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The founders of Lancaster-based Cardinal Technologies Inc. thought they were getting a $15 million equity injection and a potentially profitable business relationship. Instead, the company founders have been unseated, and Cardinal has been forced to streamline operations.
Vulcan Ventures, a corporation owned by Microsoft co-founder Paul Allen, seized control of the computer modem and multimedia producer after alleging that Cardinal intentionally misrepresented its net worth and sales projections prior to Allen's Sept. 30, 1993 initial purchase of 16.7 percent of Cardinal's privately held stock. Vulcan has successfully renegotiated the deal to gain 50.35 percent of Cardinal' s common stock.
Although Vulcan Ventures did not officially gain control until after Cardinal's June 14 shareholders' meeting and a June 30 filing with the Pennsylvania Securities Commission, it had begun flexing its takeover muscle in December 1993 when it pushed Cardinal directors to focus on company performance. Cardinal had increased net sales by $2 million to finish the year at $44.4 million but again showed an overall net loss for the year. Vulcan cited three consecutive years of net losses under Cardinal's management as a reason for change.
Cardinal's board of directors voted in March to remove several top managers including two of the founders, former CEO Harold Krall and former COO Ray Sobieski. According to Donald A. Tortorice, Cardinal's legal counsel and a company director, 40 employees who were top executives, middle managers and salespeople were cut from the payroll. That leaves the company with 175 employees.
That started the ball rolling for a Vulcan Ventures takeover. All, who still owns 13.4 percent...