MULTIBAND CORPORATION
AND SUBSIDIARIES
9449 SCIENCE CENTER DRIVE
NEW HOPE, MINNESOTA 55428
NOTICE OF 2005 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 29, 2005
The Annual Meeting of the Shareholders of Multiband Corporation and
Subsidiaries ("Multiband" or "the Company") will be held at the Radisson Hotel,
3131 Campus Drive, Plymouth, Minnesota 55441 on June 29, 2005, at 2:00 p.m.
Minneapolis time, for the following purposes, as more fully described in the
accompanying Proxy Statement.
1. To elect seven Directors for a term of one year.
2. To ratify the election of Virchow, Krause & Company, LLP as
independent auditors of the Company for fiscal year 2004.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Shareholders of record at the close of business April 25, 2005
will be entitled to receive notice of and vote at the meeting. The Company's
Board of Directors recommends a vote in favor of all the proposals.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy as promptly as possible in the
postage-paid envelope enclosed for that purpose. Returning your proxy will help
the Company ensure a quorum and avoid the additional expense of duplicate proxy
solicitations. Any shareholder attending the meeting may vote in person even if
he or she has returned the proxy.
By Order of the Board of Directors
Steven Bell
Secretary
1
MULTIBAND CORPORATION
9449 SCIENCE CENTER DRIVE
NEW HOPE, MINNESOTA 55428
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 29, 2005
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
The mailing address of the principal corporate office of the Company is
9449 Science Center Drive, New Hope, MN 55428. This Proxy Statement and the form
of proxy, which is enclosed, are being mailed to the Company's shareholders
commencing on or about May 16, 2005.
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of the Company. All shares of common stock
represented by properly executed proxies, unless such proxies have previously
been revoked, will be voted in accordance with the direction of the proxies. If
no direction is indicated, the shares will be voted in accordance with the
direction of the proxies. If any others matters are properly presented at the
meeting for action, including a question of adjourning the meeting from time to
time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgement.
When stock is in the name of more than one person, each such person
must sign the proxy. If the shareholder is a corporation, an executive or other
authorized officer must sign the proxy in the name of such corporation. If
signed as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment must be
furnished.
A shareholder executing and returning a proxy has the power to revoke
it at any time before it is voted. A shareholder who wishes to revoke a proxy
can do so by executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting, or by appearing in person at the Annual Meeting and
voting in person the shares to which the proxy relates.
In addition to the use of the mail, proxies may be solicited by
personal interview, telephone and telegram by the Directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of common stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed by the Company for their reasonable out-of-pocket
expenses incurred by them in connection therewith. All expenses incurred in
connection with this solicitation will be borne by the Company.
The Company is including with this Proxy Statement its Annual Report to
shareholders for the year ended December 31, 2004, which includes a copy of the
Company's Form 10-K registration as amended, as filed with the Securities and
Exchange Commission. Shareholders may receive, without charge, additional copies
of the Form 10-K, as amended, by writing to Multiband Corporation at its
principal corporate office.
The presence at the Annual Meeting in person or by proxy of the holders
of 34% of the outstanding shares of the Company's common stock entitled to vote
shall constitute a quorum for the transaction of business. If a broker returns a
"non-vote" proxy, indicating a lack of voting instructions by the beneficial
holder of the shares and a lack of discretionary authority on the part of the
broker to vote on a particular matter, then the shares covered by such non-vote
shall be deemed present at the meeting for purposes of determining a quorum but
shall not be deemed to be represented at the meeting for purposes of calculating
the vote required for approval of such matter. If a shareholder abstains from
voting as to any matter, then the shares held by such shareholder shall be
deemed present at the meeting for purposes of determining a quorum and for
purposes of calculating the vote with respect to such matter, but shall not be
deemed to have been voted in favor of such matter. An abstention as to any
proposal will therefore have the same effect as a vote against the proposal.
2
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on April 25, 2005
(the "Record Date") will be entitled to vote at this meeting. On the Record
Date, there were 28,544,268 shares of common stock issued and outstanding. Each
holder of common stock is entitled to one vote, exercisable in person or by
proxy, for each share of common stock held of record on the Record Date. The
affirmative vote of holders of a majority of shares of common stock outstanding
on the Record Date is required for approval of the proposals to be voted upon at
the Annual Meeting.
The following table sets forth certain information as of April 25, 2005
with respect to each person known by the Company to be the beneficial owner of
more than 5 percent of its common stock, each Director of the Company, and all
officers and Directors of the Company as a group. Except as indicated, each of
the persons listed in the following table has sole voting and investment power
with respect to the shares set forth opposite his name.
PERCENT OF
NUMBER OF SHARES(1) COMMON SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIALLY OWNED OUTSTANDING
------------------------------------- ------------------- -------------
Steven Bell
9449 Science Center Drive
New Hope, MN 55428 689,063(2) 2.4%
Frank Bennett
301 Carlson Parkway - Suite 120
Minnetonka, Minnesota 55305 232,500(3) *
Jonathan Dodge
715 Florida Avenue South - Suite 402
Golden Valley, MN 55426 80,500(4) *
David Ekman
200 44th Street SW
Fargo, ND 58103 1,751,583(5) 5.8%
Eugene Harris
225 South Meramec - Suite 722
St. Louis, MO 63105 111,220(6) *
James L. Mandel
9449 Science Center Drive
New Hope, MN 55428 714,133(7) 2.5%
Donald Miller
1924 Cocoplum Way
Naples, FL 34105 1,860,287(8) 5.4%
David Weiss
10829 Olive Blvd.
Suite 203
St. Louis, MO 63141 222,744(9) *
All Directors and executive officers
as a group (eight persons) 5,662,030 17.2%
*Less than one percent
(1) Each person has sole voting and sole dispositive power with respect to all
outstanding shares, except as noted. There are 28,544,268 shares
outstanding at April 25,2005. Shares of common stock not outstanding but
deemed beneficially owned by virtue of the individual's right to acquire
them as of April 25, 2005 or within 60 days of such date are treated as
outstanding when determining the number of shares beneficially owned by
each person and the group and the percent of the class owned by each
individual and the group. Unless otherwise indicated, each person named or
included in the group has sole vesting and investment power with respect
to the shares of common stock set forth opposite his or her name. Unless
otherwise indicated, the information in the table does not include any
stock options and/or warrants outstanding that cannot be exercised within
60 days of April 25, 2005.
(2) Includes vested options to acquire 135,500 shares of common stock. Mr.
Bell's Beneficial Ownership does include 31,250 shares of common stock
owned by his spouse as to which Mr. Bell disclaims his beneficial
ownership.
(3) Includes vested options to purchase 105,000 shares of common stock.
(4) Includes vested options to acquire 80,000 shares of common stock.
(5) Includes vested options to purchase 150,500 shares of common stock.
(6) Includes vested options to purchase 75,000 shares of common stock. Mr.
Harris's beneficial ownership does include 19,000 shares owned by his
spouse as to which Mr. Harris disclaims his beneficial ownership.
(7) Includes vested options to purchase 550,500 shares of common stock.
(8) Includes warrants and vested options to purchase 829,500 shares of common
stock.
(9) Includes vested options to purchase 105,000 shares of common stock.
3
The Nominating Committee has nominated seven persons for election at
the 2005 Annual Meeting as Directors for a one-year term expiring at the 2006
Annual Meeting. The Directors will hold office for the term for which elected
and will serve until their successors have been duly elected and qualified.
It is intended that votes will be cast pursuant to the enclosed proxy
for the election of the nominees in the table below, except for those proxies
that withhold such authority. In the event that any of the nominees of the
Company is unable or declines to serve as a Director at the time of the Annual
Meeting, the proxy will be voted for the election of such other individual as
the Nominating Committee shall designate in the place of such nominee.
Management has no reason to believe that any of the nominees will not be a
candidate or will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company by the respective
nominees for Director.
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
Steven Bell........ 46 President & Chief Financial Officer, Multiband Corporation 1994
Frank Bennett...... 48 President, Artesian Capital 2002
Jonathan Dodge..... 54 Partner, Dodge & Fox C.P.A. Firm 1997
Eugene Harris...... 40 Managing Director, Flagstone Securities 2004
James L. Mandel.... 48 Chief Executive Officer, Multiband Corporation 1998
Donald Miller...... 65 Chairman, Multiband Corporation 2001
David Weiss........ 42 Principal, Rangeline Capital, LLC 2002
STEVEN BELL was general counsel and Vice President of the Company from June 1985
through October 1994, at which time he became Chief Financial Officer. He was
also named President in July 1997. He is a graduate of the William Mitchell
College of Law.
FRANK BENNETT has been a Director of Multiband Corporation since 2002 and is
currently a member of the Audit Committee. Mr. Bennett is President of Artesian
Management, Inc., which manages Artesian Capital, a private equity investment
firm based in Minneapolis. Artesian Capital invests in companies in the
communications, consumer, financial services and health care industries. Prior
to founding Artesian Capital in 1989, he was a Vice President of Mayfield
Corporation, and a Vice President of Corporate Finance of Piper Jaffray &
Hopwood and a Vice President of Piper Jaffray Ventures, Inc. He is currently a
director of Fairfax Financial Holdings Limited, Odyssey Re Holdings Corp.,
Multiband Corporation, Northbridge Financial Corporation and Crum & Forster
Holdings, Inc. Mr. Bennett currently serves on the boards of several non-profit
organizations including the Social Enterprise Fund, American Federation of Arts,
St. David's Child Development and Family Services, PACER Center and Wayzata
Community Church. Mr. Bennett is a graduate of the University of Oregon.
JONATHAN DODGE has been the Senior Partner of the C.P.A. firm of Dodge & Fox
since its inception in March 1997. Prior to that, he was a partner in the CPA
firm of Misukanis and Dodge from 1992 to March 1997. Mr. Dodge is a member of
both the AICPA and the Minnesota Society of CPA's.
EUGENE HARRIS, age 40, is a Managing Director of Flagstone Securities, a St.
Louis based merchant bank. Mr. Harris, joined Flagstone in 2004 after 10 years
as the majority shareholder of Eidelman, Finger, Harris & Co., a registered
investment advisor. Prior to joining Eidelman, Finger, Harris & Co., Mr. Harris
held positions in general management and new business development for the
Monsanto Company from 1990 to 1994. He also was an Associate Consultant with
Bain and Co. from 1986 to 1988. Mr. Harris received a B.S. in Industrial
Engineering from Stanford University in 1986 and an M.S. in Management from the
Sloan School of Management at the Massachusetts Institute of Technology in 1990.
He is a Charted Financial Analyst and a member of the Financial Analysts
Federation. Mr. Harris was appointed to the Company's Board of Directors in
April 2004.
4
JAMES MANDEL has been the Chief Executive Officer and a Director of the Company
since October 1, 1998. From October 1991 to October 1996, he was Vice President
of Systems for Grand Casinos, Inc., where his duties included managing the
design, development, installation and on-going maintenance for the 2,000 room,
$507 million Stratosphere Hotel, Casino and Tower in Las Vegas. Mr. Mandel also
managed the systems development of Grand Casino Mille Lacs, in Onamia,
Minnesota, Grand Casino Hinckley in Hinckley, Minnesota and six other casinos
nationwide. He also serves as Chairman of the Board of CorVu Corporation and is
a trustee of the Boys and Girls Club of Minneapolis.
DONALD MILLER worked for Schwan's enterprises between 1962 and 2001, primarily
as Chief Financial Officer. He is currently employed by Schwan's as Special
Assistant to the CEO. He was appointed to the Company's Board of Directors in
September 2001 and was elected Chairman of the Board in April 2002. Mr. Miller
is also Chairman of the Company's Audit Committee. Mr. Miller also serves as a
Board and Audit Committee member for Gelstat Corporation (GSAC).
DAVID WEISS has been a Director of the Company since 2002. He is currently
Managing Principal for Rangeline Capital, LLC, a real estate investment banking
company. Prior to forming Rangeline in 2002, Mr. Weiss was Managing Director for
the St. Louis office of Northland/Marquette Capital Group.
The Company knows of no arrangements or understandings between a Director or
nominee and any other person pursuant to which any person has been selected as a
Director or nominee. There is no family relationship between any of the
nominees, Directors or executive officers of the company.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board has determined that a majority of its members are "independent" as
defined by the listing standards of the NASDAQ Stock Market. The independent
Directors are Messrs. Frank Bennett, Jonathan Dodge, Eugene Harris and Donald
Miller.
The Board of Directors met four times in 2004. As permitted by Minnesota Law,
the Board of Directors also acted from time to time during 2004 by unanimous
written consent in lieu of conducting formal meetings. Last year, there were
four such actions and accompanying Board Resolutions passed. The Board has
designated an audit committee consisting of Jonathan Dodge, Donald Miller and
Frank Bennett. The Board also designated a compensation committee consisting of
Frank Bennett, Eugene Harris, and Donald Miller.
Shareholder communication with the Board
Our Board welcomes your questions and comments. If you would like to communicate
directly to our Board, or if you have a concern related to the Company's
business ethics or conduct, financial statements, accounting practices or
internal controls, then you may contact our website via www.multibandusa.com,
section Investor Relations. All communications will be forwarded to our audit
committee.
Directors' attendance at Annual Meetings can provide shareholders with an
opportunity to communicate with Directors about issues affecting the Company.
The Company does not have a policy regarding director attendance, but all
Directors are encouraged to attend the Annual Meeting of Shareholders. Six of
our directors attended our Annual Meeting in 2004.
AUDIT COMMITTEE
Our audit committee:
o recommends to our Board of Directors the independent auditors to conduct
the annual audit of our books and records;
o reviews the proposed scope and results of the audit;
o approves the audit fees to be paid;
o reviews accounting and financial controls with the independent public
accountants and our financial and accounting staff; and
o reviews and approves transactions between us and our Directors, officers
and affiliates.
Our audit committee has a formal charter that is an exhibit to our most recent
annual report on Form 10-K.
5
Our audit committee met four times during 2004. The Audit Committee is comprised
entirely of individuals who meet the independence and financial literacy
requirements of NASDAQ listing standards. Our Board has determined that all
three members qualify as an "audit committee financial expert" independent from
management as defined by Item 401(h)(2) of Regulation S-K under the Securities
Act of 1933, as amended. The Company acknowledges that the designation of the
members of the Audit Committee as financial experts does not impose on them any
duties, obligations or liability that are greater than the duties, obligations
and liability imposed on them as a member of the audit committee and the Board
of Directors in the absence of such designation.
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing, and financial reporting practices of the Company. During the year
ended December 31, 2004, the Committee met four times, and Donald Miller, as the
Audit Committee chair and representative of the Audit Committee, discussed the
interim financial information contained in quarterly earnings announcement with
the Company's Chief Financial Officer and the Company's independent auditors
prior to public release.
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may affect their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls. The Audit Committee
reviewed with both the independent auditors their audit plans, audit scope, and
identification of audit risks.
The Audit Committee discussed and reviewed with the Company's
independent auditors all communications required by generally accepted auditing
standards, including those described in Statement on Auditing Standards No. 61,
as amended, "Communication with Audit Committees" and, both with and without
management present, discussed and reviewed the results of the independent
auditors' examination of the Company's consolidated financial statements. The
Audit Committee reviewed the audited consolidated financial statements of the
Company as of and for the fiscal year ended December 31, 2004 with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's consolidated financial statements and the Company's
independent auditors have the responsibility for the examination of those
statements.
Based on the review referred to above and discussions with management
and the independent auditors, the Audit Committee recommended to the Board of
Directors that the Company's audited consolidated financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2004 for filing with the Securities and Exchange Commission. The Audit
Committee also recommended the reappointment, subject to shareholder approval,
of the independent auditors and the Board of Directors concurred in such
recommendation.
COMPENSATION COMMITTEE
Our compensation committee
o reviews and recommends the compensation arrangements for management,
including the compensation for our chief executive officer; and
o establishes and reviews general compensation policies with the objective to
attract and retain superior talent, to reward individual performance and to
achieve our financial goals.
Our compensation committee met four times during 2004. The compensation
committee is comprised entirely of Directors who meet the independence
requirements of the NASDAQ listing standards.
6
NOMINATING COMMITTEE
The Nominating Committee was formed by our Board in April 2004 and consists of
Frank Bennett and Eugene Harris. The Nominating Committee's duties include
adopting criteria for recommending candidates for election or re-election to our
Board and its committees, considering issues and making recommendations
considering the size and composition of our Board. The Nominating Committee will
also consider nominees for Director suggested by shareholders in written
submissions to the Company's Secretary.
The Nominating Committee met in April 2005 to decide upon the nominees for
Director at the Annual Meeting.
DIRECTOR NOMINATION PROCEDURES
DIRECTOR MANAGER QUALIFICATIONS. The Company's Nominating Committee has
established policies for the desired attributes of our Board as a whole. The
Board will seek to ensure that a majority of its members are independent as
defined in the NASDAQ listing standards. Each member of our Board must possess
the individual qualities of integrity and accountability, informed judgment,
financial literacy, high performance standards and must be committed to
representing the long-term interests of the Company and the shareholders. In
addition, Directors must be committed to devoting the time and effort necessary
to be responsible and productive members of our Board. Our Board values
diversity, in its broadest sense, reflecting, but not limited to, profession,
geography, gender, ethnicity, skills and experience.
IDENTIFYING AND EVALUATING NOMINEES. The Nominating Committee regularly
assesses the appropriate number of Directors comprising our Board, and whether
any vacancies on our Board are expected due to retirement or otherwise. The
Nominating Committee may consider those factors it deems appropriate in
evaluating Director candidates including judgment, skill, diversity, strength of
character, experience with businesses and organizations comparable in size or
scope to the Company, experience and skill relative to other Board members, and
specialized knowledge or experience. Depending upon the current needs of our
Board, certain factors may be weighed more or less heavily by the Nominating
Committee. In considering candidates for our Board, the Nominating Committee
evaluates the entirety of each candidate's credentials and, other than the
eligibility requirements established by the Nominating Committee, does not have
any specific minimum qualifications that must be met by a nominee. The
Nominating Committee considers candidates for the Board from any reasonable
source, including current Board members, shareholders, professional search firms
or other persons. The Nominating Committee does not evaluate candidates
differently based on who has made the recommendation. The Nominating Committee
has the authority under its charter to hire and pay a fee to consultants or
search firms to assist in the process of identifying and evaluating candidates.
CHARTER OF THE NOMINATING COMMITTEE. A copy of the charter of the
Nominating Committee is available on our website at www.multibandusa.com.
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
remuneration paid by the Company to its executive officers whose aggregate cash
and cash-equivalent remuneration approximated or exceeded $100,000 during the
Company's last three fiscal years ending December 31, 2004.
7
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER RESTRICTED SECURITIES LTIP ALL OTHER
POSITION ($) ($) ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
COMPENSATION AWARD(S) OPTIONS/ ($) ($)
($) ($) SARs (#)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
AWARDS PAYOUTS
------------------ ---- -------- -------- ------------ ---------- ---------- ------- ------------
James L. Mandel 2004 $201,731 $125,000 -0- -0- 100,000 -0- -0-
Chief Executive Officer 2003 $250,727 $125,000 -0- -0- 300,000 -0- -0-
2002 $149,874 $100,000 -0- -0- -0- -0- -0-
Steven Bell 2004 $125,521 -0- -0- -0- 75,000 -0- -0-
Chief Financial Officer 2003 $120,484 -0- -0- -0- 50,000 -0- -0-
2002 $99,014 -0- -0- -0- 10,500 -0- -0-
Dave Ekman 2004 $120,380 -0- -0- -0- -0- -0- -0-
Chief Information Officer 2003 $111,154 -0- -0- -0- -0- -0- -0-
2002 $93,695 -0- -0- -0- -0- -0- -0-
DIRECTORS FEES
There were no cash fees paid to Directors in 2004. Outside Directors
receive a stock option of 30,000 shares at market price upon joining the
Company's Board. Additional awards or options to Directors are determined by the
Board's Compensation Committee.
8
PERFORMANCE GRAPH
The following performance graph compares cumulative total shareholder
returns on the Company's common stock over the last five fiscal years, ended
December 31, 2004, with The NASDAQ Stock Market (U.S. Companies) Index and other
leading industry indices, assuming initial investment of $100 at the beginning
of the period and the reinvestment of all dividends.
COMPARISON OF FIVE YEAR - CUMULATIVE TOTAL RETURNS*
AMONG MULTIBAND CORP.
[GRAPHIC OMITTED]
COMPARISON OF FIVE YEAR - CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
MULTIBAND CORPORATION
PREPARED BY THE RESEARCH DATAGROUP, INC.
MULTIBAND CORPORATION
------------------------------ ------- --------- -------- --------- --------
12/00 12/01 12/02 12/03 12/04
------------------------------ ------- --------- -------- --------- --------
MULTIBAND CORPORATION 112.50 43.00 22.50 30.75 40.43
------------------------------ ------- --------- -------- --------- --------
NASDAQ STOCK MARKET (U.S.) 59.19 44.90 25.97 37.93 40.26
------------------------------ ------- --------- -------- --------- --------
RUSSELL 2000 96.98 99.39 79.03 116.38 137.71
------------------------------ ------- --------- -------- --------- --------
NASDAQ TELECOMMUNICATIONS 52.17 38.29 23.31 41.85 45.52
------------------------------ ------- --------- -------- --------- --------
S & P COMMUNICATION SERVICES 61.19 53.70 35.38 37.89 45.41
------------------------------ ------- --------- -------- --------- --------
* $100 invested on 12/31/99 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31.
9
STOCK OPTION GRANTS DURING 2004
The following table provides information regarding stock options
granted during fiscal 2004 to the named executive officers in the Summary
Compensation Table.
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for Option
Underlying Granted to Exercise or Term (1)
Options Employees in Base Price Expiration -----------------------------
Name Granted (#) Fiscal Year (%) ($/Share) Date 5% 10%
---- ----------- --------------- ----------- ---------- -------- --------
James L. Mandel 100,000 16.1 $1.45 6/18/2014 $91,190 $231,093
Steven M. Bell 25,000 4.0 $1.89 4/23/2014 $29,715 $ 75,304
Steven M. Bell 50,000 8.0 $1.45 6/18/2014 $45,595 $115,546
Dave Ekman -0- -0- -- -- -- --
(1) The "potential realizable value" shown represents the potential gains based
on annual compound stock price appreciation of 5% and 10% from the date of
grant through the full option terms, net of exercise price, but before
taxes associated with exercise. The amounts represent certain assumed rates
of appreciation only, based on the Securities and Exchange Commission
rules. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock, overall market conditions and the
option holders, continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved and do not
reflect the Company's estimate of future stock price growth.
Each option represents the right to purchase one share of common stock.
The options shown in this table are all non-qualified stock options. To the
extent not already exercisable, the options generally become exercisable in the
event of a merger in which the Company is not the surviving corporation, a
transfer of all shares of stock of the Company, a sale of substantially all the
assets, or a dissolution or liquidation, of the Company.
AGGREGATED OPTION EXERCISES IN 2004 AND YEAR END OPTION VALUES
The following table provides information as to options exercised by the
named executive officers in the Summary Compensation Table during fiscal 2004
and the number and value of options at December 31, 2004.
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED VALUE (1) UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME ON EXERCISE REALIZED DECEMBER 31, 2004 DECEMBER 31, 2004
---- ----------- --------- ------------------------- -------------------------
James L. Mandel... -0- -0- 550,500 -0- $200,555 $0
Steven M. Bell.... -0- -0- 135,500 -0- $ 33,555 $0
David Ekman....... -0- -0- 150,500 -0- $0 $0
(1) Value is calculated on the basis of the difference between the option
exercise price and $1.61, the fair market value of the Company's common
stock at December 31, 2004 as quoted on the NASDAQ, multiplied by the
number of shares underlying the option.
OTHER COMPENSATION AND LONG-TERM INCENTIVE PLANS
The Company has no long-term incentive plans and issued no long-term
incentive awards during 2004.
10
The Company has an employment agreement with Mr. Steven Bell,
President, for the term beginning January 2005 and expiring September 2008. Mr.
Bell's compensation is not directly tied to the Company's performance. The
agreement states that annual base salary for Mr. Bell will be $195,000 per year.
Other key provisions of the contract include an agreement by Mr. Bell to keep
confidential information secret both during and after employment by the Company
and covenants not to compete with the Company for one year from the date of
termination of employment. The contract also provides Mr. Bell with 400,000
stock options at market price, vested over a three year period.
The Company maintains key man life insurance policies in the amount of
$1,000,000 each on the lives of Steven Bell and Marvin Frieman, former Director.
The Company is the beneficiary of these policies and has adopted a plan to pay
fifty percent of all life insurance proceeds to the spouse or surviving children
of each such individual.
The Company also has a three year employment agreement, from January
2005 to December 2007, with James L. Mandel, Chief Executive Officer, the terms
of which involve an annual base salary of $250,000 and a stock option of 600,000
shares at $1.47 per share, vested over a three year period. Mr. Mandel's job
responsibilities involve developing company business plans, developing expansion
and growth opportunities and directing other executive officers.
The Company also has a two year employment agreement, beginning April
1, 2005 and ending March 31, 2007, with David Ekman, Chief Information Officer,
the terms of which include an annual base salary of $150,000 and a stock option
of 200,000 shares at $1.35 per share, vested over a three year period.
PREFERRED STOCK
In December 1998, Multiband issued 2,550 shares of Class A Preferred for $23,638
and 37,550 shares of Class B Preferred for $359,893. The Class B Preferred was
offered to certain note holders at a conversion rate of $10.00 per share of
Class B Preferred. Each share of Class A Preferred and Class B Preferred is
non-voting (except as otherwise required by law) and convertible into five
shares of Common Stock, subject to adjustment in certain circumstances. Each
holder of a share of Class A Preferred or Class B Preferred has a five-year
warrant to purchase one share of Common Stock at $3.00 per share, subject to
adjustment. During 2001, Multiband issued 67,655 shares of Class A Preferred for
$676,556.
In June 2000, Multiband issued 80,500 shares of Class C Preferred for
$805,000. The Class C Preferred was offered to certain note holders at a
conversion rate of $10.00 a share. In September 2000, Multiband issued an
additional 72,810 shares of Class C Preferred for $728,100. Each share of Class
C Preferred is non-voting (except as otherwise required by law) and convertible
into two shares of Multiband Common Stock, subject to adjustment in certain
circumstances.
In November 2000, Multiband issued 72,500 shares of Class D Preferred
for $490,332. The Class D Preferred was sold to eight accredited investors at
$10.00 per share. Each share of Class D Preferred is non-voting (except as
otherwise required by law) and convertible into two and one-half shares of
Multiband Common Stock, subject to adjustment in certain circumstances.
In the second quarter of 2002, Preferred Class D stocks were redeemed;
$100,000 converted to Common Stock, and $300,000 converted to a Note Payable.
In the fourth quarter of 2002, Multiband issued 70,000 shares of Class
E Preferred for $700,000, with $600,000 related to conversion of a note payable
from a director of the Company into Preferred Stock.
In the first quarter of 2003, $72,000 worth of Class C Preferred Stock
was issued to an officer of the Company in a conversion of accounts payable.
Also in the first quarter of 2003, $76,500 worth of Class E Preferred Stock was
issued to a member of the Board for his purchase of Multiband assets.
In the third quarter of 2003, $25,000 worth of Class B Preferred Stock
was purchased by an accredited investor.
In addition, during 2003 $133,100 worth of Class C Preferred Stock was
redeemed.
During the second quarter of 2004, $776,500 worth of Class E Preferred
Stock was converted into Common Stock at a price of $1.25 per share. During the
third quarter of 2004, two million dollars worth of Class F Preferred Stock was
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issued. During the fourth quarter of 2004, $452,450 worth of Class G Preferred
Stock was issued and $1,083,341 worth of Class H Preferred Stock was issued.
In the first quarter of 2005, the company issued $10,000,000 worth of
Class I Preferred Stock. The shares of Series I convertible preferred stock
contain a monthly dividend that is payable at prime plus 10% through August 31,
2005, at prime rate from September 1, 2005 through August 31, 2006, and at prime
rate plus 1% thereafter.
The holders of the Class A Preferred, Class B Preferred, Class C
Preferred, Class D Preferred, Class E Preferred, Class F Preferred, Class G
Preferred and Class H Preferred (collectively, "Preferred Stock") are entitled
to receive, as and when declared by the Board, out of the assets of the Company
legally available for payment thereof, cumulative cash dividends calculated
based on the per share stated value of the Preferred Stock. The per annum
dividend rate is eight percent (8%) for the Class A Preferred and ten percent
(10%) for the Class B Preferred, Class C Preferred and Class F Preferred,
fourteen percent (14%) for the Class D Preferred, fifteen percent (15%) for the
Class E Preferred, to be paid in kind, eight percent (8%) for the Class G
Preferred and six percent (6%) for the Class H Preferred. Dividends on the Class
A Preferred, Class C Preferred, Class D Preferred, Class F Preferred and Class G
Preferred are payable quarterly on March 31, June 30, September 30, and December
31 of each year. Dividends on the Class B Preferred are payable monthly on the
first day of each calendar month. Dividends on the Class H Preferred are payable
semiannually on June 30 and December 31 of each year. Dividends on the Preferred
Stock accrue cumulatively on a daily basis until the Preferred Stock is redeemed
or converted.
In the event of any liquidation, dissolution or winding up of
Multiband, the holders of the Class A Preferred and Class B Preferred will be
entitled to receive a liquidation preference of $10.50 per share, and the
holders of the Class C Preferred, Class D Preferred, Class E Preferred, Class F
Preferred and Class G Preferred will be entitled to receive a liquidation
preference of $10.00 per share, each subject to adjustment. Holders of the Class
H Preferred will be entitled to receive a liquidation preference of $100,000 per
share. Any liquidation preference shall be payable out of any net assets of
Multiband remaining after payment or provision for payment of the debts and
other liabilities of Multiband.
Multiband may redeem the Preferred Stock, in whole or in part, at a
redemption price of $10.50 per share for the Class A Preferred and the Class B
Preferred and $10.00 per share for the Class C Preferred, Class D Preferred,
Class E Preferred, Class F Preferred and Class G Preferred (subject to
adjustment, plus any earned and unpaid dividends) on not less than thirty days'
notice to the holders of the Preferred Stock, provided that the closing bid
price of the common stock exceeds $4.00 per share (subject to adjustment) for
any ten consecutive trading days prior to such notice. Upon Multiband's call for
redemption, the holders of the Preferred Stock called for redemption will have
the option to convert each share of Preferred Stock into shares of common stock
until the close of business on the date fixed for redemption, unless extended by
Multiband in its sole discretion. Preferred Stock not so converted will be
redeemed. No holder of Preferred Stock can require Multiband to redeem his or
her shares.
RELATED PARTY TRANSACTIONS
The following is a summary of all significant related party
transactions for the three years ended December 31, 2004.
The Company had revenues from companies that are associated with a
director, who was elected to the board of directors during 2003, of
approximately $0, $1,124,000 and $636,000 for the years ended December 31, 2004,
2003, and 2002, respectively. In addition, the Company had accounts receivable
outstanding from these companies of approximately $140,000, $142,000, and
$171,000 at December 31, 2004, 2003, and 2002, respectively.
Multiband and its subsidiaries lease principal offices located at 2000
44th Street SW, Fargo, ND 58013 and 9449 Science Center Drive, New Hope,
Minnesota 55428. The Fargo office lease expires in 2017 and covers approximately
22,500 square feet. The Fargo base rent ranges from $21,577 to $24,360 per
month. The New Hope office lease expires in 2006 and covers approximately 47,000
square feet. The New Hope base rent ranges from $16,000 to $17,653 per month.
Both the New Hope and main Fargo leases have provisions that call for the
tenants to pay net operating expenses, including property taxes, related to the
facilities. Both offices have office, warehouse and training facilities. The
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main Fargo property is owned in part by David Ekman. The New Hope property was
owned jointly by Steven Bell and Marvin Frieman prior to its sale in August 2003
to an independent third party.
Interest and dividend expense paid by Multiband to related parties was
approximately $9,995 in 2004, $225,966 in 2003, and $228,000 in 2002. Related
parties include the Company's Chairman, Chief Executive Officer, President and
the President's mother.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that directors, certain
officers of the Company and ten percent shareholders file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the "SEC")
as to the Company's securities beneficially owned by them. Such persons are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-K stating that no Forms 5 were required, the Company believes that,
during fiscal year 2004, all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent shareholders were complied with.
Equity Compensation Plan Information
The following table provides information as of December 31, 2004 about
the Company's equity compensation plans.
-------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE UNDER
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS (EXCLUDING
WARRANTS AND RIGHTS WARRANTS AND RIGHTS SECURITIES REFLECTED IN COLUMN (a))
-------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 5,100,000 $1.71 2,911,568
approved by security
holders
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 0 0 0
not approved by security
holders (1)
-------------------------------------------------------------------------------------------------------------------------
TOTAL 5,100,000 $1.71 2,911,568
-------------------------------------------------------------------------------------------------------------------------
* The Company's Board has the authority to grant options and warrants to
purchase shares of the Company's common stock outside of any equity compensation
plans approved by security holders.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee had selected Virchow, Krause & Company, LLP, to
audit the consolidated financial statements of the Company for the last fiscal
year ended December 31, 2004. Virchow, Krause & Company, LLP has audited the
Company's consolidated financial statements annually since 2001. Although it is
not required to do so, the Board wishes to submit the selection of Virchow,
Krause & Company, LLP to the shareholders for ratification. In the event that a
majority of the votes cast are against the ratification, the Audit Committee
will reconsider its selection.
FEES BILLED TO THE COMPANY BY VIRCHOW, KRAUSE & COMPANY, LLP DURING FISCAL 2004
The following table details the fees paid to Virchow Krause for the
years ended December 31, 2004 and 2003.
2004 2003
---- ----
Audit Fees $135,390 $100,929
Audit-Related Fees 38,950 (3) 2,150 (1)
Tax Fees 15,540 15,000
All Other Fees 0 1,705 (2)
-------- --------
Total $188,880 $119,784
======== ========
(1) Fees related to review of Form S-3 Filings
(2) Fees related to miscellaneous research projects
(3) Fees related to review of Form S-1 filings, audit of acquisitions and
proforma required by Form 8-K rules
The Company's Audit committee consists of Frank Bennett, Jonathan Dodge
and Donald Miller. All three are considered audit committee financial experts
independent from managers. The Company's current audit committee charter has
been filed as exhibit to the annual report of the Company on Form 10-K that was
filed for the fiscal year ended on December 31, 2004. The audit committee is
responsible for engaging the audit firm and fees related to their services.
The policy of the Company's audit committee is to review and
pre-approve both audit and non-audit services to be provided by the independent
auditors (other than with de minimis exceptions permitted by the Sarbanes-Oxley
Act of 2002). This duty may be delegated to one or more designated members of
the audit committee with such approval reported to the committee at its next
regularly scheduled meeting. Approval of non-audit services shall be disclosed
to investors in periodic reports required by section 13(a) of the Securities
Exchange Act of 1934. Approximately 95 % of the fees paid to Virchow, Krause &
Company, LLP were pre-approved by the audit committee.
No services in connection with appraisal or valuations services,
fairness opinions or contribution-in-kind reports were rendered by Virchow,
Krause& Company, LLP . Furthermore, no work of Virchow, Krause & Company, LLP
with respect to its services rendered to the Company was performed by anyone
other than Virchow, Krause & Company, LLP .
It is expected that a representative of Virchow, Krause & Company, LLP
will be present at this meeting. The representative will have an opportunity to
make a statement and will be available to respond to appropriate questions.
OTHER MATTERS
The management of the Company is unaware of any other matters that are
to be presented for action at the meeting. Should any other matter come before
the meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
SHAREHOLDERS PROPOSALS
Proposals of shareholders of the Company intended to be presented by
such shareholders at the Company's 2006 Annual Meeting of Shareholders must be
received by the Company no later than December 30, 2005, in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
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Also, if a shareholder proposal intended to be presented at the 2006
Annual Meeting but not included in the Company's proxy statement and proxy is
received by the Company after March 15, 2006, then management named in the
Company's proxy form for the 2006 Annual Meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
Date: April 29, 2005 By Order of the Board of Directors
Steve Bell
Secretary
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MULTIBAND CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 29, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted on
the matters set forth on this form as directed by the shareholder, but if no
direction is made in the space provided, it will be voted FOR the election of
all nominees to the Board of Directors, and FOR the ratification of all
proposals submitted herewith to Multiband shareholders.
The undersigned, a shareholder of Multiband Corporation (the "Company") hereby
appoints James Mandel and Steven Bell, and each of them individually, as
proxies, with full power of substitution, to vote on behalf of the undersigned
the number of shares the undersigned is then entitled to vote, at the Annual
Meeting of the Shareholders of Multiband Corporation to be held at the Radisson
Hotel, 3131 Campus Drive, Plymouth, Minnesota 55441 on June 29, 2005 at 2:00
p.m., and any adjournments or postponements thereof upon matters set forth
below, with all the powers which the undersigned would possess if personally
present.
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Multiband Corporation, c/o Steven Bell, 9449 Science
Center Drive, New Hope, Minnesota 55428.
1. Election of Directors: For all nominees listed below (except as marked to
the contrary below) |_|
01 Steven Bell 02 Frank Bennett 03 Jonathan Dodge
04 Eugene Harris 05 James Mandel 06 Donald Miller
07 David Weiss
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE WRITE THE
NUMBER(S) OF THE NOMINEE(S) IN THE SPACE PROVIDED.) ____________________________
2. To ratify the election of Virchow, |_| For |_| Against |_| Abstain
Krause & Company, LLP as
independent auditors of the
Company for Fiscal Year 2004.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ALL PROPOSALS CONTAINED IN
THIS PROXY.
Address Change? Mark Box |_| The undersigned hereby revokes all previous
Indicate changes below: proxies relating to the shares covered
and Proxy hereby and acknowledge receipt of the Notice
Statement relating to the Annual Meeting.
Dated: ________________ , 2005
Signature(s) in Box
(SHAREHOLDERS MUST SIGN EXACTLY AS THE NAME
APPEARS AT LEFT, WHEN SIGNED AS A CORPORATE
OFFICER, EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC., PLEASE GIVE FULL TITLE AS
SUCH. BOTH JOINT TENNANTS MUST SIGN.)
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