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Marty
Tullio, Managing Partner
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McCloud
Communications, LLC
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949.553.9748
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marty@mccloudcommunications.com
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He has been engaged in ongoing
efforts to disrupt CNS and waste our valuable cash resources.
Brandt’s attempts to call and adjourn a special
stockholders meeting on July 3 (a holiday), July 12 (a Sunday) and July
21, and his likely future attempts to reconvene the meeting again, have
diverted and will continue to divert our management and cash resources at
this critical point in CNS’s
growth.
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He has jeopardized our planned financing,
which could result in CNS having to pursue alternative (and more
expensive) financing to fund our business plan. The financial
advisor we intended to engage has informed us that our contemplated
financing likely cannot be completed on our intended terms as long as
Brandt continues his attempts to unseat the incumbent directors, and we
expect that alternative financing will be available, if at all, on terms
that are less attractive than those we had
anticipated.
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He is trying to maintain his first security
interest in CNS’s assets. We have
offered to repay the promissory note he holds, which would result in a
release of his security interest in all of the company’s assets, but he
has failed to accept those offers. By refusing to be repaid yet
attempting to thwart our financing, Brandt is in a position where he would
personally benefit from the company’s failure and could seize all of CNS’s
assets, leaving the equity holders with
nothing.
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He fails to tell you that
additional financing may increase CNS’s – and all
stockholders’ – value, while focusing only on
how additional financings can decrease existing stockholder voting
power. While stockholders like Brandt looking to take
control of the company may be primarily concerned about having their
voting power diluted, we believe that CNS stockholders generally are more
interested in increasing the company’s value and whether additional
financing can foster an increase by helping us continue to implement our
business plan. [see shareholder
letter regarding progress and plans of the
Company]
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His
alternative plan for CNS assumes that financing is readily available on
terms that are somehow superior to terms we are currently
negotiating. Brandt’s suggestions that the company wait
until the completion and announcement of clinical trial results and
raising just a small amount of additional financing now ignores what we
believe are the realities of the financing marketplace for companies of
our size and stage of
development.
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He failed in his mission to
raise capital for CNS for over 12 months. Brandt was
charged by the board to secure additional financing for the company and
only after he was terminated as CEO, was the company able to secure $1.2
million in additional capital.
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He fails to tell you that he
may have breached his fiduciary duties as a CNS director by improperly
disclosing and using CNS’s confidential
information. We believe that Brandt has disclosed our
confidential information to certain stockholders while seeking to take
back his position as a CNS officer without authorization and that he is
now using information he obtained as a CNS director for his purposes as a
stockholder to oppose the other members of the
board.
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He fails to disclose that, as a
CNS director, he did not raise any substantive objections to the bridge
financings when they were considered and approved by the board.
While Brandt did not vote in favor of our recent bridge financings,
he did not raise the objections and concerns at the time we approved those
transactions that he now cites as his primary motivations for seeking to
replace the other incumbent directors. Brandt never requested a
Fairness Opinion in the case of his own bridge
loans.
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He is not even certain that his
nominees agree with him and his plans for CNS. Brandt’s
statements regarding his alternative plans for CNS are just that – his own
personal statements; the most he can say about his hand-picked
replacements for the current board members is that “to the extent of the
discussions that have taken place between Mr. Brandt and each of the
other nominees, Mr. Brandt believes it would be fair to describe the
Nominees, in general, as being in favor” of his
plan.
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He asserts that other directors
are trying to ignore the “will of the present
stockholders” but
fails to tell you that he has been unable to obtain a quorum for his
purported special meeting. At each of the three
purported meeting dates, Brandt has had his attorneys attempt to adjourn
the meeting because he does not have sufficient proxies to make up a
quorum and allow a meeting to be
held.
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He is the primary reason why
CNS has not had an annual meeting. As the company’s
Chairman until March 2009, Brandt had the ability to call a meeting
without the approval or agreement of any other director or any CNS
stockholder and continually refused the requests of his board members to
do so.”
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