<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PC411, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PC411, INC.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 12, 1999
TO THE STOCKHOLDERS OF PC411, INC.:
The Annual Meeting of Stockholders of PC411, Inc., a Delaware
corporation (the "Company"), will be held at The Hyatt Regency Miami, 400 S.E.
Second Avenue, Miami, Florida 33131 on Tuesday, January 12, 1999 at 11:00 a.m.
local time, and at any postponement or adjournment thereof, for the following
purposes:
1. To elect four directors to hold office until the next annual meeting
of stockholders and until their successors are elected and qualified.
2. To amend the Company's Certificate of Incorporation to change the
corporate name to CDSI Holdings Inc.
3. To transact such other business as properly may come before the
meeting or any adjournments or postponements of the meeting.
Every holder of record of common stock, par value $.01 per share (the
"Common Stock"), of the Company at the close of business on December 9, 1998 is
entitled to notice of the meeting and any adjournments or postponements thereof
and to vote, in person or by proxy, one vote for each share of Common Stock held
by such holder. A list of stockholders entitled to vote at the meeting will be
available to any stockholder for any purpose germane to the meeting during
ordinary business hours from December 31, 1998 to January 12, 1999, at the
headquarters of the Company located at 100 S.E. Second Street, 32nd Floor,
Miami, Florida 33131. A proxy statement, form of proxy and the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, together with
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, are enclosed herewith.
By Order of the Board of Directors,
RICHARD J. LAMPEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Miami, Florida
December ___, 1998
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 3
PC411, INC.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
----------
PROXY STATEMENT
----------
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors
(the "Board") of PC411, Inc., a Delaware corporation (the "Company"). The proxy
is solicited for use at the annual meeting of stockholders (the "Annual
Meeting") to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami,
Florida 33131 on Tuesday, January 12, 1999, at 11:00 a.m. local time, and at any
postponement or adjournment thereof. The Company's principal executive offices
are located at 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131, and its
telephone number is (305) 579-8000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Every holder of record of common stock, par value $.01 per share (the
"Common Stock"), of the Company at the close of business on December 9, 1998
(the "Record Date") is entitled to notice of the meeting and any adjournments or
postponements thereof and to vote, in person or by proxy, one vote for each
share of Common Stock held by such holder. At the Record Date, the Company had
outstanding 3,120,000 shares of Common Stock. The approximate date on which this
proxy statement, accompanying notice and proxy and the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, together with the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998
(the "Annual Report"), are first being mailed to stockholders is on or about
December ___, 1998.
Any stockholder giving a proxy in the form accompanying this proxy
statement has the power to revoke the proxy prior to its exercise. A proxy can
be revoked by an instrument of revocation delivered at or prior to the Annual
Meeting to the Secretary of the Company, by a duly executed proxy bearing a date
or time later than the date or time of the proxy being revoked, or at the Annual
Meeting if the stockholder is present and elects to vote in person. Mere
attendance at the Annual Meeting will not serve to revoke a proxy. Abstentions
and shares held of record by a broker or its nominee ("Broker Shares") that are
voted on any matter are included in determining the number of votes present.
Broker Shares that are not voted on any matter will not be included in
determining whether a quorum is present.
All proxies received and not revoked will be voted as directed. If no
directions are specified, such proxies will be voted FOR the election of the
Board's nominees and FOR the amendment to the Company's Certificate of
Incorporation to change the corporate name to CDSI Holdings Inc. The nominees
receiving a plurality of the votes cast will be elected as directors. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock will be required to approve the amendment to the Company's
Certificate of Incorporation. The affirmative vote of the majority of votes cast
at the meeting will be necessary for approval of any other matters to be
considered at the Annual Meeting. In all cases, shares with respect to which
authority is withheld, abstentions and Broker Shares that are not voted will not
be included in determining the number of votes cast.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock (the only class of voting securities) by
(i) each person known to the Company to own beneficially more than five percent
of the Common Stock, (ii) each of the Company's directors and nominees, (iii)
each of the Company's Named Executive Officers (as such term is defined in the
Summary Compensation Table below) and (iv) all directors and executive officers
as a group. Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares indicated as beneficially owned, and
the business address of each person is 100 S.E. Second Street, Miami, Florida
33131.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME AND ADDRESS(1) COMMON STOCK PERCENTAGE OF OWNERSHIP
- ----------------------------------------------------- ---------------------- ----------------------------------
<S> <C> <C>
New Valley Corporation(2)(3)..................... 2,990,000 64.7%
Direct Assist Holding, Inc.
Dean R. Eaker(4)................................. - 0 - --
67 Stonehedge Drive South
Greenwich, CT 06831
J. Bryant Kirkland III(5)........................ 6,000 *
Richard J. Lampen(5)............................. 6,000 *
Henry Morris(5).................................. 6,000 *
271 Madison Avenue
New York, NY 10016
Robert Lundgren(5)............................... 13,333 *
4920 N.W. 165th Street
Miami, FL 33014
All executive officers and directors
as a group (4 persons)(5).................. 31,333 1.0%
</TABLE>
- -------------------
* Less than 1%
(1) Unless otherwise indicated, each named person has sole voting and
investment power with respect to the shares set forth opposite such named
person's name.
(2) Includes 500,000 shares subject to options and 1,000,000 shares subject to
warrants which are currently exercisable or exercisable within 60 days of
the date hereof.
(3) Both New Valley Corporation ("NVC") and Direct Assist Holding, Inc.
("DAH"), a wholly-owned subsidiary of NVC, have shared voting and
investment power with regard to such shares. J. Bryant Kirkland III, an
executive officer and a director of the Company, serves as Vice President,
Chief Financial Officer and Treasurer of NVC and DAH and Richard J.
Lampen, an executive officer and a director of the Company, serves as
Executive Vice President of NVC and DAH and as a director of NVC. Neither
Mr. Kirkland nor Mr. Lampen has investment authority or voting control
over the Company's securities owned by NVC or DAH. The other executive
officers and directors of NVC and DAH are Bennett S. LeBow, Chairman and
Chief Executive Officer of NVC; Howard M. Lorber, President of NVC and a
director of NVC and Chairman, President and Chief Executive Officer of
DAH; Marc N. Bell, Vice President and Associate General Counsel of New
Valley; and Henry C. Beinstein, Arnold I. Burns, Ronald J. Kramer, and
Barry W. Ridings, directors of NVC.
(4) Mr. Eaker resigned as President, Chief Executive Officer and a director of
the Company on November 5, 1998.
2
<PAGE> 5
(5) Includes shares subject to options and/or warrants currently exercisable
or exercisable within 60 days of the date hereof.
NOMINATION AND ELECTION OF DIRECTORS
The By-Laws of the Company provide that the number of directors shall
be not less than two or more than nine, as may be fixed, from time to time, by
the Board. The size of the Board is presently set at four. The present term of
office of all directors will expire at the Annual Meeting. Four directors are to
be elected at the Annual Meeting to serve until the next annual meeting of
stockholders and until their respective successors are duly elected and
qualified or until their earlier resignation or removal.
It is intended that proxies received will be voted FOR election of the
nominees named below unless marked to the contrary. In the event any such person
is unable or unwilling to serve as a director, proxies may be voted for
substitute nominees designated by the present Board. The Board has no reason to
believe that any of the persons named below will be unable or unwilling to serve
as a director if elected.
The Board recommends that stockholders vote FOR election of the
nominees named below.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below is certain information, as of the Record Date, with
respect to each of the nominees. Each nominee is a citizen of the United States.
J. BRYANT KIRKLAND III, age 33, has served as the Company's Vice
President, Chief Financial Officer, Secretary and Treasurer since January 1998
and as a director of the Company since November 1998. Mr. Kirkland has served in
various financial capacities with New Valley Corporation ("NVC") since November
1994. He is presently Vice President, Treasurer and Chief Financial Officer of
NVC, a publicly held company engaged in the investment banking and brokerage
business, in the ownership and management of commercial real estate in the
United States and Russia and in the computer software business. From July 1992
to November 1994, Mr. Kirkland served in various financial positions at Liggett
Group Inc., a subsidiary of Brooke Group Ltd. ("Brooke"), a New York Stock
Exchange listed holding company. Mr. Kirkland received a Bachelor of Science in
Business Administration from the University of North Carolina in May 1987.
RICHARD J. LAMPEN, age 45, has served as interim President and Chief
Executive Officer of the Company since November 1998 and as a director of the
Company since January 1997. Since October 1995, Mr. Lampen has been the
Executive Vice President of NVC and since July 1996, the Executive Vice
President of its affiliates, Brooke and BGLS Inc. ("BGLS"), a wholly-owned
subsidiary of Brooke. From May 1992 to September 1995, Mr. Lampen was a partner
at Steel Hector & Davis, a law firm located in Miami, Florida. From January 1991
to April 1992, Mr. Lampen was a Managing Director at Salomon Brothers Inc, an
investment bank, and was an employee at Salomon Brothers Inc from 1986 to April
1992. Mr. Lampen is a director of NVC and Thinking Machines Corporation, a
developer and marketer of data mining and knowledge discovery software and
services in which NVC indirectly holds a controlling interest. Mr. Lampen has
served as a director of a number of other companies, including U.S. Can
Corporation, The International Bank of Miami, N.A. and Spec's Music Inc., as
well as a court-appointed independent director of Trump Plaza Funding, Inc. Mr.
Lampen received a Bachelor of Arts degree from The Johns Hopkins University in
1975 and received a Juris Doctorate degree in 1978 from Columbia Law School.
ROBERT M. LUNDGREN, age 40, has served as a director of the Company
since January 1997. He also served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company from January 1997 through January 14,
1998. Since January 14, 1998, Mr. Lundgren has been employed by Solar Cosmetic
Labs, Inc. as Chief Financial Officer. From November 1994 through January 14,
1998, Mr. Lundgren was employed by NVC where he served as Vice President and
Chief Financial Officer since May 1996. From November 1992 through November
1994, Mr. Lundgren worked for Deloitte & Touche as a
3
<PAGE> 6
Senior Manager in the audit practice. Mr. Lundgren has been a certified public
accountant since 1981 and holds a Bachelor of Science in Accounting from Wake
Forest University.
HENRY MORRIS, age 45, became a director of the Company in May 1997.
Since 1989, Mr. Morris has been the Chairman and President of Morris & Carrick,
Inc., a political and media consulting firm. Mr. Morris is also Chairman of the
Board and Chief Executive Officer of Curran & Connors, Inc., a designer and
producer of annual reports and corporate literature. Mr. Morris received a
Bachelor of Arts degree in 1974 from Columbia College and a Juris Doctorate
degree in 1978 from Columbia Law School.
Biltmore Securities, Inc., the underwriter in connection with the May
1997 initial public offering of shares of the Company's Common Stock (the
"IPO"), has the right to designate a director to serve on the Company's Board of
Directors for the three year period beginning on the date the IPO was effective.
BOARD OF DIRECTORS AND COMMITTEES
During 1997, the Board held three meetings. During 1997, the
Compensation Committee (currently composed of Messrs. Lampen and Morris) and the
Audit Committee (currently composed of Messrs. Lampen and Morris) did not meet.
Each director attended at least 75% of the meetings of the Board. The Company
does not have a nominating committee.
The Audit Committee recommends to the Board of Directors the
appointment of independent auditors, reviews and approves the scope of the
annual audit of the Company's financial statements, reviews and approves any
non-audit services performed by the independent auditors and periodically
reviews and approves major accounting policies and significant internal
accounting control procedures.
The Compensation Committee reviews and recommends to the Board of
Directors compensation arrangements for officers and directors, administers
stock option plans and reviews major personnel matters.
EXECUTIVE COMPENSATION
The following table sets forth the combined remuneration paid or
accrued by the Company during its last three fiscal years to those persons who
were, at December 31, 1997, the Company's Chief Executive Officer or who were
executive officers whose cash compensation exceeded $100,000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION COMMON SHARES
NAME AND ---------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
------------------ ---- ------ ----- -------------- ------------
<S> <C> <C> <C> <C> <C>
Dean R. Eaker, 1997 $155,149 --- 364,000 ---
President and Chief
Executive Officer(1)
</TABLE>
- --------------------
(1) Mr. Eaker resigned as an executive officer and director of the Company
on November 5, 1998. See "Certain Relationships and Related
Transactions". In connection with such resignation, Mr. Eaker agreed
that all options previously granted to him, whether vested or unvested,
would be cancelled.
4
<PAGE> 7
STOCK OPTIONS
In order to attract and retain persons necessary for the business of
the Company, the Company adopted the 1997 Stock Option Plan (the "Option Plan")
covering up to 750,000 shares, pursuant to which officers, directors and key
employees of the Company and consultants to the Company are eligible to receive
incentive and/or non-incentive stock options. The Option Plan, which expires ten
years from the date of its adoption, is administered by the Board of Directors
or the Compensation Committee. The selection of participants, allotment of
shares, determination of price and other conditions relating to the grant of
options is determined by the Board of Directors or the Compensation Committee.
Incentive stock options granted under the Option Plan are exercisable for a
period of up to 10 years from the date of grant at an exercise price which is
not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive stock option granted under the
Option Plan to a stockholder owning more than 10% of the outstanding Common
Stock may not exceed five years and its exercise price may be not less than 110%
of the fair market value of the Shares on the date of the grant. The Company had
granted options under the Option Plan to Mr. Eaker to acquire 364,000 shares of
Common Stock at an exercise price of $4.40 per share. One-third of such options
became exercisable upon consummation of the IPO and one-third are exercisable at
the end of each of the first and second year following consummation of the IPO.
In connection with Mr. Eaker's resignation as an executive officer and director
of the Company on November 5, 1998, Mr. Eaker entered into an agreement with the
Company which, among other things, cancelled the options granted to him under
the Option Plan, whether vested or unvested.
Under the Option Plan, each director who is not a full-time employee of
the Company, immediately upon first taking office, is granted options to
purchase 6,000 shares of Common Stock exercisable at the fair market value of
such shares on the date of grant. Options for 3,000 shares covered thereby are
exercisable immediately and options for 3,000 shares become exercisable on the
first anniversary of the date of grant. Subsequently, the Option Plan provides
for annual grants of options to purchase 3,000 shares of Common Stock upon
reelection as a director of the Company.
In January 1997, the Company issued to DAH options to purchase 500,000
shares of Common Stock at an exercise price of $5.75 per share.
The following tables set forth certain information concerning the
incentive stock options granted during fiscal 1997 to the Named Executive
Officers and the fiscal year-end value of unexercised options on an aggregated
basis:
OPTION GRANTS IN 1997
INDIVIDUAL GRANTS OF OPTIONS
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE APPRECIATION
SECURITIES GRANTED EXERCISE FOR OPTION TERM(1)
UNDERLYING TO EMPLOYEES PRICE EXPIRATION ---------------------------
NAME OPTION (#) IN 1997 ($/SH) DATE 5% ($) 10% ($)
---- ---------- --------- ------------ ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Dean R. Eaker 364,000(2) 79.9% $4.40 12/31/06 $996,886 $2,521,068
</TABLE>
- ----------
5
<PAGE> 8
(1) Potential realizable values are net of exercise price but before taxes,
and are based on the assumption that the Common Stock of the Company
appreciates at the annual rate shown (compounded annually) from the date
of grant until the expiration date of the respective options. These
numbers are calculated based on Securities and Exchange Commission
requirements and do not reflect the Company's projection or estimate of
future stock price growth. Actual gains, if any, on stock option exercises
are dependent on the future financial performance of the Company, overall
market conditions and the option holder's continued employment through the
vesting period. This table does not take into account any appreciation or
decline in the price of the Common Stock from the date of grant to the
date of this Proxy Statement.
(2) All of such options were cancelled on November 5, 1998.
AGGREGATED 1997 YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT 12/31/97 (#) 12/31/97 ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Dean R. Eaker 123,333 / 242,667(1) --
</TABLE>
- ---------------------
(1) All of such options was cancelled on November 5, 1998.
EMPLOYMENT AGREEMENTS
The Company had entered into an employment agreement (the "Employment
Agreement") with Dean R. Eaker, its President and Chief Executive Officer until
his resignation on November 5, 1998. The Employment Agreement had an initial
term that expired on June 30, 1998, with automatic renewals thereafter for
additional one-year periods unless notice of non-renewal was given by either
party within the ninety-day period prior to the termination date. The Employment
Agreement provided for a base salary of $180,000 which may be supplemented by
discretionary and performance increases as may be determined by the Board of
Directors. The Employment Agreement provided, among other things, for
participation in an equitable manner in any profit sharing or retirement, life
insurance and disability plans for employees or executives and for participation
in other employee benefits applicable to employees and executives of the
Company. Pursuant to the Employment Agreement, termination of employment by the
Company without "cause", or by the executive following a material adverse change
in title, duties or benefits, would subject the Company to liability for
liquidated damages in an amount equal to six months' base salary. The Employment
Agreement contained a non-competition covenant with the Company for a period of
one-year following termination of employment.
In connection with Mr. Eaker's resignation, Mr. Eaker entered into an
agreement with the Company which terminated his employment agreement as of
November 5, 1998.
COMPENSATION OF DIRECTORS
The Company pays each director who is not a full-time employee of the
Company an annual retainer of $5,000, payable quarterly and reimburses the
directors for reasonable travel expenses incurred in connection with their
activities on behalf of the Company.
Under the Company's Option Plan, each director who is not a full-time
employee of the Company, immediately upon first taking office, is granted
options to purchase 6,000 shares of Common Stock exercisable at the fair market
value of such shares on the date of grant. Options for 3,000 shares covered
thereby are exercisable immediately and options for 3,000 shares become
exercisable on the first
6
<PAGE> 9
anniversary of the date of grant. Subsequently, the Option Plan provides for
annual grants of options to purchase 3,000 shares of Common Stock upon
reelection as a director of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DAMI TRANSACTION -- On November 5, 1998, PC411, Inc. (the "Company")
contributed the non-cash assets and certain liabilities of its on-line data
delivery service business (the "PC411 Service") to Digital Asset Management,
Inc. ("DAMI"). DAMI is a newly formed corporation organized by Dean Eaker, the
former President, Chief Executive Officer and a director of the Company, and
Edward Fleiss, the former Vice President and Chief Technology Officer of the
Company, to continue to operate and develop the PC411 Service. The Company
received preferred stock representing an initial 42.5% interest in DAMI in
exchange for the contribution of the PC411 Service. Acxiom Corporation
("Acxiom") purchased preferred stock representing a 42.5% interest in DAMI for
$1,250,000 and will initially designate a majority of the Board of Directors of
DAMI. DAMI's management, including Messrs. Eaker and Fleiss, will hold an
initial 15% interest in DAMI with options to increase their ownership position
to 50% upon satisfaction of certain operational and financial benchmarks over a
three-year period.
The Company has agreed, under certain conditions, to fund up to
$200,000 of an $800,000 working capital line to be provided to DAMI by Acxiom,
the Company and Dean R. Eaker.
Effective with the closing of the DAMI transaction, Dean R. Eaker and
Edward A. Fleiss resigned their positions with the Company and entered into an
agreement with the Company terminating their employment agreements. The Board of
Directors of the Company elected Richard J. Lampen, a director of PC411, as
interim President and Chief Executive Officer, and J. Bryant Kirkland III, Vice
President and Chief Financial Officer of PC411, as a director. Messrs. Lampen
and Kirkland also serve as executive officers of NVC.
NEW VALLEY CORPORATION -- The Company and DAH, a wholly owned
subsidiary of NVC, entered into an agreement dated as of May 10, 1995, as
amended, pursuant to which the Company sold and DAH purchased 1,820 shares of
the Company's authorized Preferred Stock for an aggregate of $1,001,000 ($550
per share). Initially, the Preferred Stock was convertible into shares of Common
Stock on a one for one basis. In connection with the Loan Agreement (defined
below), the conversion ratio on the Preferred Stock was increased to 4.7395
shares of Common Stock for each share of Preferred Stock. The holder of the
Preferred Stock was entitled to receive an annual cash dividend of $55 for each
share of Preferred Stock. The right to receive dividends was cumulative.
Approximately $170,000 in accrued and unpaid dividends was paid in May 1997 out
of the net proceeds of the IPO.
The Company entered into a Loan and Security Agreement, dated as June
27, 1996, as amended (the "Loan Agreement"), with NVC pursuant to which NVC
agreed, from time to time and in its absolute and sole discretion, to lend the
Company up to an aggregate of $750,000. From June 27, 1996 to May 15, 1997 NVC
made 23 advances aggregating $659,148. Each advance was evidenced by a demand
promissory note issued by the Company and payable to NVC with interest at a rate
of 12% per annum (the "NVC Notes"). The NVC Notes were secured by all of the
assets of the Company. In May 1997 the Company issued 1,000,000 warrants (the
"NVC Warrants") to NVC in satisfaction of $250,000 of the indebtedness owed to
NVC. The NVC Warrants are of the same class and have the same terms and
conditions as the warrants offered in the IPO. Accordingly, each NVC Warrant
entitles the holder thereof to purchase one share of Common Stock at a price
equal to $6.10 per share beginning one year from the date of the IPO, May 14,
1998, and ending four years thereafter, May 13, 2002. Upon consummation of the
IPO, the remaining amount due to NVC, including accrued interest, $447,064, was
repaid out of the proceeds of the IPO and the Loan Agreement was terminated.
In January 1997, the Company issued to DAH options to purchase 500,000
shares of Common Stock at an exercise price of $5.75 per share. The Company has
agreed with DAH that, upon its written request, the Company will file a
registration statement with respect to the shares of Common Stock acquired
7
<PAGE> 10
upon the exercise of such options. The Company has agreed, to the extent
permitted by law, to indemnify and hold harmless each of DAH and NVC against
certain liabilities in connection with the registration and offering of the
Company's securities, including liabilities arising under the Securities Act of
1933, the Securities Exchange Act of 1934 or any comparable state securities
laws. The Company has further agreed to pay all fees and expenses incident to
the registration of such securities, except selling commissions and fees and
expenses of counsel and any other professional advisors, if any, to each of DAH
and NVC.
Certain accounting and related financial functions are performed on
behalf of the Company by employees of NVC. Expenses incurred relating to these
functions are allocated to the Company and paid as incurred to NVC based on
management's best estimate of the cost involved. The amounts so allocated for
the Company's fiscal year ended December 31, 1997 was immaterial.
OTHER. In 1997, the Company reimbursed $10,000 to Matthew E. Stasior, a
former director of the Company, for expenses in connection with the IPO.
APPROVAL OF CHANGE IN CORPORATE NAME
The Board has adopted and declared advisable, subject to stockholder
approval, an amendment to the Company's Certificate of Incorporation to change
the corporate name to "CDSI Holdings Inc."
On November 5, 1998, the Company contributed the PC411 Service,
including the rights to the "PC411" name, to DAMI in exchange for preferred
stock representing an initial 42.5% interest in DAMI. See "Certain Relationships
and Related Transactions - DAMI Transaction". As a result of the DAMI
transaction, the Company's primary business operations will be the marketing of
an inventory control system for tobacco products through its wholly owned
subsidiary, Controlled Distribution Systems, Inc. The Board believes that the
new corporate name will more appropriately reflect the Company's current
business activities.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock will be required to approve this amendment to the
Company's Certificate of Incorporation. As a result, shares with respect to
which authority is withheld, abstentions and Broker Shares that are not voted
will have the same effect as votes against this proposal.
The Board recommends a vote FOR amending the Company's Certificate of
Incorporation to change the corporate name.
RELATIONSHIP WITH INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP ("PWC") has been the independent auditors
for the Company since March 11, 1998 and will serve in that capacity for the
1998 fiscal year unless the Board deems it advisable to make a substitution.
On March 11, 1998, the Audit Committee of the Company's Board of
Directors voted to dismiss the firm of KPMG Peat Marwick LLP ("KPMG") and
approve the engagement of the firm of PWC as auditors for fiscal year 1997.
During the two most recent fiscal years and through March 11, 1998, there were
no disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the disagreements in connection
with its report. The audit report of KPMG on financial statements of the Company
as of and for the two fiscal years ended December 31, 1996 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified as to audit
scope or accounting principles; however, such report did contain an explanatory
paragraph stating that "the Company's losses from operations and deficit
accumulated during the
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development stage raise substantial doubt about the entity's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statement do not include any adjustments that
might result from the outcome of this uncertainty".
It is expected that one or more representatives of PWC will attend the
Annual Meeting and be available to respond to any questions. These
representatives will be given an opportunity to make statements at the Annual
Meeting if they so desire.
MISCELLANEOUS
1997 ANNUAL REPORT ON FORM 10-K
The Company has mailed, with this proxy statement, a copy of the Annual
Report to each stockholder as of the Record Date. If a stockholder requires an
additional copy of the Annual Report, the Company will provide one, without
charge, on the written request of any such stockholder addressed to the
Company's Secretary at PC411, Inc., 100 S.E. Second Street, 32nd Floor, Miami,
Florida 33131.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and executive
officers of the Company, as well as persons who own more than 10% of a
registered class of the Company's equity securities (the "Reporting Persons"),
to file reports of initial beneficial ownership and changes in beneficial
ownership on Forms 3, 4 and 5 with the SEC and the New York Stock Exchange. Such
Reporting Persons are also required by SEC regulations to furnish the Company
with copies of all such reports that they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during and with respect to the fiscal year ended December 31,
1997, all Reporting Persons have timely complied with all filing requirements
applicable to them except for a Form 3 untimely filed by J. Bryant Kirkland III,
an officer of the Company.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders of the Company pursuant to Rule 14a-8 under the
Securities Exchange of 1934 must be received by the Company at its principal
executive offices, 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131,
Attention: J. Bryant Kirkland III, Secretary, on or before ___________, 1999 in
order to be included in the Company's proxy statement and accompanying proxy
card relating to that meeting. Notice of a stockholder proposal submitted
outside the processes of Rule 14a-8 will be considered untimely unless submitted
by _______, 1999.
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company.
In addition to the use of the mails, some of the directors, officers and regular
employees of the Company may, without additional compensation, solicit proxies
personally or by telephone. The Company will reimburse brokerage houses, banks
and other custodians, nominees and fiduciaries for customary and reasonable
expenses incurred in forwarding soliciting material to the beneficial owners of
Common Stock.
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The Board knows of no other matters which will be presented at the
Annual Meeting. If, however, any other matter is properly presented at the
Annual Meeting, the proxy solicited by this proxy statement will be voted in
accordance with the judgment of the person or persons holding such proxy.
By Order of the Board of Directors,
RICHARD J. LAMPEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: December ____, 1998
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APPENDIX A
PC411, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS OF PC411, INC.
The undersigned stockholder of PC411, Inc. (the "Company") hereby
constitutes and appoints J. Bryant Kirkland III and Marc N. Bell, attorney and
proxy of the undersigned, with power of substitution, to attend, vote and act
for the undersigned at the Annual Meeting of Stockholders of the Company, a
Delaware corporation, to be held at The Hyatt Regency Miami, 400 S.E. Second
Avenue, Miami, Florida 33131 on Tuesday, January 12, 1999 at 11:00 a.m. local
time, and at any adjournments or postponements thereof, with respect to the
following on the reverse side of this proxy card and, in their discretion, on
such other matters as may properly come before the meeting and at any
adjournments or postponements thereof.
(TO BE CONTINUED AND SIGNED ON THE REVERSE SIDE)
[x] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
<TABLE>
<S> <C>
Item 1. Election of Directors:
FOR all nominees named at right (except as indicated to the contrary) [ ]
WITHHOLD AUTHORITY to vote for all nominees named at right [ ]
Nominees: J. Bryant Kirkland III, Richard J. Lampen, Robert M. Lundgren and Henry Morris
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on
the line provided below.)
- -------------------------------------------------------------------------------------------------------------
Item 2. Proposal to change the corporate name to CDSI Holdings Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If not otherwise directed, this proxy will be voted FOR the election of
the nominees and FOR the change in the corporate name.
The Board of Directors recommends a vote FOR all nominees in Item 1 and
FOR the approval of Item 2.
PLEASE DATE, SIGN AND MAIL AT ONCE IN THE ENCLOSED POSTPAID ENVELOPE.
Signature ________________ Date _______ Signature _________________ Date _________
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. If signing as attorney,
administrator, trustee, guardian or the like, please give full title as such. If
signing for a corporation, please give your title.
</TABLE>
