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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the [X] Definitive
Proxy Statement Commission Only (as permitted [ ] Definitive Additional
Materials by Rule 14a-6(e)(2)) [ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
Compu-DAWN, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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:
<PAGE>
(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>
COMPU-DAWN, INC.
77 Spruce Street
Cedarhurst, New York 11516
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 2, 1998
To the Stockholders of Compu-DAWN, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Compu-DAWN, Inc., a Delaware corporation (the "Company" or
"Compu-DAWN"), will be held at the Company's executive offices at 77 Spruce
Street, Cedarhurst, New York 11516 on November 2, 1998 at 11:00 a.m., New York
time, for the following purposes:
(1) To elect two Class I directors, whose term of office shall expire at
the Company's annual meeting of stockholders in 2000, and two Class II
directors, whose term of office shall expire at the Company's annual meeting of
stockholders in 2001.
(2) To approve the issuance of shares of Common Stock underlying the
Company's Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock as well as certain warrants issued in connection therewith.
(3) To transact such other business as may properly come before the
Meeting.
Only stockholders of record at the close of business on September 16, 1998
are entitled to notice of and to vote at the Meeting or any adjournment thereof.
By Order of the Compu-DAWN
Board of Directors
Mark Honigsfeld
Chairman of the Board, Chief Executive
Officer and Secretary
Cedarhurst, New York
October 2, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF COMPU-DAWN, AND RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED
FOR THAT PURPOSE. A STOCKHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE VOTE
BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON
================================================================================
<PAGE>
COMPU-DAWN, INC.
77 Spruce Street
Cedarhurst, New York 11516
PROXY STATEMENT
SOLICITING, VOTING AND REVOCABILITY OF PROXY
This Proxy Statement is being mailed to all stockholders of record of
Compu-DAWN, Inc. (the "Company" or "Compu-DAWN") at the close of business on
September 16, 1998 in connection with the solicitation by the Board of Directors
of Proxies to be voted at the Annual Meeting of Stockholders (the "Meeting") to
be held at the Company's executive offices at 77 Spruce Street, Cedarhurst, New
York 11516 on November 2, 1998 at 11:00 a.m., local time, or any adjournment
thereof. The Proxy and this Proxy Statement were mailed to stockholders on or
about October 9, 1998.
All shares represented by Proxies duly executed and received will be voted
on the matters presented at the Meeting in accordance with the instructions
specified in such Proxies. Proxies so received without specified instructions
will be voted (1) FOR the nominees named in the Proxy to Compu-DAWN's Board of
Directors, consisting of two Class I directors, whose term of office shall
expire at the Company's annual meeting of stockholders in 2000, and two Class II
directors, whose term of office shall expire at the Company's annual meeting of
stockholders in 2001 and (2) FOR the approval of the issuance of shares of
Common Stock underlying the Company's Series A Convertible Preferred Stock (the
"Series A Preferred Shares") and Series B Convertible Preferred Stock (the
"Series B Preferred Shares") as well as certain warrants issued in connection
therewith. The Board does not know of any other matters that may be brought
before the Meeting nor does it foresee or have reason to believe that Proxy
holders will have to vote for substitute or alternate nominees to the Board. In
the event that any other matter should come before the Meeting or any nominee is
not available for election, the persons named in the enclosed Proxy will have
discretionary authority to vote all Proxies not marked to the contrary with
respect to such matters in accordance with their best judgment.
The total number of shares of Common Stock of the Company ("Common Shares")
outstanding and entitled to vote as of September 16, 1998 was 3,166,507. The
Common Shares are the only class of securities of the Company entitled to vote
on matters presented to the stockholders of the Company, each share being
entitled to one noncumulative vote. A majority of the Common Shares outstanding
and entitled to vote as of September 16, 1998, or 1,583,254 Common Shares, must
be present at the Meeting in person or by proxy in order to constitute a quorum
for the transaction of business. Only stockholders of record as of the close of
business on September 16, 1998 will be entitled to vote. With regard to the
election of directors, votes may be cast in favor or withheld. Each class of
directors shall be elected by a plurality of the votes cast in favor. Votes
withheld in connection with the election of one or more of the
<PAGE>
nominees for director will not be counted as votes cast for such individuals.
Stockholders may expressly abstain from voting on Proposal 2 by so indicating on
the Proxy. Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted as present in the tabulation of votes on Proposal 2.
Broker non-votes are not counted for the purpose of determining whether Proposal
2 has been approved. Since Proposal 2 requires the affirmative approval of a
majority of the Common Shares present in person or represented by proxy at the
Meeting (assuming a quorum is present at the Meeting), abstentions will have the
effect of a negative vote while broker non-votes will have no effect.
Any person giving a Proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. The Proxy may be revoked
by filing with Compu- DAWN written notice of revocation or a fully executed
Proxy bearing a later date. The Proxy may also be revoked by affirmatively
electing to vote in person while in attendance at the Meeting. However, a
stockholder who attends the Meeting need not revoke a Proxy given and vote in
person unless the stockholder wishes to do so. Written revocations or amended
Proxies should be sent to Compu-DAWN at 77 Spruce Street, Cedarhurst, New York
11516, Attention: Corporate Secretary.
The Proxy is being solicited by the Compu-DAWN Board of Directors.
Compu-DAWN will bear the cost of the solicitation of Proxies, including the
charges and expenses of brokerage firms and other custodians, nominees and
fiduciaries for forwarding proxy materials to beneficial owners of Compu-DAWN
shares. Solicitations will be made primarily by mail, but certain directors,
officers or employees of Compu-DAWN may solicit Proxies in person or by
telephone, telecopier or telegram without special compensation.
A list of stockholders entitled to vote at the Meeting will be available
for examination by any stockholder for any purpose germane to the Meeting,
during ordinary business hours, for ten days prior to the Meeting, at the
offices of the Company, 77 Spruce Street, Cedarhurst, New York 11516, and also
during the whole time of the Meeting for inspection by any stockholder who is
present.
2
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information for the fiscal years
ended December 31, 1997, 1996 and 1995 concerning the compensation of Mark
Honigsfeld, Chairman of the Board and Chief Executive Officer of the Company,
and the other persons who were the Company's most highly compensated executive
officers during the 1997 fiscal year. No other executive officer of the Company
had a combined salary and bonus in excess of $100,000 for the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
Name and Common Shares
Principal Position Year Salary Bonus Underlying Options
<S> <C> <C> <C> <C>
Mark Honigsfeld(1) 1997 $250,000 - 100,000
Chairman of the Board 1996 $ 62,500(2) - 233,000
and Chief Executive 1995 - - -
Officer
Dong W. Lew(3) 1997 $125,000 - 8,561
President 1996 $ 87,500 $15,000(4) 156,950
1995 $ 70,980 - -
Louis Libin 1997 $178,651 - 100,000
Chief Technology 1996 - - -
Officer 1995 - - -
</TABLE>
- -------------------
(1) Mr. Honigsfeld was elected Chief Executive Officer of the Company and was
entitled to compensation effective as of October 1, 1996.
(2) Represents accrued and unpaid salary relating to 1996 (based on a salary of
$250,000 per annum) that was converted into 12,500 Common Shares upon the
closing of the Company's initial public offering in June 1997 (the "IPO").
(3) Mr. Lew acted as the Company's Chief Executive Officer during 1994, 1995
and from the period January 1, 1996 to September 30, 1996 and resigned as
an officer and director of the Company in April 1998.
(4) Represents an accrued and unpaid signing bonus (relating to the execution
of Mr. Lew's employment agreement in October 1996) that was converted into
3,000 Common Shares upon the closing of the IPO.
3
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning individual
grants of stock options during the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
Number of Common Percentage of Total
Shares Underlying Options Granted to
Name Options Granted Employees in Fiscal Year Exercise Price Expiration Date
----- ---------------------- ------------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Mark Honigsfeld 100,000 35.9% $3.00 January 6, 2007
Dong W. Lew 8,561(1) 3.1% $5.50 August 27, 2002
Louis Libin 50,000 18.0% $3.00 January 6, 2007
50,000 18.0% $6.75 December 1, 2007
</TABLE>
- ---------------
(1) These options were granted as a reload feature at the time Mr. Lew
surrendered 8,561 Common Shares valued in the aggregate at $47,085 (or
$5.50 per share) to exercise options to purchase 156,950 Common Shares.
These options were exercised by Mr. Lew in April 1998, at which time Mr.
Lew surrendered 4,380 Common Shares valued in the aggregate at $47,085 per
share (or $10.75 per share), in payment of the exercise price.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth certain information concerning the value of
options unexercised as of December 31, 1997:
<TABLE>
<CAPTION>
Number of Common Shares Value of Unexercised
Number of Common Underlying Unexercised In-the-Money Options
Shares Acquired Value Options at December 31, 1997 at December 31, 1997
Name on Exercise Realized Exercisable/Unexercisabl Exercisable /Unexercisable
<S> <C> <C> <C> <C>
Mark Honigsfeld 233,000 $629,100 0 / 100,000 0 / $625,000
Dong W. Lew 156,950 $816,140 8,561 / 0 $32,104 / 0
Louis Libin - - 0 / 100,000 0 / $437,500
</TABLE>
Compensation of Directors
Each non-employee director of the Company is entitled to receive a
director's fee of $1,000 per meeting attended in person and $500 per meeting
attended by telephone and options to purchase 5,000 Common Shares of the Company
each year, except that Alfred Luciani is entitled to receive
4
<PAGE>
options to purchase 10,000 Common Shares of the Company each year. The options
granted to directors are exercisable for a period of ten years from the date of
grant at an exercise price equal to the market price of the Company's Common
Shares on the date of grant. Additionally, each non-employee director is
entitled to be reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors of the Company. The members of the
Board of Directors meet regularly, as needed.
Employment Contracts; Termination of Employment and Change-in-Control
Arrangements
The Company is a party to an Employment Agreement with Mark Honigsfeld for
a term of three years commencing as of October 1, 1996, subject to continuing,
annual, automatic one-year extensions, unless either the Company or Mr.
Honigsfeld notifies the other, at least 90 days prior to any annual anniversary
date, of its or his desire not to extend the term thereof. The Employment
Agreement also provides for earlier termination as discussed below. Pursuant to
his Employment Agreement, Mr. Honigsfeld serves as Chairman of the Board and
Chief Executive Officer of the Company.
The Employment Agreement provides for base annual compensation of $250,000.
In addition to such base compensation, Mr. Honigsfeld is entitled to receive (i)
an annual bonus amount equal to a percentage of base salary (ranging from 7% to
20%) based upon the Company achieving certain sales levels (ranging from
$3,750,000 to $6,000,000 in the initial year, with $1,000,000 increased sales
level thresholds per year if the bonus is earned in a particular year) and (ii)
an annual bonus based on the Company's EBITANC (as defined below), if any. Such
latter bonus for each year ranges from 5% to 10% of EBITANC based on EBITANC
thresholds ranging from $250,000 to $1,500,000. EBITANC is an amount equal to
the Company's earnings before deducting the following: interest expense, taxes,
and any one time nonrecurring charges resulting from divestitures, acquisitions,
consolidations, restructurings and changes in accounting principles. The use of
EBITANC, as opposed to earnings, has the effect of increasing the earnings base
(by the amount of the excluded deductions) for the purpose of calculating the
bonus.
The Employment Agreement also provides that Mr. Honigsfeld is entitled to
receive, for each year thereof, options for the purchase of 5,000 Common Shares
of the Company for each $100,000 of EBITANC. Such options would be exercisable
for a five year period at an exercise price of no less than 110% of the market
value of the Common Shares on the date of the grant. Mr. Honigsfeld is also
entitled to receive an expense allowance of up to $500 per month and an
automobile allowance in the amount of $1,000 per month.
The Employment Agreement provides that, notwithstanding the rolling
three-year term thereof, it may be terminated prior to the expiration date under
the following circumstances: (i) death; (ii) total disability (as provided for
in the Employment Agreement); (iii) termination by the Company for "cause" (as
defined in the Employment Agreement); (iv) termination by the Company at any
time upon written notice to Mr. Honigsfeld; (v) termination by Mr. Honigsfeld
upon 30 days written notice to the Company; (vi) termination by Mr. Honigsfeld
at any time for "good reason" (as
5
<PAGE>
defined in the Employment Agreement); or (vii) termination by the Company at any
time within 12 months after a "change in control" (as defined in the Employment
Agreement). Additionally, the Employment Agreement allows Mr. Honigsfeld to
devote up to 10% of his working time to other endeavors that are not in
competition with the Company.
The Employment Agreement provides for compensation under certain
circumstances upon termination of employment (in addition to accrued but unpaid
compensation) as follows: (i) in the event of Mr. Honigsfeld's death, his estate
or spouse shall be entitled to receive an amount equal to his monthly salary as
of the date of death multiplied by the number of full years that he was an
employee of the Company or a subsidiary or a predecessor in interest thereof;
(ii) in the event of termination of the Employment Agreement due to disability,
Mr. Honigsfeld shall be entitled to receive an amount equal to his monthly
salary as of the date of termination of the Employment Agreement, multiplied by
the number of full years that he was an employee of the Company or a subsidiary
or a predecessor in interest thereof (but, in no event, would he be entitled to
an amount equal to less than six months of salary); and (iii) in the event of
termination of employment by the Company following a "change of control" or for
any reason other than death, disability or "cause," or in the event of
termination of an Employment Agreement by Mr. Honigsfeld for "good reason," he
shall be entitled to receive his full salary for the unexpired term of such
agreement, without mitigation of damages based upon employment obtained
elsewhere.
The Employment Agreement provides for a restriction on the solicitation of
customers of the Company for a period of two years following termination
thereof, and a covenant not to compete with the Company for a period of six
months following termination of employment for cause.
Effective January 6, 1997, the Company and Louis Libin entered into a
three-year Employment Agreement pursuant to which Mr. Libin serves as the
Company's Chief Technology Officer. Such Employment Agreement provides for a
salary of $200,000, $225,000 and $250,000 per annum in the first, second and
third years, respectively. Additionally, Mr. Libin's Employment Agreement allows
him to devote up to one day each week to other endeavors that are not in
competition with the Company. Other terms of Mr. Libin's Employment Agreement
conform in structure to the material provisions of Mr. Honigsfeld's, such as
bonuses, benefits, restrictive covenants and termination.
All stock options held by Messrs. Honigsfeld and Libin, and by each of the
directors of the Company, will vest upon a change in control of the Company (as
defined in their respective stock option agreements). Once and to the extent the
options vest, whether by passage of time or upon a change in control, they will
not terminate notwithstanding termination of employment for any reason. See
"Security Ownership of Certain Beneficial Owners and Management."
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Common Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of September 16,
1998 regarding the beneficial ownership of the Company's Common Shares (i) by
each person who the Company believes to be the beneficial owner of more than 5%
of its outstanding Common Shares, (ii) by each current director, (iii) by each
person listed in the Summary Compensation Table under "Executive Compensation"
and (iv) by all current executive officers and directors as a group:
Name and Address
of Beneficial Owner Number Percent
Mark Honigsfeld 848,200(1) 25.0%
77 Spruce Street
Cedarhurst, New York
JNC Strategic Fund Ltd. 327,103(2) 10.3%
c/o Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11, Bermuda
Dong W. Lew 100,000 .2%
1350 Grand Summit Drive
Reno, Nevada
Louis Libin 41,667(3) .2%
77 Spruce Street
Cedarhurst, New York
William D. Rizzardi 2,667(4) *
77 Spruce Street
Cedarhurst, New York
Harold Lazarus 1,667(5) *
134 Hofstra University
Hempstead, New York
7
<PAGE>
Name and Address
of Beneficial Owner Number Percent
Alfred Luciani 0 -
Bayport One, Suite 300
West Atlantic City, New Jersey
All executive officers and directors
as a group (5 persons) 894,201(1)(3)(4)(5) 26.2%
- -------------------
* Represents less than 1%.
(1) Represents (i) 423,200 shares held by the Mark Honigsfeld Living Trust (the
"Honigsfeld Trust") whose sole beneficiary is Mr. Honigsfeld's wife; Mr.
Honigsfeld, the settlor and trustee of the trust, has the right to
terminate the Honigsfeld Trust and receive the shares; (ii) 200,000 shares
held by the Mardee Charity Fund Foundation, a private charitable foundation
of which Mr. Honigsfeld and his wife are the sole trustees; and (iii)
225,000 shares issuable upon the exercise of currently exercisable options.
(2) Excludes 32,710 shares issuable upon the exercise of warrants (see Proposal
2). The number of shares issuable upon exercise of such warrants is subject
to antidilution adjustment. Subsequent to September 16, 1998, JNC Strategic
Fund Ltd. exchanged its 327,103 Common Shares for 1,750 Series B Preferred
Shares that are convertible, subject to certain conditions, into an
aggregate of 327,103 Common Shares (see Proposal 2).
(3) Includes 16,667 shares issuable upon the exercise of currently exercisable
options.
(4) Includes 1,667 shares issuable upon the exercise of currently exercisable
options.
(5) Represents shares issuable upon the exercise of currently exercisable
options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1997, the Company entered into a secured Credit Agreement with
Mr. Honigsfeld. Pursuant to the Credit Agreement, the Company initially borrowed
$200,000. In April 1997, the Company and Mr. Honigsfeld amended the Credit
Agreement to provide for an additional line of credit of $500,000. Outstanding
principal under the Credit Agreement bears interest at the rate of 10% per
annum. The repayment of up to $200,000 under the Credit Agreement is secured by
a first priority security interest in all the assets of the Company. The Company
entered into the Credit Agreement because it required additional financing to
fund the Company's working capital needs and no other sources of financing were
available at that time. Contemporaneously with the closing of the IPO, $200,000
of indebtedness was converted into 40,000 Common Shares pursuant to an agreement
between the Company and Mr. Honigsfeld. In May 1997, the Company borrowed an
additional $200,000 under the Credit Agreement. As of June 30, 1998, $100,000 in
principal was outstanding under the Credit Agreement. In 1997, the Company paid
Mr. Honigsfeld an aggregate of $9,316 in interest under the Credit Agreement.
The Company believes that the terms of the Credit Agreement are commercially
reasonable and are at least as favorable to the Company as it could have
obtained from an unrelated third party. The Credit Agreement was approved by,
among others, all the disinterested directors of the Company.
8
<PAGE>
To the extent that the Company may enter into any agreements with related
parties in the future (of which none are presently contemplated), the Board of
Directors of the Company has determined that the terms of such agreements must
be commercially reasonable and no less favorable to the Company than it could
obtain from unrelated third parties. Additionally, the Board of Directors of the
Company has further determined that such agreements must be approved by a
majority of the disinterested directors of the Company.
PROPOSAL 1: ELECTION OF DIRECTORS
Compu-DAWN's Board of Directors is currently divided into three classes.
Each class of directors is elected for a three-year term. Mark Honigsfeld and
Dr. Harold Lazarus are nominated for election by Compu-DAWN's stockholders as
Class II directors. Class II directors will serve for a term of three years
which expires at the annual meeting of stockholders in 2001 or when their
successors are elected and qualified.
In addition, since the Company did not hold an annual meeting of
stockholders in 1997 with respect to the election of Class I directors, William
D. Rizzardi and Alfred Luciani, the Company's Class I directors, are also
nominated for election by Compu-DAWN's stockholders as Class I directors. Class
I directors will serve until the annual meeting of stockholders in 2000 or until
their successors are elected and qualified.
In addition to the foregoing persons, Louis Libin serves as the sole Class
III director of the Company. Mr. Libin's term expires at the annual meeting of
stockholders in 1999 or when his successor is elected and qualified.
Nominees for Director
The following tables set forth the positions and offices presently held
with Compu-DAWN by each nominee, his age as of August 31, 1998, the class of
directorship for which he is nominated and the year in which he became a
director. Proxies not marked to the contrary will be voted in favor of each such
nominee's election. The Board recommends a vote FOR all nominees.
Nominees for Class I Directors
Term Expiring at 2000 Annual Meeting
Positions and Offices Presently Year Became
Name Age Held with the Company a Director
William D. Rizzardi 55 Director 1997
Alfred Luciani 53 Director 1998
9
<PAGE>
William D. Rizzardi
Mr. Rizzardi joined the Company in January 1997 as a director. Since
December 1996, Mr. Rizzardi has been the President of Environmental Solutions
Corporation, a bio-remediation company. From 1995 to 1996, Mr. Rizzardi was an
independent management consultant to the Long Island Research Institute, a
not-for-profit technology development laboratory. From 1979 to 1994, Mr.
Rizzardi held various positions with Northrop Grumman Corporation and its
affiliates, including a Vice President of Grumman Data Systems Division, where
he was responsible for the development, operation and support of all information
systems for the Grumman Corporation, Corporate Vice President of Information
Management and Chief Information Officer of Grumman Data Systems Division, and a
Vice President of Northrop Grumman Corporation - Data Systems and Services
Division following the acquisition of Grumman Corporation by Northrop
Corporation. Mr. Rizzardi received a Bachelor of Science Degree in Nuclear
Physics from City College of the City University of New York and a B.S.E.E.
Degree in Management from the Sloan School of M.I.T.
Alfred Luciani
Mr. Luciani joined the Company in May 1998 as a director. Since January
1996, Mr. Luciani has been providing consulting services and management and
development expertise to the gaming industry through Luciani and Associates and
AJL Corp. From April 1993 to December 1995, Mr. Luciani was President and
Chairman of American Gaming and Entertainment, Ltd. ("American Gaming"), an
entity engaged in the gaming management business. From 1983 to 1994, Mr. Luciani
held several positions in the gaming industry, including President and Chief
Executive Officer of the Golden Nugget Casino Hotel in Las Vegas and the
Mashantucket Pequot Gaming Enterprise, and Executive Vice President of the
Golden Nugget and Resorts Casino Hotels in Atlantic City. Mr. Luciani's
involvement in the gaming industry extends back to 1976 when, as an Assistant
Attorney General for the State of New Jersey, he was extensively involved with
the drafting of the Casino Control Act of New Jersey. In 1995, American Gaming
and Resorts of Mississippi, a subsidiary of American Gaming, was placed in an
involuntary Chapter 11 proceeding due to a disagreement with certain of its
creditors as to a payment plan. In 1996, the Gold River Hotel and Casino
Corporation, of which Mr. Luciani was a director, filed a voluntary petition in
bankruptcy under Chapter 11.
Nominees for Class II Directors
Term Expiring at 2001 Annual Meeting
Positions and Offices Presently Year Became
Name Age Held with the Company a Director
Mark Honigsfeld 44 Chairman of the Board, Chief 1996
Executive Officer, Secretary and
Director
Harold Lazarus, Ph.D. 71 Director 1997
10
<PAGE>
Mark Honigsfeld
Mr. Honigsfeld joined the Company as Chairman of the Board, Secretary and a
director in August 1996 and, effective October 1, 1996, he was elected Chief
Executive Officer of the Company. In 1978, he founded Facelifters Home Systems,
Inc. ("FACE"), a cabinet manufacturing and installation company for which he
served as Chief Executive Officer and Chairman of the Board until April 25,
1996. On such date, FACE, a publicly-traded company, was acquired by a New York
Stock Exchange company in a transaction valued at approximately $70 million to
FACE's stockholders. Prior to the merger, FACE's revenues on an annualized basis
approached $50 million. As the founder, Chief Executive Officer and Chairman of
the Board, Mr. Honigsfeld was directly involved in the planning and development
of almost all areas of FACE's business, including corporate finance, public
offerings, investor relations, mergers and acquisitions, licensing, product
design and engineering, sales and marketing, manufacturing, field installation,
customer service, management information services and management training. Prior
to the sale transaction, FACE had approximately 600 employees and associates
representing its products and services at 28 locations in 14 states,
approximately 135 telemarketing personnel, 180 direct sellers, 120 manufacturing
employees and 165 supervisory, management and administrative personnel. In
addition, FACE had working arrangements with approximately 175 independent
contracting companies nationwide. Mr. Honigsfeld holds a Bachelor of Science
Degree in Industrial Arts, magna cum laude, and a Master of Science Degree in
Industrial Arts, with honors, from City College of the City University of New
York.
Harold Lazarus, Ph.D
Dr. Lazarus joined the Company as a director in March 1997. Dr. Lazarus has
been a Professor of Management at the Hofstra University Frank G. Zarb School of
Business (the "Hofstra Business School") since 1980. From 1973 to 1980, Dr.
Lazarus served as Dean of the Hofstra Business School. Dr. Lazarus is an
organization development consultant who lectures in Europe, Asia, North America
and South America on leadership, time management, total quality management,
managing change, effective meetings, problem solving, decision making, mission
statements, management by objectives, and communications. Dr. Lazarus was
Professor of Management at the New York University Leonard N. Stern School of
Business for ten years, and he also taught at Columbia University Graduate
School of Business and Harvard University Business School. Dr. Lazarus has
served on several boards of directors of public companies in the past, including
FACE, Ideal Toy Corporation, Superior Surgical Manufacturing Company, Stage II
Apparel Corporation and Graham-Field Health Products, Inc. Dr. Lazarus has
published seven books and 65 articles on business management. He also chairs the
board of Phi Beta Kappa Alumni of Long Island (New York). Dr. Lazarus received a
Masters of Science Degree and a Doctor of Philosophy Degree in Management and
Marketing from Columbia University.
11
<PAGE>
Other Director
The following table sets forth the positions and offices held by Louis
Libin, the Company's sole Class III director, his age as of August 31, 1998 and
the year in which he became a director.
Class III Director
Term Expiring at 1999 Annual Meeting
Positions and Offices Presently Year Became
Name Age Held with the Company a Director
Louis Libin 39 Chief Technology Officer and 1997
Director
Louis Libin
Mr. Libin joined the Company in January 1997 on a per diem basis as Chief
Technology Officer and a director. Effective March 10, 1997, he began to serve
as the Company's Chief Technology Officer on a full-time basis. Since 1989, Mr.
Libin has represented the United States on satellite and transmission issues at
the International Telecommunications Union (the "ITU") in Geneva, Switzerland.
Mr. Libin has also been Chairman of the Expert Group on Broadcast Interactive
Services of the ITU since 1991. From 1987 to 1997, Mr. Libin served as the
Director of Technology (specializing in broadcast transmission systems) for the
General Electric Corporation ("GE") and the National Broadcasting Corporation.
From 1995 to 1997, Mr. Libin also served as Assistant Secretary of all GE's
wholly-owned subsidiaries that are involved in broadcast media, with the
responsibility for technical developments and all Federal Communications
Commission (the "FCC") issues and licenses. From 1983 to 1986, Mr. Libin was a
project manager for Radio Corporation of America ("RCA") until RCA's acquisition
by GE. From 1981 to 1982, Mr. Libin was employed by the Loral Corporation as an
electronic design engineer where he designed radio frequency systems for the
United States military. From 1980 to 1981, Mr. Libin was a design engineer for
the Chryon Corporation, a computer graphics company. From 1979 to 1980, he
worked for Burroughs Computer Systems, Inc. (now part of Unisys) as a field
engineer. Additionally, since 1988, Mr. Libin has acted as a consultant and
advisor to the FCC in connection with the planning of communications systems and
logistics for major events in the United States and abroad, including political
conventions, presidential inaugurations, and the Olympics. Mr. Libin is an
active member of the National Society of Professional Engineers and the
Association of Federal Communications Consulting Engineers. He also sits on the
Engineering Advisory Board of the National Association of Broadcasters. Mr.
Libin has planned and managed telecommunications projects in the United States
and in Europe. Mr. Libin was responsible for the planning and implementation of
a new television and telecommunications network in New Zealand in 1990. Mr.
Libin has also provided expert consulting on satellite issues in certain of the
republics of the former Soviet Union. Mr. Libin was also instrumental in the
development of the new transmission technology and the algorithms for software
modeling of the new North American digital terrestrial television system which
12
<PAGE>
was approved by the FCC in 1996. Mr. Libin has published numerous scientific
papers in radio frequency and telecommunications. Mr. Libin received a B.S.E.E.
Degree in Electrical Engineering from the Pratt Institute and completed his
graduate studies in optical electronics at M.I.T.'s Executive Program in 1991.
There are no family relationships among any of Compu-DAWN's executive
officers and directors.
Board Committees
The Audit Committee is responsible for reviewing and making recommendations
regarding the Company's employment of independent auditors, the annual audit of
the Company's financial statements and the Company's internal accounting
controls, practices and policies. The members of the Audit Committee are Messrs.
Honigsfeld and Rizzardi, and Dr. Lazarus.
The Company has neither a nominating committee, charged with the search for
and recommendation to the Board of potential nominees for Board positions, nor a
compensation committee, charged with periodically reviewing the compensation of
the Company's officers and employees and recommending appropriate adjustments.
These functions are performed by the Board as a whole. The Board will consider
stockholder recommendations for Board positions which are made in writing to the
Company's Chairman of the Board.
Meetings
The Board held one meeting during the year ended December 31, 1997. All of
the then incumbent directors of Compu-DAWN attended such meeting. The Board also
acted on eleven occasions during 1997 by unanimous written consent in lieu of a
meeting. The Audit Committee met once during 1997.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended ("Section
16"), requires that reports of beneficial ownership of capital stock and changes
in such ownership be filed with the Securities and Exchange Commission (the
"SEC") by Section 16 "reporting persons," including directors, certain officers,
holders of more than 10% of the outstanding Common Shares and certain trusts of
which reporting persons are trustees. Compu-DAWN is required to disclose in this
Proxy Statement each reporting person whom it knows to have failed to file any
required reports under Section 16 on a timely basis during the fiscal year ended
December 31, 1997. To Compu-DAWN's knowledge, based solely on a review of copies
of Forms 3, 4 and 5 furnished to it and written representations that no other
reports were required, during the fiscal year ended December 31, 1997,
Compu-DAWN's officers, directors and 10% stockholders complied with all Section
16(a) filing requirements applicable to them except that each of the six
directors and executive officers of the Company in office at the time of the IPO
filed his Form 3 ten days late.
13
<PAGE>
PROPOSAL 2: APPROVAL OF THE ISSUANCE OF SHARES
OF COMMON STOCK UNDERLYING THE COMPANY'S
SERIES A CONVERTIBLE PREFERRED STOCK AND
SERIES B CONVERTIBLE PREFERRED STOCK
AS WELL AS CERTAIN WARRANTS
Description of Transaction
On June 5, 1998, pursuant to a Securities Purchase Agreement among the
Company, JNC Strategic Fund Ltd. ("Strategic") and JNC Opportunity Fund Ltd.
("Opportunity" and together with Strategic, the "Purchasers"), dated as of May
31, 1998 (the "Securities Purchase Agreement"), the Company issued to the
respective Purchasers (i) units, consisting of, in the aggregate, 327,103 Common
Shares (the "Issued Shares") and five-year warrants to acquire 32,710 Common
Shares, for an aggregate purchase price of $1,750,000 (or an effective purchase
price of $5.35 per Issued Share, assuming no value is attributed to the
warrants), and (ii) units, consisting of, in the aggregate, 3,250 Series A
Preferred Shares and five-year warrants to acquire 57,497 Common Shares, for an
aggregate purchase price of $3,250,000. Each of the Series A Preferred Shares
has a face amount of $1,000 as no value was attributed to the warrants.
On September 26, 1998, pursuant to a Securities Exchange Agreement between
the Company and Strategic as of such date (the "Securities Exchange Agreement"),
the Company issued to Strategic 1,750 Series B Preferred Shares in exchange for
the Issued Shares. Each of the Series B Preferred Shares has a face amount of
$1,000.
Subject to certain limitations discussed below, the Series A Preferred
Shares are convertible into Common Shares, on or after October 3, 1998, at a
conversion price equal to the lesser of (x) 85% (subject to reduction under
certain circumstances) of the average of the five lowest closing bid prices for
the Common Shares during the 25 consecutive trading days preceding the date of
conversion and (y) $8.025 per share, subject to adjustment as provided for in
the Certificate of Designations, Preferences and Rights of the Series A
Preferred Shares (the "Series A Certificate of Designation") (the "Floating
Conversion Price"); however, the conversion price cannot be less than $5.00 per
share, subject to adjustment as provided for in the Series A Certificate of
Designation. Based on a conversion price of $5.00 per share (such price being
greater than the Floating Conversion Price currently in effect), the number of
Common Shares issuable upon the conversion of the Series A Preferred Shares as
of October 3, 1998 (including Common Shares issuable upon the conversion of a
premium amount of 5% (on an annualized basis) of the stated value of the Series
A Preferred Shares) was approximately 660,000 shares. The Series A Preferred
Shares rank prior to the Company's Common Shares and any class or series of
capital stock of the Company hereafter created (unless agreed otherwise by the
holders of the Series A Preferred Shares in accordance with the provisions of
the Series A Certificate of Designation). The holders of the Series A Preferred
Shares are not entitled to receive any dividends thereon; however, as indicated
above, a 5% premium is payable in connection with any conversion, redemption or
liquidation. The holders of the Series A Preferred Shares have no voting rights
except as otherwise provided by law or in the Series A
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<PAGE>
Certificate of Designation.
Subject to certain limitations discussed below, the Series B Preferred
Shares are convertible into Common Shares at a conversion price of $5.35 per
share, subject to adjustment as provided for in the Certificate of Designations,
Preferences and Rights of the Series B Preferred Shares (the "Series B
Certificate of Designation"). Based on such conversion price, the number of
Common Shares issuable upon conversion of the Series B Preferred Shares is
327,103. The Series B Preferred Shares rank prior to the Company's Common Shares
to the extent of $.01 per share, prior to any class or series of capital stock
of the Company hereafter created (unless agreed otherwise by the holders of the
Series B Preferred Shares in accordance with the provisions of the Series B
Certificate of Designation) and junior to the Series A Preferred Shares. The
holders of the Series B Preferred Shares are not entitled to receive any
dividends thereon; however, in the event the Board of Directors of the Company
shall declare a dividend with respect to the Common Shares, the holders of the
Series B Preferred Shares shall be entitled to a dividend amount based on the
number of Common Shares into which the Series B Preferred Shares are
convertible. The holders of the Series B Preferred Shares have no voting rights
except as otherwise provided by law or in the Series B Certificate of
Designation.
The warrants to acquire, in the aggregate, 90,207 Common Shares (the
"Warrants") are exercisable at a price of $8.025 per share, subject to
adjustment as provided for in the Warrants.
Notwithstanding the foregoing, pursuant to the terms of the Series A
Certificate of Designation, the Series B Certificate of Designation and the
Warrants, the Series A Preferred Shares, the Series B Preferred Shares and the
Warrants are currently convertible or exercisable by any holder only to the
extent that the number of Common Shares thereby issuable, together with the
number of Common Shares owned by such holder and its affiliates (but not
including Common Shares underlying unconverted Series A Preferred Shares and
Series B Preferred Shares or unexercised portions of the Warrants) would not
exceed 4.99% of the then outstanding Common Shares as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended. Such
restriction is subject to waiver by the respective securityholder upon not less
than 61 days notice. In addition, neither the Series A Preferred Shares nor the
Series B Preferred Shares are convertible into Common Shares to the extent such
conversion would violate the rules of the National Association of Securities
Dealers, Inc. (the "NASD") discussed below.
The Company has agreed to register the resale of the Common Shares issuable
upon conversion of the Series A Preferred Shares and Series B Preferred Shares
(the "Conversion Shares") and upon exercise of the Warrants (the "Warrant
Shares"). The $5,000,000 in gross proceeds received by the Company pursuant to
the Securities Purchase Agreement is intended to be used for working capital
purposes.
15
<PAGE>
NASD Rule
This proposal is being presented to the Company's stockholders in
accordance with Rule 4310(c)(25)(H) of the NASD (the "NASD Rule"). The NASD Rule
requires stockholder approval for the issuance of shares of Common Stock in a
transaction involving the sale or issuance by the issuer of Common Stock (or
securities convertible into or exercisable for Common Stock) equal to 20% or
more of the Common Stock or 20% or more of the voting power outstanding before
the issuance for less than the greater of book or market value of the stock.
Pursuant to the Securities Purchase Agreement and the Securities Exchange
Agreement, the Company agreed to seek such approval of its stockholders as may
be required to issue all of the Conversion Shares and Warrant Shares without
violating the NASD Rule.
As of June 5, 1998, 2,839,404 Common Shares of the Company were issued and
outstanding. Accordingly, the provisions of the NASD Rule applied as of such
date with respect to a transaction involving the sale or issuance by the Company
of Common Shares (or securities convertible into or exercisable for Common
Shares) equal to 567,880 or more Common Shares for less than the greater of book
or market value of the issued Common Shares.
As of June 5, 1998, the closing sale price of the Company's Common Shares,
as reported by Nasdaq, was $6.875 per share (the "Market Price") (such amount
being greater than the book value of the Company's Common Shares as of such
date). Since the effective purchase price for the Issued Shares was (and the
conversion price for the Series B Preferred Shares is) $5.35 per share, and the
conversion price for the Series A Preferred Shares may, at the time of
conversion, be less than the Market Price (due to the floating nature of the
conversion price), the Company is seeking stockholder approval of the issuance
of Conversion Shares. The foregoing stockholder approval shall also serve as
approval of the issuance of Warrant Shares (although stockholder approval is not
required by the NASD Rule with regard thereto since the exercise price for the
Warrants of $8.025 per share is greater than the Market Price).
In the event the Company does not receive approval by the stockholders of
this Proposal 2, any holder of Series A Preferred Shares who is prohibited from
converting Series A Preferred Shares because the issuance of Conversion Shares
would exceed the permissible amount provided for under the NASD Rule may elect
(i) to require the Company to redeem from such holder those Series A Preferred
Shares for which the Company is unable to issue Conversion Shares due to the
foregoing at a price per Series A Preferred Share generally equal to the number
of Conversion Shares into which such Series A Preferred Shares would be
convertible multiplied by a price based on the market value of the Company's
Common Shares; (ii) to require, with the consent of holders of at least 50% of
the outstanding Series A Preferred Shares (including any Series A Preferred
Shares held by the requesting holder), the Company to terminate the listing of
its Common Shares on The Nasdaq Stock Market and to cause its Common Shares to
be eligible for trading on the over-the-counter electronic bulletin board; or
(iii) to require the Company to issue Common Shares in accordance with the
holder's notice of conversion at a conversion price equal to the greater of (x)
the closing bid price of the Common Shares and (y) the book value per Common
Share, each in effect as of the date of the holder's written notice to the
Company of its election to receive Common Shares. The remedies discussed in (ii)
and (iii) above would also be available to any holder of Series B Preferred
Shares who is prohibited from converting Series B Preferred Shares because the
issuance of Common Shares would exceed the permissible amount provided for under
the NASD Rule.
16
<PAGE>
In light of the redemption or Nasdaq delisting obligation, failure to
obtain stockholder approval pursuant to the NASD Rule would adversely affect the
Company's financial position (in the event of a redemption) or the stockholders'
liquidity in their Common Shares (in the event of a Nasdaq delisting).
Description of Securities
Common Shares
The Company is currently authorized to issue up to 20,000,000 Common
Shares, of which 3,166,507 shares were issued and outstanding as of September
16, 1998. In addition, as of September 16, 1998, the Company had reserved
443,466 Common Shares for issuance pursuant to the exercise of outstanding
options and 630,607 Common Shares for issuance pursuant to the exercise of
outstanding warrants. Additional Common Shares are reserved for issuance upon
the conversion of the Series A Preferred Shares as discussed above under
"Description of Transaction" in this Proposal 2. Further, 327,103 Common Shares
are reserved for issuance upon the conversion of the Series B Preferred Shares.
Such Common Shares were outstanding as of September 16, 1998 but were
subsequently reacquired by the Company in the Exchange. All of the issued and
outstanding Common Shares are validly issued, fully paid and non-assessable.
Holders of the Common Shares of the Company are entitled to share equally
on a per share basis in such dividends as may be declared by the Board of
Directors out of funds legally available therefor. There are presently no plans
to pay dividends with respect to the Common Shares. Upon liquidation,
dissolution or winding up of the Company, after payment of creditors and the
holders of any senior securities of the Company, including Preferred Shares, if
any, the assets of the Company will be divided pro rata on a per share basis
among the holders of the Common Shares. The Common Shares are not subject to any
liability for further assessments. There are no conversion or redemption
privileges, nor any sinking fund provisions, with respect to the Common Shares,
and the Common Shares are not subject to call. The holders of the Common Shares
do not have any preemptive or other subscription rights.
Holders of the Common Shares are entitled to cast one vote for each share
held at all stockholders' meetings, including the annual meeting for the
election of directors. The Common Shares do not have cumulative voting rights.
Preferred Shares
The Company's Certificate of Incorporation currently authorizes 1,000,000
"blank check" Preferred Shares. Pursuant to authority granted in the Certificate
of Incorporation, the Board of Directors of the Company has the authority,
without further action by the holders of the outstanding Common Shares, to issue
Preferred Shares from time to time in one or more series, to fix the number of
shares constituting any series and the stated value thereof, if different from
the par value, and to fix the terms of any such series, including dividend
rights, dividend rates, conversion or exchange rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
and the liquidation preference of such series. As of September 16, 1998, there
were 3,250 Series A Preferred Shares issued and outstanding. As discussed above,
subsequent to September 16, 1998, 1,750 Series B Preferred Shares were issued in
the Exchange. A description of the designations, preferences and rights of the
Series A Preferred Shares and Series B Preferred Shares is set forth above under
"Description of Transaction" in this Proposal 2.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends that the stockholders vote
FOR this proposal. The officers and directors of the Company intend to vote
their shares in favor of this proposal.
17
<PAGE>
INDEPENDENT AUDITORS
Lazar Levine & Felix LLP has served as the Company's independent auditors
since 1996 and has been selected as the Company's independent auditors for the
fiscal year ending December 31, 1998.
A representative of Lazar Levine & Felix LLP is expected to be available by
telephone at the Meeting, will have the opportunity to make a statement, if such
representative so desires, and will be available to respond to appropriate
questions.
There have been no changes in the Company's accountants, and the Company
has had no disagreements with the Company's accountants on accounting and
financial disclosure, during the Company's two most recent fiscal years and the
interim period since its most recent fiscal year.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at Compu-DAWN's 1999 Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the SEC,
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), must be received by the Secretary of Compu-DAWN at the principal
executive offices of Compu-DAWN by June 4, 1999 for inclusion in Compu-DAWN's
Proxy Statement and form of Proxy relating to such meeting. The Company,
however, intends to hold next year's annual meeting earlier in the year than
this year's meeting. Accordingly, the Company suggests that stockholder
proposals intended to be presented at next year's annual meeting be submitted
well in advance of April 15, 1999, the earliest date upon which the Company
anticipates the proxy statement and form of proxy relating to such meeting will
be released to stockholders.
In order for a stockholder to nominate a candidate for director, under the
Company's ByLaws, timely notice of the nomination must be received by the
Company in advance of the meeting. Ordinarily, such notice must be received at
the principal executive offices of the Company (as provided below) not less than
60 days nor more than 90 days prior to the meeting; however, in the event that
less than 70 days' notice of the date of the meeting is given to stockholders
and public disclosure of the meeting date, pursuant to a press release, is
either not made at all or is made less than 70 days prior to the meeting date,
notice by such stockholder to be timely made must be so received no later than
the close of business on the tenth day following the earlier of (i) the day on
which the notice of the date of the meeting was mailed to stockholders or (ii)
the day on which such public disclosure of the meeting date was made. The
stockholder filing the notice of nomination must describe various matters,
including such information as (x) the name, age, business and residence
addresses, occupation or employment and shares held by the nominee; (y) any
other information relating to such nominee required to be disclosed in a Proxy
Statement; and (z) the name, address and shares held by the stockholder.
In order for a stockholder to bring other business before an annual meeting
of stockholders, under the Company's By-
18
<PAGE>
Laws, timely notice must be received by
the Company within the time limits described above. A stockholder's notice must
set forth as to each matter the stockholder proposes to bring before the annual
meeting certain information regarding the proposal, including (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at such meeting; (ii) the name and address
of such stockholder proposing such business; (iii) the class and number of
shares of the Company which are beneficially owned by such stockholder; and (iv)
any material interest of such stockholder in such business. These requirements
are separate from and in addition to the requirements a stockholder must meet to
have a proposal included in the Company's Proxy Statement.
Any notice given pursuant to the foregoing requirements must be sent to the
Secretary of the Company at 77 Spruce Street, Cedarhurst, New York 11516. Any
stockholder desiring a copy of the Company's By-Laws will be forwarded one
without charge upon receipt of written request therefor.
OTHER BUSINESS
While the accompanying Notice of Annual Meeting of Stockholders provides
for the transaction of such other business as may properly come before the
Meeting, the Company has no knowledge of any matters to be presented at the
Meeting other than those listed as Proposals 1 and 2 in the notice. However, the
enclosed Proxy gives discretionary authority in the event that any other matters
should be presented.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement is accompanied by a copy of the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (the "Form 10-KSB")
and the Company's Quarterly Report on Form 10-QSB for the period ended June 30,
1998 (the "Form 10-QSB").
19
<PAGE>
The following information from the Form 10-KSB, as filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, is hereby incorporated by
reference into this Proxy Statement:
(i) the consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the two years ended December 31, 1997 and
1996, included in Item 7 thereof; and
(ii) "Management's Discussion and Analysis or Plan of Operation" included in
Item 6 thereof.
The following information from the Form 10-QSB, as filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, is hereby incorporated by
reference into this Proxy Statement:
(i) the consolidated financial statements of the Company as of June 30, 1998
and for each of the six months ended June 30, 1998 and 1997, included in
Item 1 of Part I thereof; and
(ii) "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 2 of Part I thereof.
Any statement contained in a document incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
By Order of the Compu-DAWN
Board of Directors
Mark Honigsfeld
Chairman of the Board, Chief Executive
Officer and Secretary
Cedarhurst, New York
October 2, 1998
20
<PAGE>
COMPU-DAWN, INC.
77 Spruce Street
Cedarhurst, New York 11516
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Mark Honigsfeld and Louis Libin as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them, and each of them, to represent and vote, as designated below, all the
shares of Common Stock of Compu-DAWN, Inc. (the "Company") held of record by the
undersigned on September 16, 1998 at the Annual Meeting of Stockholders to be
held on November 2, 1998 or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted for Proposals 1 and 2 and in favor of any proposal to
adjourn the meeting in order to allow the Company additional time to obtain
sufficient Proxies with regard thereto.
(Continued and to be signed on reverse side)
<PAGE>
[Reverse Side]
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Stockholders
Compu-DAWN, Inc.
November 2, 1998
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A |X| Please mark your votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 and 2
1. Election of Directors
<TABLE>
NOMINEES:
<S> <C> <C>
FOR all nominees listed at right WITHHOLD AUTHORITY Class I Directors:
(except as marked to the to vote for all nominees listed. WILLIAM RIZZARDI
contrary as instructed below). ALFRED LUCIANI
Class II Directors:
MARK HONIGSFELD
HAROLD LAZARUS, Ph.D.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
such nominee's name from the list below.)
2. Proposal to approve the issuance of shares of Common Stock
underlying the Company's Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock as well as certain
warrants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
<PAGE>
[Reverse side continued]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
Signature:________ Signature, if held jointly:______________ Dated: ______, 1998
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership or limited liability company, please sign in full partnership or
limited liability company name by an authorized person.
<PAGE>
