SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
[Amendment
No.___]
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
x Preliminary
Proxy
Statement
o Confidential,
for Use of
the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive
Proxy
Statement
o Definitive
Additional
Materials
o Soliciting
Material
under §
240.14a-12
CARDINAL
COMMUNICATIONS, INC
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee
required.
o Fee
computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)
Title
of each class of securities to which transaction applies:
2)
Aggregate number of securities to which transaction applies:
3)
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the Ñling fee is
calculated and state how it was determined):
4)
Proposed maximum aggregate value of transaction:
5)
Total
fee paid:
o Fee
paid previously with
written preliminary materials.
o Check
box if any part of
the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the
filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the
date of
its filing.
1)
Amount
Previously Paid:
2)
Form
Schedule or Registration Statement No.:
3)
Filing
Party:
4)
Date
Filed:
Cardinal
Communications, Inc.
390
Interlocken Crescent, Suite 900
Broomfield,
Colorado 80021
Telephone
(303) 285-5379
NOTICE
OF ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD
JUNE 6, 2006
To
Our
Shareholder:
The
Annual Meeting of Shareholders of Cardinal Communications, Inc. (the “Company”)
will be held on Tuesday, June 6, 2005, at 10:00 a.m. (Local Time), at the Omni
Interlocken Resort, 500
Interlocken Boulevard,
Broomfield, Colorado 80021, for the following purposes:
| (1) |
ELECTION
OF EIGHT DIRECTORS.
To elect the Eight persons listed in the Proxy Statement that accompanies
this Notice to serve as directors of the Company until our next annual
meeting of shareholders, or until their respective successors are
elected
and qualified.
|
| (2) |
RATIFICATION
AND APPROVAL OF AUDITORS.
To
ratify the selection of AJ.
Robbins, PC as
the Company’s independent auditors for the fiscal year ending December 31,
2006.
|
| (3) |
APPROVAL
OF REVERSE COMMON STOCK SPLIT.
To give our Board of Directors the discretionary authority, prior
to the
next annual meeting of shareholders, if the Board deems it in the
best
interest of the Shareholders, to amend our Articles of Incorporation
to
effect a reverse stock split of
one of the following amounts: i) one share of common stock for five
shares
of common stock; ii) one share of common stock for ten shares of
common
stock, iii) one share of common stock for twenty shares of common
stock,
or iv) one share of common stock for thirty shares of common
stock.
|
| (4) |
APPROVAL
OF FORWARD COMMON STOCK SPLIT. To give our Board of Directors the
discretionary authority, prior to the next annual meeting of shareholders,
if the Board deems it in the best interest of the Shareholders, to
amend
our Articles of Incorporation to effect a forward stock split of
two
common shares of common stock for each one share of common stock.
|
| (5) |
OTHER
BUSINESS. To transact such other business as may properly come before
the
meeting or any adjournment or adjournments
thereof.
|
Shareholders
of record at the close of business on Friday, May 12, 2006, are entitled to
notice of and to vote at the Annual Meeting and at any continuation or
adjournments thereof.
All
shareholders
are
cordially invited to attend the Annual Meeting in person. Your vote is
important. Please
fill in, date, sign and return the enclosed proxy in the return envelope as
promptly as possible, whether or not you plan to attend the Annual
Meeting.
Your
promptness in returning the proxy will assist in the expeditious and orderly
processing of the proxies and will assist in ensuring that a quorum is present
or represented. Even though you return your proxy, you may nevertheless attend
the Annual Meeting and vote your shares in person if you wish. If you want
to
revoke your proxy at a later time for any reason, you may do so in the manner
described in the attached Proxy Statement.
| |
By
Order of the Board of Directors
|
| |
|
| |
/s/
Edouard A. Garneau
|
| |
President
& CEO
|
| |
|
Cardinal
Communications, Inc.
390
Interlocken Crescent, Suite 900
Broomfield,
Colorado 80021
Telephone
(303) 285-5379
________________
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD
ON JUNE
6, 2006
VOTING
AND PROXY
This
Proxy Statement is furnished to holders of Common Stock, par value $.0001 per
share (the “Common Stock”), Series
A
Preferred Stock, par value $.0001 per share (the “Series A Stock”) and
Series B Preferred Stock, par value $.0001 per share (the “Series B Stock”), of
Cardinal Communications, Inc., a Nevada corporation (the “Company”), in
connection with the solicitation of the accompanying proxy on behalf of the
Board of Directors of the Company (the “Board”) for use at the 2006 Annual
Meeting of the Company’s shareholders (the “Annual Meeting”) and at any
adjournment(s) or postponement(s) thereof. The Annual Meeting will be held
at
the Omni Interlocken Resort, 500 Interlocken Boulevard, Broomfield, Colorado
80021, on June 6, 2006, at 10:00 a.m. (local time), for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders (the “Notice”).
When
proxies in the accompanying form are properly executed and received, the shares
represented thereby will be voted at the Annual Meeting in accordance with
the
directions noted thereon. If no direction is indicated on the proxy, the shares
represented thereby will be voted (i) for the election of the Board’s nominees
as directors as set forth in the Proxy Statement; (ii) for the ratification
of
the selection of AJ.
Robbins, PC as
the
Company’s independent auditors for the fiscal year ending December 31, 2006;
(iii) to give our Board of Directors the discretionary authority, if the Board
deems it in the best interest of the Shareholders, to amend our Articles of
Incorporation to effect a reverse stock split prior to the next annual meeting
of shareholders of one of the following amounts: a)one share of common stock
for
five shares of common stock; b) one share of common stock for ten shares of
common stock, c) one share of common stock for twenty shares of common stock
or
d) one share of common stock for thirty shares of common stock; and (iv) to
give
our Board of Directors the discretionary authority, if the Board deems it in
the
best interest of the Shareholders, prior to the next annual meeting of
shareholders, to amend our Articles of Incorporation to effect a forward stock
split of two common shares of common stock for each one share of common
stock.
Securities
Transfer Corporation (“STC”) is assisting us in this solicitation of proxies.
Questions or requests for proxy materials can be directed to them
at:
Securities
Transfer Corporation
2591
Dallas Parkway, Suite 102
Frisco,
Texas 75034
Or
call:
(469) 633-0101
Or
Fax:
(469) 633-0088
Many
of
the Company’s shareholders hold their shares in “street-name” in the name of a
brokerage firm or bank. If you hold your shares in “street-name,” please note
that only your brokerage firm or bank can sign a proxy on your behalf, and
only
upon receipt of your specific instructions. The Board urges you to contact
the
person responsible for your account today, and instruct them to execute a proxy
in favor of the proposals described in this Proxy Statement.
If
you
hold your shares in more than one type of account or if your shares are
registered differently, you may receive more than one proxy. Please sign and
return all proxies that you receive.
This
Proxy Statement and the accompanying proxy are first being mailed to
shareholders on or about __________, 2006.
REVOCABILITY
OF PROXY AND VOTING OF SHARES
Any
shareholder giving a proxy has the power to revoke it at any time before it
is
exercised. The proxy may be revoked before it is exercised by sending a written
revocation or a duly executed proxy bearing a later date to the Company’s
Secretary at our principal executive offices at 390 Interlocken Crescent, Suite
900, Broomfield, Colorado 80021.The proxy may also be revoked by attending
the
meeting and voting in person.
If
it is
not revoked, the proxy will be voted at the meeting in accordance with the
shareholder’s instructions indicated on the proxy card. If
no instructions are indicated, the proxy will be voted FOR the approval of
all
of the proposals set forth herein. We
currently know of no other matters to be considered at the Annual Meeting of
Shareholders. If,
however, any other matters come before the Annual Meeting of Shareholders,
or
any adjournment or adjournments thereof, the persons named in the proxy will
vote the proxy in accordance with their best judgment on any such
matter.
RECORD
DATE, VOTING RIGHTS AND OUTSTANDING SHARES
The
record date for the determination of shareholders entitled to notice of and
to
vote at the Annual Meeting was the close of business on May 12, 2006 (the
“Record Date”).
Each
share of Common Stock outstanding on the Record Date will be entitled to one
vote on all matters to be acted upon at the Annual Meeting. On the Record Date,
there are _______ shares of Common Stock outstanding.
Each
share of Series A Stock will be entitled to vote on all matters to be acted
upon
at the Annual Meeting. The Series A Stock holders vote as if their shares have
been converted to Common Stock as of the Record Date according to the conversion
features of the Series A Stock contained in the Company’s Articles of
Incorporation. Accordingly, the Series A Stockholders are entitled to 2,000
votes per share. On the Record Date, there are _______ shares of Series A
Stock outstanding, entitled to cast ____________ votes at the Annual Meeting
or
by Proxy.
Each
share of Series B Stock will be entitled to vote on all matters to be acted
upon
at the Annual Meeting. The Series B Stock holders vote as if their shares have
been converted to Common Stock as of the Record Date according to the conversion
features of the Series B Stock contained in the Company’s Articles of
Incorporation. Accordingly, the Series B Stockholders are entitled to 100 votes
per share of Series B Stock. On the Record Date, there are __________ shares
of
Series B Stock outstanding, entitled to cast ___________ votes at the
Annual Meeting or by Proxy.
Therefore,
as of the Record Date, there is estimated to be a total
of __________ votes
represented by the holders of Common Stock, Series A Stock and Series B Stock.,
therefore a total of ________ votes
in
person or by proxy is estimated to constitute a quorum at the meeting.
There
are
no cumulative voting rights with respect to the Common Stock the Series A Stock,
or the Series B Stock. The presence, in person or by proxy, of holders of a
majority of the outstanding shares of Common Stock, Series A Stock and Series
B
Stock entitled to vote at the Annual Meeting is necessary to constitute a quorum
to transact business. Assuming the presence of a quorum, directors will be
elected by a plurality of the votes cast. To approve any other matter to be
presented at the Annual Meeting, the number of votes cast in favor of the matter
must exceed the number of votes cast in opposition to the matter.
Certain
of our members of our Board of Directors and other shareholders of the Company
are parties to an agreement that contain certain voting covenants with respect
to the election of directors. That agreement and the voting covenants are
disclosed in the Proxy Statement under the Section “Certain Relationships and
Related Transactions.”
When
the
proxy is properly executed, dated and returned, the shares it represents will
be
voted in accordance with any directions noted on it. Votes cast by proxy or
in
person at the Annual Meeting will be tabulated by the Inspectors of Election,
in
conjunction with information received from our transfer agent. The Inspectors
of
Election will also determine whether or not a quorum is present.
Shares
which abstain from voting as to the proposals, and shares held in “street name”
by brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to the proposals (“broker
non-votes”), will be counted for purposes of determining whether the affirmative
vote of a majority of the shares present at the meeting and entitled to vote
on
the proposals has been obtained, but will have the effect of reducing the number
of affirmative votes required to achieve the majority vote on the proposals.
SOLICITATION
The
Company is soliciting your proxy. The cost of this solicitation, including
expenses in connection with preparing and mailing this Proxy Statement, will
be
borne by the Company. In addition to original solicitation of proxies by mail,
our directors, officers and other employees may, without additional
compensation, solicit proxies by telephone, facsimile and personal interviews.
Proxies may not
be
returned through the Internet. The directors and executive officers who may
participate in the solicitation will not be additionally compensated but will
be
reimbursed for out-of-pocket expenses. The Company has engaged STC to serve
as
its proxy solicitors. Pursuant to the Company’s agreement with STC, they will
provide various proxy advisory and solicitation services for the Company in
exchange for a fee not to exceed $20,000 plus expenses. The Company has also
agreed to indemnify STC against certain liabilities in connection with this
solicitation. The Company may also request, and reimburse the reasonable fees
and expenses of, banking institutions, brokerage firms, custodians, nominees
and
fiduciaries to forward solicitation materials to the beneficial owners of Common
Stock, Series A Stock, and Series B Stock that those companies hold of record.
DELIVERY
OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
The
Company will only deliver one Proxy Statement to multiple shareholders sharing
an address unless we have received contrary instructions from one or more of
the
shareholders. The Company will promptly deliver a separate copy of this Proxy
Statement to shareholders at a shared address to which a single copy of the
document was delivered upon oral or written request to:
Cardinal
Communications, Inc.
Attn:
Corporate Secretary
390
Interlocken Crescent, Suite 900
Broomfield,
Colorado 80021
Telephone
(303) 285-5379
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The
following table sets forth certain information known to us regarding beneficial
ownership of our common stock as of March 31, 2006 by (i) each person who
is
known to us to be beneficial owners of more than 5% of our common stock,
(ii)
each of our Directors and the executive officers, and (iii) our executive
officers and Directors as a group. Except as otherwise noted below, the address
of each persons is 390 Interlocken Crescent, Suite 900, Broomfield, Colorado
80021.
| NAME
AND ADDRESS OF BENEFICIAL
OWNER |
|
NUMBER OF SHARES BENEFICIALLY OWNED(1)
|
|
PERCENTAGE
OF SHARES
BENEFICIALLY
OWNED(1)
|
|
| |
|
|
|
|
|
|
Ed
Buckmaster
|
|
|
83,547,992
|
|
|
20.2
|
%
|
|
Crestview
Capital Master LLC (2)
|
|
|
47,666,666
|
|
|
11.5
|
%
|
|
Evergreen
Venture Partners, LLC(3)
|
|
|
15,000,000
|
|
|
3.6
|
%
|
|
Monarch
Pointe Fund, Ltd. (4)
|
|
|
25,400,000
|
|
|
6.1
|
%
|
|
David
A. Weisman(5)
|
|
|
17,500,000
|
|
|
4.2
|
%
|
|
Richard
E. Wilson(6)
|
|
|
2,207,180
|
|
|
*
|
|
|
Ed
Garneau(7)
|
|
|
18,744,463
|
|
|
4.5
|
%
|
|
Byron
T. Young
|
|
|
6,139,909
|
|
|
1.5
|
%
|
|
Jeff
Fiebig(8)
|
|
|
3,003,547
|
|
|
*
|
|
|
Craig
Cook(9)
|
|
|
1,538,506
|
|
|
*
|
|
|
Ron
Bass (10)
|
|
|
844,730
|
|
|
*
|
|
|
Joseph
Durnford
|
|
|
0
|
|
|
*
|
|
|
Robert
Hale
|
|
|
0
|
|
|
*
|
|
|
Robert
Searls (11)
|
|
|
4,818,600
|
|
|
1.2
|
%
|
|
Kerry
Briggs
|
|
|
447,600
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
226,859,193
|
|
|
54.9
|
%
|
|
Supplemental
Beneficial Ownership Information
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
All executive officers and
Directors as a group (7 persons)
|
|
|
55,244,535 |
|
|
13.4 |
% |
*
Represents beneficial ownership of less than 1%.
(1)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
and
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of March 31, 2005, are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Except as pursuant
to applicable community property laws, the persons named in the table have
sole
voting and investment power with respect to all shares of common stock
beneficially owned. Percentages are based on 413,413,174 shares of common
stock
outstanding as of March 31, 2005.
(2)
Includes 40,000,000 shares issuable upon conversion of convertible debentures
held by Crestview Capital Master LLC. Crestview's business address is 95
Revere
Dr., Suite A, Northbrook, Illinois, 60062.
(3)
Evergreen Venture Partners, LLC's business address is 1535 Grant Street,
Suite
140, Denver, CO 80203.
(4)
Includes 17,500,000 shares issuable upon conversion of Series A Preferred
Shares
and 5,400,000 shares issuable upon exercise of warrants held by Monarch Pointe
Fund, Ltd. Monarch's business address is 555 South Flower St., Suite 4500,
Los
Angeles, California 90071.
(5)
Includes 17,500,000 shares issuable upon exercise of warrants.
(6)
Includes 750,000 shares issuable upon exercise of options. Mr. Wilson's address
is 6252 Harbour Heights Parkway, Mukilteo, Washington 98275.
(7)
Includes: (i) 5,203,870 shares were issued to, and owned by five affiliated
limited liability companies for which Mr. Garneau serves as Manager, and
in his
capacity as Manager, Mr. Garneau exercises voting control over the 5,203,870
common shares. Mr. Garneau disclaims beneficial ownership of all such shares:
(ii) 600,000 shares and 200,000 shares issuable upon exercise of two warrants
issued in a private placement transaction to September Serenade Ltd., a family
owned partnership of which Mr. Garneau serves as a general partner and in
which
he shares voting control over the shares with his wife. Each of Mr. Garneau
and
his wife own a 0.5% interest in the partnership. Mr. Garneau disclaims
beneficial ownership of all but 0.5% of the shares and warrants owned by
the
partnership; and (iii) 9,721,950 common shares and 2,777,700 common shares
issuable upon conversion of Series B Preferred Stock issued to and owned
by DD
Family Properties LLC, a family owned LLC of which Mr. Garneau owns a 21%
interest and for which he serves as Manager. Mr. Garneau exercises voting
control over all of the common shares and preferred shares owned by the LLC.
Mr.
Garneau disclaims beneficial ownership of all but 21% of the common shares
and
preferred shares owned by DD Family Properties LLC.
(8)
Includes 320,100 shares issuable upon conversion of Series B Preferred Shares
and 66,667 shares issuable upon exercise of warrants.
(9)
Includes 100,000 shares issuable upon conversion of Series B Preferred Shares
and 66,667 shares issuable upon exercise of warrants.
(10)
Includes 400,000 shares issuable upon conversion of options.
(11)
Includes 1,070,800 shares issuable upon conversion of Series B Preferred
Shares.
AUTHORIZED
CAPITAL STOCK
Our
authorized capital stock consists of 800,000,000 shares of Common Stock, $.0001
par value per share and 100,000,000 shares of Preferred Stock, issuable in
series, $.0001 par value per share. The following description of certain
provisions of our Common Stock and Preferred Stock does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions
of
the our Articles of Incorporation, as amended.
DESCRIPTION
OF COMMON STOCK
As
of May
12, 2006, there are estimated to be 429,277,284 shares of our Common Stock
outstanding. Additional shares of common stock have been reserved for issuance
as follows: 59,131,879 shares pursuant to various warrants; 167,652,060 shares
pursuant to various convertible debentures; 52,500,000 shares pursuant to the
Series A and Series B convertible preferred stock; and 7,150,000 shares pursuant
to various options. Each share of Common Stock is entitled to one vote at all
meetings of shareholders. All shares of Common Stock are equal to each other
with respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional shares of common stock nor are there any
subscription, conversion or redemption rights applicable to the Common Stock.
Our Articles of Incorporation, as amended, prohibit cumulative voting in the
election of directors. The absence of cumulative voting means that holders
of
more than 50% of the shares voting for the election of directors can elect
all
directors if they choose to do so. In such event, the holders of the remaining
shares of Common Stock will not be entitled to elect any director. A majority
of
the shares entitled to vote, represented in person or by proxy, constitutes
a
quorum at a meeting of shareholders. In the event of liquidation, dissolution
or
winding up, holders of shares of Common Stock will be entitled to receive,
on a
pro rata basis, all assets remaining after satisfaction of all liabilities
and
all preferences payable to the Preferred Stock, if any.
DESCRIPTION
OF PREFERRED
STOCK
As
of May
12, 2006, there are estimated to be 8,750 shares
of
our Series “A” Convertible Preferred Stock and 350,000 shares of our Series “B”
Convertible Preferred Stock outstanding.
The
Series A Stock is convertible into the Company's common stock at a conversion
price ranging from $0.05 to $0.075 as calculated in accordance with the
Certificate of Designation under
our
Articles of Incorporation,
filed
with the State of Nevada. The conversion price per share for the Series A Stock
shall be equal to eighty-five percent (85%) of the Market Price provided,
however, that subject to certain provisions, in no event shall the conversion
price be less than $0.05 per share (the "Floor Price") or exceed $0.075 (the
"Ceiling Price"). Each holder of the Series A Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of any assets
of the Company legally available therefore, such dividends as may be declared
from time to time by the Board of Directors. Except as provided by Nevada law,
the holder of shares of Series A Stock shall not have the right to vote on
matters that come before the shareholders. The holders of shares of Series
A
Stock have a payment preference over the Series B Stock and the Common Stock
upon the liquidation, dissolution or winding up of the Company.
The
Series B Convertible Preferred Stock includes the right on the part of the
Company or the holders to effect the conversion of the Series B Stock to Common
Stock from time to time when there is sufficient authorized but unissued shares
of Common Stock available for issuance upon conversion in accordance with the
Certificate of Designation under our Articles of Incorporation, filed with
the
State of Nevada. The Series B Stock is convertible into Common Stock at the
conversion rate of 100 to 1, assuming there is sufficient authorized Common
Stock. The Series B Stock designation also provides that the Series B Stock
will
be senior to the Common Stock with respect to rights upon liquidation, winding
up or dissolution of the Company, but will be junior to the Company's Series
A
Stock. The Series B Stock will vote together with the Common Stock as a single
class on an as-converted to Common Stock basis.
Any
and
all descriptions of the Certificate of Designations of the Series A Stock and
Series B Stock as described in this Proxy Statement are qualified in their
entirety by reference to the full text of the Certificate of Designations as
filed with the State of Nevada.
LEGAL
PROCEEDINGS
Cardinal
Communications, Inc. (the “Company”) is a defendant in a proceeding styled
Exceleron Software, Inc. v. Cardinal Communications, Inc., Cause No.
DV05-8334-J, filed in the Dallas County, Texas District Court on August 22,
2005. Exceleron is seeking damages of $240,000 together with interest and
attorney’s fees for early termination of a billing software contract. The
Company intends to vigorously defend this action, however, the Company cannot
control the outcome and the extent of the losses, if any, that may be
incurred.
Usurf
TV,
formerly known as Neighborlync, a wholly owned subsidiary of the Company that
ceased operations in early 2005, was sued by Platte Valley Bank in Scotts Bluff,
Nebraska County Court. The case is styled Platte Valley Bank v. Usurf TV, f/k/a/
Neighborlync, Inc., Case No. CI O5-1050 and was filed on September 12, 2005.
The
Plaintiff obtained judgment for $45,000 in or around October 2005. The
Defendant, however, does not have any assets and is no longer in business.
The
Company will vigorously defend itself against any attempts to enforce the
judgment against the Company, but has recorded a $45,000 liability in connection
with this lawsuit.
The
Company is a defendant in an arbitration proceeding styled Douglas O. McKinnon
v. Cardinal Communications, Inc. pending before the American Arbitration
Association in Denver, Colorado. The demand for arbitration was filed on July
29, 2005. Mr. McKinnon is seeking $360,000, representing two years salary
pursuant to an employment agreement with the Company. The Company intends to
vigorously defend this action; however, the Company cannot control the outcome
and extent of losses, if any, that may be incurred.
Sovereign
Companies, LLC (“Sovereign”), a wholly owned subsidiary of the Company, is
involved in litigation surrounding a condominium development project in Greeley,
Colorado known as Mountain View at T-Bone. In October 2005, Sovereign, Mountain
View at T-Bone, LLC (“Mountain View”), and Mr. Edouard A. Garneau filed a
declaratory relief action against certain members of Mountain View seeking
a
determination of the various rights and obligations of the members. The action
is styled Sovereign Companies, LLC et al. v. Yale King et al., Case No.
05-CV-649 and is pending in Larimer County District Court in Colorado. The
declaratory relief action seeks to clarify the roles and responsibilities of
certain members and the operational authority of individual managers of Mountain
View and asserts claims against certain of its members. Mr. Garneau is a member
of the Company’s Board of Directors and indirectly owns and controls shares of
the Company’s common and preferred stock
In
a
related action, Sovereign and Mr. Garneau, in his capacity as Manager of
Sovereign and Mountain View, were named in a lawsuit brought by several
individual members of Mountain View, claiming unspecified damages for breach
of
contract by Sovereign and Mr. Garneau, and for other causes of action against
Mr. Garneau individually. That case is styled Yale King et al. v. Sovereign
Companies, LLC et al., Case No. 2005-CV-1008 and was filed in June 2005 in
Weld
County District Court in Colorado. This action was subsequently dismissed for
improper venue and transferred to Denver County District Court. Both related
cases have been stayed pending a determination as to where the two cases should
proceed. Sovereign disputes the allegations of the other Mountain View members
and intends to vigorously defend the action. However, the Company cannot control
the outcome and extent of the losses, if any, that may be incurred. Mr. Garneau
is a member of the Company’s Board of Directors and indirectly owns and controls
shares of the Company’s common and preferred stock.
Colorado
River KOA, LLC (“CRKOA”), a partially owned subsidiary of the Company, has been
sued by WHR Properties, Inc. in a case styled WHR Properties, Inc. v. Colorado
River KOA, LLC and is currently pending in Gunnison County District Court in
Colorado. The action was filed on March 17, 2006 and alleges breach of an
agreement for the purchase of real property and seeks specific performance
of
the alleged contract and, alternatively, an unspecified claim for damages.
CRKOA
disputes the allegations and intends to vigorously defend the action. However,
the Company cannot control the outcome and extent of the losses, if any, that
may be incurred.
Sovereign
Companies, LLC and Sovereign Developments, LLC, (collectively “Sovereign”),
wholly owned subsidiaries of the Company, have been sued by Jech Excavating,
Inc. in a case styled Jech Excavating, Inc. v. Riverplace Condominiums, LLC
et
al., Case No. 55-CV-06-2-28 pending in Olmstead County District Court in
Minnesota. The action was filed on February 22, 2006 and alleges breach of
contract under a promissory note relating to the performance of excavating
work
at the Riverplace development. The action also asserts a claim against Mr.
Garneau individually. The Plaintiff is seeking damages of $664,000 together
with
interest and attorney’s fees. The parties are currently engaging in settlement
negotiations. Sovereign intends to vigorously defend the action. However,
Sovereign cannot control the outcome and extent of the losses, if any, that
may
be incurred.
Sovereign
Homes, a wholly owned subsidiary of the Company, has been sued by third-party
plaintiff, Jech Excavating, Inc. in a case styled Falcon Drilling &
Blasting, Inc. v. Jech Excavating, Inc. et al., Case No. 55-C4-05-005151,
pending in Olmstead County District Court in Minnesota. The third-party
complaint against Sovereign Homes was filed on March 9, 2006 and seeks
enforcement of a mechanics lien, alleges breach of contract, and asserts other
claims relating to the performance of excavating work at the Rocky Creek
development. The Plaintiff is seeking damages of $263,000 together with interest
and attorney’s fees. The parties are currently engaging in settlement
negotiations. Sovereign Homes intends to vigorously defend the action. However,
Sovereign Homes cannot control the outcome and extent of the losses, if any,
that may be incurred.
IDENTIFICATION
OF DIRECTORS AND/OR EXECUTIVE OFFICERS
The
following table sets forth certain information regarding each of our Directors
and executive officers as of May 12, 2006.
|
NAME
|
AGE
|
TITLE(S)
|
|
Ed
Garneau (1)(2)(5)(7)
|
44
|
Director,
Chief Executive Officer
|
|
Richard
E. Wilson (1)(2)(4)(5)(6)
|
63
|
Director,
Chairman of the Board of Directors
|
|
Byron
Young (2) (6)
|
32
|
Director
|
|
David
A. Weisman
|
43
|
Director
|
|
Jeffrey
Fiebig(4)(6)
|
45
|
Director
|
|
Joseph
M. Durnford
|
42
|
Director
|
|
Robert
T. Hale
|
67
|
Director
|
|
Robert
R. Searls
|
59
|
Director
|
|
Kerry
D. Briggs
|
58
|
Director
|
|
Ronald
S. Bass (3)
|
39
|
Principal
Accounting Officer
|
|
Craig
A. Cook (3)
|
59
|
Chief
Administrative Officer
|
(1)
Member of the Executive Committee of the Board of Directors.
(2)
Member of the Audit Committee of the Board of Directors.
(3)
Member of the Disclosure Committee of the Board of Directors.
(4)
Member of the Nominating Committee of the Board of Directors.
(5)
Member of the Compensation Committee of the Board of Directors.
(6)
Member of the Special Committee of the Board of Directors.
(7)
Mr.
Garneau entered into an Employment Agreement with the Company effective as
of
February 21, 2005 whereby Mr. Garneau was appointed the position of Chief
Operating Officer of the Company. On November 4, 2005, Mr. Garneau was appointed
Chief Executive Officer of the Company.
Our
officers serve at the discretion of our Board of Directors. Mr. Garneau has
an
executive employment agreement. Our Directors serve until the next annual
meeting of shareholders or until their respective successors are elected and
qualified. There exists no family relationship between our officers and
Directors. Certain information regarding the backgrounds of each of our officers
and Directors is set forth below.
RICHARD
E. WILSON.
Mr.
Wilson has served as a member of our Board of Directors since March 2003. In
November 2005 he was appointed as the Chairman of our Board of Directors. Since
2002, Mr. Wilson has served as a principal and executive vice president of
business development of NetPort-Datacom, Inc., a privately held Mukilteo,
Washington-based provider of international voice service. Mr. Wilson was
co-founder of The Association of Communications Enterprises (ASCENT) (formerly
the Telecommunications Resellers Association), a leading trade group
representing entrepreneurial and small business communications companies. He
served on that organization's Board of Directors in 1992 and 1993 and is
currently Chairman Emeritus of ASCENT. During 2001 and 2002, Mr. Wilson was
a
principal in SigBioUSA, LLC, a Mulkiteo, Washington-based telecommunications
consulting firm with expertise in both wireline and wireless telecommunications
applications. From May 2000 to April 2001, Mr. Wilson was president and chief
executive officer of Open Telecommunications North America, a wholly owned
subsidiary of Open Telecommunications Australia, a publicly traded company
in
Australia that provides telecommunications-network-infrastructure related
products and services. Also, from 2000 through January 2002, Mr. Wilson served
as a Director of GlobalNet International Telecommunications, Inc., an
Illinois-based provider of global telecommunications services. GlobalNet was
publicly traded under the symbol GBNE, until acquired by Titan Corporation
in
2002.
EDOUARD
A. GARNEAU.
Mr.
Garneau joined our Board of Directors December 20, 2004. In February 2005 Mr.
Garneau was appointed the position of Chief Operating Officer of the Company
and
in November 2005, Mr. Garneau was appointed as Chief Executive Officer of the
Company. Mr. Garneau is the founder and, since 1994, has been the Chief
Executive Officer of Sovereign Companies (recently acquired by the Company
on
February 18, 2005), a diversified real estate development company with broadband
telecommunications installation and operations in 4 states currently
representing 10 major developments or approximately 1100 homes. Prior to
founding Sovereign, Mr. Garneau served eight years in the US Air Force as a
fighter pilot.
JEFFREY
W. FIEBIG.
Mr.
Fiebig joined us as a member of our Board of Directors March 2005. Mr. Fiebig
joined the Sovereign Companies (recently acquired by the Company on February
18,
2005) as Vice President in August of 2004 and in September 2005 he was promoted
to President of the Sovereign Companies. Mr. Fiebig has spent the last sixteen
years in the US Air Force on active duty or in the reserves. From January 2001
to January 2004, Mr. Fiebig was the Supervisor and Commander of six Squadrons
and over 500 personnel at Luke Air Force Base, Arizona. In addition to his
US
Air Force duties Mr. Fiebig was an instructor and evaluator for United Airlines
from May of 1997 to September 2004.
BYRON
YOUNG.
Mr.
Young joined us as a member of our Board of Directors in August 2004.
Concurrently, Mr. Young will remain active as President of the Company’s Texas
subsidiary, Connect Paging Inc. d/b/a/ Get-A-Phone ("GAP"). Mr. Young purchased
GAP in 2000, sold off all paging assets and refocused the company on dial tone.
GAP has grown to over 13,000 customers to date and revenues exceeding $8.6
million annually. Prior to Connect Paging, Mr. Young founded Phone America
in
1997 which was merged with Trans National Telecommunications, Inc. in 1999
and
prior to Phone America, founded Paging Express, Inc. in 1994.
JOSEPH
M. DURNFORD.
Mr.
Durnford has over 19 years experience in corporate finance, accounting, business
strategy, and mergers and acquisitions. Mr. Durnford is the Founder and CEO
of
JD Ford & Company, a specialized investment bank that has been directly
responsible for completing numerous middle market merger and acquisition
transactions, and raised capital through a variety debt and equity financing
structures. During his career Mr. Durnford has participated in corporate finance
and merger and acquisition transactions with values exceeding $1 billion, in
a
variety of industries including manufacturing, software development, real estate
development, construction, financial services, and consumer products. He is
a
Certified Public Accountant and serves on the corporate boards of Thomas
Industries, which he chairs, Compass Bank of Colorado, and Mallfinder Networks.
ROBERT
T. HALE.
Mr.
Hale brings more than 35 years of business expertise to the Board, the majority
of which involved the telecommunications industry. Mr. Hale is currently the
Chairman of Granite Telecommunications a successful telecom and software
services company. Granite Telecommunications, provides local phone services,
telecom expense reporting and premier dial tone support services to over 15,000
customers with over 120,000 locations and 490,000 telephone lines throughout
the
country. A graduate of Tufts University with a degree in economics, Mr. Hale
has
served on audit and compensation committees of various boards of directors.
Mr.
Hale co-founded Network Plus, Inc., and ASCENT. He is former Director of the
merged Comptel/Ascent Board, and has served as Director of Sigecom, LLC and
Utilicom Networks.
ROBERT
R. SEARLS.
Mr.
Searls is a successful real estate developer and has formed a series of
partnerships and corporations for the purpose of purchasing or developing a
variety of real estate projects including commercial retail, office, self
storage, multi-family and residential subdivisions. A former Navy and Eastern
Airline pilot, Mr. Searls has been a Series 7 stockbroker and negotiated the
acquisition and sale of several hundred million dollars in real estate in
Colorado and Florida.
KERRY
D. BRIGGS.
Mr.
Briggs is President and Owner of Briggs Financial Services, a specialty line
insurance agency serving the banking and credit union marketplace. Mr. Briggs
has over 20 years of experience in the finance and banking industry. Mr. Briggs
also is a successful real estate developer, building and owning several
apartment and condominium complexes in Utah, Arizona, and Kansas. Mr. Briggs
served as a pilot in the United States Air Force Reserve for 28 years, retiring
in 2000 as a Colonel.
DAVID
A. WEISMAN.
Mr.
Weisman joined us in October 2004 as the Chairman of the Company’s Board of
Directors. For a period in 2005, Mr. Weisman was Chief Executive Officer of
the
Company. Currently he is a Director. Mr. Weisman also served as Chairman and
CEO
of a broadband and communications technology and services company, Eagle
Broadband. Before Eagle Broadband, he was: Vice President, Sales & Marketing
for IP Dynamics; co-founder and Vice President, Sales and Marketing for Canyon
Networks; Vice President, Marketing and Customer Service for ACT Networks;
co-founder and Vice President, Sales & Marketing for Thomson Enterprise
Networks. Mr. Weisman also served as a pilot with the United States Air Force
Reserve. He holds a B.A. in Economics and International Relations from U.C.L.A.
RONALD
S. BASS.
Mr.
Bass joined us as Principal Accounting Officer in November 2003. Prior to
joining us, Mr. Bass served as Chief Financial Officer of Phantom Group from
January 2002 to October 2003, Chief Financial Officer of Knovada from May 2001
to October 2003, Director of finance and operations at Vista Travel Ventures
from March 1999 to May 2001, and Manager Administration at Group Voyagers from
July 1993 to March 1999. Mr. Bass brings more than 13 years of executive finance
and operations experience including experience in equity funding, treasury
management, financial analysis, tax planning, accounting system design and
implementation, process engineering and risk management.
CRAIG
A. COOK.
Mr.
Cook has been the Company’s Chief Administrative Officer since February 2005.
Mr. Cook joined us as Vice President of Operations in December 2004. He comes
to
Cardinal from Sovereign Companies, having served as the Chief Operating Officer
from 2001 to 2004. Previously, he was the Chief Operating Officer for Denver
Public Schools from 1994 to 2001 and the Assistant Superintendent of Kansas
City
Public Schools, Kansas City, Missouri from 1988 to 1994. A retired Lieutenant
Colonel in the U.S. Army, Cook served in various accounting and finance
positions during his military service. He holds an MBA degree from the
University of Nevada, Reno, combined with a BSBA from the University of Idaho.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
With Management And Others
In
connection with the acquisition of Sovereign Partners, LLC, (“Sovereign”)
we issued common shares and series B preferred shares to the former members
of
Sovereign. On February 18, 2005 at the closing of the Acquisition, 9,721,950
shares of common stock and 27,777 shares of Series B preferred stock were issued
by us to entities in which Mr. Garneau has an economic interest. These entities
were members of Sovereign as of the closing of the Acquisition. Specifically,
the common shares and preferred shares were issued to, and are owned by, DD
Family Properties LLC, a family owned LLC of which Mr. Garneau owns a 21%
interest and for which he serves as Manager. Mr. Garneau exercises voting
control over all of the common shares and preferred shares owned by the LLC.
Also on February 18, 2005 at the closing of the Acquisition, 3,747,800 shares
of
common stock and 10,708 shares of Series B preferred stock were issued by us
to
Searls Family LLLP an entity in which Mr. Searls has an economic interest.
Under the terms of the Acquisition, additional shares of common stock and
preferred stock will be issued to the former Sovereign members, including
Searl's Family LLLP and DD Family Properties, LLC over the next several years.
In
2004,
we entered into an acquisition transaction whereby we acquire certain assets
of
the "Sovereign Companies." As part of that transaction, we issued 2,854,167
shares of common stock on March 8, 2004 and 2,349,703 shares of common on
November 22, 2004 to five affiliated limited liability companies (the owners
of
the Sovereign Company assets) over which Mr. Garneau served as Manager as of
those dates. Mr. Garneau continues to serve as Manager of those entities and
in
his capacity as Manager, Mr. Garneau exercises voting control over the 5,203,870
common shares. The acquisition of the assets closed before Mr. Garneau became
a
Director or officer of our Company.
In
addition, 600,000 shares of common stock and warrants to purchase 200,000 shares
of common stock were issued by us on November 22, 2004 as part of a private
placement transaction. All of the foregoing common shares and warrants to
purchase common shares were acquired by, and are owned by, September Serenade
Ltd., a family owned partnership of which Mr. Garneau serves as a general
partner. He shares voting control over the shares with his wife. Each of Mr.
Garneau and his wife own a 0.05% interest in the partnership. The private
placement and the sale of the shares and warrants closed before Mr. Garneau
became a Director or officer of our Company.
Related
Party Debt
The
Company has related party debt of $4,381,225 at December 31, 2005, utilizing
twelve different related parties. Interest rates range from 6.00% to 16.00%,
and
have maturity dates ranging from September 2005 through October 2007, with
three
exceptions. Two notes amortize over thirty years maturing April 2033 and
February 2034, and one note is interest only, with no stated maturity date.
In
May
2005 the Company and a related party, Jantaq, Inc. entered into a loan
transaction evidenced by a $50,000 promissory note. A principal of Jantaq,
Inc.,
John Weisman, is the brother of our former CEO David Weisman. The terms of
the
agreement provided for payment of 12% per annum interest and the note was due
on
or before June 8, 2005. On June 1, 2005 we amended the note to increase the
balance due to $125,000. This note was satisfied in June 2005 with the issuance
of 4,166,667 shares of the Company’s common stock in lieu of a cash payment.
Interest of $1,125 was recorded in relation to this note and financing expense
of $119,708 was recorded in relation to the stock conversion.
In
June
2005, the Company entered into a note payable agreement in the amount of
$500,000 with a related party, Ed Buckmaster. Mr. Buckmaster is the general
partner of AEJM Enterprises Limited Partnership, a shareholder of the Company
and father-in-law of the current CEO, Mr. Edouard Garneau. The terms of the
agreement provide for the payment of 12% simple interest over the term of the
note. The note was due September 1, 2005. The Company is currently negotiating
an amendment and extension on the balance of this note.
In
August
2005 the Company and a related party, Jantaq, Inc. entered into a loan
transaction evidenced by a $150,000 promissory note. A principal of Jantaq,
Inc., John Weisman, is the brother of our former CEO David Weisman. The terms
of
the agreement provide for the payment of 10% per annum interest and the note
was
due September 1, 2005. In September, the Company satisfied the note by the
issuance of 5,505,000 shares of the Company’s common stock in lieu of a cash
payment. Financing expense of $75,705 was recorded in relation to the stock
conversion.
Subsequent
to December 31, 2005 additional related party debt has been incurred and is
described as follows and in the Current Report, Form 8K filed with the
Securities and Exchange Commission on April 3, 2006. In March 2006, the Company
entered into a five year, $2,500,000 note payable agreement with a related
party, Ed Buckmaster. A shareholder of the Company, Mr. Buckmaster is the
general partner of Thunderbird Management Limited Partnership (Thunderbird),
and
father-in-law of the current CEO, Mr. Edouard Garneau. The terms of the
agreement provide for 12% simple interest over the life of the note; this note
consolidates prior notes held by Thunderbird.
Voting
Agreement with Respect to Directors
In
connection with the Acquisition Agreement, the Company, each member of our
Board
of Directors including David Weisman, Edouard Garneau, Richard Wilson and Byron
Young, and each of the persons who were Members of Sovereign immediately prior
to the Closing entered into an Investor Rights Agreement. Pursuant to the
Investor Rights Agreement, each of such persons agree to take all steps
necessary, including the exercise of their voting rights as a shareholder of
our
Company, to ensure the Mr. Ed Garneau and one other person selected by the
Members, is elected to the Company's Board of Directors and serves as a Director
until all of the shares of Common Stock issued to the Members have either been
registered and sold on an effective registration statement or are eligible
for
resale under Rule 144 of the Securities Act of 1933. Mr. Garneau and Mr. Fiebig
are each designated as nominees for election to our Board of Directors under
this Proxy Statement. If all such persons who are parties to the Investors
Rights Agreement vote in favor of these two nominees, an estimated total of
53,053,870 shares of Common Stock and 35,000,000 shares of Series B Stock
(voting on an as converted basis) will be voted in favor of each of Mr. Garneau
and Mr. Fiebig. Such shares would provide for an estimated 88,053,870 votes
in
favor of these nominees.
The
Investor Rights Agreement also provides that should certain events happen;
each
party to the Investor Rights Agreement will take all steps necessary to increase
the number of Directors of our Company and grant the Members the right to fill
all such newly created Board of Director vacancies. In addition, the Investor
Rights Agreement provides for certain protective operating covenants that
prohibit the Company from taking certain extraordinary actions absent the prior
consent of the Members.
Indebtedness
of Management
There
is
no debt owed by directors, director nominees or executive officers to the
Company.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES ACT
The
Company's executive officers and Directors, and beneficial owners of more than
10% of the Common Stock, are required to file initial reports of ownership
and
reports of changes of ownership of the Common Stock with the SEC. The SEC's
rules require such person to furnish the Company with copies of all Section
16(a) reports they file. The Company has determined that not all of the reports
required to have been filed during 2005 were filed on a timely basis. Based
solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to
the
Company under Rule 16a-3(e) of the Exchange Act, the Company has determined
that
all officers and Directors have filed reports as follows:
|
NAME
|
FORM
|
LAST
DATE FILED BEFORE 4/30/2006
|
| |
|
|
|
Ronald
Bass
|
Form
4
|
4/28/2006
|
| |
|
|
|
Craig
A. Cook
|
Form
4
|
4/28/2006
|
| |
|
|
|
Jeffrey
Fiebig
|
Form
4
|
4/28/2006
|
| |
|
|
|
Ed
Garneau
|
Form
4
|
4/28/2006
|
| |
|
|
|
David
A. Weisman
|
Form
4
|
11/22/2005
|
| |
|
|
|
Richard
E. Wilson
|
Form
4
|
4/14/2006
|
| |
|
|
|
Byron
Young
|
Form
4
|
4/28//2006
|
CORPORATE
GOVERNANCE; BOARD COMMITTEES; MEETINGS
Executive
Committee
Our
Board
of Directors created an executive committee to facilitate management between
meetings of the full Board of Directors. The Executive Committee is composed
of
Ed Garneau and Richard E. Wilson. Pursuant to our Bylaws, between meetings
of
the full Board of Directors, the Executive Committee has the full power and
authority of the Board of Directors in the management of our business and
affairs, except to the extent limited by Nevada law. Pursuant to the Bylaws
of
the Executive Committee, as adopted by the full Board of Directors, the
Executive Committee has the authority to exercise all powers of the Board of
Directors, except the power:
-
to
declare dividends;
-
to sell
or otherwise dispose of all or substantially all of our assets;
-
to
recommend to our shareholders any action requiring their approval; and
-
to
change the membership of any committee, fill the vacancies thereon or discharge
any committee.
During
2005 the Executive Committee did not meet in person; however it met
telephonically and took action by unanimous written consent in lieu of a meeting
on numerous occasions.
Audit
Committee
The
Audit
Committee of our Board of Directors is composed of Richard E. Wilson, Byron
Young, and Ed Garneau. Our Board of Directors has determined that the Audit
Committee does not have a member with the requisite education, background or
experience to be considered an "audit committee financial expert" as that term
is defined by the SEC. The purposes of the audit committee are:
-
to
oversee the quality and integrity of the financial statements and other
financial information we provide to any governmental body or the public;
-
to
oversee the independent auditors' qualifications and independence;
-
to
oversee the performance of our independent auditors;
-
to
oversee our systems of internal controls regarding finance,
-
accounting, legal compliance and ethics that management and the Board of
Directors has established or will establish in the future;
-
to
establish procedures for the receipt, retention and treatment of
-
complaints regarding accounting, internal controls, and other auditing matters
and for the confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters;
-
to
provide an open avenue of communication among the independent auditors,
financial and senior management, the internal auditing department, and the
Board
of Directors, always emphasizing that the independent auditors are accountable
to the audit committee; and
-
to
perform such other duties as are directed by the Board of Directors.
AUDIT
COMMITTEE REPORT
The
Audit
Committee has reviewed and discussed with management the audited Financial
statements of the Company for the year ended December 31, 2005 (the "Audited
Financial Statements''), management's assessment of the effectiveness of the
Company's internal control over Financial reporting, and the independent
auditors' evaluation of the Company's system of internal control over Financial
reporting.
In
addition, the Audit Committee has discussed with AJ. Robbins, PC, who reports
directly to the Audit Committee, the matters required by Statement on Auditing
Standards Nos. 61 and 90 (Communication with Audit Committees). The Audit
Committee also has discussed with AJ. Robbins, PC its independence from the
Company, including the matters contained in the written disclosures and letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). The
Audit
Committee also has discussed with management of the Company and AJ. Robbins,
PC
such other matters and received such assurances from them as it deemed
appropriate. The Audit Committee considered whether the rendering of non-audit
services by AJ. Robbins, PC to the Company is compatible with maintaining the
independence of AJ. Robbins, PC from the Company.
Following
the foregoing review and discussions, the Audit Committee recommended to the
Board of Directors that the Audited Financial Statements be included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2005,
for
Filling with the Securities and Exchange Commission.
The
Audit Committee
Richard
E. Wilson
Byron
Young
Ed
Garneau
Compensation
and Stock Committee
The
compensation and stock committee is composed of Richard Wilson and Ed Garneau.
The general purposes of the committee are:
-
to
assist the Board of Directors in discharging the Board of Directors'
responsibilities relating to compensation of the Company's executives;
-
to make
recommendations to the Board of Directors with respect to all compensation
plans, including equity-based plans for employees and Directors; and
-
to
produce an annual report on executive compensation for inclusion in the
Company's proxy statement, in accordance with applicable rules and regulations.
Nominating
Committee
The
nominating committee is composed of Jeffrey Fiebig and Richard Wilson. The
general purposes of the committee are:
-
to
assist the Board of Directors by identifying individuals qualified to become
Board of Directors members, and to recommend to the Board of Directors the
Director nominees for the next annual meeting of stockholders;
-
to
develop and recommend to the Board of Directors the corporate governance
guidelines applicable to the Company;
-
to lead
the Board of Directors in its annual review of the Board of Directors'
performance;
-
to
conduct an annual assessment of each committee; and
-
to
recommend to the Board of Directors Director nominees for each committee.
NOMINATING
COMMITTEE REPORT
During
2005 and through April 19, 2006, the Nominating Committee evaluated potential
candidates for positions on the Board of Directors and its committees, in
accordance with the criteria set forth in the Charter of the Nominating
Committee. The Nominating Committee approved and recommended to the Board of
directors the selection of four director nominees (Messrs. Durnford, Hale,
Searls, and Briggs) to serve immediately on the current Board of Directors.
In
addition, the Nominating Committee approved and recommended to the Board of
Directors the four of the four director nominees currently standing for election
or re-election at the Annual Meeting of the Shareholders.
The
Nominating Committee
Richard
Wilson
Jeff
Fiebig
Disclosure
Committee
The
disclosure committee is composed of Craig Cook and Ron Bass. The general purpose
of the committee is to design, establish and maintain a system of controls
and
other procedures to ensure that information required to be disclosed in the
reports and statements filed by the Company pursuant to the Exchange Act, is
recorded, processed, summarized and reported in conformity with the rules and
forms of the Securities and Exchange Commission
Special
Committee
The
Special Committee is composed of Richard E. Wilson, Byron T. Young, and Jeffery
W. Fiebig. Mr. Wilson, as a non-employee director receives monthly compensation
for his work on this committee. The purpose of the committee is to conduct
a
thorough investigation of the Company’s compliance with federal and state
securities laws relating to sales of securities of the company and other items
of interest. The results of this committee’s findings are reported on the
Company’s Current Report on Form 8-K filed with the SEC on March 30,
2006.
EXECUTIVE
COMPENSATION
Director
Compensation
Non-employee
directors do not receive annual payments for their service as directors, nor
has
the Board established a per-meeting stipend, however for his services on the
Special Committee, Mr. Richard Wilson receives monthly compensation. At such
time as the Company’s cash position improves, it is likely that the Board will
begin to compensate non-employee directors. However, no determination of the
amount of any such payment amounts has been made. Directors who are also
employees of the Company receive no additional compensation for their service
on
the Board and its committees.
Executive
Compensation
The
following table sets forth in summary form the compensation received during
each
of the last three completed fiscal years by our Chief Executive Officer and
each
executive officer who received total salary and bonus exceeding $100,000 during
any of the last three fiscal years.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Annual
Compensation
|
|
|
|
Long-term
Compensation
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Payouts
|
|
|
|
|
Name
and principal position
|
|
Year
|
|
Salary
$
|
|
|
|
Bonus
$
|
|
Other
Annual Compensation $
|
|
|
|
Restricted
Stock Awards
$
|
|
Securities
Underlying options/SARs #
|
|
LTIP
Payouts $
|
|
All
Other Compensation
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edouard
A. Garneau (a)
|
|
|
2005
|
|
$
|
185,000
|
|
|
(1
|
)
|
|
|
|
$
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Weisman (b)
|
|
|
2005
|
|
$
|
205,000
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500,000
|
|
|
|
|
|
|
|
|
Former
Chairman of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
Board and Former
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
McKinnon (c)
|
|
|
2005
|
|
$
|
180,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
Chief Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig
Cook
|
|
|
2005
|
|
$
|
150,000
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Fiebig
|
|
|
2005
|
|
$
|
180,000
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
and President of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
Partners, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron
Young
|
|
|
2005
|
|
$
|
120,000
|
|
|
(5
|
)
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
and President of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Connect
Paging, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
Zinsli
|
|
|
2005
|
|
$
|
150,000
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
Partners, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a),
Mr.
Garneau was appointed Chief Executive Officer of the Company on November 4,
2005.
(b)
Mr.
Weisman was appointed Chief Executive Officer on April 18, 2005. Mr. Weisman
resigned his positions as Chairman of the Board of Directors and Chief Executive
Officer effective November 4, 2005.
(c)
Mr.
McKinnon left the Company in July 2005.
(1)
$24,998 of Mr. Garneau’s salary amount was paid by the issuance of 1,503,170
shares of our common stock, an average per share value of $.02 per share, the
last closing price of our common stock less a 10% discount, as reported by
the
Over-The-Counter Bulletin Board, on the date of issuance.
(2)
$89,690 of Mr. Weisman’s salary amount was paid by the issuance of 4,529,794
shares of our common stock, an average per share value of $.02 per share, the
last closing price of our common stock less a 10% discount, as reported by
the
Over-The-Counter Bulletin Board, on the date of issuance.
(3)
$23,709 of Mr. Cook’s salary amount was paid by the issuance of 1,171,840 shares
of our common stock, an average per share value of $.02 per share, the last
closing price of our common stock less a 10% discount, as reported by the
Over-The-Counter Bulletin Board, on the date of issuance.
(4)
$30,471 of Mr. Fiebig’s salary amount was paid by the issuance of 1,519,378
shares of our common stock, an average per share value of $.02 per share, the
last closing price of our common stock less a 10% discount, as reported by
the
Over-The-Counter Bulletin Board, on the date of issuance.
(5)
$16,879 of Mr. Young’s salary amount was paid by the issuance of 840,149 shares
of our common stock, an average per share value of $.02 per share, the last
closing price of our common stock less a 10% discount, as reported by the
Over-The-Counter Bulletin Board, on the date of issuance.
(6)
Approximately $32,150 of Mr. Zinsli’s salary amount was paid by the issuance of
1,607,490 shares of our common stock, an average per share value of $.02 per
share, the last closing price of our common stock less a 10% discount, as
reported by the Over-The-Counter Bulletin Board, on the date of issuance.
(7)
Commissions earned as licensed Real Estate Broker.
Employment
Contracts and Termination of Employment and Change-in-Control Agreements
The
following table summarizes certain provisions of the employment agreements.
|
Name
of Officer
|
Positions
|
Term
|
Annual
Salary
|
|
Date
|
|
|
|
| |
|
|
|
|
Douglas
O. McKinnon (1)
|
Former
President and
|
3
Years
|
$180,000
|
|
4/15/2002
|
Chief
Executive Officer
|
|
|
| |
|
|
|
|
Edouard
Garneau
|
Chief
Executive Officer
|
3
Years
|
$185,000
|
|
2/21/2005
|
|
|
|
(1)
Mr. McKinnon is no longer with the Company as of
July 2005.
In
connection with each of their respective employment agreements, the executive
officers entered into confidentiality agreements and agreements not to compete
with the Company during the term of employment and for a period of one year
thereafter.
Under
Mr.
McKinnon's employment agreement, should the Company (1) experience a change
in
control or (2) change Mr. McKinnon's responsibilities with the Company, Mr.
McKinnon has the right, in his sole discretion, to terminate his employment
with
the Company and the Company would be liable for all compensation remaining
to be
paid during the then-current term of his employment agreement, plus an
additional period of one year.
Under
each employment agreement, if the executive is terminated by the Company other
than for cause, he will be entitled to continue to receive his base salary
for
the unexpired term of his employment contract.
2005
Stock Ownership Plan
In
December 2004, our Board of Directors adopted a stock ownership plan for our
officers, Directors and consultants known as the 2005 Stock Ownership Plan.
The
2005 Plan was established by the Board of Directors as a means to promote our
success and enhance our value by linking the personal interests of participants
to our shareholders, and by providing participants with an incentive for
outstanding performance. Persons who are officers, directors or consultants
are
eligible to participate in the 2005 Plan. The Board of Directors may, at any
time and from time to time, grant shares of our common stock in such amounts
and
upon such terms and conditions as it may determine, to include the granting
of
shares of the Common Stock and the granting of options to purchase shares of
the
common stock. A total of
150,000,000 shares of our common stock have been reserved for issuance under
the
2005 Plan registration statement on Form S-8 (SEC File No.333-121916) relating
to the 2005 Plan, as amended, have been filed with the SEC. At May 1, 2006,
40,289,770 shares of our common stock remain unissued under the Plan.
Stock
Appreciation Rights
We
have
never granted any stock appreciation rights (SARs), nor do we expect to grant
any SARs in the foreseeable future.
MEETINGS
OF THE BOARD OF DIRECTORS
During
2005 fiscal year, the Board of Directors held three meetings attended by all
the
directors, held over 12 telephonic meetings and it took action by unanimous
written consent in lieu of a meeting on numerous occasions.
COMMUNICATIONS
WITH MEMBERS OF THE BOARD OF DIRECTORS
The
Board
of Directors has not established a formal process for shareholders to send
communications to its members. Any stockholder may send a communication to
any
member of the Board of Directors, in care of the Company’s address 390
Interlocken Crescent, Suite 900, Broomfield, Colorado, 80021. The Company will
forward any such communication to the Board member. If the stockholder would
like the communication to be confidential, it should be so marked.
ATTENDANCE
OF BOARD MEMBERS AT ANNUAL SHAREHOLDERS’ MEETING
Each
of
the members of the Board of Directors will be required to attend the
meeting.
PROPOSAL
#1 - ELECTION OF EIGHT DIRECTORS
The
Bylaws of the Company provide that the Board of Directors shall be comprised
of
not less than three nor more than nine members, and that each director shall
be
elected to serve until the next Annual Meeting of Shareholders (or Annual
Meeting for the purpose of electing directors) and until his or her successor
shall be elected and shall qualify. Any vacancies on the Board may be filled
by
a majority vote of the Board and any director so elected shall hold office
for
the unexpired term of his or her predecessor or until the next election of
directors by the shareholders of the Company.
The
names
of the nominees for directors and other information about them appears below.
All of the nominees have consented to serve if elected. If for any unforeseen
reason a nominee is unable to serve if elected, the persons named in the
accompanying proxy may exercise their discretion to vote for a substitute
nominee selected by the Board. The Board, however, has no reason to anticipate
that any of the nominees will not be able to serve, if elected.
Richard
E. Wilson - 63.
Mr.
Wilson has served as a member of our Board of Directors since March 2003, and
serves currently as our Chairman. Since 2002, Mr. Wilson has served as a
principal and executive vice president of business development of
NetPort-Datacom, Inc., a privately held Mukilteo, Washington-based provider
of
international voice service. Mr. Wilson was co-founder of The Association of
Communications Enterprises (ASCENT) (formerly the Telecommunications Resellers
Association), a leading trade group representing entrepreneurial and small
business communications companies. He served on that organization's Board of
Directors in 1992 and 1993 and is currently Chairman Emeritus of ASCENT. During
2001 and 2002, Mr. Wilson was a principal in SigBioUSA, LLC, a Mulkiteo,
Washington-based telecommunications consulting firm with expertise in both
wireline and wireless telecommunications applications. From May 2000 to April
2001, Mr. Wilson was president and chief executive officer of Open
Telecommunications North America, a wholly owned subsidiary of Open
Telecommunications Australia, a publicly traded company in Australia that
provides telecommunications-network-infrastructure related products and
services. Also, from 2000 through January 2002, Mr. Wilson served as a director
of GlobalNet International Telecommunications, Inc., an Illinois-based provider
of global telecommunications services. GlobalNet was publicly traded under
the
symbol GBNE, until acquired by Titan Corporation in 2002.
Ed
Garneau - 44.
Mr.
Garneau joined our Board of Directors December 20, 2004 and appointed as Chief
Operating Officer on February 21, 2005, and was appointed Chief Executive
Officer in November, 2005. Mr. Garneau will also serve as a member of our audit
committee. Mr. Garneau is the founder and, since 1994, has been the Chief
Executive Officer of Sovereign Companies, a diversified real estate development
company with broadband telecommunications installation and operations in 4
states currently representing 10 major developments or approximately 1100 homes.
Prior to founding Sovereign, Mr. Garneau served eight years in the US Air Force
as a fighter pilot.
Jeffrey
W. Fiebig - 44.
Mr.
Fiebig joined us as a member of our Board March 2005. Mr. Fiebig joined the
Sovereign Companies (recently acquired by the Company on February 18, 2005)
as
Vice President in August of 2004. Mr. Fiebig has spent the last twenty-one
years
in the US Air Force on active duty or in the reserves. He was a combat fighter
pilot in Desert Storm and flew the Slot Position for the world famous US Air
Force Thunderbirds. From January 2001 to January 2004, Mr. Fiebig was the Group
Commander of six Squadrons and supervised over 500 personnel at Luke Air Force
Base, Arizona. In addition to his US Air Force duties Mr. Fiebig was an
instructor and evaluator for United Airlines from May of 1997 to September
2004.
Byron
Young - 32.
Mr.
Young joined us as a member of our Board of Directors in August 2004.
Concurrently, Mr. Young will remain active as President of the Company’s Texas
subsidiary, Connect Paging Inc. d/b/a/ Get-A-Phone (“GAP”). Mr. Young purchased
GAP in 2000, sold off all paging assets and refocused the company on dial tone.
GAP has grown to over 14,000 customers to date and revenues exceeding $9 million
annually. Prior to Connect Paging, Mr. Young founded Phone America in 1997
which
was merged with Trans National Telecommunications, Inc. in 1999 and prior to
Phone America, founded Paging Express, Inc. in 1994.
Joseph
M. Durnford - 42.
Mr.
Durnford has over 19 years experience in corporate finance, accounting, business
strategy, and mergers and acquisitions. Mr. Durnford is the Founder and CEO
of
JD Ford & Company, a specialized investment bank that has been directly
responsible for completing numerous middle market merger and acquisition
transactions, and raised capital through a variety debt and equity financing
structures. During his career Mr. Durnford has participated in corporate finance
and merger and acquisition transactions with values exceeding $1 billion, in
a
variety of industries including manufacturing, software development, real estate
development, construction, financial services, and consumer products. He is
a
Certified Public Accountant and serves on the corporate boards of Thomas
Industries, which he chairs, Compass Bank of Colorado, and Mallfinder Networks.
Robert
T. Hale - 67.
Mr.
Hale brings more than 35 years of business expertise to the Board, the majority
of which involved the telecommunications industry. Mr. Hale is currently the
Chairman of Granite Telecommunications a successful telecom and software
services company. Granite Telecommunications provides local phone services,
telecom expense reporting and premier dial tone support services to over 15,000
customers with over 120,000 locations and 490,000 telephone lines throughout
the
country. A graduate of Tufts University with a degree in economics, Mr. Hale
has
served on audit and compensation committees of various boards of directors.
Mr.
Hale co-founded Network Plus, Inc., and ASCENT. He is former Director of the
merged Comptel/Ascent Board, and has served as Director of Sigecom, LLC and
Utilicom Networks.
Robert
R. Searls - 59.
Mr.
Searls is a successful real estate developer and has formed a series of
partnerships and corporations for the purpose of purchasing or developing a
variety of real estate projects including commercial retail, office, self
storage, multi-family and residential subdivisions. A former Navy and Eastern
Airline pilot, Mr. Searls has been a Series 7 stockbroker and negotiated the
acquisition and sale of several hundred million dollars in real estate in
Colorado and Florida.
Kerry
D. Briggs - 58.
Mr.
Briggs is President and Owner of Briggs Financial Services, a specialty line
insurance agency serving the banking and credit union marketplace. Mr. Briggs
has over 20 years of experience in the finance and banking industry. Mr. Briggs
also is a successful real estate developer, building and owning several
apartment and condominium complexes in Utah, Arizona, and Kansas. Mr. Briggs
served as a pilot in the United States Air Force Reserve for 28 years retiring
in 2000 as a Colonel.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ABOVE-NAMED
NOMINEES FOR DIRECTORS.
PROPOSAL
#2
- RATIFICATION AND APPROVAL
OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject
to ratification and approval by the shareholders, the Board has selected the
firm of AJ.
Robbins, PC as
the
Company’s independent auditors for its fiscal year ending December 31, 2006.
AJ.
Robbins, PC has acted as the Company’s independent auditors for fiscal years
ending December 31, 2004, and December 31, 2005. Prior to engaging AJ. Robbins,
PC, the Company had not consulted AJ. Robbins, PC regarding the application
of
accounting principles to a specified transaction, completed or proposed, the
type of audit opinion that might be rendered on the Company’s financial
statements or a reportable event, nor did the Company consult with AJ. Robbins,
PC regarding any disagreements with its prior auditor on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction
of
the prior auditor, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.
Representatives
of AJ. Robbins, PC will be present at the Annual Meeting of Shareholders, will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions from
shareholders.
Audit
and Audit Related Fees.
The
following table sets forth fees billed to us by our auditors during the fiscal
years ended December 31, 2005 and December 31, 2004 for: (i) services rendered
for the audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditor that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with
tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.
| |
|
|
|
| |
|
December
31, 2005
|
December
31, 2004
|
|
(i)
|
Audit
fees
|
$809,357
|
$55,065
|
|
(ii)
|
Audit
related fees
|
$254,518
|
$5,000
|
|
(iii)
|
Tax
|
$78,998
|
$0
|
|
(iv)
|
All
other fees
|
$0
|
$0
|
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” the RATIFICATION AND APPROVAL
OF AJ. ROBBINS, P.C. AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2006.
PROPOSAL
#3 - APPROVAL
OF AMENDMENT TO AUTHORIZE A REVERSE SPLIT OF OUR COMMON STOCK.
The
Company’s shareholders are being asked to authorize the Board of Directors, in
its discretion, to amend the Company’s Articles of Incorporation to effect a
“reverse split” of its issued and outstanding Common Stock (the “Reverse Split”)
at any time prior to the next annual meeting of shareholders. By approving
this
proposal, the Board of Directors will be empowered to reverse split the
Company’s Common Stock by choosing one of four ratios (the “split ratio”),
namely one share for five shares, one share for ten shares, one share for twenty
shares, or one share for thirty shares. If the Board of Directors decides to
approve the Reverse Split, the determination of the ratio to be used will be
made on the date of approval.
Reasons
for the Reverse Split
The
Company believes that under certain circumstances the decrease in the number
of
shares of Common Stock outstanding may make it more attractive to potential
merger or acquisition candidates and may enhance its ability to raise capital
through the financial markets and to return the Company's share price to a
level
that is typical of other public companies.
Criteria
for Determining the Split Ratio
The
criteria for determining the split ratio will be based upon a review, by the
Board, of the capital structure of the Company including, shares and convertible
instruments outstanding, shares price, general market conditions and the
potential benefits from each of the options available.
There
can
be no assurance that the market price of the Common Stock immediately after
the
Reverse Split will be maintained for any period of time, or that the market
price of the Common Stock after the proposed Reverse Split will exceed the
current market price.
Effectiveness
of the Reverse Stock Split and Mechanism for Share Exchange
If
the
Reverse Split is approved by the shareholders and effected by the Board of
Directors, the Board of Directors will fix a record date for determination
of
shares subject to the Reverse Split. As of the date of this Proxy Statement,
the
Board of Directors has not fixed a record date for the Reverse
Split.
If
approved by the shareholders, the Reverse Split would become effective with
the
filing of an amendment to the Company’s Articles of Incorporation with the
Nevada Secretary of State on any date selected by the Board of Directors, on
or
prior to the Company’s next annual meeting of shareholders. However, the Board
of Directors reserves the right, even after shareholder approval, to forego
or
postpone filing the amendment if such action is determined not to be in the
best
interests of the Company and its shareholders. At our last annual meeting,
the
Board sought approval for a Reverse Split and determined that a split was not
in
the best interests of the Company and its shareholders prior to this year’s
Annual Meeting and the shareholders previous authorization will lapse. If the
Reverse Split is not implemented by the Board of Directors and effected by
the
next annual meeting of shareholders, the authority to file the amendment and
effect the reverse split again will lapse. In such case, the Board of Directors
will again seek shareholder approval at a future date for a reverse stock split
if it deems it to be advisable at that time. A proposed “form” of amendment is
attached hereto as Appendix A.
If
the
Reverse Split is approved and the Board of Directors elects to effect the
Reverse Split, then each share of Common Stock outstanding as of the record
date
chosen for the Reverse Split will immediately and automatically be changed,
as
of the effective date of the amendment, into a number which reflects the split
ratio chosen by the Board of Directors. For example, if the Board of Directors
approves a Reverse Split of one share for five shares, than each share of
outstanding Common Stock will automatically be changed, as of the effective
date
of the Amendment, into one fifth of a share of Common Stock. In addition,
proportional adjustments will be made to the maximum number of shares issuable
under the Company’s equity plans, as well as the number of shares issuable upon
exercise and the exercise price of the Company’s outstanding options and
conversion of the Company’s Series A Stock and Series B Stock.
The
Corporation shall not recognize on its stock record books any purported transfer
of any fractional share of Common Stock of the Corporation. Instead, any
fractional shares shall be rounded to the nearest whole share.
Management
does not anticipate that the Company’s financial condition, the percentage
ownership of management, the number of our shareholders, or any aspect of the
Company’s business will materially change as a result of the Reverse Split.
Because the Reverse Split will apply to all issued and outstanding shares of
Common Stock and outstanding rights to purchase Common Stock or to convert
other
securities into Common Stock, the proposed Reverse Split will not alter the
relative rights and preferences of existing shareholders.
Provided
that the Reverse Split is approved by the shareholders and the Board of
Directors fixes a record date and effects the Reverse Split, then the Company
will notify each holder of record with instructions for the surrender and
exchange of certificates.
Based
on
the foregoing discussion, the Board of Directors requests that shareholders
approve the following resolutions in connection with the proposed Reverse
Split:
RESOLVED,
that the shareholders of the Company hereby authorize the Board of Directors,
at
any time prior to the next annual meeting of shareholders, to amend the
Company’s Articles of Incorporation to effect a combination of the Company’s
issued and outstanding Common Stock using the ratio x:1,
with
x
equaling
five, ten, twenty, or thirty, which number shall be chosen by the Board of
Directors in its discretion (the “Reverse Split”); and it is
further
RESOLVED,
that the officers of the Company be, and each of them hereby is, authorized
and
empowered (any one of them acting alone), in the name of and on behalf of the
Company, to procure any authorizations or approvals or to do or cause to be
done
all such acts or things and to sign and deliver or cause to be signed and
delivered, all such documents, including but not limited to, an amendment to
the
Articles of Incorporation, stock certificates, federal and state securities
forms, filings, applications or other documents, with such amendments, additions
and other modifications thereto, as such officer may deem appropriate, which
shall be deemed conclusively evidenced by the execution and delivery thereof,
and to carry out and fully perform the terms and provisions of such documents
in
order to carry into effect the foregoing resolutions and to fully effect the
transactions contemplated in such resolutions.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE
AUTHORIZATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON
STOCK.
PROPOSAL
#4
- APPROVAL
OF AMENDMENT TO AUTHORIZE A FORWARD SPLIT OF OUR COMMON STOCK.
The
Company’s shareholders are being asked to authorize the Board of Directors, in
its discretion, to amend the Company’s Articles of Incorporation to effect a
“forward split” of its issued and outstanding Common Stock (the “Forward Split”)
at any time prior to the next annual meeting of shareholders. By approving
this
proposal, the Board of Directors will be empowered to forward split the
Company’s Common Stock in the ratio of two shares for each one outstanding
share.
Reasons
for the Forward Split
The
Company believes that under certain circumstances the increase in the number
of
shares of Common Stock outstanding may make it more attractive to potential
merger or acquisition candidates and may enhance its ability to raise capital
through the financial markets.
There
can
be no assurance that the market price of the Common Stock immediately after
the
Forward Split will be maintained for any period of time, or that the market
price of the Common Stock after the proposed Forward Split will exceed the
current market price.
Effectiveness
of the Forward Stock Split and Mechanism for Share Exchange
If
the
Forward Split is approved by the shareholders and effected by the Board of
Directors, the Board of Directors will fix a record date for determination
of
shares subject to the Forward Split. As of the date of this Proxy Statement,
the
Board of Directors has not fixed a record date for the Forward
Split.
If
approved by the shareholders, the Forward Split would become effective with
the
filing of an amendment to the Company’s Articles of Incorporation with the
Nevada Secretary of State on any date selected by the Board of Directors, on
or
prior to the Company’s next annual meeting of shareholders. However, the Board
of Directors reserves the right, even after shareholder approval, to forego
or
postpone filing the amendment if such action is determined not to be in the
best
interests of the Company and its shareholders. At our last annual meeting,
the
Board sought approval for a Forward Split and determined that a split was not
in
the best interests of the Company and its shareholders prior to this year’s
Annual Meeting and the shareholders previous authorization will lapse. If the
Forward Split is not implemented by the Board of Directors and effected by
the
next annual meeting of shareholders, the authority to file the amendment and
effect the forward split again will lapse. In such case, the Board of Directors
will again seek shareholder approval at a future date for a forward stock split
if it deems it to be advisable at that time. A proposed “form” of amendment is
attached hereto as Appendix B.
If
the
Forward Split is approved and the Board of Directors elects to effect the
Forward Split, then each share of Common Stock outstanding as of the record
date
chosen for the Forward Split will immediately and automatically be changed,
as
of the effective date of the amendment. If the Board of Directors approves
the
Forward Split, than each share of outstanding Common Stock will automatically
be
changed, as of the effective date of the Amendment, into two shares of Common
Stock. In addition, proportional adjustments will be made to the maximum number
of shares issuable under the Company’s equity plans, as well as the number of
shares issuable upon exercise and the exercise price of the Company’s
outstanding options and conversion of the Company’s Series A Stock and Series B
Stock.
Management
does not anticipate that the Company’s financial condition, the percentage
ownership of management, the number of our shareholders, or any aspect of the
Company’s business will materially change as a result of the Forward Split.
Because the Forward Split will apply to all issued and outstanding shares of
Common Stock and outstanding rights to purchase Common Stock or to convert
other
securities into Common Stock, the proposed Forward Split will not alter the
relative rights and preferences of existing shareholders.
Provided
that the Forward Split is approved by the shareholders and the Board of
Directors fixes a record date and effects the Forward Split, then it will notify
each holder of record with instructions for the surrender and exchange of
certificates.
Based
on
the foregoing discussion, the Board of Directors requests that shareholders
approve the following resolutions in connection with the proposed Forward
Split:
RESOLVED,
that the shareholders of the Company hereby authorize the Board of Directors,
at
any time prior to the next annual meeting of shareholders, to amend the
Company’s Articles of Incorporation to effect a combination of the Company’s
issued and outstanding Common Stock using the ratio 1:2, and it is
further
RESOLVED,
that the officers of the Company be, and each of them hereby is, authorized
and
empowered (any one of them acting alone), in the name of and on behalf of the
Company, to procure any authorizations or approvals or to do or cause to be
done
all such acts or things and to sign and deliver or cause to be signed and
delivered, all such documents, including but not limited to, an amendment to
the
Articles of Incorporation, stock certificates, federal and state securities
forms, filings, applications or other documents, with such amendments, additions
and other modifications thereto, as such officer may deem appropriate, which
shall be deemed conclusively evidenced by the execution and delivery thereof,
and to carry out and fully perform the terms and provisions of such documents
in
order to carry into effect the foregoing resolutions and to fully effect the
transactions contemplated in such resolutions.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE
AUTHORIZATION TO EFFECT A FORWARD STOCK SPLIT OF THE COMPANY’S COMMON
STOCK.
TRANSACTION
OF OTHER BUSINESS
At
the
date of this Proxy Statement, the only business that the Board of Directors
intends to present or knows that others will present at the meeting is as set
forth above. If any other matter or matters are properly brought before the
meeting, or any adjournment thereof, it is the intention of the persons named
in
the accompanying form of proxy to vote the proxy on such matters in accordance
with their best judgment.
Your
cooperation in giving this matter your immediate attention and returning your
proxies will be appreciated.
STOCKHOLDER
PROPOSALS FOR 2007 ANNUAL MEETING
Pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, any shareholder who
intends to present a proposal at the next Annual Meeting of Shareholders in
the
year 2007 must deliver the proposal, including the name of a proposed nominee
to
the Board of Directors, or to our principal executive office no later than
the
close of business on December 29, 2006.
Notice
of
intention to present a proposal at the 2007 Annual Meeting should be addressed
to Corporate Secretary, Cardinal Communications, Inc., 390 Interlocken Crescent,
Suite 900 Broomfield, Colorado 80021. The Company reserves the right to vote
against, reject, rule out of order, or take other appropriate action with
respect to any proposal that does not comply with these
requirements.
PROXY
CARDINAL
COMMUNICATIONS, INC.
This
proxy is solicited on behalf of the Board of Directors
for
the Special Meeting of Shareholders in Lieu of Annual Meeting, on June 6,
2006
This
proxy will be voted as specified by the stockholder. If no specification is
made, all shares will be voted “FOR” the approval of the four proposals set
forth in the proxy statement.
The
undersigned hereby appoints Edouard A. Garneau and Craig A. Cook, each of them,
Proxies for the undersigned, with full power of substitution, to vote all shares
of Cardinal Communications, Inc. Common Stock which the undersigned may be
entitled to vote at the Special Meeting of Shareholders of Cardinal
Communications, Inc. to be held on Tuesday June 6, 2006, or at any adjournment
thereof, upon the matters set forth on the reverse side and described in the
accompanying Proxy Statement and upon such other business as may properly come
before the meeting or any adjournment thereof.
| |
PROPOSAL
#1:
|
ELECTION
OF DIRECTORS:
|
|
|
|
| |
|
|
|
|
|
| |
|
EDOUARD
A. GARNEAU
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
RICHARD
E. WILSON
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
JEFFEREY
W. FIEBIG
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
BYRON
T. YOUNG
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
JOSEPH
M. DURNFORD
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
ROBERT
T. HALE
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
ROBERT
R. SEARLS
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
KERRY
D. BRIGGS
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
|
|
| |
PROPOSAL
#2:
|
APPROVAL
AND RATIFICATION OF AJ.
|
|
|
|
| |
|
ROBBINS,
PC AS THE COMPANY’S
|
|
|
|
| |
|
INDEPENDENT
AUDITORS
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
|
|
| |
PROPOSAL
#3:
|
AUTHORIZATION
FOR REVERSE STOCK
|
|
|
|
| |
|
SPLIT
OF THE COMMON STOCK
|
|
|
|
| |
|
PRIOR
TO THE NEXT ANNUAL MEETING
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
| |
|
|
|
|
|
| |
PROPOSAL
#4:
|
AUTHORIZATION
FOR A FORWARD STOCK
|
|
|
|
| |
|
SPLIT
OF THE COMMON STOCK
|
|
|
|
| |
|
PRIOR
TO THE NEXT ANNUAL MEETING
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
Please
mark, date and sign your proxy card and mail it in the enclosed envelope as
soon
as possible.
In
their discretion, proxies are entitled to vote upon such other matters as may
properly come before the meeting, or any adjournment
thereof.
Signature_______________________________________
Date_________________ Class and number of shares
held___________________
Signature______________________________________
Date___________________ Class and number of shares
held___________________
Note:
Please mark, date and sign this proxy card and return it in the enclosed
envelope. Please sign as your name appears hereon. If shares are registered
in
more than one name, all owners should sign. If signing in a fiduciary or
representative capacity, please give full title and attach evidence of
authority. Corporations please sign with full corporate name by a duly
authorized officer and affix corporate seal.
APPENDIX
A
FORM
OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT A REVERSE SPLIT OF THE
COMMON STOCK
Article
Four, Section 4.1 is hereby amended to include at the end of such Section,
the
following language: "Upon the filing of this Certificate of Amendment to
Articles of Incorporation, (the “Split Effective Date”), each ______ shares of
common stock, par value $.0001 per share, of the Corporation issued and
outstanding or held as treasury shares immediately prior to the Split Effective
Date (the “Old Common Stock”) shall automatically without any action on part of
the holder thereof, be reclassified and changed into one share of common stock,
par value $.0001 per share, which the Corporation shall be authorized to issue
immediately subsequent to the Split Effective Date (the “New Common Stock”).
Each holder of a certificate or certificates which immediately prior to the
Split Effective Date represented outstanding shares of Old Common Stock (the
“Old Certificates”) shall, from and after the Split Effective Date, be entitled
to receive upon surrender of such Old Certificates to the Corporation’s transfer
agent for cancellation, a certificate or certificates (the “New Certificates”)
representing the shares of New Common Stock into which the shares of Old Common
Stock formerly represented by such Old Certificates so surrendered are
reclassified under the terms hereof. No fractional shares of New Common Stock
of
the Corporation shall be issued. No stockholder of the Corporation shall
transfer any fractional shares of Common Stock of the Corporation. The
Corporation shall not recognize on its stock record books any purported transfer
of any fractional share of Common Stock of the Corporation. Instead, any
fractional shares shall be rounded to the nearest whole share."
APPENDIX
B
FORM
OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT A FORWARD SPLIT OF THE
COMMON STOCK
Article
Four, Section 4.1 is hereby amended to include at the end of such section,
the
following language: “Immediately upon the filing of this Certificate of
Amendment to the Articles of Incorporation (the “Filing Date”), each one
outstanding share of the Corporation’s Common Stock will be split, automatically
and without further action into two shares of Common Stock. Such split shall
be
effected on a certificate-by-certificate basis, and any fractional shares
resulting from such split shall be rounded up to the nearest whole
share.”