Schedule 14A Information
Proxy Statement Pursuant to Section 14(a)
Of the Securities Exchange Act of 1934
[X] Filed by Registrant
[ ] Filed by Party other than Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use by Commission only (as permitted by Rule 14a-6 (e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11 (c) or 240.14a-12
HEARTLAND COMMUNICATIONS & MANAGEMENT, INC.
(Name of Registrant as Specified in its Charter)
HEARTLAND COMMUNICATIONS & MANAGEMENT, INC.
(Name of Person(s) filing Proxy Statement)
Payment of Filing Fee (check appropriate box):
[X] No Fee required
[ ] 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: N/A
2) Aggregate number of securities to which transaction applies: N/A
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
Filing fee is calculated and state how it was determined.): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] 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 Filng by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
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[GRAPHICS OMITTED]
April 30, 1998
Dear HCMI Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held in Tysons Corner in the office building located at 8150 Leesburg Pike
(Rt. 7), sixth floor conference room, Vienna, VA 22182 on Wednesday, June 17,
1998 at 10:00 a.m. Information about the meeting, the nominees for directors and
the proposals to be considered is presented in the Notice of Annual Meeting and
the Proxy Statement on the following pages.
In addition to the formal items of business to be brought before the
meeting, I will report on the Company's operations during 1998. This will be
followed by a question and answer period.
Your participation in HCMI's affairs is important, regardless of the
number of shares you hold. To ensure your representation, even if you cannot
attend the meeting, please sign, date and return the enclosed proxy promptly.
We look forward to seeing you on June 17, 1998.
Sincerely,
Michael L. Foudy
President and Chairman of the Board
(703) 883-1836
(703) 748-4844 fax
[email protected]
1320 Old Chain Bridge Road
Suite 220
McLean, Virginia 22101
New Media Solutions
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[GRAPHICS OMITTED]
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 17, 1998
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Heartland Communication & Management,
Inc. will be held in the office building located in Tysons Corner at 8150
Leesburg Pike (Rt. 7), sixth floor conference room, Vienna, VA 22182 on
Wednesday, June 17, 1998 at 10:00 a.m., for the following purposes:
1. To elect seven directors;
2. To approve the 1997 annual bonus pool
3. To approve and ratify the appointment of BDO Seidman, LLP as
independent auditors; and
4. To transact such other business as properly may come before the
meeting and any adjournment thereof.
Stockholders of record at the close of business on March 31, 1998 are
entitled to receive notice of, and vote at, the Annual Meeting.
By Order of the Board of Directors,
Bradford W. Baker
Corporate Secretary
April 30, 1998
(703) 883-1836
(703) 748-4844 fax
[email protected]
1320 Old Chain Bridge Road
Suite 220
McLean, Virginia 22101
New Media Solutions
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- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Heartland Communication & Management, Inc. ("HCMI" or
the "Company") of proxies to be voted at the Annual Meeting of Stockholders on
Wednesday, June 17, 1998. The Proxy Statement, the accompanying proxy card and
Annual Report on Form 10-K which has been filed with the Securities and Exchange
Commission, are being mailed to stockholders on or about April 30, 1998.
Business at the Annual Meeting is conducted in accordance with the procedures
determined by the presiding officer and is generally limited to matters properly
brought before the meeting by or at the suggestion of the Board of Directors or
by a stockholder pursuant to provisions requiring advance notice and disclosure
of relevant information.
The number of voting securities of HCMI outstanding on March 31, 1998, the
record date for the meeting, was 1,389,314 shares of common stock, $.001 par
value per share, each share being entitled to one vote. Stockholders do not have
cumulative voting rights.
Voting of Proxies
Since many HCMI stockholders are unable to attend the Company's Annual
Meeting, the Board of Directors solicits proxies to give each stockholder an
opportunity to vote on all matters scheduled to come before the meeting as set
forth in this Proxy Statement. Stockholders are urged to read the material in
this Proxy Statement, specify their choice on each matter by marking the
appropriate boxes on the enclosed proxy card, and sign, date and return the card
in the enclosed stamped envelope.
If no choice is specified and the card is properly signed and returned, the
shares will be voted by the Proxy Committee as recommended by the Company. A
stockholder who signs a proxy may revoke or revise that proxy at any time before
the meeting. A previously returned proxy may be cancelled by voting by ballot at
the meeting.
Stockholder proxies are received by DCM which is serving as the Company's
proxy processing agent, and the vote is certified by Inspectors of Election.
Proxies and ballots that identify the vote of individual stockholders are kept
confidential until the final vote has been tabulated at the Annual Meeting,
except as necessary to meet legal requirements or in a contested proxy
solicitation, and in cases where stockholders write comments on their proxy
cards.
HCMI's Proxy Committee consists of Michael L. Foudy, President, Chief
Executive Officer, and Chairman of the Board of Directors, and Mr. Bradley
Niemcek, Vice-President - Operations and Director. Proxy cards, unless otherwise
indicated by the stockholder, also confer the Proxy Committee discretionary
authority to vote all shares of stock represented by the proxies on any matter
which properly may be presented for action at the meeting even if not covered
herein. If any of the nominees for directo named in Proposal 1 - Election of
Directors should be unavailable for election, the proxies will be voted for the
election of such other person as may be recommended by the Company in place of
such nominee.
Stockholders of record at the close of business on March 31, 1998, are
entitled to receive notice of the meeting and to vote the shares held on that
date. The holders of a majority of the issued and outstanding shares of stock of
the Company entitled to vote at the meeting must be represented in person or by
proxy at the Annual Meeting for the meeting to be held. Other than the election
of directors, which requires a plurality of the votes of the stockholders
represented at the meeting, each matter to be submitted to the stockholders
requires the affirmative vote of the holders of a majority of the shares
represented at the meeting, in person or by proxy, and entitled to vote.
Abstentions have the same effect as a vote against any
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such matter. Broker non-votes are deemed not entitled to vote and are not
counted as votes for or against any such matter.
Attendance at Annual Meeting
To ensure the availability of adequate space for HCMI stockholders wishing
to attend the meeting, priority seating will be given to stockholders of record,
beneficial owners of the Company's stock having evidence of such ownership, or
their authorized representatives, and invited guest of management. In addition,
a stockholder may bring one guest. In order that seating may be equitably
allocated, a stockholder wishing to bring more than one guest must write to the
Secretary of the Company in advance of the meeting and receive written
concurrence. Those unable to attend may request from the Corporate Secretary a
copy of the report of the proceedings of the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
A board of seven directors is to be elected at the Annual Meeting, each
director so elected to hold office for a term of one year and until the election
and qualification of a successor. All directors hold office until the next
annual meeting of stockholders and until the next their successors are duly
elected and qualified. The Company's By-Laws authorize the Board of Directors
from time to time to determine the number of its members. Vacancies in unexpired
terms and any additional positions created by Board action are filled by action
of the existing Board of Directors.
The board of Directors recommends a vote FOR the following nominees:
MICHAEL L. FOUDY, born 1951, a principal founder, President, Chief
Executive Officer and Chairman of the Board of Directors, graduated from the
University of Arizona in 1973 and received a Juris Doctorate from the University
of Arizona College of Law in 1976. Mr. Foudy hosted ATB=s "America The
Beautiful" nationally syndicated talk radio show from February 27, 1995 until
February 28, 1977 and now co-hosts "Newsmaker" which is broadcast on 119 radio
stations by the United Broadcasting Network. H has diverse experience in public
affairs, integrated marketing communications, strategic planning, management,
entrepreneurship, finance, writing and broadcasting. Mr. Foudy=s accomplishments
include creation of a 30,000 member Utility Shareholder's Association to
intervene in rate legal cases and winning over $400 million in increased rate
base. During the 1992 Presidential primary campaign, he was actively engaged in
organizing a movement to draft an independent candidate for President (which
activities generally would permit an independent candidate for President to
obtain ballot access in all U.S. jurisdictions).
During 1974, while in law school, Michael Foudy founded a small marketing
communications company in Tucson. When he sold his interest in the Company
thirteen years later, WFC/Westcom had grown to be the largest public
affairs/public relations Company in Arizona with billings of over $7 million,
with offices in Tucson, Phoenix and San Diego, a staff of twenty-five
professionals, a base of Ablue chip" clients and a history of profitability.
Since 1987, Mr. Foudy has undertaken a variety of projects on behalf of
distressed clients. These range from a comprehensive marketing audit for the
owners of Garfinckel=s Department Stores in Washington, D.C. to preparation of
promotional and sales materials for the liquidation of $86 million of commercial
property and the auction of 4,000 residential properties once owned by First
City Bank of Houston, Texas. He directed the successful repositioning of a
master planned golf and retirement community owned by Fairfield Homes in Green
Valley, Arizona and designed a comprehensive marketing communications program
which doubled home sales for the troubled home builder. He also supervised the
restructuring/liquidation of Compass Publishing based in Chicago, Illinois and
Sarasota, Florida.
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Mr. Foudy wrote the book Reinventing America which was published by the
Institute for American Democracy. He serves on the Board of Directors of
Heartland Capital Corporation, which he co-founded, and is Of Counsel to the DCM
Group, an integrated communications strategy firm based in McLean, Virginia. Mr.
Foudy has been active in a variety of charitable and community organizations
including the Tucson Free Clinic, Tucson Community Food Bank, Arizona Opera
Company and Southwestern Film Consortium. He currently serves on the foundation
for American Liberty and the American Initiative Committee Board of Directors
and is Editor of the American Initiative Newsletter.
THOMAS BURGUM, born in 1935, is a principal of Thicksten Grimm Burgum, a
Washington, D.C.-based law firm. Mr. Burgum is a 1958 graduate of Jamestown
College (North Dakota) and a recipient of a 1965 law degree from the University
of North Dakota. Since 1982, he has been a principal and Executive Vice
President of Thicksten Grimm Burgum, overseeing the implementation of lobbying
and consulting services to industrial financial and government clients. From
1980 - 1982, Mr. Burgum was the principal of Burgum and Associates, serving as a
government relations consultant to a variety of agricultural and local
government clients. In 1979 - 1980, he served as Deputy Under-Secretary of
Agriculture, directing operation of the FmHA (rural development) loan,
Alternative Energy and Rural Rail Acquisition programs; in such capacity, Mr.
Burgum was selected to act as chairman of the Secretary's Working Group of
Agriculture and Transportation; selected to represent the Department in issue
negotiations with the Office of Management and Budget as well as the Department
of the Treasury; and received a Presidential Commendation for coordinating
successful Carter Administration efforts to pass the rural Development Act of
1980. From 1971 - 1979, he served as a member of the staff of the appropriations
committee for North Dakota Senator Quentin N. Burdick, directing legislative
research for that committee's Agriculture, Transportation and Environmental
Subcommittees and coordinated legislative efforts during the period with
representatives of the Executive Branch during the Nixon, Ford and Carter
Administrations. From 1972 - 1974, Mr. Burgum served as Staff Director of the
Bankruptcy Reform committee for Senator Burdick= and directed the legislative
drafting and lobbying effort for the Municipal Bankruptcy Amendments of 1975,
acted as Staff Advisor for the Judiciary Subcommittee Chairman during the floor
debate; and received a special Presidential commendation for staff work on the
Municipal Bankruptcy Amendments. From 1968 - 1972, he served as North Dakota
State's Attorney for Stutsman County; in such capacity, Mr. Burgum represented
the state in all criminal prosecutions and, as the senior attorney for this
governmental unit, managed all legal operations of the county.
GREGORY JACKSON, born 1942, an undergraduate of Columbia University and
Whitman college as well as a 1996 graduate of Columbia's Graduate School of
Journalism, was the principal New York correspondent for ABC news from 1970 to
1977. Mr. Jackson went on to produce and host a number of network series and
syndicated productions. These include: managing editor of "How'd They Do That?"
a Telepictures/CBS 1994 B 1995 prime-time series; producer and host of "Up front
With . . .,@ a syndicated half-hour celebrity series; producer and host of
AHeart of the Mater,@ a WCBS (New York City) daily 15-minute ANightline@-style
field piece and studio discussion; producer and host of AOne on One,@ an ABC
nightly network half-hour high profile celebrity series (after ANightline@);
executive producer of non-dramatic programming at CBS Cable; producer and host
of ASignature@ for CBS Cable; producer and host of AHealthline,@ a weekly PBS
health series; producer and writer of ATo Be An Astronaut,@ a one-hour ABC
videocassette; producer and writer of ACaring For Your Newborn,@ a two-hour
child care video with Dr. Benjamin Spock. Mr. Jackson is also author of the
textbook, AGetting Into Broadcast Journalism." Mr. Jackson also has often served
as a marketing advisor and board member on small, high-tech companies unrelated
to broadcasting. For example, he created a video sales campaign key for a
private company $450,000 in debt so successful that, due to a rise in sales
and/or projected sales, the Company was bough out by a major competitor for
$14,000,000. In 1989, he purchased, managed and (in 1996) sold a full service
country club in Boise, Idaho. Mr. Jackson began his journalism career in Boise.
He started with United Press International, became an assistant managing editor
at the daily paper, press secretary to the Idaho governor and, finally, local
television news director. In 1966, while in Columbia=s master degree in
journalism program (where NBC had sent him) he was instrumental in setting up
the school TV production program and subsequently taught.
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SHARON M. MURPHY, born 1940, is Provost and Vice President for Academic
Affairs of Bradley University. Dr. Murphy received her Ph.D. from the University
of Iowa and has served in faculty and administrative positions at Marquette
University, Southern Illinois University, University of Wisconsin- Milwaukee
and, during 1977-78, as a Fulbright senior lecturer in mass communication at the
University of Nigeria. She is co-author of Great Women of the Press (1983),
co-editor of International Perspectives on News (1982), co-author of Let My
People Know: American Indian Journalism 1828-1978 (1981), co-editor of Screen
Experience: An Approach to Film (1968) and author of Other Voices: Black,
Chicano and American Indian Press (1974). Dr. Murphy has been a public relations
director, magazine editor and newspaper reporter. She was vice-president of the
national Accrediting Council on Education in Journalism and Mass Communication
(1983-1986), president of the Association for Education in Journalism and Mass
Communication (AAEJMC@) (1986-1987) and member of various committees for AEJMC
and the Association of Schools of Journalism and Mass Communication. She has
been honored by Women in Communications, Inc., the Milwaukee Press Club, the
Catholic School Press Association, the Jaycees, the YWCA and the Gannett
Foundation. Dr. Murphy is a member of the North Central Association
Consultant-Evaluator Corps and serves on the Board of Directors of the Everett
McKinley Dirksen Congressional Leadership Research Center, the Women=s Fund of
the Peoria Community Foundation, the Peoria Area Chamber of Commerce, the Peoria
Symphony Orchestra, a member of the Peoria Riverfront Development Commission and
the Peoria Race Relations Committee.
BRADLEY B. NIEMCEK, born 1940, Vice President-Operations and director of
the Company, is a 1965 Journalism graduate of Marquette University and is
currently pursuing, on a part-time basis, a graduate degree in International
Telecommunications at George Mason University. He plays an active role in the
Heartland Radio Network, which not only provides marketing and management
services to ATB Productions, L.L.C. but also has other broadcast activities
under development. Mr. Niemcek is a 30-year veteran of the communications
industry. He spent his early years as a newspaper reporter, television news
writer and public relations executive. In addition, Mr. Niemcek for the past two
decades has worked for, or established and built his own, companies specializing
in client services based on emerging communications technologies. Mr. Niemcek
began his career as a reporter and writer for the Milwaukee Sentinel and the NBC
affiliates in that city, WTMJ radio and TV. He was recruited into the corporate
public relations field in 1967 by Carl Byoir & Associates in Chicago and, after
one year there, moved to its New York headquarters. Mr. Niemcek departed Byoir
in 1974 to undertake a series of entrepreneurial enterprises in the sports
promotion field, television syndication and in newsletter publishing. In 1982,
he founded Newslink, Inc. to develop and market a satellite distribution service
to connect public relations enterprises with the nation=s local TV newsrooms. By
1988, the firm had expanded to include offices in New York and Washington, D.C.
and diversified into providing facilities management satellite services for
broadcast and cable TV clients as well; its largest client was Cable News
Network (ACNN@). Mr. Niemcek sold his interest in Newslink in 1988 and formed TV
People, Inc., a television facilities management firm and, from his new base in
the Washington, D.C. area, consulted on the development of a number of local and
regional political campaigns.
KIRBY S. RALSTON, born 1953, is a 1976 graduate of Texas Christian
University with a B.A. in Journalism. While in college, Mr. Ralston worked in
the sports department at the Fort Worth Star-Telegram. He also was a staff
member of the TCU student newspaper and radio station. After graduation, Mr.
Ralston joined the family-owned Ralston Advertising in Omaha, Nebraska where he
handled the sales and marketing of promotional advertising products. In 1978,
Mr. Ralston formed A Advertising & Supply, a direct mail marketing unit of
Ralston Advertising specializing in the promotion of political campaign items.
In 1990, Mr. Ralston was named President of Ralston Advertising/A Advertising &
Supply. He is a board member of the Mid-America Direct Marketing Association and
an active member of the Greater Omaha America Marketing Association and the
Omaha Federation of Advertising.
B. ERIC SIVERTSEN, born 1953, who graduated from the College of William &
Mary in 1975 and George Mason University School of Law in 1981, previously
served as an officer and director of various subsidiaries of DeRand Corporation
of America. Mr. Sivertsen, who currently serves as executive vice president of
Telecom Towers, L.L.C., is a member of the Virginia state bar and has extensive
experience
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creating marketing strategies products and has coordinated the development of a
national securities marketing organization and selling group. He has performed
acquisition due diligence, including financial and other risk analysis of
potential acquisitions, budget preparation and other pro forma financial
analysis. Mr. Sivertsen has negotiated various acquisition-related agreements,
including purchase and sale, senior and subordinated commercial financing,
seller refinancing, mortgages, leases, employment and credit enhancement
agreements. He also manages operations of a public telecommunications fund
oversees preparation of budgets, contract negotiations, development of operating
strategies, as well as the review and hiring of personnel. He served as senior
deputy to the chairman of the board of DeRand Corporation of America, serves as
in-house counsel to DeRand and Chief Personnel Manager and Administrator for
several DeRand subsidiaries. During the last several years, he has been selected
to speak at various investment seminars and conferences and on radio regarding
telecommunications investments and investment banking.
The Board of Directors and its Committees
Board Meetings
During 1997, the Board of Directors met once, and all directors attended
that meeting. Consequently all directors attended more than 75% of the meetings
of the Board.
Committees of the Board
At the present time, the Board of Directors has no committees. During 1998
the Board expects to appoint the following committees: the Audit Committee, the
Compensation and Stock Committee and the Executive Committee. Information
concerning these committees is set forth below.
The Audit Committee will oversee the performance, and review the scope, of
the audit performed by the Company's independent accountants. The Audit
Committee also will review audit plans and procedures, changes in accounting
policies and the use of the independent accountants for non-audit services.
The Compensation and Stock Committee will determine the compensation and
benefits of all officers of the Company and establishes general policies
relating to compensation and benefits of employees of the Company. The
compensation and Stock Committee will also be responsible for administering the
Company's Stock Option Plan when implemented.
The Executive Committee will be responsible for all matters which arise
between regular meetings of the Board of Directors to the extent permitted by
applicable law.
Director Compensation
Other than Michael L. Foudy and Bradley B Niemcek, directors receive no
cash compensation for their services to the Company as directors but are
reimbursed for expenses actually incurred in connection with attending meetings
of the Board of Directors. As compensation for serving on the Board, the then
five directors (including Foudy, Alexenburg, Burgum, Ralston and Sivertsen) each
received 12,500 shares of the Company's common stock during 1997. The issuance
of these shares resulted in compensation expense of $31,250 being recorded by
the Company.
Executive compensation
Compensation of the Company's executives was subject to review and approval
by the Company's Board of Directors during 1997. In determining the compensation
to be paid to the Company's executive officers in 1997, the Company employed
compensation policies designed to align such compensation with the interests of
the Company's stockholders and to relate it to overall corporate performance.
These policies
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are intended to attract and retain executives whose abilities are critical to
the long-term success of the Company, to support a performance-oriented
environment that rewards achievement of internal corporate goals and to reward
executives for the enhancement of stockholder value.
The components of the compensation of each executive officer, including the
Chief Executive Officer, are base salary, cash bonus awards and stock grants, as
described below:
Remuneration
The Company was formed on March 27, 1996 and therefore paid no compensation
prior to that time. Under the current compensation agreements, dated as of May
1, 1996 with the Company, Michael L. Foudy and Bradley B. Niemcek earn
compensation at the annual rate of $120,000 and $60,000, respectively, plus
certain out-of-pocket expenses during this start-up period. In addition,
Bradford W. Baker and Gerald Garcia have employment agreements with the Company
which do not provide for direct compensatio but do make each eligible for
certain employee benefits, including a bonus and/or stock options. (See
Employment Agreements@ following.)
Prior to the receipt of funds from the Initial Public Offering and if only
the minimum funding is subscribed for in the Initial Public Offering and no
other funds are available, it is intended that the amount of salaries for
Messrs. Foudy and Niemcek will be reduced sufficiently until cash flow is
available to adequately pay these amounts. However, it is intended that the
difference between the full compensation level and what is paid will be accrued
and ultimately paid when funds, if any, are available. It is currently
anticipated that each of these individuals will devote up to approximately 50%
of their time to either HCC or ATB Productions, L.L.C., affiliates of the
Company (for which the Company will be reimbursed for that portion of the
individual=s base salary). Determination of time allocation will be at the
discretion of the Board of Directors. As the Company's operations develop, it is
anticipated that additional personnel and outside consultants may be hired.
Employee Benefits
It is anticipated that the Company will implement, in the near future, a
Restricted Employee Stock Option plan under which its Board of Directors may
grant employees, directors and certain advisors of the Company options to
purchase its Shares at exercise prices of not less than 85% of the then current
market price on the date of the grant. Any income from such options are not
expected to be tax deferrable. As of the date of this Proxy Statement, the plan
has not been defined and no options hav been granted but 600,000 Shares have
been reserved. Moreover, the Company has agreed with certain state securities
regulators that (i) the amount of outstanding options and warrants for its
shares shall not exceed, during the period the offering is registered, more than
10% of the total Shares outstanding; and (ii) the term of any such warrants will
be ten years or less. Finally, see "Employment Agreements" below with respect to
employment agreements with four officers and employees providing, among othe
terms, their ability annually to buy up to 100,000 Shares of common stock of the
Company at $.10 per Share.
The Company anticipates that it will adopt in the future an employee cash
bonus program to provide incentive to the Company=s employees. It is anticipated
that such a plan would pay bonuses to employees based upon the Company=s pre-tax
or after-tax profit for a particular period. It is anticipated that the Company
will adopt a retirement plan such as a 401(k) retirement plan and that it will
implement an employee health plan comparable to the industry standard.
Establishment of such plans and their implementation will be at the discretion
of the Board of Directors; any such bonus plan will be based on annual
objective, goal-based criteria developed by the Board of Directors for eligible
participants.
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Employment Agreements
Messrs. Foudy, Baker and Niemcek (as of May 1, 1996) and Mr. Garcia (as of
November 1, 1997) each entered into a three-year employment agreement with the
Company (collectively, the AEmployment Agreements@) that provides for bonuses
and such other benefits (including base annual salaries as to Messrs. Foudy and
Niemcek). In addition, these employees are eligible to annually receive options
to buy 100,000 Shares of common stock at $.10 per Share with terms, other than
price, to be determined by the Board of Directors. Messrs. Foudy, Garcia, Baker
and Niemcek and the Boards of Directors each have the right to terminate the
Employment Agreements with or without cause at any time; provided, however, that
termination by the Board of Directors without cause would obligate the Company
to pay the compensation due under the applicable Employment Agreement for the
remainder of its term. Pursuant to the terms of the Employment Agreements,
Messrs. Foudy, Garcia, Baker and Niemcek have agreed that they will not compete
with the Company during the period of their employment and for a one-year period
after termination of the applicable Employment Agreement.
Base salaries of the executive officers are targeted to be within the
competitive range among communication companies similar in size to the Company.
The base salaries of the executive officers are set forth in individual
employment agreements.
Cash bonuses are designed to provide annual incentives based on individual
performance in achieving the Company's annual business goals. For 1997 these
goals included developing the Company's business plan, registering its stock
with the Securities and Exchange Commission and arranging for working capital
loans pending the completion of the Initial Public Offering ("IPO"). The Board
of Directors makes the determination as to bonus awards at the end of each year
based on the subjective evaluation of the contributions of the individual
executive officer towards the achievement of the Company's annual business
goals.
Stock awards or option grants are intended to provide the most meaningful
component of executive compensation. Stock awards or option grants provide
compensation in a manner that is intrinsically related to long-term stockholder
value because such awards or options have value only to the extent of share
appreciation from date of award or grant.
The Committee believes that periodic stock awards or grants are
appropriate, particularly in view of the absence of a Company-sponsored
long-term incentive or pension plan. Periodic awards of stock or stock options
are granted to executives at the discretion of the Board, based on an
individual's contribution toward achieving the Company's strategic goals.
In light of the Company's early stages in its development, the Company, in
evaluating its executives, assigns less weight to the Company's near-term
achievement of more traditional measures of corporate performance, such as
earnings per share and return on equity. In its evaluation, the Company places
more weight on its strategic goals of completing its business plan, effecting
its Initial Public Offering with the Securities and Exchange Commission (the
"SEC") and the funding of the Company's working capital needs. In this regard,
the Company has completed its initial business plan and its Registration
Statement was declared effective by the SEC on February 13, 1998. In regard to
the Company's working capital needs, Michael L. Foudy has loaned, on an
unsecured basis, in excess of $500,000 to the Company and its affiliates.
In regard to the measures of corporate performance, such as return on
equity, the Company has intentionally not yet paid any dividends. Furthermore,
there has been no public trading in the Company's common stock. Without
dividends or changes in share price, as measured in a public market, there is no
return on equity. Consequently, such measures are currently not applicable to
the Company and performance graphs reflecting such a return have not been
included herein.
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PROPOSAL 2 - ESTABLISHMENT OF 1997 BONUS POOL
The Board of Directors based the 1997 compensation of the Chief Executive
Officer and the Company's other executive officers on the policies described
above. In addition, the Board of Directors is further recommending, in light of
the policies and achievements described above including the provision of an
unsecured working capital loan in excess of $500,000, the establishment of the
1997 bonus pool and that 100,000 shares of common stock of the Company and
$120,000 in cash be transferred to the bonus pool for distribution by the Board
of Directors. The Board further recommends that Michael L. Foudy, the Company's
Chief Executive Officer, be the sole recipient of the 1997 bonus pool.
The Board of directors recommends a vote for the creation and distribution
of the 1997 bonus pool in the amounts and manner cited above.
Executive Compensation
The following table summarizes the compensation paid by the Company to its
Chief Executive Officer since March 27, 1996 (date of formation) through
December 31, 1997.
<TABLE>
<CAPTION>
Annual
-------------------------------------- Other Annual
Name and Principal Position (4) Year Salary (2) (3) Bonus Compensation
- ------------------------------- ---- -------------- ----- ------------
<S> <C> <C> <C> <C>
Michael L. Foudy 1997 $ 25,000 - (1) $ 6,250 (1)
President, Chief Executive 1996 $ 75,000 -
Officer and Chairman of the
Board
</TABLE>
(1) Excludes 1997 bonus pool amounts since subject to approval (Proposal 2) and
not yet paid.
(2) Represents cash compensation paid in each period. Due to cash deficiencies,
significant portions of salaries as specified in the compensation
agreements have been deferred, particularly in 1997, until funds, if any,
are available as discussed above under "Remuneration."
(3) Includes compensation provided by affiliates of the Company as discussed
above in "Remuneration."
(4) No disclosure needs to be provided for any executive officer other than the
Chief Executive Officer since no executive officer was paid or will be paid
(for accrued portions of payroll) an annual salary and bonus greater than
$100,000 per year.
(5) There is no long-term compensation or any other type of compensation.
Section 162(m) of the internal Revenue Code generally limits the tax
deductibility of annual compensation paid to certain officers to $1 million. As
noted above, the Company did not exceed this deductibility cap for any of its
officers or employees.
Principal Shareholders
The following table sets forth certain information as of March 31, 1998
regarding the beneficial ownership of common stock of each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
common stock, each of the directors of the Company, each of the executive
officers of the Company and all executive officers and directors of the Company
as a group.
<PAGE>
12 of 13
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Name Number of Shares (3) Percent (2)
---- -------------------- -----------
<S> <C> <C>
Directors and Officers
Michael L. Foudy (1) 270,671 19.5%
Gerald Garcia 53,801 3.8%
Bradley B. Niemcek 5,412 .4%
Bradford W. Baker - -
Ron Alexenburg 12,500 .9%
Thomas Burgum 12,500 .9%
Kirby Ralston 12,500 .9%
B. Eric Sivertsen 12,500 .9%
Gregory Jackson - -
Sharon Murphy - -
------- ----
All executive officers and directors as a group (10 persons) 379,884 27.3%
======= ====
</TABLE>
(1) Mr. Foudy would also have been included as a more than 5% owner of
outstanding common stock.
(2) Reflects 1,389,314 total outstanding shares of common stock as of March 31,
1998.
(3) Does not include warrants inasmuch as the Company does not believe it is
probable they will be exercisable.
PROPOSAL 3 - APPOINTMENT OF INDEPENDENT AUDITORS
Management has recommended and the Board of Directors approved the
appointment of BDO Seidman, LLP as independent auditors for the fiscal 1998,
subject to stockholder approval and ratification.
Management, in arriving at its recommendation to the Board, reviewed the
performance of BDO Seidman, LLP in prior years as well as the firm's reputation
for integrity and competence in the fields of accounting and auditing.
Management has expressed its satisfaction with BDO Seidman, LLP in these
respects.
BDO Seidman, LLP has served as the Company's independent auditor since the
Company's inception in 1996. Representatives of BDO Seidman, LLP will be present
at the stockholders' meeting and will have the opportunity to make such
statements as they may desire. They will also be available to respond to
appropriate questions from the stockholders present.
The Board of Directors recommends a vote FOR the approval of the
appointment of BDO Seidman, LLP as independent auditors of the Company for the
year 1998.
Other Matters
The Board of Directors of the Company knows of no matters to be presented
at the Annual Meeting other than those described in this Proxy statement. Other
business may properly come before the meeting, and in that event it is the
intention of the Proxy committee to vote as recommended by the Company.
Proxy Solicitation
The cost of solicitation of proxies will be borne by the Company. The
Company will request brokerage houses, banks and other custodians or nominees
holding stock in their names for others to forward proxy materials to their
customers or principals who are the beneficial owners of shares and will
reimburse them for their expenses in doing so. The Company expects to solicit
proxies primarily by mail,
<PAGE>
13 od 13
but directors, officers, and other employees of the Company may also solicit in
person, by telephone, facsimile, or by mail. The Company has retained DCM to
assist in the solicitation of proxies. DCM will solicit proxies by personal
interview, telephone, facsimile, and mail. It is anticipated that the fee for
those services will not exceed $1,000 plus reimbursement of customary
out-of-pocket expenses.
Deadline for Submission of Stockholder Proposals for Next Year's Annual Meeting
The proxy rules adopted by the Securities and Exchange Commission provide
that certain stockholder proposals must be included in the proxy statement for
the Company's Annual Meeting. For a proposal to be considered for inclusion in
next year's proxy statement, it must be received by the Company no later than
December 1, 1998.
The Company's Annual Report, on Form 10-K, including the Company's audited
financial statements for the year ended December 31, 1997, is being mailed
herewith to all stockholders of record.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING PROXY
CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
Bradford W. Baker
Corporate Secretary
1320 Old Chain Bridge Road
Suite 220
McLean, VA 22101
April 30, 1998
