which consideration is desired at the 2000
annual meeting of stockholders of the Company must be received by the Company no
later than November 25, 1999, 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.
If a stockholder wishes to present a proposal for consideration at the 2000
annual meeting of stockholders of the Company without having such matter
included in the proxy statement of the Company for such annual meeting but does
not give the Company notice of such matter by February 15, 2000, then the
proxies solicited by the Board of Directors for such annual meeting may confer
discretionary authority on the persons holding such proxies to vote on such
matter in accordance with their judgment. Stockholder proposals should be sent
to the Secretary of the Company at the principal executive office of the
Company.
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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, 1998, 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. German and Mr. Sloma each filed one late report covering one transaction
each. In making these statements, the Company has relied solely upon a review of
Forms 3 and 4 furnished to the Company during its most recent fiscal year, Forms
5 furnished to the Company with respect to its most recent fiscal year, and
written representations from reporting persons that no Form 5 was required.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement. The
Company did not receive timely advance notice from any stockholder that such
stockholder intends to bring a matter before the Meeting; for such purpose,
timely advance notice means notice of the particular matter at least 45 days
before this year's date which corresponds to the date on which the Company first
mailed its proxy materials for last year's annual meeting of stockholders.
Therefore, if any matter not discussed in this Proxy Statement is properly
presented at the Meeting, the persons named in the accompanying proxy or their
substitutes will have discretionary authority to vote on such matter 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 $5,000, 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 1, 1999. 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 or as having
been incorporated herein by reference.
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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 11 and the
Performance Graph on page 10 shall not be incorporated by reference into any
such filings.
THE BOARD OF DIRECTORS
Omaha, Nebraska
March 25, 1999
A COPY OF THE FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCLUDING EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, DATA TRANSMISSION NETWORK
CORPORATION, 9110 WEST DODGE ROAD, SUITE 200, OMAHA, NEBRASKA 68114.
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Exhibit 1
To Proxy Statement
DATA TRANSMISSION NETWORK CORPORATION
1999 Stock Incentive Plan
1. Purpose. The purpose of the Data Transmission Network Corporation
1999 Stock Incentive Plan (the "Plan") is to foster and promote the long-term
financial success of the Company and its Subsidiaries and thereby increase
stockholder value by providing incentives to those full-time employees who are
likely to be responsible for achieving such success.
2. Certain Definitions.
"1989 Plan" means the Company's existing employee Stock Option Plan of
1989.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto. References to a particular section of the Code
shall include any regulations issued under such section.
"Committee" shall have the meaning provided in Section 3 of the Plan.
"Common Stock" means the Common Stock, $.001 par value per share, of
the Company.
"Company" means Data Transmission Network Corporation, a Delaware
corporation.
"Disability" means (i) with respect to the exercise of an Incentive
Stock Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code and (ii) for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a grantee
unable or incompetent to carry out the job responsibilities which such grantee
held or the tasks to which such grantee was assigned at the time the disability
was incurred and which is expected to be permanent or for an indefinite duration
exceeding one year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means, as determined by the Committee, the last
reported sale price on the principal national securities exchange on which the
Common Stock is listed or admitted to trading on the trading day for which the
determination is being made, or, if no such reported sale takes place on such
day, the average of the closing bid and asked prices on such day on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not admitted to trading on a
national securities exchange, the average of the closing bid and asked prices in
the over-the-counter market on the day for which the determination is being made
as reported through Nasdaq, or, if bid and asked prices for the Common Stock on
such day are not reported through Nasdaq, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in the Common Stock selected for such purpose by the
Committee, or, if none of the foregoing is applicable, then the fair market
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value of the Common Stock as determined in good faith by the Committee in its
sole discretion.
"Incentive Stock Option" means any stock option intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any stock option that is not
intended to be an Incentive Stock Option, including any stock option that
provides (as of the time such option is granted) that it will not be treated as
an Incentive Stock Option.
"Parent Corporation" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at the time of the
granting of the option, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"Performance Unit Award" means an award granted pursuant to Section 8.
"Plan Year" means the twelve-month period beginning on January 1 and
ending on December 31; provided, that the first Plan Year shall be a short Plan
Year beginning on the date the Plan becomes effective and ending on December 31,
1999.
"Restricted Stock Award" means an award of Common Stock granted
pursuant to Section 9.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act, as in effect from
time to time.
"Stock Appreciation Right" means an award granted pursuant to Section
7.
"Stock Bonus Award" means an award of Common Stock granted pursuant to
Section 10.
"Stock Option" means any option to purchase Common Stock granted
pursuant to Section 6.
"Subsidiary" means (i) as it relates to Incentive Stock Options, any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the option, each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain and (ii) for all other
purposes, a corporation, domestic or foreign, of which not less than 50% of the
voting shares are held by the Company or by a Subsidiary, whether or not such
corporation now exists or hereafter is organized or acquired by the Company or
by a Subsidiary.
3. Administration. The Plan shall be administered by a committee
composed solely of two or more members of the Board (the "Committee") selected
by the Board, each of whom shall qualify as a "Non-Employee Director" within the
meaning of Rule 16b-3 and as an "outside director" within the meaning of Section
162(m) of the Code.
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The Committee shall have authority to grant to eligible employees of the
Company or its Subsidiaries, pursuant to the terms of the Plan, (a) Stock
Options, (b) Stock Appreciation Rights, (c) Restricted Stock Awards, (d)
Performance Unit Awards, (e) Stock Bonus Awards, or (f) any combination of the
foregoing.
Subject to the applicable provisions of the Plan, the Committee shall have
authority to interpret the provisions of the Plan and to decide all questions of
fact arising in the application of such provisions; to select the full-time
employees to whom awards or options shall be granted under the Plan; to
determine whether and to what extent awards or options shall be granted under
the Plan; to determine the types of awards and options to be granted under the
Plan and the amount, size, terms and conditions of each such award or option; to
determine the time when awards or options shall be granted under the Plan; to
determine whether, to what extent and under what circumstances the payment of
Common Stock and other amounts payable with respect to an award granted under
the Plan shall be deferred either automatically or at the election of the
grantee; to determine the Fair Market Value of the Common Stock from time to
time; to authorize persons to execute on behalf of the Company any agreement
required to be entered into under the Plan; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as the
Committee from time to time shall deem advisable; and to make all other
determinations necessary or advisable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all decisions and
determinations made by the Committee pursuant to the provisions of the Plan
shall be made in the sole discretion of the Committee and shall be final and
binding on all persons, including but not limited to the Company and its
Subsidiaries, the full-time employees to whom awards and options are granted
under the Plan, the heirs and legal representatives of such employees, and the
personal representatives and beneficiaries of the estates of such employees.
The Committee may delegate to any officer or officers of the Company any of
the Committee's duties, powers, and authorities under the Plan upon such
conditions and with such limitations as the Committee may determine; provided,
that only the Committee may select for awards or options under the Plan, and
make grants of awards or options under the Plan to, full-time employees of the
Company or any Subsidiary who are subject to Section 16 of the Exchange Act at
the time of such selection or the making of such a grant.
4. Common Stock Subject to the Plan. Subject to adjustment pursuant to
Section 19, the maximum number of shares of Common Stock that may be issued
under the Plan is (i) 353,000 shares of Common Stock which remain available for
future option grants under the 1989 Plan, plus (ii) the number of shares subject
to stock options outstanding under the 1989 Plan that are forfeited, terminated,
canceled, acquired by the Company or expire unexercised, which maximum number
shall not exceed 1,930,000. The Company shall reserve and keep available for
issuance under the Plan such maximum number of shares of Common Stock, subject
to adjustment pursuant to Section 19. Such shares may consist in whole or in
part of authorized and unissued shares or treasury shares or any combination
thereof. Except as otherwise provided in the Plan, any shares subject to an
option or right which expires for any reason or terminates unexercised as to
such shares shall again be available for the grant of awards or options under
the Plan. If any shares of Common Stock have been pledged as collateral for
indebtedness incurred by an optionee in connection with the exercise of a Stock
Option and such shares are returned to the Company in satisfaction of such
indebtedness, then such shares shall again be available for the grant of awards
or options under the Plan.
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5. Eligibility to Receive Awards and Options. Awards and options may be
granted under the Plan to those full-time employees of the Company or any
Subsidiary who are responsible for or contribute to, or are likely to be
responsible for or contribute to, the growth and success of the Company or any
Subsidiary. The granting of an award or option under the Plan to an employee of
the Company or any Subsidiary shall conclusively evidence the Committee's
determination that such grantee meets one or more of the criteria referred to in
the preceding sentence. Directors of the Company or of any Subsidiary who are
not employees of the Company or any Subsidiary shall not be eligible to
participate in the Plan.
6. Stock Options. A Stock Option may be an Incentive Stock Option or a
Non-Qualified Stock Option. To the extent that any Stock Option does not qualify
as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option. Stock Options may be granted alone or in addition to other awards made
under the Plan. Stock Options shall be evidenced by agreements in such form as
the Committee shall approve from time to time. The agreements shall contain in
substance the following terms and conditions and may contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) Type of Option. Each option agreement shall identify the
Stock Option represented thereby as an Incentive Stock Option or a
Non-Qualified Stock Option, as the case may be.
(b) Option Price. The option exercise price per share shall
not be less than the Fair Market Value of the Common Stock on the date
the Stock Option is granted and in no event shall be less than the par
value of the Common Stock.
(c) Term. Each option agreement shall state the period or
periods of time within which the Stock Option may be exercised, in
whole or in part, which shall be such period or periods of time as the
Committee may determine at the time of the Stock Option grant;
provided, that no Stock Option granted under the Plan shall be
exercisable more than ten years after the date of its grant; and
provided further, that one-third of the shares covered by each Stock
Option granted under the Plan shall become exercisable on each of the
first three anniversaries of the date of its grant, unless the option
agreement specifically provides otherwise and except as such
exercisability is accelerated upon the death or Disability of the
optionee as provided in Section 6(e). The Committee shall have
authority to accelerate previously established exercise rights, subject
to the requirements set forth in the Plan, under such circumstances and
upon such terms and conditions as the Committee shall deem appropriate.
(d) Payment for Shares. The Committee may permit all or part
of the payment of the option exercise price to be made (i) in cash, by
check or by wire transfer or (ii) in shares of Common Stock (A) which
already are owned by the optionee and which are surrendered to the
Company in good form for transfer or (B) which are retained by the
Company from the shares of the Common Stock which would otherwise be
issued to the optionee upon the optionee's exercise of the Stock
Option. Such shares shall be valued at their Fair Market Value on the
date of exercise of the Stock Option. In lieu of payment in fractions
of shares, payment of any fractional share amount shall be made in cash
or check payable to the Company. The Committee also may provide that
the exercise price may be paid by delivering a properly executed
exercise notice in a form approved by the Committee together with
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irrevocable instructions to a broker to promptly deliver to the Company
the amount of the applicable sale or loan proceeds required to pay the
exercise price. No shares of Common Stock shall be issued to any
optionee upon the exercise of a Stock Option until the Company receives
full payment therefor as described above.
(e) Rights upon Termination of Employment. In the event that
an optionee ceases to be employed by the Company and all of its
Subsidiaries for any reason other than such optionee's death or
Disability, any rights of the optionee under any Stock Option then in
effect immediately shall terminate; provided, that the optionee (or the
optionee's legal representative) shall have the right to exercise the
Stock Option during its term within a period of six (6) months after
such termination of employment to the extent that the Stock Option was
exercisable at the time of such termination or within such other period
and subject to such other terms and conditions as may be specified by
the Committee. Notwithstanding the foregoing provisions of this Section
6(e), the optionee (and the optionee's legal representative) shall not
have any rights under any Stock Option, and the Company shall not be
obligated to sell or deliver shares of Common Stock (or have any other
obligation or liability) under any Stock Option, if the Committee shall
determine that the employment of the optionee with the Company or any
Subsidiary has been terminated for cause. In the event of such
determination, the optionee (and the optionee's legal representative)
shall have no right under any Stock Option to purchase any shares of
Common Stock regardless of whether the optionee (or the optionee's
legal representative) shall have delivered a notice of exercise prior
to the Committee's making of such determination. Any Stock Option may
be terminated entirely by the Committee at the time of or at any time
subsequent to a determination by the Committee under this Section 6(e)
which has the effect of eliminating the Company's obligation to sell or
deliver shares of Common Stock under such Stock Option.
In the event that an optionee ceases to be employed by the
Company and all of its Subsidiaries by reason of such optionee's
Disability, prior to the expiration of a Stock Option and without such
optionee's having fully exercised such Stock Option, such optionee or
such optionee's legal representative shall have the right to exercise
such Stock Option during its term within a period of twelve (12) months
after such termination of employment to the extent that such Stock
Option was exercisable at the time of such termination (as such
exercisability is accelerated pursuant to the next sentence) or within
such other period and subject to such other terms and conditions as may
be specified by the Committee. Notwithstanding the provisions of this
Section 6(e), unless otherwise specified in the Stock Option agreement,
in the event that an optionee ceases to be employed by the Company and
all of its Subsidiaries by reason of such optionee's Disability, each
Stock Option granted more than twelve (12) months prior to such event
shall become immediately exercisable in full.
In the event that an optionee ceases to be employed by the
Company and all of its Subsidiaries by reason of such optionee's death,
prior to the expiration of a Stock Option and without such optionee's
having fully exercised such Stock Option, the personal representative
of such optionee's estate or the person who acquired the right to
exercise such Stock Option by bequest or inheritance from such optionee
shall have the right to exercise such Stock Option during its term
within a period of twelve (12) months after the date of such optionee's
death to the extent that such Stock Option was exercisable at the time
of such death (as such exercisability is accelerated pursuant to the
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next sentence) or within such other period and subject to such other
terms and conditions as may be specified by the Committee.
Notwithstanding the provisions of this Section 6(e), unless otherwise
specified in the Stock Option agreement, in the event that an optionee
dies, each Stock Option granted more than twelve (12) months prior to
such death shall become immediately exercisable in full.
To the extent that the aggregate Fair Market Value (determined as of
the time the option is granted) of the Common Stock with respect to which
Incentive Stock Options granted under the Plan (and all other plans of the
Company and its Subsidiaries) become exercisable for the first time by any
individual in any calendar year exceeds $100,000, such Stock Options shall be
treated as Non-Qualified Stock Options. No Incentive Stock Option shall be
granted to any employee if, at the time the option is granted, the employee (in
his or her own right or by reason of the attribution rules applicable under
Section 424(d) of the Code) owns more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent Corporation or
Subsidiary unless at the time such option is granted the option price is at
least 110% of the Fair Market Value of the stock subject to such Stock Option
and such Stock Option by its terms is not exercisable after the expiration of
five years from the date of its grant.
7. Stock Appreciation Rights. Stock Appreciation Rights shall enable
the grantees thereof to benefit from increases in the Fair Market Value of
shares of Common Stock and shall be evidenced by agreements in such form as the
Committee shall approve from time to time. The agreements shall contain in
substance the following terms and conditions and may contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) Award. A Stock Appreciation Right shall entitle the
grantee, subject to such terms and conditions as the Committee may
prescribe, to receive upon the exercise thereof an award equal to all
or a portion of the excess of (i) the Fair Market Value of a specified
number of shares of Common Stock at the time of the exercise of such
right over (ii) a specified price which shall not be less than the Fair
Market Value of the Common Stock at the time the right is granted or,
if connected with a previously granted Stock Option, not less than the
Fair Market Value of the Common Stock at the time such Stock Option was
granted. Subject to the limitations set forth in Section 4, such award
may be paid by the Company in cash, shares of Common Stock (valued at
their then Fair Market Value) or any combination thereof, as the
Committee may determine. Stock Appreciation Rights may be, but are not
required to be, granted in connection with a previously or
contemporaneously granted Stock Option. In the event of the exercise of
a Stock Appreciation Right, the number of shares reserved for issuance
under the Plan shall be reduced by the number of shares covered by the
Stock Appreciation Right as to which such exercise occurs.
(b) Term. Each agreement shall state the period or periods of
time within which the Stock Appreciation Right may be exercised, in
whole or in part, subject to such terms and conditions prescribed for
such purpose by the Committee; provided, that no Stock Appreciation
Right shall be exercisable more than ten years after the date of its
grant; and provided further, that one-third of each Stock Appreciation
Right granted under the Plan shall become exercisable on each of the
first three anniversaries of the date of its grant, unless the
agreement specifically provides otherwise and except as such
exercisability is accelerated upon the death or Disability of the
grantee as provided in Section 7(c). The Committee shall have authority
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to accelerate previously established exercise rights, subject to the
requirements set forth in the Plan, under such circumstances and upon
such terms and conditions as the Committee shall deem appropriate.
(c) Rights upon Termination of Employment. In the event that a
grantee of a Stock Appreciation Right ceases to be employed by the
Company and all of its Subsidiaries for any reason other than such
grantee's death or Disability, any rights of the grantee under any
Stock Appreciation Right then in effect immediately shall terminate;
provided, that the grantee (or the grantee's legal representative)
shall have the right to exercise the Stock Appreciation Right during
its term within a period of six (6) months after such termination of
employment to the extent that the Stock Appreciation Right was
exercisable at the time of such termination or within such other period
and subject to such other terms and conditions as may be specified by
the Committee. Notwithstanding the foregoing provisions of this Section
7(c), the grantee (and the grantee's legal representative) shall not
have any rights under any Stock Appreciation Right, and the Company
shall not be obligated to pay or deliver any cash, Common Stock or any
combination thereof (or have any other obligation or liability) under
any Stock Appreciation Right, if the Committee shall determine that the
employment of the grantee with the Company or any Subsidiary has been
terminated for cause. In the event of such determination, the grantee
(and the grantee's legal representative) shall have no right under any
Stock Appreciation Right regardless of whether the grantee (or the
grantee's legal representative) shall have delivered a notice of
exercise prior to the Committee's making of such determination. Any
Stock Appreciation Right may be terminated entirely by the Committee at
the time of or at any time subsequent to a determination by the
Committee under this Section 7(c) which has the effect of eliminating
the Company's obligations under such Stock Appreciation Right.
In the event that a grantee of a Stock Appreciation Right
ceases to be employed by the Company and all of its Subsidiaries by
reason of such grantee's Disability, prior to the expiration of a Stock
Appreciation Right and without such grantee's having fully exercised
such Stock Appreciation Right, such grantee or such grantee's legal
representative shall have the right to exercise such Stock Appreciation
Right during its term within a period of twelve (12) months after such
termination of employment to the extent that such Stock Appreciation
Right was exercisable at the time of such termination (as such
exercisability is accelerated pursuant to the next sentence) or within
such other period and subject to such other terms and conditions as may
be specified by the Committee. Notwithstanding the provisions of this
Section 7(c), unless otherwise specified in the Stock Appreciation
Right agreement, in the event that a grantee ceases to be employed by
the Company and all of its Subsidiaries by reason of such grantee's
Disability, each Stock Appreciation Right granted more than twelve (12)
months prior to such event shall become immediately exercisable in
full.
In the event that a grantee ceases to be employed by the
Company and all of its Subsidiaries by reason of such grantee's death,
prior to the expiration of a Stock Appreciation Right and without such
grantee's having fully exercised such Stock Appreciation Right, the
personal representative of the grantee's estate or the person who
acquired the right to exercise such Stock Appreciation Right by bequest
or inheritance from such grantee shall have the right to exercise such
Stock Appreciate Right during its term within a period of twelve (12)
months after the date of such grantee's death to the extent that such
Stock Appreciation Right was exercisable at the time of such death (as
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such exercisability is accelerated pursuant to the next sentence) or
within such other period and subject to such other terms and conditions
as may be specified by the Committee. Notwithstanding the provisions of
this Section 7(c), unless otherwise specified in the Stock Appreciation
Right agreement, in the event that a grantee dies, each Stock
Appreciation Right granted more than twelve (12) months prior to such
death shall become immediately exercisable in full.
8. Performance Unit Awards. Performance Unit Awards shall entitle the
grantees thereof to receive future payments based upon and subject to the
achievement of preestablished long-term performance targets and shall be
evidenced by agreements in such form as the Committee shall approve from time to
time. The agreements shall contain in substance the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) Performance Period. The Committee shall establish with
respect to each Performance Unit Award a performance period of not
fewer than two years nor more than five years.
(b) Unit Value. The Committee shall establish with respect to
each Performance Unit Award a value for each unit which shall not
change thereafter or which may vary thereafter on the basis of criteria
specified by the Committee.
(c) Performance Targets. The Committee shall establish with
respect to each Performance Unit Award maximum and minimum performance
targets to be achieved during the applicable performance period. The
achievement of the maximum targets shall entitle a grantee to payment
with respect to the full value of a Performance Unit Award. The
achievement of less than the maximum targets, but in excess of the
minimum targets, shall entitle a grantee to payment with respect to a
portion of a Performance Unit Award according to the level of
achievement of the applicable targets as specified by the Committee. To
the extent the Committee deems necessary or appropriate to protect
against the loss of deductibility pursuant to Section 162(m) of the
Code, such targets shall be established in conformity with the
requirements of Section 162(m) of the Code.
(d) Performance Measures. Performance targets established by
the Committee shall relate to corporate, division, subsidiary, group or
unit performance in terms of objective financial criteria or
performance goals which satisfy the requirements of Section 162(m) of
the Code or, with respect to grantees not subject to Section 162(m) of
the Code, such other measures or standards of performance as the
Committee may determine. Multiple targets may be used and may have the
same or different weighting, and the targets may relate to absolute
performance or relative performance measured against other companies,
businesses or indexes.
(e) Adjustments. At any time prior to the payment of a
Performance Unit Award, the Committee may adjust previously established
performance targets or other terms and conditions of such Performance
Unit Award, including the Company's or another company's financial
performance for Plan purposes, in order to reduce or eliminate, but not
to increase, the payment with respect to a Performance Unit Award that
otherwise would be due upon the attainment of such previously
established performance targets. Such adjustments shall be made to
reflect major unforeseen events such as changes in laws, regulations or
accounting practices, mergers, acquisitions or divestitures or other
extraordinary, unusual or nonrecurring items or events.
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(f) Payment of Performance Unit Awards. Upon the conclusion of
each performance period, the Committee shall determine the extent to
which the applicable performance targets have been attained and any
other terms and conditions have been satisfied for such period and
shall provide such certification thereof as may be necessary to satisfy
the requirements of Section 162(m) of the Code. The Committee shall
determine what, if any, payment is due on a Performance Unit Award and,
subject to the limitations set forth in Section 4, whether such payment
shall be made in cash, shares of Common Stock (valued at their then
Fair Market Value) or a combination thereof. Payment of a Performance
Unit Award shall be made in a lump sum or in installments, as
determined by the Committee, commencing as promptly as practicable
after the end of the performance period unless such payment is deferred
upon such terms and conditions as may be specified by the Committee.
(g) Termination of Employment. In the event that a grantee of
a Performance Unit Award ceases to be employed by the Company and all
of its Subsidiaries for any reason other than such grantee's death or
Disability, any rights of such grantee under any Performance Unit Award
then in effect whose performance period has not ended shall terminate
immediately; provided, that the Committee may authorize the partial
payment of any such Performance Unit Award if the Committee determines
such action to be equitable.
In the event that a grantee of a Performance Unit Award ceases
to be employed by the Company and all of its Subsidiaries by reason of
such grantee's death or Disability, any rights of such grantee under
any Performance Unit Award then in effect whose performance period has
not ended shall terminate immediately; provided, that the Committee may
authorize the payment to such grantee or such grantee's legal
representative of all or any portion of such Performance Unit Award to
the extent earned under the applicable performance targets, even though
the applicable performance period has not ended, upon such terms and
conditions as may be specified by the Committee.
9. Restricted Stock Awards. Restricted Stock Awards shall consist of
shares of Common Stock restricted against transfer, subject to a substantial
risk of forfeiture and to other terms and conditions intended to further the
purpose of the Plan as the Committee may determine, and shall be evidenced by
agreements in such form as the Committee shall approve from time to time. The
agreements shall contain in substance the following terms and conditions and may
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem appropriate:
(a) Restriction Period. The Common Stock covered by Restricted
Stock Awards shall be subject to the applicable restrictions
established by the Committee over such period as the Committee shall
determine. To the extent the Committee deems necessary or appropriate
to protect against the loss of deductibility pursuant to Section 162(m)
of the Code, Restricted Stock Awards also may be subject to the
attainment of one or more preestablished performance objectives which
relate to corporate, subsidiary, division, group or unit performance in
terms of objective financial criteria or performance goals which
satisfy the requirements of Section 162(m) of the Code; provided, that
any such preestablished financial criteria or performance goals
subsequently may be adjusted by the Committee to reduce or eliminate,
but not to increase, a Restricted Stock Award in order to take into
account unforeseen events or changes in circumstances.
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(b) Restriction upon Transfer. Shares of Common Stock covered
by Restricted Stock Awards may not be sold, assigned, transferred,
exchanged, pledged, hypothecated or otherwise encumbered, except as
provided in the Plan or in any Restricted Stock Award agreement entered
into between the Company and a grantee, during the restriction period
applicable to such shares. Notwithstanding the foregoing provisions of
this Section 9(b), and except as otherwise provided in the Plan or the
applicable Restricted Stock Award agreement, a grantee of a Restricted
Stock Award shall have all of the other rights of a holder of Common
Stock including but not limited to the right to receive dividends and
the right to vote such shares.
(c) Payment. The Committee shall determine the amount, form
and time of payment, if any, that shall be required from the grantee of
a Restricted Stock Award in consideration of the issuance and delivery
of the shares of Common Stock covered by such Restricted Stock Award.
(d) Certificates. Each certificate issued in respect of shares
of Common Stock covered by a Restricted Stock Award shall be registered
in the name of the grantee and shall bear the following legend (in
addition to any other legends which may be appropriate):
"This certificate and the shares of stock represented
hereby are subject to the terms and conditions
(including forfeiture provisions and restrictions
against transfer) contained in the Data Transmission
Network Corporation 1999 Stock Incentive Plan and a
Restricted Stock Award Agreement entered into between
the registered owner and Data Transmission Network
Corporation. Release from such terms and conditions
may be obtained only in accordance with the
provisions of such Plan and Agreement, a copy of each
of which is on file in the office of the Secretary of
Data Transmission Network Corporation."
The Committee may require the grantee of a Restricted Stock Award to
enter into an escrow agreement providing that the certificates
representing the shares covered by such Restricted Stock Award will
remain in the physical custody of an escrow agent until all
restrictions are removed or expire. The Committee also may require that
the certificates held in such escrow be accompanied by a stock power,
endorsed in blank by the grantee, relating to the Common Stock covered
by such certificates.
(e) Lapse of Restrictions. Except for preestablished
performance objectives established with respect to Restricted Stock
Awards to grantees subject to Section 162(m) of the Code, the Committee
may provide for the lapse of restrictions applicable to Common Stock
subject to Restricted Stock Awards in installments and may waive such
restrictions in whole or in part based upon such factors and such
circumstances as the Committee shall determine. Upon the lapse of such
restrictions, certificates for shares of Common Stock, free of the
restrictive legend set forth in Section 9(c), shall be issued to the
grantee or the grantee's legal representative. The Committee shall have
authority to accelerate the expiration of the applicable restriction
period with respect to all or any portion of the shares of Common Stock
covered by a Restricted Stock Award except, with respect to grantees
subject to Section 162(m) of the Code, to the extent such acceleration
would result in the loss of the deductibility of such Restricted Stock
Award pursuant to Section 162(m) of the Code.
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(f) Termination of Employment. In the event that a grantee of
a Restricted Stock Award ceases to be employed by the Company and all
of its Subsidiaries for any reason, any rights of such grantee with
respect to shares of Common Stock that remain subject to restrictions
under such Restricted Stock Award shall terminate immediately, and any
shares of Common Stock covered by a Restricted Stock Award with
unlapsed restrictions shall be subject to reacquisition by the Company
upon the terms set forth in the applicable agreement with such grantee.
The Committee may provide for complete or partial exceptions to such
employment requirement if the Committee determines such action to be
equitable.
10. Stock Bonus Awards. The Committee may grant a Stock Bonus Award to
an eligible grantee under the Plan based upon corporate, division, subsidiary,
group or unit performance in terms of preestablished objective financial
criteria or performance goals or, with respect to participants not subject to
Section 162(m) of the Code, such other measures or standards of performance
(including but not limited to performance already accomplished) as the Committee
may determine; provided, that any such preestablished financial criteria or
performance goals subsequently may be adjusted to reduce or eliminate, but not
to increase, a Stock Bonus Award in order to take into account unforeseen events
or changes in circumstances.
If appropriate in the sole discretion of the Committee, Stock Bonus
Awards shall be evidenced by agreements in such form as the Committee shall
approve from time to time. In addition to any applicable performance goals or
standards and subject to the terms of the Plan, shares of Common Stock which are
the subject of a Stock Bonus Award may be (i) subject to additional restrictions
(including but not limited to restrictions on transfer) or (ii) granted directly
to a grantee free of any restrictions, as the Committee shall deem appropriate.
11. General Restrictions. Each award or grant under the Plan shall be
subject to the requirement that if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (ii) the consent or approval of any governmental regulatory
body, or (iii) an agreement by the grantee of an award or grant with respect to
the disposition of the shares of Common Stock subject or related thereto is
necessary or desirable as a condition of, or in connection with, such award or
grant or the issuance or purchase of shares of Common Stock thereunder, then
such award or grant may not be consummated and any rights thereunder may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, approval or agreement shall have been effected or obtained upon
conditions acceptable to the Committee. Awards or grants under the Plan shall be
subject to such additional terms and conditions, not inconsistent with the Plan,
as the Committee in its sole discretion deems necessary or desirable, including
but not limited to such terms and conditions as are necessary to enable a
grantee to avoid any short-swing profit recapture liability under Section 16 of
the Exchange Act.
12. Single or Multiple Agreements. Multiple forms of awards or grants
or combinations thereof may be evidenced either by a single agreement or by
multiple agreements, as determined by the Committee.
13. Rights of a Stockholder. Unless otherwise provided by the Plan, the
grantee of any award or grant under the Plan shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject or
related to such award or grant unless and until certificates for such shares of
Common Stock are issued to such grantee.
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14. No Right to Continue Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any grantee the
right to continue in the employment of the Company or any Subsidiary or affect
any right which the Company or any Subsidiary may have to terminate the
employment of any grantee with or without cause.
15. Withholding. The Company's obligation to (i) deliver shares of
Common Stock or pay cash upon the exercise of any Stock Option or Stock
Appreciation Right, (ii) deliver shares of Common Stock or pay cash in payment
of any Performance Unit Award, (iii) deliver stock certificates upon the vesting
of any Restricted Stock Award, and (iv) deliver shares of Common Stock upon the
grant of any Stock Bonus Award shall be subject to applicable federal, state and
local tax withholding requirements. In the discretion of the Committee, amounts
required to be withheld for taxes may be paid by the grantee in cash or shares
of Common Stock (either through the surrender of previously held shares of
Common Stock or the withholding of shares of Common Stock otherwise issuable
upon the exercise or payment of such Stock Option, Stock Appreciation Right or
Award) having a Fair Market Value equal to the required tax withholding amount
and upon such other terms and conditions as the Committee shall determine;
provided, that any election by a grantee subject to Section 16(b) of the
Exchange Act to pay any tax withholding in shares of Common Stock shall be
subject to and must comply with any applicable rules under Section 16(b) of the
Exchange Act.
16. Indemnification. No member of the Board or the Committee, nor any
officer or employee of the Company or a Subsidiary acting on behalf of the Board
or the Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan; and all
members of the Board or the Committee and each and any officer or employee of
the Company or any Subsidiary acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
17. Non-Assignability. No award or grant under the Plan shall be
assignable or transferable by the recipient thereof except by will, by the laws
of descent and distribution or, in the case of awards or grants other than
Incentive Stock Options, pursuant to a qualified domestic relations order or by
such other means (if any) as the Committee may approve from time to time. No
right or benefit under the Plan shall in any manner be subject to the debts,
contracts, liabilities or torts of the person entitled to such right or benefit.
18. Nonuniform Determinations. The Committee's determinations under the
Plan (including but not limited to determinations of the persons to receive
awards or grants, the form, amount and timing of such awards or grants, the
terms and provisions of such awards or grants and the agreements evidencing them
and the establishment of values and performance targets) need not be uniform and
may be made by the Committee selectively among the persons who receive, or are
eligible to receive, awards or grants under the Plan, whether or not such
persons are similarly situated.
19. Adjustments. In the event of any change in the outstanding shares
of Common Stock, by reason of a stock dividend or distribution, stock split,
recapitalization, merger, reorganization, consolidation, split-up, spin-off,
combination of shares, exchange of shares or other change in corporate structure
affecting the Common Stock, the Committee shall make appropriate adjustments in
(a) the aggregate number of shares of Common Stock (i) reserved for issuance
under the Plan, (ii) for which grants or awards may be made to an individual
grantee and (iii) covered by outstanding awards and grants denominated in shares
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or units of Common Stock, (b) the exercise or other applicable price related to
outstanding awards or grants and (c) the appropriate Fair Market Value and other
price determinations relevant to outstanding awards or grants and shall make
such other adjustments as may be equitable under the circumstances; provided,
that the number of shares subject to any award or grant always shall be a whole
number.
20. Terms of Payment. Subject to any other applicable provisions of the
Plan and to any applicable laws, whenever payment by a grantee is required with
respect to shares of Common Stock which are the subject of an award or grant
under the Plan, the Committee shall determine the time, form and manner of such
payment, including but not limited to lump-sum payments and installment payments
upon such terms and conditions as the Committee may prescribe. Installment
payment obligations of a grantee may be evidenced by full-recourse,
limited-recourse or non-recourse promissory notes or other instruments, with or
without interest and with or without collateral or other security as the
Committee may determine.
21. Termination and Amendment. The Board may terminate the Plan or
amend the Plan or any portion thereof at any time, including but not limited to
amendments to the Plan necessary to comply with the requirements of Section
16(b) of the Exchange Act, Section 162(m) of the Code, Section 422 of the Code
or any regulations issued under any of such statutory provisions. The
termination or any modification or amendment of the Plan shall not, without the
consent of a grantee, adversely affect such grantee's rights under an award or
grant previously made to such grantee under the Plan. The Committee may amend
the terms of any award or grant previously made under the Plan, prospectively or
retroactively; but, except as otherwise expressly permitted by the Plan and
subject to the provisions of Section 19, no such amendment shall adversely
affect the rights of the grantee of such award or grant without such grantee's
consent. Notwithstanding the foregoing provisions of this Section 21,
stockholder approval of any action referred to in this Section 21 shall be
required whenever necessary to satisfy the applicable requirements of Section
16(b) of the Exchange Act, Section 162(m) of the Code, Section 422 of the Code
or any regulations issued under any of such statutory provisions.
22. Severability. With respect to participants subject to Section 16 of
the Exchange Act, (i) the Plan is intended to comply with all applicable
conditions of Rule 16b-3 or any successor to such rule, (ii) all transactions
involving grantees who are subject to Section 16(b) of the Exchange Act are
subject to such conditions, regardless of whether the conditions are expressly
set forth in the Plan and (iii) any provision of the Plan that is contrary to a
condition of Rule 16b-3 shall not apply to grantees who are subject to Section
16(b) of the Exchange Act. If any of the terms or provisions of the Plan, or
awards or grants made under the Plan, conflict with the requirements of Section
162(m) or Section 422 of the Code with respect to awards or grants subject to or
governed by Section 162(m) or Section 422 of the Code, as the case may be, then
such terms or provisions shall be deemed inoperative to the extent they so
conflict with the requirements of Section 162(m) or Section 422 of the Code, as
the case may be. With respect to an Incentive Stock Option, if the Plan does not
contain any provision required to be included in the Plan under Section 422 of
the Code (as amended from time to time) or any successor to such section, then
such provision shall be deemed to be incorporated in the Plan with the same
force and effect as if such provision had been expressly set out in the Plan.
23. Effect on Other Plans. Participation in the Plan shall not affect
an employee's eligibility to participate in any other benefit or incentive plan
of the Company or any Subsidiary. Any grants or awards made pursuant to the Plan
shall not be taken into account in determining the benefits provided or to be
36
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provided under any other plan of the Company or any Subsidiary unless otherwise
specifically provided in such other plan.
24. Term of Plan. The Plan was approved by the Board on, and shall be
effective as of, February 25 ,1999, subject only to the approval of the Plan by
the stockholders of the Company not later than December 31, 1999, and shall
terminate for purposes of further grants on the earlier of February 24, 2009, or
the effective date of the termination of the Plan by the Board pursuant to
Section 21. No awards or options may be granted under the Plan after the
termination of the Plan, but such termination shall not affect any awards or
options outstanding at the time of such termination or the authority of the
Committee to continue to administer the Plan apart from the making of further
grants.
25. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of Delaware.
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