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 Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
COMTEX NEW NETWORK, 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: _____________________________________________________________
COMTEX NEWS NETWORK,INC.
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
October 28, 2002
Dear Fellow Shareholders:
You are cordially invited to attend COMTEX News Network,
Inc.'s Annual Meeting of Shareholders to be held on December 5,
2002 at 11:00 a.m. local time at the Sheraton National Hotel, 900
South Orme Street, Arlington, Virginia.
At this meeting, you will be asked to vote, in person or by
proxy, on the following matters: (i) the election of the
Company's Board of Directors; (ii) approval of an amendment to
the Company's 1997 Employee Stock Purchase Plan; (iii) approval
of a proposed change in the state of incorporation of the Company
from New York to Delaware; (iv) approval of an increase in the
number of shares of authorized Common Stock to 25,000,000 and the
addition of a class of Preferred Stock; (v) ratification of the
appointment of Ernst & Young LLP as the Company's independent
auditors; and (vi) any other business as may properly come before
the meeting. In addition, we will be pleased to report on the
business of the Company and a discussion period will be provided
for questions and comments of general interest to shareholders.
Whether or not you are able to attend, it is important that
your shares be represented and voted at this meeting.
Accordingly, please complete, sign and date the enclosed proxy
and mail it in the envelope provided at your earliest
convenience. Your prompt response is important and would be
appreciated.
Sincerely,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D.
Chairman
/S/ CHARLES W. TERRY
Charles W. Terry
President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting, please complete, sign, and
return promptly the enclosed proxy in the envelope provided to ensure
that your vote will be counted. You may vote in person if you so desire
even if you have previously sent in your proxy.
If your shares are held in the name of a bank, brokerage firm or other
nominee, please contact the party responsible for your account and
direct him or her to vote your shares on the enclosed card.
COMTEX News Network, Inc.
Notice of Annual Meeting of Shareholders
December 5, 2002
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of COMTEX News Network, Inc., a New York corporation (the "Company"
or "Comtex"), is scheduled to be held on December 5, 2002 at 11:00
a.m., local time, at the Sheraton National Hotel located at 900
South Orme Street, Arlington, Virginia for the following purposes:
1. To elect six directors to serve for the terms of office
specified in the accompanying proxy statement and until
their successors are duly elected and qualified;
2. To approve an amendment to the Company's 1997 Employee
Stock Purchase Plan to increase the number of shares
reserved for issuance by an additional 200,000 shares of
Common Stock;
3. To approve a change in the state of incorporation of the
Company from New York to Delaware;
4. To approve an increase in the number of shares of
authorized Common Stock to 25,000,000 and the addition of
a class of Preferred Stock;
5. To ratify the selection of Ernst & Young LLP as
independent auditors for the Company for fiscal year 2003;
and
6. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on October
28, 2002 are entitled to notice of and to vote at the Annual Meeting
and any adjournment thereof. All shareholders are cordially invited
to attend the Annual Meeting in person. However, to assure your
representation at the meeting, you are urged to complete, sign and
date the enclosed form of proxy and return it promptly in the
envelope provided. Shareholders attending the meeting may revoke
their proxy and vote in person.
FOR THE BOARD OF DIRECTORS
/S/ S. AMBER GORDON
S. Amber Gordon
Corporate Secretary
Alexandria, Virginia
October 28, 2002
COMTEX News Network, Inc.
PROXY STATEMENT
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, par value $.01 per share of COMTEX News Network, Inc. (the
"Company") in connection with the solicitation by the Board of
Directors of the Company of proxies for the Annual Meeting of
Shareholders to be held on December 5, 2002 at 11:00 a.m. local time
at the Sheraton National Hotel, 900 South Orme Street, Arlington,
Virginia, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Shareholders. The purposes
of the Annual Meeting and the matters to be acted upon are set forth
in the accompanying Notice of Annual Meeting of Shareholders. The
Board of Directors is not currently aware of any other matters that
will come before the meeting.
Proxies for use at the Annual Meeting are being solicited by
the Board of Directors of the Company. These proxy solicitation
materials are first being mailed on or about November 4, 2002 to all
shareholders entitled to vote at the Annual Meeting. Proxies will
be solicited chiefly by mail. The Company will make arrangements
with brokerage houses and other custodians, nominees and fiduciaries
to send proxies and proxy material to the beneficial owners of
shares and will reimburse them for their expenses in so doing.
Should it appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and
employees of the Company may communicate with shareholders, banks,
brokerage houses and others by telephone, facsimile or in person to
request that proxies be furnished. All expenses incurred in
connection with this solicitation will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting and a return
envelope for the proxy are enclosed. Shareholders may revoke the
authority granted by their execution of proxies at any time before
their effective exercise by filing with the Secretary of the Company
a written notice of revocation or a duly executed proxy bearing a
later date, or by voting in person at the Annual Meeting. Shares of
the Company's Common Stock represented by executed and unrevoked
proxies will be voted in accordance with the choice or instructions
specified thereon. If no specifications are given, the proxies
intend to vote the shares represented thereby in favor of each of
the nominees for director listed under Election of Directors below,
and to approve Proposals No. 2, 3, 4 and 5 as set forth in the
accompanying Notice of Annual Meeting of Shareholders and, in
accordance with their best judgment, on any other matters which may
properly come before the Annual Meeting.
Record Date and Voting Rights
Only shareholders of record at the close of business on October
28, 2002 are entitled to notice of and to vote at the Annual
Meeting. As of October 28, 2002, 13,140,893 shares of Common Stock
were issued and outstanding. This is the only class of shares
authorized by the Company. Each Common Stock share is entitled to a
single non-cumulative vote on all matters that may properly come
before the annual meeting. The holders of a majority of the votes
of shares entitled to vote at the annual meeting will constitute a
quorum at the Annual Meeting.
Under New York law, (i) a plurality of the votes cast at the
Annual Meeting is necessary to elect directors; (ii) the
affirmative vote of a majority of the votes cast is required to
approve the Amendment to the Company's 1997 Employee Stock Purchase
Plan; (iii) the affirmative vote of the holders of at least two-
thirds of the shares of the Company's Common Stock outstanding on
the Record Date is required for approval of the proposed
reincorporation in Delaware through the merger (the
"Reincorporation"); (iv) the affirmative vote of the holders of at
least a majority of the outstanding shares is required for the
authorization of additional shares of Common Stock and to add a new
class of Preferred Stock; and (v) the affirmative vote of a majority
of the votes cast is required to ratify the appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year
2003. Broker "non-votes" and the shares as to which a shareholder
abstains from voting are included for the purposes of determining
whether a quorum of shares is present at the Annual Meeting. A
broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not have discretionary voting power with
respect to that item and has not received voting instructions from
the beneficial owner. A broker "non-vote" will have the effect of
an AGAINST vote on the proposed Reincorporation and on the proposed
change in the Common Stock.
Votes at the Annual Meeting will be tabulated by Inspectors of
Election appointed by the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to
be presented at the Company's 2003 Annual Meeting of Shareholders
must be received by the Company no later than July 10, 2003 in order
that they may be included in the proxy statement and form of proxy
relating to that meeting.
SHAREHOLDER LIST
A list of shareholders entitled to vote at the Annual Meeting
will be available at the Company's offices, 4900 Seminary Road,
Suite 800, Alexandria, Virginia 22311, for a period of ten (10) days
prior to the Annual Meeting for examination by any shareholder, and
at the Annual Meeting itself.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October 28,
2002 regarding the beneficial ownership of shares of the Company's
common stock, par value $.01 per share (the "Common Stock") of (i)
each person known to the Company to be the beneficial owner, within
the meaning of Section 13(d) of the Securities Exchange Act of 1934,
as amended, (the "Exchange Act"), of more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company named in the Summary
Compensation Table (see "Executive Compensation") and (iv) all
executive officers and directors of the Company as a group. Unless
otherwise indicated, the address of each named beneficial owner is
c/o COMTEX News Network, Inc., 4900 Seminary Road, Suite 800,
Alexandria, Virginia 22311. Except to the extent indicated in the
footnotes, each of the beneficial owners named below has sole voting
and investment power with respect to the shares of Common Stock
listed.
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership <F1> of Class
- -------------------- ------------------------ ----------
AMASYS Corporation 2,979,758 <F2> 21.3%
4900 Seminary Road, St. 800
Alexandria, VA 22311
C.W. Gilluly, Chairman 4,467,506 <F3> 33.7%
Charles W. Terry, Director, 901,908 <F4> 6.7%
President and Chief Executive
Officer
Erik Hendricks, Director 64,900 <F5> *
Robert A. Nigro, Director 151,142 <F6> 1.1%
John S. Brunette, Director 29,900 <F7> *
Stephen W. Ellis 3,300 <F8> *
Robin Deal, Vice President, 102,548 <F9> *
Finance & Accounting
Slawek Ligier, Vice President, 108,431 <F10> *
Chief Technology Officer
Martin A. Greif, Vice President, 23,392 *
Sales and Marketing
All Directors and 5,849,727 42.0%
executive officers as a group
(9 Persons)
* Less than 1%.
<FN>
<F1> Beneficial ownership is direct unless otherwise indicated.
<F2> Includes 826,321 shares which may be acquired upon the
conversion of a Convertible Note held by AMASYS, convertible
at $1.10 per share, the principal balance of which was
$908,954 as of September 30, 2002. (See "Note Payable to
AMASYS.")
<F3> Includes 100,000 shares of Common Stock which may be
acquired by Dr. Gilluly upon the exercise of vested options
granted under the COMTEX News Network, Inc. 1995 Stock
Option Plan;2,323,006 shares of Common Stock held jointly
by Dr. Gilluly and his spouse; and 1,000,000 shares of
Common Stock held by Dr. Gilluly's spouse, as to which he
disclaims beneficial ownership.
<F4> Includes 397,733 shares of Common Stock which may be
acquired upon the exercise of vested options granted under
the COMTEX News Network, Inc. 1995 Stock Option Plan;
10,000 shares of Common Stock held by Mr. Terry's children
under the Uniform Gifts to Minors Act; 5,000 shares of
Common Stock held by Mr. Terry's mother, as to which Mr.
Terry holds dispositive power; and 12,000 shares of Common
Stock held by Mr. Terry's spouse, as to which he disclaims
beneficial ownership.
<F5> Includes 49,900 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
<F6> Includes 59,900 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
<F7> Includes 29,900 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
<F8> Includes 3,300 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
<F9> Includes 89,440 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
<F10> Includes 75,000 shares of Common Stock which may be acquired
upon the exercise of vested options granted under the COMTEX
News Network, Inc. 1995 Stock Option Plan.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six directors, constituting the entire Board of Directors,
are to be elected at the Annual Meeting. Unless otherwise
specified, the enclosed proxy will be voted in favor of the
persons named below to serve until the next Annual Meeting and
until their successors are elected and qualified. Each person
named below is now a director of the Company. In the event any
of these nominees shall be unable to serve as a director, the
shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the
nominee. All nominees have consented to be named and have
indicated their intent to serve if elected. The Board of
Directors has no reason to believe that any of the nominees will
be unable to serve or that any vacancy on the Board of Directors
will occur.
The names of the nominees and certain other information
about them are set forth below:
Name Age Office Held with Company
- ------ ----- ------------------------
C.W. Gilluly, Ed.D. 56 Chairman of the Board
John S. Brunette 43 Director
Stephen W. Ellis 52 Director
Erik Hendricks 58 Director
Robert A. Nigro 53 Director
Charles W. Terry 51 President, Chief Executive
Officer and Director
C.W. GILLULY, Ed.D. has served as a director and Chairman
of the Board of the Company since 1992. Dr. Gilluly served as
President of the Company from June 1992 until May 1993, and as
Chief Executive Officer from June 1992 until September 1997. Dr.
Gilluly has served as Chairman of the Board and President of
AMASYS and its predecessor, Infotechnology, Inc., since June
1992. Dr. Gilluly also serves as a director of Analex
Corporation, an engineering services firm primarily involved with
homeland security and biodefense.
JOHN S. BRUNETTE has served as a director of the Company
since 2000. Mr. Brunette serves as Chief Executive Officer of
Teleglobe Communications Corporation. Mr. Brunette joined
Teleglobe as Senior Vice President, General Counsel and Secretary
in October 1998. Prior to that, he was Assistant General Counsel
of MCI Communications Corporation ("MCI") for over 12 years.
During his tenure at MCI, Mr. Brunette was responsible for the
finance, securities, and mergers and acquisitions activities of
MCI and its subsidiaries. Mr. Brunette has directed numerous
transactions involving equity investments, debt issuances, and
technologies in the Internet and telecommunications sectors.
STEPHEN W. ELLIS became a director of the Company in October
2002. Mr. Ellis is a private investor specializing in
information technology, financial services, and electronic market
data firms. In addition to his investment activities, he has
frequently served as an interim senior executive for developing
companies in these same industries. From February 2001 through
May 2002, he served as Executive Vice President and Chief
Financial Officer of GFI Group, Inc., a leading credit, equity,
energy and foreign exchange derivatives brokerage firms, where he
directed a $34 million private equity financing. From March 1999
through September 2000, Mr. Ellis was Executive Vice President,
Chief Financial Officer and a Director of HotJobs.com raising
more than $150 million through its 1999 initial public stock
offering and follow-on offerings. He also served as Senior Vice
President of Finance and Operations at Biztravel.com from March
1998 until January 1999. As Vice President and Chief Financial
Officer of Metromedia Fiber Network, Inc., from March 1997
through February 1998, Mr. Ellis led a successful $150 million
initial public offering. Mr. Ellis is also a Certified Public
Accountant.
ERIK HENDRICKS has served as a director of the Company
since 1991. Since 1979 he has served as the Executive Director
and Chief Operating Officer of the Pennsylvania Society for the
Prevention of Cruelty to Animals, a non-profit humane society.
ROBERT A. NIGRO has served as a director of the Company
since 1991. Mr. Nigro is an investment banker who specializes in
corporate development and turnarounds. He joined SEI Investments
Company as Senior Vice President in November 1993 and served as
Chief Executive Officer of SEI Capital AG from April 1995 through
2002. From 1991 to 1993, Mr. Nigro was Chairman and Chief
Executive Officer of the National Abandoned Property Processing
Company. Mr. Nigro was associated with the First Boston
Corporation in various capacities from 1976 to 1990 including
serving as Managing Director in the New York and Atlanta offices.
Mr. Nigro also serves as a director of AMASYS Corporation.
CHARLES W. TERRY was appointed President of the Company in
August 1994 and has served as a director since December 1994.
Mr. Terry was appointed Chief Executive Officer in September
1997. From August 1992 until he joined the Company, Mr. Terry was
President of Corporate Cost Management, Inc., an organization
specializing in cost management and decisions support software
for the healthcare industry. From March 1992 to August 1992, Mr.
Terry served as Vice President of Sales and Marketing for Health
Payment Review, Inc., a corporation specializing in containment
software for health insurance and managed care companies. From
1977 to 1991, Mr. Terry held various key leadership posts in the
fields of development, sales, marketing and general management at
CompuServe, a leading provider of computer-based information and
communication services.
Executive Officers
The following table contains information as of September
28, 2002 as to the executive officers of the Company who are not
also directors of the Company:
Name Age Office Held With Company
---- --- ------------------------
Robin Y. Deal 38 Vice President,
Finance & Accounting
Slawek Ligier 35 Vice President,
Chief Technology Officer
Martin A. Greif 45 Vice President,
Sales and Marketing
ROBIN Y. DEAL was appointed Vice President, Finance &
Accounting of the Company in January 2001. Ms. Deal is
responsible for all of the Company's financial matters. Ms. Deal
began her tenure with the Company in 1996 as the Controller and
was appointed to Vice President, Finance & Accounting in January
2001.
SLAWEK LIGIER was appointed Vice President, Chief
Technology Officer in January 2001. Mr. Ligier joined the Company
from Intuit Insurance Services (a wholly owned subsidiary of
Intuit Incorporated) where he served as the Vice President
and Chief Technical Officer from 1998 to 2001. Mr. Ligier
was a Director of Tax Technology with Ernst & Young LLP
from 1996 to 1998.
MARTIN A. GREIF was appointed Vice President, Sales and
Marketing in January, 2002. Mr. Greif joined the Company from
Microsystems Technology, Inc., where he worked since March, 1996,
most recently serving as Vice President of Marketing and
International Sales. Previously, Mr. Greif was with leading
technology companies, such as Inso Corporation, Ziff Information
Services and CompuServe.
There are no family relationships among the directors or
executive officers of the Company.
Meetings of the Board of Directors
The Board of Directors held a total of 8 meetings during
the Company's fiscal year ended June 30, 2002. Each director
attended in person or telephonically at least 7 of the meetings
held by the Board of Directors.
Report of the Audit Committee of the Board of Directors
The Audit Committee oversees the Company's financial
reporting process on behalf of the Board. The Company's
management has the primary responsibility for the financial
statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities,
the Committee reviewed the audited financial statements in the
Annual Report with management including a discussion of the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who
are responsible for expressing an opinion on the conformity of
those audited financial statements with generally accepted
accounting principles, their judgments as to the quality, not
just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the
committee under generally accepted auditing standards. In
addition, the Committee has discussed with the independent
auditors the auditors' independence from the management and the
Company including the matters in the written disclosures required
by the Independence Standards Board. Each member of the audit
committee is "independent". The committee held 1 meeting during
fiscal year 2002.
The Committee discussed with the Company's independent
auditors the overall scope and plan for their audits. The
Committee meets with the independent auditors, with and without
management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. In
reliance on the reviews and discussions referred to above, the
Committee recommended to the Board (and the Board has approved)
that the audited financial statements be included in the Annual
Report on Form 10-K for the year ended June 30, 2002 for filing
with the Securities and Exchange Commission. The material in
this report is not "soliciting material," is not deemed filed
with the SEC, and is not incorporated by reference into any
filing of the Company under the Securities Act of 1933, as
amended, or the Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates it by reference
into such filing.
Submitted by the Audit Committee
John S. Brunette, Chairman
Erik Hendricks
Robert A. Nigro
The Compensation Committee of the Board of Directors, which
held 2 meetings in fiscal 2002, is comprised of Messrs.
Hendricks, Nigro and Brunette. The Compensation Committee
evaluates management's recommendations and makes its own
recommendations to the Board of Directors concerning the
compensation of the Company's executive officers. It is also
responsible for the formulation of the Company's executive
compensation policy and the research, analysis and subsequent
recommendation regarding the administration of the Company's 1995
Stock Option Plan.
The Board of Directors does not have a Nominating Committee
or an Executive Committee.
The Board of Directors recommends a Vote FOR
the election of the Directors named on the enclosed Proxy.
PROPOSAL NO. 2
AMENDMENT TO THE 1997 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted an amendment to the
Comtex News Network, Inc. 1997 Employee Stock Purchase Plan to
increase the number of shares reserved for issuance thereunder
from 400,000 to 600,000, subject to shareholder approval. As of
October 28, 2002, 92,572 shares of Common Stock remained available
for issuance under the Employee Stock Purchase Plan. At the
Annual Meeting, the shareholders are being asked to approve this
amendment to the 1997 Employee Stock Purchase Plan.
Description of the 1997 Employee Stock Purchase Plan
Introduction
The Stock Purchase Plan is intended to provide a means
through which the Company allows employees of the Company
and its subsidiaries to aquire a stock ownership
interest in the Company in order to assist the Company and its
subsidiaries in retaining the services of its employees, to
secure and retain the services of new employees, and to provide
incentives for such employees to exert maximum efforts for the
success of the Company.
Purpose
The purpose of the Stock Purchase Plan is to provide a
means by which employees of the Company and its subsidiaries can
be given an opportunity to purchase the Company's Common Stock
through payroll deductions. The Stock Purchase Plan is an
employee stock purchase plan under Internal Revenue Code Section
423. That section provides certain tax benefits to employees, as
explained below. The Stock Purchase Plan authorizes the
reservation of 400,000 shares of Common Stock for issuance under
the Stock Purchase Plan. The amendment to the Stock Purchase
Plan, if approved by shareholders, would increase the number of
shares of Common Stock reserved under the Stock Purchase Plan to
600,000.
Administration
The Stock Purchase Plan is administered by the Compensation
Committee. The Compensation Committee has the full power,
discretion and authority to interpret and administer the Stock
Purchase Plan and the rights granted under it. The Compensation
Committee may delegate administrative functions to employees of
the Company.
Eligibility
Once the Stock Purchase Plan becomes effective, any person
who is employed by the Company or its subsidiaries is eligible to
participate in the Stock Purchase Plan on the first day of any
January or July following the employee's commencement of
employment with the Company. An employee is not eligible for the
grant of any rights under the Stock Purchase Plan if, immediately
after such grant, the employee would own, directly or indirectly,
5% or more of the total combined voting power or value of all
classes of stock of the Company or of any parent or subsidiary of
the Company, including any stock that the employee may purchase
under all outstanding options.
Participation in the Plan
Eligible employees become participants in the Stock
Purchase Plan by electing payroll deductions in increments of not
less than $10 per pay period.
Periods of Plan Operation
The Plan operates over two semi-annual purchase
periods each year. One period will begin on the first trading
day of January and end on the last trading day of June. The
second period will begin on the first trading day of July and end
on the last trading day of December. The first trading days of
January and July are each a "Grant Date" and the last trading
days of June and December are each an "Investment Date".
Purchase Price
The purchase price per share for the semi-annual period at
which shares are sold under the Stock Purchase Plan equals the
lower of (a) 85% of the fair market value of a share of Common
Stock on the Grant Date for the semi-annual period, or (b) 85% of
the fair market value of a share of Common Stock on the
Investment Date for that semi-annual period. Fair market value
is defined as the closing trading price of the Common Stock on
the relevant date. The Compensation Committee, at its
discretion, may increase the percentage above 85%.
Purchase of Stock
By executing an election to participate in the Stock
Purchase Plan, the employee is entitled to purchase shares under
such plan. On each Investment Date, the Company will apply the
funds in the participant's account to the purchase of shares of
its Common Stock in full and fractional shares. If the aggregate
number of shares to be purchased on any Investment Date would
exceed the maximum aggregate number available under the Stock
Purchase Plan, the shares available will be allocated among such
participants in proportion to their contributions during the semi-
annual period. The shares may be purchased from the Company or
on the open market, at the discretion of the Company. If shares
are purchased on the open market, the Company pays any brokerage
and other costs and discount below the market price.
Termination of Employment
An employee's participation in the Stock Purchase Plan will
be terminated when the employee retires, terminates active
employment, or dies. The employee will receive a certificate for
the shares in his Investment Account and a cash refund of his
Payroll Deduction Account.
Restrictions on Transfer
Rights granted under the Stock Purchase Plan are not
transferable and may be exercised only by the person to whom such
rights are granted, except: (a) to the extent that an employee is
permitted to designate a beneficiary as provided in the Stock
Purchase Plan, (b) to the extent permitted by will or the laws of
descent and distribution if no such beneficiary has been
designated, and (c) pursuant to a qualified domestic relations
order.
Duration and Termination
The Compensation Committee or the Board may suspend or
terminate the Stock Purchase Plan at any time. Unless earlier
terminated by action of the Board or the Compensation Committee,
the Stock Purchase Plan will remain in effect until such time as
no shares of Common Stock remain available for issuance under the
Stock Purchase Plan and the Company and employees have no further
rights or obligations under the Stock Purchase Plan.
Federal Income Tax Information
Rights granted under the Stock Purchase Plan are intended
to qualify under the provisions of Internal Revenue Code Sections
421 and 423. Under these provisions, a participant will be taxed
on amounts withheld for the purchase of shares as if such amounts
were actually received. Other than this tax, no income will be
taxable to a participant until disposition of the shares
acquired, and the method of taxation will depend upon the holding
period of the purchased shares.
If the stock is disposed of at least two years after the
Grant Date and more than one year after the stock is acquired by
the participant on an Investment Date, then the lesser of (a) the
excess of the fair market value of the stock at the time of such
disposition over the purchase price, or (b) the excess of the
fair market value of the stock as of the Grant Date over the
purchase price (determined as of the Grant Date) will be treated
as ordinary income. Any further gain or any loss will be taxed
as a mid-term capital gain or loss if held 18 months or less from
the Investment Date or long-term capital gain or loss if held
more than 18 months from the Investment Date.
If the stock is sold or disposed of before the expiration
of either of the holding periods described above, then the excess
of the fair market value of the stock on the Investment Date over
the purchase price will be treated as ordinary income at the time
of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance
of any gain will be treated as capital gain. Even if the stock is
later disposed of for less than its fair market value on the date
of purchase, the same amount of ordinary income is attributed to
the participant, and a capital loss will be recognized equal to
the difference between the sales price and the fair market value
of the stock on such purchase date. Any capital gain or loss
will be long-term if the stock is held for more than 18 months,
mid-term if held more than one year, or short-term if held one
year or less.
There are no federal income tax consequences to the Company
by reason of the grant or exercise of rights under the Stock
Purchase Plan. The Company generally is entitled to a deduction
to the extent amounts are taxed as ordinary income to a
participant.
The Board of Directors recommends a vote FOR approval of
the amendment to the
Comtex News Network, Inc. 1997 Employee Stock Purchase
Plan.
PROPOSAL NO. 3
APPROVAL OF REINCORPORATION IN DELAWARE
General
The Board of Directors has approved a proposal to change the
Company's state of incorporation from New York to Delaware,
subject to shareholder approval. The Reincorporation will be
effected by merging the Company with and into New Comtex, Inc.
("New Comtex"), a Delaware corporation formed by the Company for
the purpose of the Reincorporation, in accordance with the terms
of an Agreement and Plan of Merger (the "Merger Agreement"). A
copy of the form of Merger Agreement is attached to this Proxy
Statement as Appendix A, and statements herein regarding such
Agreement are qualified by reference to the complete Merger
Agreement.
Upon the effective date of the Reincorporation, each
outstanding share of the Company's Common Stock will
automatically become one share of the common stock of New Comtex
(the "New Comtex Common Stock"). The Company will cease to exist
as a New York corporation, and New Comtex will be the continuing
or surviving corporation of the Reincorporation. Thus, New
Comtex will succeed to all of the business and operations, own
all of the assets and other properties and will assume and become
responsible for all of the liabilities and obligations of the
Company. The Reincorporation, therefore, will not involve any
change in the business, properties or management of the Company.
The name of the surviving company will be Comtex News Network,
Inc. The persons serving as officers and directors of the
Company will serve as the officers and directors of Comtex after
the Reincorporation, see Proposal 1, "Election of Directors."
Purpose of Merger and Reincorporation
The purpose of the Reincorporation is to change the state of
incorporation and legal domicile of the Company from New York to
Delaware. The Board of Directors believes that this change in
the domicile would be in the best interests of the Company and
its shareholders. The Company was incorporated in New York in
1980. Delaware has long been a leading state in adopting,
construing and implementing comprehensive and flexible corporate
laws that respond to the legal and business needs of
corporations. As a result, the Delaware General Corporation Law
(the "DGCL") is widely regarded to be one of the best-defined
bodies of corporate law in the United States. The Delaware
legislature is particularly sensitive to corporate law issues,
and Delaware courts have developed considerable expertise in
construing Delaware's corporate law. Accordingly, the Board of
Directors believes that Delaware law would provide greater
predictability in the Company's legal affairs than is currently
available under New York law.
The interests of the Company's Board of Directors,
management and affiliated shareholders in voting on the
Reincorporation proposal may not be the same as those of
unaffiliated shareholders. Delaware law does not afford minority
shareholders some of the rights and protections available under
New York law. A discussion of the principal differences between
New York and Delaware law as they affect shareholders is set
forth below in the section entitled "Significant Changes Caused
by the Reincorporation."
Authorized Shares of Stock
The Company's Certificate of Incorporation authorizes
18,000,000 shares of Common Stock, par value $0.01 per share, of
which 13,140,893 shares of Common Stock are issued and
outstanding as of the Record Date. New Comtex's Certificate of
Incorporation authorizes 25,000,000 shares of Common Stock and
5,000,000 in Preferred Stock, par value $0.01 per share. No
shares of any capital stock will be issued by New Comtex in
connection with the Reincorporation, other than the shares of New
Comtex Common Stock to be issued for the Company's outstanding
Common Stock and the grant of options in exchange for any options
then outstanding for the purchase of the Company's Common Stock.
Conversion of the Stock
Assuming shareholder approval of this proposal, as soon as
the Reincorporation becomes effective, each outstanding share of
the Company's Common Stock will automatically convert into and be
exchanged for one share of New Comtex Common Stock, and the
Company shareholders will automatically become stockholders of
New Comtex.
In addition, each outstanding option, right or warrant to
acquire shares of the Company's Common Stock outstanding upon the
Reincorporation will be converted into an option, right or
warrant to acquire the same number of shares of New Comtex Common
Stock. Any Company employee benefit plan in effect will be
continued by New Comtex following the Reincorporation.
Therefore, beginning on the effective date of the
Reincorporation, each Comtex stock certificate that was
outstanding immediately prior to the Reincorporation will
automatically represent the same number of New Comtex, Inc.
shares. Stockholders of the Company need not exchange their
stock certificates for New Comtex, Inc. stock certificates.
Likewise, stockholders should not destroy their old certificates
and should not send their old certificates to the Company, either
before or after the effective date of the Reincorporation.
Shareholders do not have any statutory appraisal rights on the
Reincorporation.
Transferability of Shares
Shareholders whose shares of the Company's Common Stock are
freely tradable before the Reincorporation will own shares of New
Comtex that are freely tradable after the Reincorporation.
Similarly, any shareholders holding securities with transfer
restrictions before the Reincorporation will hold shares of New
Comtex that have the same transfer restrictions after the
Reincorporation. For purposes of computing the holding period
under Rule 144 of the Securities Act, those who hold New Comtex
stock certificates will be deemed to have acquired their shares
on the date they originally acquired their Company Common Stock.
After the Reincorporation, New Comtex will continue to be a
publicly held company, and, like the Company's shares, shares of
New Comtex will be quoted on the OTC Bulletin Board, under the
same trading symbol and CUSIP number. New Comtex will also file
with the SEC and provide to its stockholders the same types of
information that the Company has previously filed and provided.
Certain Federal Income Tax Consequences of the Reincorporation
The discussion of U.S. federal income tax consequences set
forth below is for general information only and does not purport
to be a complete discussion or analysis of all potential tax
consequences that may apply to a shareholder. Shareholders are
urged to consult their tax advisors to determine the particular
tax consequences of the Reincorporation, including the
applicability and effect of federal, state, local, foreign and
other tax laws.
The following discussion sets forth the principal U.S.
federal income tax consequences of the Reincorporation to the
Company shareholders who hold their shares as a capital asset.
It does not address all of the federal income tax consequences
that may be relevant to a particular shareholder based upon their
individual circumstances or to shareholders who are subject to
special rules, such as financial institutions, tax-exempt
organizations, insurance companies, dealers in securities,
foreign holders or holders who acquired their shares pursuant to
the exercise of employee stock options or otherwise as
compensation.
The following disclosure is based on the Internal Revenue
Code regulations, rulings and decisions in effect as of the date
of this Proxy Statement, all of which are subject to change,
possibly with retroactive effect, and to differing
interpretations. The following disclosure does not address the
tax consequences to our shareholders under state, local and
foreign laws. The Company has neither requested nor received a
tax opinion from legal counsel with respect to the consequences
of reincorporation. No rulings have been or will be requested
from the Internal Revenue Service as to the consequences of the
Reincorporation. There can be no assurance that future
legislation, regulations, administrative rulings or court
decisions would not alter the consequences set forth below.
The Reincorporation provided for in the Merger Agreement is
intended to be a tax-free reorganization under the Code.
Assuming the Reincorporation qualifies as a tax-free
reorganization, no gain or loss will be recognized to the holders
of the Company's capital stock as a result of consummation of the
Reincorporation, and no gain or loss will be recognized by the
Company or New Comtex. Each former holder of the Company's
Common Stock will have the same basis in the capital stock of New
Comtex received by that holder pursuant to the Reincorporation as
that holder has in the Company's Common Stock held by that holder
at the time the Reincorporation is consummated. Each
shareholder's holding period with respect to New Comtex's Common
Stock will include the period during which that holder held the
corresponding Company Common Stock, provided the latter was held
by such holder as a capital asset at the time the Reincorporation
was consummated.
Accounting Treatment
In accordance with accounting principles generally accepted
in the United States, the Company expects that the
Reincorporation will be accounted for as a reorganization of
entities under common control and recorded at historical cost.
Regulatory Approvals
The Reincorporation will not be consummated until after
shareholder approval. The Company will obtain all required
consents of governmental authorities, including the filing of a
Certificate of Merger with the Secretary of State of New York and
the filing of a Certificate of Merger with the Secretary of State
of Delaware.
Significant Changes Caused by the Reincorporation
Delaware law differs in certain respects from New York law.
Although it is not practical to compare all the differences
between the laws of governing corporations in New York and
Delaware, the following discussion provides a summary of certain
material differences which may affect the rights of shareholders.
The Company's corporate affairs are governed at present by the
Business Corporation Law of New York (the "New York Law"), by its
Certificate of Incorporation filed in New York (the "New York
Certificate") and by the Bylaws adopted pursuant to New York Law
(the "New York Bylaws"). Following the Reincorporation, the
Company's corporate affairs will be governed by the DGCL, by the
Certificate of Incorporation of New Comtex (the "Delaware
Certificate") and by the Bylaws of New Comtex (the "Delaware
Bylaws"). The discussion below regarding Delaware Law and New
York Law is current as of the date of this Proxy Statement.
There may be changes in either or both Delaware or New York Law
that could affect the analysis below. Both sets of Certificates
of Incorporation and Bylaws are available for inspection during
business hours at the Company's principal executive offices. In
addition, copies may be obtained by writing to the Company at
Comtex News Network, Inc., 4900 Seminary Road, Suite 800,
Alexandria, VA, 22311, Attention: Corporate Secretary.
Under New York Law, a person who owns stock of the Company
is referred to as a "shareholder;" while under Delaware Law, such
person is known as a "stockholder." Such terms have the same
meaning and are used herein interchangeably.
Action by Written Consent of Shareholders in lieu of a
Shareholder Vote. New York Law allows shareholders to act by
written consent in lieu of a meeting only by unanimous written
consent of those shareholders who would have been entitled to
vote on a given action at a meeting, unless the Certificate of
Incorporation permits that action to be taken by the holders of
outstanding shares having at least the minimum number of votes
required to authorize the action at a meeting at which all shares
entitled to vote thereon were present and voted. The New York
Certificate does not contain such a provision. Conversely,
Delaware Law states that unless the Certificate of Incorporation
provides otherwise, stockholders may act by written consent of at
least the minimum number of votes required to authorize that
action at a meeting at which all shares entitled to vote thereon
were present and voted. The Delaware Certificate prohibits any
action by stockholders to be taken by written consent.
Amendment of Certificate of Incorporation. Delaware Law
allows a Board of Directors to recommend that stockholders amend
the Certificate of Incorporation, and a majority of the shares
entitled to vote at a stockholders' meeting are sufficient to
approve that amendment. The Delaware Certificate generally
requires the approval of at least 80% of the outstanding voting
stock to amend the following provisions: (1) the limitation on
voting rights of persons who directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of
any class of equity security of the Company; (2) the inability of
stockholders to act by written consent; (3) the inability of
stockholders to call special meetings of stockholders; (4) the
division of the Board into three staggered classes; (5) the
ability of the Board to fill vacancies on the Board; (6) the
inability to deviate from the manner prescribed in the Bylaws by
which stockholders nominate directors and bring other business
before meetings of stockholders; (7) the requirement that at
least 80% of stockholders must vote to remove directors, and can
only remove directors for cause; (8) the ability of the Board to
amend and repeal the Bylaws; and (9) the ability of the Board to
evaluate a variety of factors in evaluating offers to purchase or
otherwise acquire the Company. Under New York Law, except for
certain ministerial changes to the Certificate of Incorporation
that the Board of Directors may authorize and except as otherwise
required by the Certificate of Incorporation, the Board of
Directors may recommend an amendment to the Certificate of
Incorporation for approval by shareholders. A majority of the
shares entitled to vote at a shareholders' meeting is sufficient
to approve that amendment.
Who May Call a Special Meeting of Shareholders. Under both
New York Law and Delaware Law, the Board of Directors or anyone
authorized in the Certificate of Incorporation or Bylaws may call
a special meeting of shareholders. Currently, the New York
Bylaws provide that a special meeting can be called by the
President or the Board of Directors. The Delaware Bylaws provide
that a meeting of stockholders may be called by a majority of the
Board of Directors or the Chairman of the Board.
Right of Shareholders to Inspect Shareholder List. Under
New York Law, a shareholder of record may inspect the list of
shareholders of record at any meeting of shareholders upon the
request thereat or prior thereto. Under Delaware Law, any
stockholder may, upon making a demand under oath stating the
purpose thereof, inspect the stockholders' list for any purpose
reasonably related to that person's interest as a stockholder.
In addition, for at least ten days prior to each stockholder's
meeting, as well as at the meeting, a Delaware corporation must
make available for examination a list of stockholders entitled to
vote at the meeting.
Vote Required for Certain Transactions. Until
February 1998, New York Law required the holders of at least two-
thirds of the outstanding stock of a New York corporation at a
meeting of the stockholders to approve certain mergers,
consolidations or sales of all or substantially all the
corporation's assets that may occur outside the ordinary course
of business. Since February 1998, a New York corporation then in
existence, which would include the Company, may provide in its
Certificate of Incorporation that the holders of a majority of
the outstanding stock may approve such transactions. The Company
has not, however, adopted such a provision in its Certificate of
Incorporation, and so the holders of at least two-thirds of the
Company's outstanding stock must approve such transactions.
Under Delaware Law, unless the Certificate of Incorporation
or Bylaws provide otherwise (but in no case shall a quorum
consist of less than a majority of the outstanding stock entitled
to vote on such transactions), the holders of a majority of the
outstanding stock entitled to vote on such transactions have the
power to approve a merger, consolidation, or sale of all or
substantially all the assets. The Delaware Certificate contains
provisions requiring the affirmative vote of at least 80% of the
voting stockholders to approve certain transactions, which
include, but are not limited to, the following: (1) mergers or
consolidations; (2) sales, leases, exchanges, mortgages, pledges,
transfers or other dispositions of 10% or more of the aggregate
market value of all assets of the corporation or outstanding
stock of the corporation; (3) any transactions resulting in the
issuance or transfer by the corporation of stock in the
corporation to the interested stockholder except in limited
instances; (4) adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on
the behalf of an interested stockholder; and (5) any other
transaction, with certain exceptions, that increases the
proportionate share of the stock owned by the interested
stockholder. Notwithstanding the foregoing, under Delaware Law
the vote of the stockholders of the surviving corporation is not
required to authorize a merger unless the Certificate of
Incorporation states otherwise, if these three conditions are
met: (1) the merger agreement does not amend the surviving
corporation's Certificate of Incorporation; (2) each share of
stock of the surviving corporation that is outstanding or in the
treasury immediately prior to the effective date of the merger is
to be an identical outstanding or treasury share of the surviving
corporation after the effective date; and (3) the merger results
in no more than a 20% increase in its outstanding common stock.
Special vote requirements may apply to certain business
combinations with interested shareholders. See the discussion of
these requirements below under the heading "Business Combinations
with Interested Shareholders."
Limitations of Directors' Liability. Both New York Law and
Delaware Law permit a corporation to limit a director's personal
liability for actions taken in that director's official capacity.
Under New York Law, a director is not liable to the corporation
for the benefit of its creditors or shareholders for damages if
the director has acted in good faith and with the same degree of
care that an ordinarily prudent person would exercise in similar
circumstances. New York Law also permits a corporation to
include in its Certificate of Incorporation a provision
eliminating or limiting the personal liability of a director,
with certain specific exceptions, to the corporation or its
shareholders for damages for any breach of duty in that capacity.
The New York Certificate contains such a provision. Under
Delaware Law, limits on a director's liability must be addressed
in the Certificate of Incorporation. The Delaware Certificate
limits directors' monetary liability to the fullest extent
permitted by Delaware Law. However, in some cases directors may
be liable despite these limitations. Delaware Law forbids any
limitation of liability where (1) a director breached the duty of
loyalty to the corporation or its stockholders, (2) a director's
acts or omissions were not in good faith or involved intentional
misconduct or a knowing violation of law, (3) a director received
an improper personal benefit from a transaction involving the
corporation, or (4) a director authorized an unlawful dividend or
stock repurchase or redemption.
Indemnification of Directors and Officers. With some
variations, both New York Law and Delaware Law allow a
corporation to "indemnify," that is, to make whole, any person
who is or was a director or officer of the corporation if that
person is held liable or incurs costs for something that person
did or failed to do in an official capacity.
Additionally, each of the two laws permits a corporation to
purchase insurance for its directors and officers against some or
all of the costs of such indemnification or against liabilities
arising from actions and omissions of the insured person, even
though the corporation may not have power to indemnify the person
against such liabilities. New York Law, however, restricts the
types of claims that may be made under insurance purchased by the
corporation against these liabilities and restricts what costs
may be covered by insurance. For example, there would be no
insurance coverage if the person to be indemnified was guilty of
deliberate dishonesty and that dishonesty was material to the
event that produced the claim, or if the person gained some
financial profit or other advantage to which he or she was not
legally entitled.
If the Reincorporation is approved by the Company's
shareholders, the New York Law indemnification provisions will
continue to apply to acts and omissions that occurred prior to
the effective date of the Reincorporation.
Transactions with Interested Directors. Both Delaware Law
and New York Law provide several methods for establishing the
validity of transactions between a corporation and interested
directors, including a vote by the uninterested directors or the
shareholders, if the material facts as to the director's interest
are disclosed in good faith to the Board of Directors or
shareholders, respectively. However, Delaware Law also provides
that a contract between a director and the corporation may be
valid if it is fair to the corporation as of the time it is
authorized by the Board or shareholders, even if the interested
director's votes are counted.
Appraisal Rights. Generally, "appraisal rights" entitle
dissenting shareholders to receive the fair value of their shares
in a merger or consolidation of a corporation or in a sale of all
or substantially all its assets. New York Law also extends
appraisal rights to an exchange of a corporation's shares. New
York Law provides that dissenting shareholders have no appraisal
rights if their shares are listed on a national securities
exchange, such as the OTC Bulletin Board. However, in the case
of shares not listed on an exchange, appraisal rights under New
York Law allow a voting and dissenting shareholder of a New York
corporation, with various exceptions, to receive fair value for
its shares in such transactions. One exception is a merger
between a parent corporation and its subsidiary when the parent
owns at least 90% of the subsidiary. In this case, a shareholder
of the parent corporation has no appraisal rights. When
appraisal rights are available, the shareholder may have to
request the appraisal and follow other required procedures.
Similarly, under Delaware Law, appraisal rights are not
available to a stockholder if, among other things, the
corporation's shares are listed on a national securities
exchange, such as the OTC Bulletin Board or held by more than
2,000 stockholders of record, or if the corporation will be the
surviving corporation in a merger that does not require the
approval of the surviving corporation's stockholders. However,
under Delaware Law, regardless of the foregoing, a dissenting
shareholder in a merger or consolidation has appraisal rights
unless the transaction requires the exchange of shares for
something other than one or more of the following: (1) shares of
stock of the surviving corporation or of a new corporation that
results from the merger or consolidation; (2) shares of another
corporation that will be listed on a national securities
exchange, designated as a national market system security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or held by more than 2,000 stockholders
of record after the merger or consolidation occurs; or (3) cash
instead of fractional shares of the surviving corporation or
another corporation.
Business Combinations with Interested Shareholders. Under
New York Law, an interested shareholder is generally prohibited
from entering into certain types of business combinations with a
New York corporation for a period of five years after becoming an
"interested shareholder," unless the Board of Directors approved
either the business combination or the acquisition of stock by
the interested shareholder before the interested shareholder
acquired its shares. An "interested shareholder" under New York
Law is generally a beneficial owner of at least 20% of the
corporation's outstanding voting stock or is an affiliate or
associate of a corporation who owned at least 20% of the
outstanding stock within the preceding five years. "Business
combinations" under New York Law include the following:
(1) mergers and consolidations with an interested shareholder or
between corporations where the interested shareholder is an
affiliate; (2) sales, leases, mortgages, pledges, transfers or
other dispositions to an interested shareholder of assets with an
aggregate market value which either equals 10% or more of the
corporation's consolidated assets or outstanding stock, or
represents 10% or more of the consolidated earning power or net
income of the corporation; (3) issues and transfers to an
interested shareholder of stock with an aggregate market value of
5% or more of the aggregate market value of the outstanding stock
of the corporation; (4) liquidation or dissolution of the
corporation proposed by or in connection with an interested
shareholder; (5) reclassification or recapitalization of
securities, merger, consolidation or other transaction with an
interested shareholder that would increase the proportionate
stock ownership of an interested shareholder; and (6) the receipt
by an interested shareholder of benefit from loans, guarantees,
pledges or other financial assistance or tax benefits provided by
the corporation.
Delaware Law generally prohibits an interested stockholder
from entering into certain types of business combinations with a
Delaware corporation for three years after becoming an interested
stockholder unless: (1) before the stockholder became an
interested stockholder, the Board of Directors approved the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder; (2) upon
consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding, subject to technical calculation rules; or (3) on or
after the time the interested stockholder became an interested
stockholder, the Board of Directors approved the business
combination, and at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder also
ratified the business combination at a stockholders' meeting.
An "interested stockholder" under the Delaware Certificate
is any person other than the corporation and its majority-owned
subsidiaries who owns directly or indirectly at least 10% of the
outstanding voting stock or is an affiliate or associate of the
corporation who owned directly or indirectly at least 10% of the
outstanding stock within the preceding two years, and this
definition includes affiliates of the corporation. Business
Combinations under Delaware Law include: (1) mergers or
consolidations; (2) sales, leases, exchanges, mortgages, pledges,
transfers or other dispositions of 10% or more of the aggregate
market value of all assets of the corporation or outstanding
stock of the corporation; (3) any transactions resulting in the
issuance or transfer by the corporation of securities in the
corporation to the interested stockholder except in limited
instances; (4) adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on
the behalf of an interested stockholder; and (5) any other
transaction, with certain exceptions, that increases the
proportionate share of the stock owned by the interested
stockholder.
Proxies. Under New York Law, a proxy cannot be voted or
acted upon after 11 months from its date unless the proxy
provides for a longer period. Under Delaware Law a proxy cannot
be voted or acted upon after three years from its date unless the
proxy provides for a longer period.
Nomination of Directors. Neither the New York Certificate
nor the New York Bylaws contain provisions regarding the
nomination of directors. The Delaware Bylaws provide that
nominations of directors may be made at annual meetings of
stockholders by or at the direction of the Board of Directors, or
by any stockholder entitled to vote for the election of directors
at such annual meeting who provides timely notice to the
Secretary of the Company.
Preemptive Rights. Preemptive rights are the right to
purchase shares or other securities to be issued by the Company
with the purpose of maintaining percentage ownership in the
corporation. Under New York Law, shareholders of corporations
incorporated prior to February 22, 1998 are entitled to
preemptive rights unless specifically provided otherwise in the
Certificate of Incorporation. The New York Certificate
specifically provides otherwise. Under Delaware Law, preemptive
rights must be specifically granted to the stockholders in the
Certificate of Incorporation. The Delaware Certificate does not
grant such rights.
Other Changes to Reflect Technical Differences Between
Delaware Law and New York Law. In addition to the changes
described above, certain technical changes have been made in the
Delaware Certificate and Delaware Bylaws from the New York
Certificate and New York Bylaws to reflect differences between
Delaware Law and New York Law. Such technical changes include
designation of a registered office and registered agent in the
State of Delaware for jurisdiction in certain claims against the
Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE REINCORPORATION.
A VOTE FOR THE REINCORPORATION WILL CONSTITUTE APPROVAL OF THE MERGER,
THE DELAWARE CERTIFICATE, THE DELAWARE BYLAWS, AND ADOPTION AND ASSUMPTION
BY NEW COMTEX OF ANY EXISTING COMPANY STOCK OPTIONS, EMPLOYEE
BENEFIT PLANS AND AGREEMENTS.
PROPOSAL NO. 4
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
TO 25,000,000 AND TO ADD A CLASS OF PREFERRED STOCK
The Board of Directors has approved, subject to stockholder
approval, an Amendment to the Company's Certificate of
Incorporation to authorize an increase from 18,000,000 shares of
Common Stock to 25,000,000 shares of Common Stock, par value
$0.01, and to authorize up to 5,000,000 shares of Preferred
Stock, par value $0.01, the rights and preferences to be
determined by the Board of Directors. The Company proposes to
amend Article 3 of the Company's Certificate of Incorporation or
adopt the New Comtex, Inc. Certificate of Incorporation if the
Reincorporation is approved by the shareholders to read as
follows:
"3. The total number of shares of capital stock of the
Company that the Company shall have authority to issue
is Thirty Million (30,000,000), of which Twenty-Five
Million (25,000,000) shares having a par value of $0.01
shall be designated Common Stock; and Five Million
(5,000,000) shares having a par value of $0.01 shall be
designated as Preferred Stock."
Common Stock
The shares of Common Stock shall be alike and equal in all
respects and shall have one vote for each share. After any
requirements with respect to preferential dividends, if any,
on the Preferred Stock have been met, then, and not
otherwise, dividends payable in cash or in any other medium
may be declared by the Board of Directors and paid on the
shares of Common Stock. After distribution in full of the
preferential amount, if any, to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, dissolution, distribution of assets
or winding-up of the Company, the holders of the Common
Stock shall be entitled to receive all of the remaining
assets of the Company of whatever kind available for
distribution to stockholders ratably in proportion to number
of shares of Common Stock held by them respectively.
Preferred Stock
The designations, powers, preferences, rights,
qualifications, limitations and restrictions of the
Preferred Stock are as follows:
The Preferred Stock may be issued in one or more series at
such time or times and for such consideration or
considerations as the Board of Directors may determine
pursuant to a resolution or resolutions providing for such
issuance duly adopted by the Board (authority to do so being
hereby expressly vested in the Board) and such resolution or
resolutions shall also set forth, with respect to each such
series of Preferred Stock, the following:
(1) The distinctive designation, stated value and number of
shares comprising such series, which number may (except
where otherwise provided by the Board of Directors in
creating such series) be increased or decreased (but
not below the number of shares then outstanding) from
time to time by action of the Board of Directors;
(2) The rate of dividend, if any, on the shares of that
series, whether dividends shall be cumulative and, if
so, from which date, and the relative rights of
priority, if any, of payment of dividends on shares of
that series over shares of any other series;
(3) Whether the shares of that series shall be redeemable
and, if so, the terms and conditions of such
redemption, including the date upon or after which they
shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under
different conditions and at different redemption dates,
or the property or rights, including securities of any
other corporation, payable in case of redemption;
(4) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if
so, the terms and amounts payable into such sinking
fund;
(5) The rights to which the holders of the shares of that
series shall be entitled in the event of voluntary or
involuntary liquidation, dissolution, distribution of
assets or winding-up of the Company, and the relative
rights of priority, if any, of payment of shares of
that series;
(6) Whether the shares of that series shall be convertible
into or exchangeable for shares of capital stock of any
class or any other series of Preferred Stock and, if
so, the terms and conditions of such conversion or
exchange including the rate of conversion or exchange,
the date upon or after which they shall be convertible
or exchangeable, the duration for which they shall be
convertible or exchangeable, the event upon or after
which they shall be convertible or exchangeable at
whose option they shall be convertible or exchangeable,
and the method of adjusting the rate of conversion or
exchange in the event of a stock split, stock dividend,
combination of shares or similar event;
(7) Whether the shares of that series shall have voting
rights in addition to the voting rights provided by law
and, if so, the terms of such voting rights;
(8) Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be
subject to restrictions as to issuance, or as to the
powers, preferences or rights of any such other series;
and
(9) Any other preferences, privileges and powers, and
relative, participating, optional or other special
rights, and qualification, limitation or restriction of
such series, as the Board of Directors may deem
advisable and as shall not be inconsistent with the
provisions of this Certificate of Incorporation and to
the full extent now or hereafter permitted by the laws
of the state of incorporation.
The Board of Directors believes that it is advisable and in
the best interests of the Company to have available additional
authorized but unissued shares of Common Stock and Preferred
Stock to provide for future needs. Currently, the Company has
authorized 18,000,000 shares of Common Stock with 13,140,893
shares of Common Stock issued and outstanding and 4,820,828
shares of Common Stock reserved for stock option grants, other
benefit plans, warrants and convertible debt. Currently the
Company has no authority to issue Preferred Stock. In the event
shareholders do not approve the Reincorporation (see Proposal 3),
the Company will need additional authorized shares of Common
Stock. The additional but unissued shares of Common and Preferred
Stock will be available for issuance from time to time by the
Company at the discretion of the Board of Directors, normally
without further stockholder action (except as may be required for
a particular transaction by applicable law, requirements of
regulatory agencies or by stock exchange rules), for any proper
corporate purpose including, among other things, future
acquisitions of property or securities of other corporations,
stock dividends, stock splits, stock options, convertible debt
and equity financing. The Company's Board of Directors believes
that the additional but unissued Common Stock may be necessary
for future financing and to attract potential new equity capital
to carry out the Company's business objectives.
The Board of Directors Unanimously Recommends that Shareholders Vote
FOR the Amendment to the Certificate of Incorporation to Increase the Number
of Shares of Authorized Common Stock and to add a class of Preferred Stock.
In the event the Reincorporation Proposal and Amendment to
Increase the Number of Authorized Shares of Common Stock and to
add a class of Preferred Stock are not approved by shareholders,
the Company will continue as a New York corporation under its
present Certificate of Incorporation but with only 18,000,000
shares of Common Stock authorized, of which
13,140,893 are outstanding and 4,820,828 are reserved for issuance.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst &
Young LLP ("Ernst & Young") as the Company's independent auditors
for the fiscal year ending June 30, 2003. The Board of Directors
believes it is appropriate to seek shareholder ratification of
this appointment in light of the critical role played by
independent auditors in maintaining the integrity of Company
financial controls and reporting. Ernst & Young were the
Company's independent auditors for the prior fiscal year.
A representative of Ernst & Young is expected to attend the
Annual Meeting. The representative will have the opportunity to
make a statement, if he or she so desires, and will be available
to respond to appropriate questions from shareholders.
The following table sets forth the aggregate fees billed or
to be billed by Ernst & Young LLP for the following services
during fiscal 2002:
Description of Services Fees
------------------------ -------
Audit fees <F1> $ 64,155
All other fees $ 0
---------
Total $ 64,155
<FN>
<F1> Audit Fees: represents the aggregate fees billed or to be
billed for professional services rendered for the audit of
our fiscal year 2002 annual financial statements and for the
review of the financial statements included in our quarterly
reports during such period.
Vote Required; Recommendation of the Board of Directors
Although not required to be submitted for shareholder
approval, the Board of Directors has conditioned its appointment
of its independent auditors upon receiving the affirmative vote
of a majority of the shares represented, in person or by proxy at
the Annual Meeting. In the event the shareholders do not approve
the selection of Ernst & Young LLP, the appointment of
independent auditors will be reconsidered by the Board of
Directors.
The Board of Directors recommends a vote FOR ratification
of Ernst & Young LLP
as Independent Auditors for the Company for
Fiscal Year 2003.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation paid or accrued by the Company to its Chief
Executive Officer, President and the other executive officers of
the Company who earned total salary and bonus in excess of
$100,000 during the fiscal year ended June 30, 2002
(collectively, the "Named Executive Officers"):
Annual Compensation Long-Term
Compensation
Awards
Name and Fiscal Shares All Other
Principal Position Year Salary Bonus Underlying Compensation
Options
--------------------- ------ ----------- ---------- ---------- -----------
C.W. Gilluly <F1> 2002 $ 73,405 - - -
Chairman 2001 $ 74,149 - - -
2000 $ 70,123 - - -
Charles W. Terry <F2> 2002 $ 198,600 $ 52,216 - -
President and 2001 $ 194,492 $ 32,777 - -
Chief Executive Officer 2000 $ 169,438 $ 295,715 - -
Robin Y. Deal <F3> 2002 $ 106,369 $ 9,180 75,000 <F6> -
Vice President, Finance 2001 $ 93,484 $ 12,500 50,000 <F6> -
& Accounting 2000 $ 70,720 $ 4,860 12,000 <F6> -
Slawek Ligier <F4> 2002 $ 160,000 $ 14,000 125,000 <F6> -
Vice President 2001 $ 61,539 - 100,000 <F6> -
Chief Technology Officer
Martin A. Greif <F5> 2002 $ 111,373 $ 7,000 100,000 <F6> -
Vice President -
Sales and Marketing
<FN>
<F1> Dr. Gilluly served as President of the Company from June
1992 until May 1993 and as Chief Executive Officer from
June 1992 to September 1997. He continues to serve the Company
as its Chairman. See "Executive Compensation -
Board of Directors Interlocks and Insider Participation."
<F2> Mr. Terry was appointed President of the Company in August
1994. He was appointed Chief Executive Officer in September
1997.
<F3> Ms. Deal was appointed Vice President, Finance & Accounting
in January 2001.
<F4> Mr. Ligier was appointed Vice President, Chief Technology
Officer in January 2001.
<F5> Mr. Greif was appointed Vice President, Sales and Marketing
in January 2002. In Fiscal year 2002, Mr. Greif earned a
base salary of $94,231 and commissions of $17,142 based on
the Company's achieving or exceeding certain targeted
revenue goals.
<F6> Granted pursuant to the Company's 1995 Stock Option Plan.
See "Executive Compensation - Stock Option Grants."
Stock Option Grants
The following table provides details regarding all stock
options granted to the Named Executive Officers during the fiscal
year ended June 30, 2002:
Option Grants in Fiscal Year 2002
Potential
Number of % of Total Realizable Value at Assumed
Shares Options Exercise Expiration Annual Rates of Stock Price
Name Underlying Granted Price Date Appreciation for Option Term (3)
Options in Fiscal Year 5% 10%
Granted
- ------- -------------- --------------- ------- ------- -----------------------------
C.W. Gilluly - - - - - -
Charles W. Terry - - - - - -
Robin Deal 25,000<F1> 2.91% $0.45 10/01/2011 $ 7,075 $ 17,930
50,000<F2> 5.82% $0.52 01/02/2012 $ 16,351 $ 41,437
Slawek Ligier 50,000<F1> 5.82% $0.45 10/01/2011 $ 14,150 $ 35,859
75,000<F2> 8.73% $0.52 01/02/2012 $ 24,527 $ 62,156
Martin A. Greif 100,000<F2> 11.63% $0.52 01/02/2012 $ 32,703 $ 82,875
<FN>
<F1> Options vest one-half upon the date of grant, and one-half
each on the first anniversary of the date of grant, and
expire 10 years after the grant date. The option exercise
price is 100% of the fair market value on the date of grant.
Options are exercisable for a period of 90 days after
termination of employment to the extent vested at that time.
<F2> Options vest one-third each upon the first, second and third
anniversaries of the date of grant, and expire 10 years
after the grant date. The option exercise price is 100% of
the fair market value on the date of grant. Options are
exercisable for a period of 90 days after termination of
employment to the extent vested at that time.
<F3> Amounts represent hypothetical gains that could be achieved
if exercised at the end of the option term. The dollar
amounts under these columns assume 5% and 10% compounded
annual appreciation in the Common Stock from the date the
respective options were granted. These calculations and
assumed realizable values are required to be disclosed under
Securities and Exchange Commission rules and, therefore, are
not intended to forecast possible future appreciation of
common stock or amounts that may be ultimately realized upon
exercise. The Company does not believe this method
accurately illustrates the potential value of a stock
option.
Set forth below is certain information as of June 30, 2002 regarding equity
compensation to directors and executive officers of the Company that has been
approved by stockholders.
Equity compensation plans Number of securities to be Weighted Number of securities
approved by stockholders issued upon exercise of average remaining available for
outstanding options and rights exercise issuance under plan
price
1995 Stock Option Plan 1,129,733 $0.72 801,213
Options Exercised and Year-End Option Values
The following table sets forth certain information regarding
the value of exercised and unexercised options held by the Named
Executive Officers as of June 30, 2002.
Fiscal Year-End Option Values
Shares Number of Shares Value of Unexercised
Acquired upon Value Realized Underlying Unexercised In-the-Money Options
Exercise of From Exercise Options at June 30, 2002 at June 30, 2002 <F2>
Name Options Of Options Exercisable Unexercisable Exercisable Unexercisable
<F1>
- ------- -------------- ------------- ----------- ------------ ------------ ------------
C.W. Gilluly 4,323,006 $ 1,469,822 100,000 - $ 19,000 -
Charles W. Terry 517,175 $ 129,933 397,733 - $ 64,169 -
Robin Deal 10,500 $ 3,570 79,420 87,580 $ 1,050 -
Slawek Ligier - - 75,000 150,000 $ - -
Martin A. Greif - - - 100,000 $ - -
<FN>
<F1> Represents the difference between the exercise price and
the market value price on the date of exercise.
<F2> Represents the difference between the exercise price of
the outstanding options and the closing bid price of the
common stock on June 30, 2002, which was $0.29 per share.
Options that have an exercise price greater than the
fiscal year-end market value are not included in the value
calculation.
Stock Option Plan
In October 1995, the Board of Directors approved the COMTEX
News Network, Inc. 1995 Stock Option Plan, which was approved by
shareholders in December 1995. The Plan provides for the
issuance of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and non-qualified stock options
in order to recruit and retain key employees, consultants and
directors.
Compensation of Directors
During fiscal year 2002, the Company's directors were
reimbursed for travel expenses in connection with attendance at
Board of Directors' meetings. Non-employee directors of the
Company also received a fee of $1,000 for each Board of
Directors' meeting attended. Employee directors did not receive
additional compensation for Board of Directors' meeting
attendance. The Company's directors did not receive any
compensation for committee participation during fiscal year 2002.
In addition to the amounts described above, both Dr. John
Sanders, who resigned as a director on August 31, 2002, and Mr.
Brunette provided consulting to the Company on business and
financial matters for which they each received a monthly retainer
of $1,500 during Fiscal Year 2002. Mr. Brunette stopped
receiving any consulting fees as of July 2002.
Employment Agreements
The Company has an employment contract with Mr. Terry, who
was appointed President in August 1994 and Chief Executive
Officer in September 1997. Under the terms of the agreement
dated October 1, 1998, Mr. Terry is employed for a one-year
period, subject to renewal at the Company's discretion for two
additional one-year terms. The agreement was extended through
December 31, 2002. The agreement provides that Mr. Terry is to
be paid an initial base salary, subject to annual increases
commensurate with annual increases awarded to other executive
officers of the Company. The base salary for the fiscal year
ended June 30, 2002 was $195,000. Mr. Terry is entitled to
receive six months severance pay in the event the Company
terminates his employment or determines not to renew his
employment agreement or twelve months severance pay in the event
his employment is terminated within the first six calendar months
after a change in control of the Company, as determined by the
Board of Directors, unless his termination is for reasons of
gross negligence, willful misconduct, the commission of a felony,
or a crime of moral turpitude. Mr. Terry is eligible to receive a
bonus based upon the achievement of specified annual gross
revenue and net income goals, and to participate in the Company's
Stock Option Plan.
The Company also has severance agreements with Ms. Deal, Mr.
Greif and Mr. Ligier. These officers are entitled to receive
three months severance pay in the event the Company terminates
their employment as part of an overall reduction in work force,
or six months severance pay in the event their employment is
terminated within the first six calendar months after a change in
control of the Company. Whether a change in control has occurred
for purposes of these agreements will be determined by the Board
of Directors.
Compensation Committee Report on Executive Compensation
General. The Company believes its compensation policies are
designed to provide competitive levels of compensation that
integrate with the Company's annual and long-term quantitative
and qualitative performance factors. The compensation policies
reward above-average corporate performance, recognize individual
initiative and achievements and assist the Company in attracting
and retaining qualified executives.
The Company establishes compensation based on both objective
and subjective criteria. Objective criteria include actual
versus target annual operating budget performance and actual
versus target revenue growth, either as to the Company as a
whole, or as to the officer's particular operating unit.
Subjective performance criteria encompass evaluation of each
officer's initiative and contribution to overall corporate
performance, the officer's managerial ability, and the officer's
performance in any special projects that the officer may have
undertaken. The Company also endorses the position that stock
ownership by management and stock-based performance compensation
arrangements are beneficial in aligning managements' and
shareholders' interests in the enhancement of shareholder value
and therefore uses its Stock Option and Stock Purchase Plans to
recruit and retain senior management.
Compliance with Internal Revenue Code Section 162(M)
Section 162(m) of the Internal Revenue Code disallows a tax
deduction to publicly held companies for compensation paid to
certain of their executive officers, to the extent that
compensation, whether payable in cash or stock, exceeds $1
million per covered officer in any fiscal year. The limitation
applies only to compensation that is not considered to be
performance-based. Non-performance-based compensation paid to
our executive officers for the 2002 fiscal year did not exceed
the $1 million limit per officer, and the compensation committee
does not anticipate that any non-performance-based compensation
payable to the executive officers for the 2003 fiscal year will
exceed that limit. Because it is unlikely that the actual
compensation payable to any of our executive officers in the
foreseeable future will approach the $1 million limit, the
compensation committee has decided at this time not to take any
action to limit or restructure the elements of cash compensation
payable to the executive officers. The compensation committee
will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1
million level.
2002 Compensation for the Chairman
Dr. Gilluly, the Company's Chairman, served as Chief Executive
Officer until September 1997. The Company has agreed to
compensate Dr. Gilluly for his continuing services as Chairman,
at the rate of approximately $73,400 for fiscal year 2002. Dr.
Gilluly does not have an employment agreement or severance
agreement with the Company. In 1995, the Committee granted Dr.
Gilluly non-qualified stock options, which are now fully vested,
under the 1995 Stock Option Plan to purchase a total of 200,000
shares of the Company's Common Stock at the fair market value on
the date of grant, of which 100,000 options remain unexercised.
No subsequent grants of options have been made to Dr. Gilluly.
2002 Compensation for the President and Chief Executive Officer
Mr. Terry was appointed President of the Company in August
1994 and was appointed Chief Executive Officer in September 1997.
In October 1998, the Company and Mr. Terry renewed a 1994
agreement regarding the terms of Mr. Terry's employment. The
1998 agreement has been extended though December 31, 2002. Mr.
Terry's employment agreement is described in "Executive
Compensation - Employment Agreements," above. Mr. Terry's
compensation during fiscal year 2002 was determined by the terms
of the employment agreement. The Compensation Committee believes
that Mr. Terry's employment agreement follows the Company's
compensation goals and bases his compensation upon both objective
quantitative performance factors (a bonus based upon the Company
meeting annual gross revenue and net income goals) and other non-
performance based elements (a base annual salary).
Submitted by the Compensation Committee
Erik Hendricks
Robert A. Nigro
John S. Brunette
Board of Directors Interlocks and Insider Participation
General. Dr. Gilluly serves as Chairman of the Board of the
Company. Dr. Gilluly also serves as Chairman and Chief Executive
Officer of AMASYS, which owns approximately 21% of the Company's
Common Stock (See "Beneficial Ownership of Common Stock").
Note Payable to AMASYS
During August 2001, AMASYS and COMTEX signed an amendment to
the Note Payable to AMASYS, (Second Amendment to Amended,
Consolidated and Restated 10% Senior Subordinated Secured Note)
(the "Amended Note") extending the due date of the note to July
1, 2008. In addition to the extension of the term, the Amended
Note includes a provision for AMASYS to convert all or a portion
of the outstanding principal amount, plus accrued interest, into
Common Stock of COMTEX. The Amended Note is convertible at a
price of $1.10 per share as of August 31, 2002, which price
increases by $0.10 upon each anniversary of the amendment.
The Amended note bears interest at a rate of 10% on the
principal balance of $914,954 at June 30, 2002. The Note is
collateralized by a continuing interest in all receivables, all
products of such receivables and the proceeds thereof, all
purchase orders, and all patents and technology now or hereafter
held or received by the Company.
Approximately $132,000, $130,000 and $105,000 in principal
and interest were paid to AMASYS during the fiscal years ended
June 30, 2002, 2001 and 2000, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related transactions involving
directors of the Company and certain other entities are described
in "Executive Compensation - Board of Directors Interlocks and
Insider Participation."
PERFORMANCE GRAPH
The graph below depicts the Company's stock price as an
index assuming $100 invested on July 1, 1997 along with the
composite prices of companies listed in the Nasdaq Stock Market
(U.S. Companies) Index and a composite of peer group companies in
the Internet Information Providers Index. The Nasdaq Stock
Market Index and Internet Information Providers Index were
prepared by Media General, a source believed to be reliable,
although the Company is not responsible for any errors or
omissions in such information.
The Internet Information Providers Index includes the
following companies: A.D.A.M., American OnineLtin Am, Aptimus
Inc., Bankrate Inc., Career Worth Inc., Chinadotcom Corp, CNET
Networks, Inc., Edgar Online, Euniverse Inc., Finity Holdings
Inc., Heathcentral.com, Homeseekers. Com Inc., Homestore Inc.,
Hoover's Inc., Ilive Inc., Infospace Incorporated, Internet Gold-
Golden, Ivillage Inc., Jupitermedia Corp., Knot Inc., Looksmart
LTD, Marketwatch.com Inc., Modern MFG Services Inc., Multex.com
Inc., Netlease.com Inc., Onesource Information SV, Overture
Services Inc., QSC AG Adr, Quotesmith.com Inc., Rediff.com India
Ltd Ads, Rstar Corporation, Sales Online Direct, Inc., Salon
Media Group Inc., Sohu.com Inc., Sportsline.com Inc., Stockscape
Technologies, Theglobe.com Inc., TheStreet.com, Tucows Inc., US
Dataworks Inc., Verticalnet, Inc., World Gaming Plc Spons, Yahoo!
Inc.
The comparisons are required by regulations of the
Securities and Exchange Commission and are not intended to
forecast or to be indicative of the possible future performance
of the Company's Common Stock.
FISCAL YEAR ENDING
COMPANY / INDEX / MARKET 1997 1998 1999 2000 2001 2002
------ ------ ------- ------- ------- ------
COMTEX News Network, Inc. 100.00 219.96 1,319.58 1,919.39 428.66 185.54
Internet Info. Providers 100.00 559.62 1,547.67 1,575.61 346.85 186.24
Nasdaq Market Index 100.00 132.56 185.76 279.51 154.79 104.99
The preceding report on executive compensation and the stock
performance graph shall not be deemed incorporated by reference
into any of our previous filings under the Securities Act of 1933
or the Securities Exchange Act of 1934 which might incorporate
filings made by us under those acts, nor will such report or
graph be incorporated by reference into any future filings made
by us under those acts, except to the extent that we specifically
incorporate this information by reference.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's
officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than
10% shareholders are required by the regulation to furnish the
Company with copies of the Section 16(a) forms which they file.
To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company, and written
representations that no other reports were required during the
fiscal year beginning July 1, 2001 and ended June 30, 2002, all
Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial
owners were complied with in a timely manner.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year
ended June 30, 2002, including the financial statements and notes
thereto is being mailed to the shareholders of record along with
this Proxy Statement. The Annual Report is not incorporated by
reference in this Proxy Statement and is not considered to be
part of the proxy material.
The Company will furnish any exhibit described in the list
accompanying the 2002 Form 10-K upon the payment, in advance, of
the specified reasonable fees related to the Company's furnishing
of such exhibit(s). Requests for copies of such report and/or
exhibit(s) should be directed to the Company at its principal
executive offices, 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, Attention: Corporate Secretary.
OTHER MATTERS
The Board of Directors knows of no other business to be
acted upon at the Annual Meeting other than the matters referred
to in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote the shares they represent as
the Board of Directors may recommend.
By Order of the Board of Directors
/S/ S. AMBER GORDON
S. Amber Gordon
Corporate Secretary
Date: October 28, 2002
APPENDIX A
FORM OF
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is effective as of
___________________, 2002 by and between New Comtex Inc., a Delaware
corporation ("New Comtex" or the "Surviving Company"), and COMTEX News Network,
Inc., a New York corporation ("Comtex" or the "Non-Surviving Company"). Each are
sometimes hereinafter referred to as the "Constituent Companies."
W I T N E S S E T H :
WHEREAS, pursuant to Section 252 of the Delaware General Corporation Law
("DGCL") and Section 904 of the New York Business Corporation Law ("NYBCL") the
Constituent Companies' respective Certificates of Incorporation and Bylaws, the
Board of Directors and Shareholders of Comtex and the Shareholders and Board of
Directors of New Comtex have each approved the Merger (as hereinafter defined),
whereby Comtex will merge with and into New Comtex, upon the terms and subject
to the conditions set forth herein, as evidenced by Minutes of a Meeting of the
Board of Directors of New Comtex dated __________________, 2002, Minutes of a
Meeting of the Stockholders of New Comtex dated __________________, Minutes of a
Meeting of the Board of Directors of Comtex and Minutes of a Meeting of the
Stockholders of Comtex dated ___________________, 2002;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
have agreed as follows:
ARTICLE I
THE MERGER
1.01 The Merger.
(a) Subject to the terms and conditions of this Agreement, at the Effective Time
(as such term is defined in Section 1.01(b) hereof), Comtex shall be merged with
and into New Comtex (the "Merger") in accordance with Section 252 of the DGCL
and Section 904 of the NYBCL, and the separate corporate existence of Comtex
shall cease to exist and New Comtex shall continue as the Surviving Company
under the laws of the State of Delaware under the name "Comtex News Network,
Inc."
(b) The Surviving Company shall file a duly executed Certificate of Merger with
the Delaware Secretary of State ("DE Certificate of Merger"). The Non-Surviving
Company shall file duly executed Certificate of Merger with the New York
Secretary of State ("NY Certificate of Merger"). The "Effective Time" of the
Merger shall be the later of: (i) the date and time of acceptance for filing
with the Delaware Secretary of State the DE Certificate of Merger, and (ii) the
date and time of acceptance for filing with the New York Secretary of State the
NY Certificate of Merger.
(c) At the Effective Time, the Surviving Company shall thereupon and thereafter
possess all of the rights, privileges, powers and franchises, both of a public
and private nature, of each of the Constituent Companies, and shall be subject
to all of the restrictions, disabilities and duties of each of the Constituent
Companies; and all of the rights, privileges, powers and franchises of each of
the Constituent Companies, and all property (real, personal and mixed), and all
debts due to either of the Constituent Companies on whatever account, for stock
subscriptions as well as all other things in action or belonging to each of the
Constituent Companies, shall be vested in the Surviving Company; and all
property, rights, privileges, powers and franchises and all and every other
interest shall thereafter be the property of the Surviving Company as they were
of the several and respective Constituent Companies; but all rights of creditors
and all liens upon any property of either of the Constituent
C-1
Companies shall be preserved unimpaired, and all debts, liabilities and duties
of each of the Constituent Companies shall thenceforth attach to the Surviving
Company, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by the Surviving Company.
1.02 Conversion of Shares of Common Stock. Immediately at the Effective Time,
each of the issued and outstanding shares of Common Stock of the Non-Surviving
Company shall be converted into the same number of shares of Common Stock of the
Surviving Company pursuant to the Merger.
1.03 Certificate of Incorporation of the Surviving Company. The Certificate of
Incorporation of the Surviving Company in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Company and the Non-Surviving Company until otherwise amended or repealed.
1.04 Bylaws of the Surviving Company. The Bylaws of the Surviving Company shall
be the Bylaws of the Surviving and Non-Surviving Company until otherwise amended
or repealed.
1.05 Board of Directors of the Non-Surviving Company. The Board of Directors of
the Non-Surviving Company in office immediately prior to the Effective Time,
together with such additional persons as may thereafter be elected, shall serve
as the Board of Directors of the Surviving Company from and after the Effective
Time in accordance with the Bylaws of the Surviving Company.
1.06 Tax Treatment of the Merger. It is intended by the parties hereto that the
Merger shall constitute a reorganization of the Surviving and the Non-Surviving
Company within the meaning of Section 368 of the Internal Revenue Code of 1986,
as amended.
ARTICLE II
SHARES OF STOCK
2.01 Authorized Shares of Comtex and New Comtex. The authorized capital stock
of Comtex consists of ______ (__,000,000) shares of common stock with a par
value of $0.__ per share, and no shares of preferred stock. The authorized
capital stock of New Comtex consists of Thirty Million (30,000,000) shares
consisting of Twenty-five Million (25,000,000) shares of common stock with a par
value of $0.01 per share, and Five Million (5,000,000) shares of preferred stock
with a par value of $0.01 per share.
2.02 Conversion of Shares of Stock. At the Effective Time, pursuant to the
Merger, each stockholder of the Non-Surviving Company shall automatically become
a stockholder of the Surviving Company and each share of common stock in the
Non-Surviving Company shall be converted into the same number of shares of
common stock in the Surviving Company.
ARTICLE III
MISCELLANEOUS
3.01 Fees and Expenses. Whether or not the Merger is consummated, the Surviving
Company shall pay the costs and expenses incident to the preparation of this
Agreement, the consummation of the Merger, and the performance of and compliance
with all of the agreements and conditions contained herein.
3.02 Notices. All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or mailed by
overnight delivery service or by first class mail postage prepaid, or sent by
telecopier, to the parties at the following addresses (or at such other address
of a party as shall be specified by like notice) as follows:
(a) if to the Non-Surviving Company at:
COMTEX News Network, Inc
4900 Seminary Road, Suite 800
Alexandria, VA 22311
Attention: President
(b) if to the Surviving Company at:
New Comtex, Inc.
4900 Seminary Road, Suite 800
Alexandria, VA 22311
Attention: President
3.03 Binding Effect; Benefit. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
3.04 Amendment and Modification. Subject to applicable law, this Agreement may
be amended, modified and supplemented in any and all respects by written
agreement of the directors and shareholders of the Surviving Company and the
directors and shareholders of the Non-Surviving Company at any time prior to the
Effective Time with respect to any of the terms contained herein.
3.05 Section Headings. The Section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
3.06 Applicable Law. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to the conflict of laws principles or rules
thereof.
3.07 Integration. This Agreement sets forth and is intended to be an integration
of all of the promises, agreements, conditions, understandings, covenants,
warranties and representations among the parties with respect to the Merger and
there are no promises, agreements, conditions, understandings, covenants,
warranties or representations, oral or written, express or implied, among the
parties with respect to the transactions contemplated other than as set forth
herein. Any and all prior agreements among the parties with respect to the
Merger are hereby revoked.
IN WITNESS WHEREOF, the parties hereto have executed this Merger Agreement
effective as of the date first written.
COMTEX News Network, Inc.
a New York Corporation
By:
Charles W. Terry
President and Chief Executive Officer
NEW COMTEX, INC.
a Delaware Corporation
By:
C.W. Gilluly, Ed.D.
Chairman
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMTEX NEWS NETWORK, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 5, 2002
The undersigned appoints Charles W. Terry and S. Amber Gordon, or either of
them, with full power of substitution, to attend the Annual Meeting of
Shareholders of COMTEX News Network, Inc. on December 5, 2002, and any
adjournments thereof, and to vote all shares which the undersigned would be
entitled to vote if personally present upon the following matters set forth in
the Notice of Annual Meeting and Proxy Statement:
1. ELECTION OF DIRECTORS
[_] FOR the SIX nominees listed below (except as marked to the
contrary below)
[_] WITHHOLD AUTHORITY to vote for the SIX nominees listed below
C.W. Gilluly, Erik Hendricks, Robert A. Nigro,
Charles W. Terry, John S. Brunette and Stephen W. Ellis
INSTRUCTION: To withhold authority for any individual nominee, write that
nominee's name in the space
provided below:
- --------------------------------------------------------------------------------
2. Proposal to approve an amendment to the Company's 1997 Employee Stock
Purchase Plan to increase the number of shares reserved for issuance
by an additional 200,000 shares of Common Stock;
[_] FOR this proposal
[_] AGAINST this proposal
[_] ABSTAIN
3. Proposal to approve a change in the state of incorporation of
the Company from New York to Delaware.
[_] FOR this proposal
[_] AGAINST this proposal
[_] ABSTAIN
4. Proposal to increase the number of authorized Common Stock to
25,000,000 and to add a class of Preferred Stock.
[_] FOR this proposal
[_] AGAINST this proposal
[_] ABSTAIN
5. Proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year 2003.
[_] FOR this proposal
[_] AGAINST this proposal
[_] ABSTAIN
6. In their discretion, upon such other business as may properly come
before the meeting and any adjournments thereof.
This Proxy when properly executed will be voted as directed. If no direction is
indicated, this Proxy will be voted FOR the election of the six named
individuals as directors, FOR the amendment to the Company's 1997 Employee Stock
Purchase Plan, FOR the Reincorporation, FOR the increase in the
Common Stock and to add a class of Preferred Stock, and FOR the ratification of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
2003.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
Shareholder's Signature
Joint Holder's Signature (If applicable)
Date: