Comtex Scientific Corporation
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
October 28, 1999
Dear Fellow Shareholders:
You are cordially invited to attend Comtex Scientific
Corporation's Annual Meeting of Shareholders to be held on December
2, 1999 at 11:00 a.m. local time at the Courtyard by Marriott, 2700
Eisenhower Avenue, Alexandria, Virginia.
At this meeting, you will be asked to vote, in person or by
proxy, on the following matters: (i) election of the Company's
Board of Directors; (ii) approval of an amendment to the Company's
Certificate of Incorporation to change the name of the Company to
"Comtex News Network, Inc."; (iii) approval of an amendment to the
Company's 1995 Stock Option Plan; (iv) ratification of the
appointment of Ernst & Young LLP as the Company's independent
accountants; and (v ) 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,
[INSERT SIGNATURE]
C.W. Gilluly, Ed.D.
Chairman
[INSERT SIGNATURE]
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 Scientific Corporation
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 2, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Comtex Scientific Corporation, a New York corporation (the
"Company"), is scheduled to be held on December 2, 1999 at 11:00
a.m., local time, at the Courtyard by Marriott located at 2700
Eisenhower Avenue, Alexandria, Virginia for the following purposes:
1. To elect five 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 Certificate of
Incorporation to change the name of the Company to "Comtex
News Network, Inc.";
3. To approve an amendment to the Company's 1995 Stock
Option Plan to increase the number of shares of Common
Stock reserved for issuance by an additional 1,000,000
shares of Common Stock, as adopted by the Company's Board
of Directors (the "Board") on September 13, 1999;
4. To ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal 2000;
and
5. 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 22, 1999 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
[INSERT SIGNATURE]
S. Amber Gordon
Corporate Secretary
Alexandria, Virginia
October 28, 1999
Comtex Scientific Corporation
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common
Stock, par value $.01 per share of Comtex Scientific Corporation
(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 2, 1999 at 11:00 a.m. local
time at the Courtyard by Marriott, 2700 Eisenhower Avenue,
Alexandria, 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, 1999 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 and 4 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 22, 1999 are entitled to notice of and to vote at the
Annual Meeting. As of October 22, 1999, __________ shares of
Common Stock were issued and outstanding. Each share of Common
Stock is entitled to one vote on all matters that may properly
come before the Annual Meeting. The holders of a majority of
the outstanding shares of Common Stock, present in person or by
proxy, will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum. "Broker non-
votes" are shares held by brokers or nominees which are present
in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received
from the beneficial owner.
Directors will be elected by a plurality of the votes cast
at the Annual Meeting. Accordingly, abstentions or non-votes
will not affect the election of candidates receiving the
plurality of votes.
Proposal No. 2, the proposed amendment to the Company's
Certificate of Incorporation to change the Company's name,
requires the approval of the holders of a majority of all votes
entitled to be cast at the Annual Meeting. For this purpose,
abstentions and non-votes will be deemed shares voted against
proposal 2 and will be included in calculating the number of
votes necessary for approval of proposal 2. Proposals No. 3 and
4, the proposed amendment of the Company's 1995 Stock Option Plan
and the ratification of Ernst & Young LLP as the Company's
independent accountants, require the approval of the holders of a
majority of the votes cast at the Annual Meeting. For this
purpose, abstentions and non-votes will be deemed shares not
voted on such matters, will not count as votes for or against the
proposals, and will not be included in calculating the number of
votes necessary for the approval of such proposals.
All other matters to come before the Annual Meeting require
the approval of the holders of a majority of the votes cast as
the Annual Meeting. For this purpose, abstentions and non-votes
will be deemed shares not voted on such matters, will not count
as votes for or against the proposals, and will not be included
in calculating the number of votes necessary for the approval of
such matters.
Votes at the Annual Meeting will be tabulated by Inspectors
of Election appointed by the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October
22, 1999 regarding the beneficial ownership of the Company's
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
Scientific Corporation, 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 listed.
The shares shown as beneficially owned by Dr. Gilluly include
certain options, the exercise of which could result in a change
in control of the Company. See "Executive Compensation - Board
of Directors Interlocks and Insider Participation."
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership <F1> of Class
AMASYS Corporation 4,693,940 <F2> ___%
4900 Seminary Road,
St. 800
Alexandria, VA 22311
C.W. Gilluly, Chairman 4,523,506 <F3> ___%
Erik Hendricks, Director 34,900 <F4> *
Robert A. Nigro, Director 99,142 <F4> ___%
John D. Sanders, 42,400 <F5> ___%
Ph.D., Director
Charles W. Terry, 882,008 <F6> ___%
Director, President
and Chief Executive Officer
Deborah W. Ikins, 185,225 <F7> ___%
Executive Vice President
All Directors and 6,049,706 <F8> ____%
Executive Officers as
a group
(10 Persons)
<FN>
* Less than 1%.
<F1> Beneficial ownership is direct unless otherwise indicated.
<F2> Includes 2,540,503 shares of the Company's Common Stock which
may be acquired by Dr. Gilluly and his wife, Marny (the
"Gillulys"), pursuant to a Stock Option Agreement among
AMASYS, Pacific Telecommunications Systems, Inc., a wholly
owned subsidiary of AMASYS ("PTSI"), and the Gillulys. See
"Executive Compensation - Board of Directors Interlocks and
Insider Participation."
<F3> Includes 1,783,003 shares which may be acquired pursuant to
a Stock Option Agreement between the Company and the Gillulys.
Also includes 200,000 shares which may be acquired by Dr.
Gilluly upon the exercise of vested options granted under the
Comtex Scientific Corporation 1995 Stock Option Plan.
<F4> Includes 34,900 shares which may be acquired upon the exercise
of vested options granted under the
Comtex Scientific Corporation 1995 Stock Option Plan.
<F5> Includes 9,900 shares which may be acquired upon the exercise
of vested options granted under the Comtex Scientific
Corporation 1995 Stock Option Plan.
<F6> Includes 629,508 shares which may be acquired upon the
exercise of vested options granted under the Comtex Scientific
Corporation 1995 Stock Option Plan; 225,500 which may be
acquired upon the exercise of vested options granted per a
transfer by Dr. Gilluly of options held by Dr. Gilluly that
were previously granted by Comtex; 10,000 shares held by Mr.
Terry's children under the Uniform Gifts to Minors Act; 5,000
shares held by Mr. Terry's mother, as to which Mr. Terry holds
dispositive power; and 12,000 shares held by Mr. Terry's wife,
as to which he disclaims beneficial ownership.
<F7> Includes 174,600 shares which may be acquired upon the
exercise of vested options granted under the Comtex Scientific
Corporation 1995 Stock Option Plan and 3,500 which may be
acquired upon the exercise of vested options granted per a
transfer by Dr. Gilluly of options held by Dr. Gilluly that
were previously granted by Comtex.
<F8> Includes 162,600 shares not reported in Notes (3) through (8),
above, which may be acquired upon the exercise of vested
options granted under the Comtex Scientific Corporation 1995
Stock Option Plan and 3,500 shares which may be acquired upon
the exercise of vested options granted per a transfer by
Dr. Gilluly of options held by Dr. Gilluly that were
previously granted by Comtex
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Five 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:
DIRECTOR
NOMINEE AGE SINCE OFFICE HELD WITH COMPANY
C.W. Gilluly, Ed.D. 53 1992 Chairman of the Board
Erik Hendricks 55 1991 Director
Robert Nigro 50 1991 Director
Charles W. Terry 48 1994 President, Chief Executive Officer
and Director
John D. Sanders, Ph.D. 61 1998 Director
C.W. GILLULY, Ed.D., has served as Chairman of the Board of
the Company since June 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. AMASYS holds
4,693,940 (approximately ____%) of the issued and outstanding
shares of the Company. 2,540,503 shares of the Company's Common
Stock owned by AMASYS are subject to option by Dr. Gilluly. Dr.
Gilluly and his spouse (the "Gillulys") also directly own options
to acquire an additional 1,783,003 shares of the Company's Common
Stock. See "Executive Compensation - Board of Directors
Interlocks and Insider Participation." Dr. Gilluly also is Chief
Executive Officer and Chairman of the Board of Hadron, Inc., a
corporation that provides technology solutions to government and
commercial clients.
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. In April 1995, Mr. Nigro
became Chief Executive Officer of SEI Capital AG. He joined SEI
Investments Company, as Senior Vice President in November 1993.
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.
CHARLES W. TERRY was appointed President of the Company in
August 1994 and director in 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.
JOHN D. SANDERS, Ph.D., serves as a business consultant to
emerging technology companies. He was Chairman and Chief Executive
Officer of TechNews, Inc., publisher of Washington Technology
newspaper, from 1988 to 1996, prior to its sale to The Washington
Post Company. In addition, Dr. Sanders has been a Registered
Representative of Wachtel & Co., Inc., a Washington D.C.-based
stock brokerage firm, since 1968. Dr. Sanders serves on the boards
of ITC Learning Corporation, Sensys Technologies, Inc. and Hadron,
Inc.
EXECUTIVE OFFICERS
The following table contains information as of October 22,
1999 as to the executive officers of the Company who are not also
directors of the Company:
Officer Office Held
Name Since With Company
Deborah W. Ikins 1996 Executive Vice President
Thomas E. Christian 1996 Vice President and
Chief Information Officer
Aaron N. Daniels 1999 Vice President, Finance &
Administration and Chief
Financial Officer
Sheri Robey-Lapan 1999 Vice President, Marketing
and Corporate Strategy
S. Amber Gordon 1996 Corporate Secretary
DEBORAH W. IKINS (42) was appointed Executive Vice
President in May 1999. Ms. Ikins joined the Company in 1993 and
was appointed Vice President of Sales in December 1996. From 1991
until 1993, Ms. Ikins was with Micro Research Industries, a
division of Telecommunications Industries, Inc., in various sales
and customer service management positions. Prior to Micro
Research, Ms. Ikins served in customer service management positions
with Basis, Inc., a financial database management company.
THOMAS E. CHRISTIAN (39) joined the Company as Vice
President and Chief Information Officer in December 1996. From
1994 through 1996, Mr. Christian was the Director of Management and
Marketing Information Systems for the National Association of
Broadcasters, and from 1990 through 1994, he worked in various
technical management positions for the American Red Cross.
AARON N. DANIELS (38) was appointed Vice President, Finance
& Administration and Chief Financial Officer of the Company in July
1999. From 1994 through 1999, Mr. Daniels was with The Washington
Post Company, first managing financial reporting activities then as
Vice President and Treasurer and Chief Financial Officer of Legi-
Slate, a wholly owned subsidiary. Mr. Daniels also worked for the
Lafarge Corporation and Pricewaterhouse Coopers.
SHERI ROBEY-LAPAN (36) was appointed Vice President of
Marketing and Corporate Strategy in October 1999. From 1995
through October 1999, Ms. Lapan was the Vice President of Marketing
and Communications of the Software and Information Industry
Association (SIIA). Prior to SIIA, Ms. Lapan had a variety of
Marketing positions with publishers including Online Access
magazine and Telephony Magazines.
S. AMBER GORDON (45) was appointed Corporate Secretary of
the Company in May 1996. Ms. Gordon also serves as Executive Vice
President and Corporate Secretary of Hadron, Inc. Since 1995, Ms.
Gordon has been President of S.A. Gordon Enterprises, Inc., a
consulting company specializing in corporate financial communications,
through which she is compensated for her services as Corporate
Secretary.
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 4 meetings during the
Company's fiscal year ended June 30, 1999. Each director attended
in person or telephonically all of the meetings held by the Board
of Directors.
During fiscal year 1999, the Board of Directors' Audit
Committee was comprised of Messrs. Hendricks, Nigro and Sanders.
The Audit Committee recommends engagement of the Company's
independent auditors, is primarily responsible for approving the
services performed by the Company's independent auditors and for
reviewing and evaluating the Company's accounting principles and
its system of internal accounting controls and has general
responsibility in connection with related matters. The Audit
Committee met one time during fiscal 1999.
The Compensation Committee of the Board of Directors (the
"Compensation Committee"), which held 3 meetings in fiscal 1999, is
comprised of Messrs. Hendricks, Nigro and Sanders. 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 CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
On September 13, 1999, the Board of Directors of the Company
unanimously approved an amendment to Article 1 of the Company's
Certificate of Incorporation (the "Certificate of Incorporation")
to change the name of the Company from "Comtex Scientific
Corporation" to "Comtex News Network, Inc." In connection
therewith, the following resolution will be introduced at the
Annual Meeting:
RESOLVED, that Article 1 of the Certificate of Incorporation,
as restated as of the date hereof, is amended to read in its
entirety as follows:
1. The name of the corporation is Comtex News Network, Inc.
The Board of Directors recommends that shareholders approve
the proposed amendment to the Company's Certificate of
Incorporation because it considers the proposal to be in the best
interests of the Company and its shareholders. The Board of
Directors believes that it is appropriate for the Company to change
its name in order to better reflect the Company's position in the
marketplace.
The proposed amendment to the Certificate of Incorporation to
change the Company's name will require the approval of a majority
of the outstanding shares of Common Stock of the Company entitled
to notice of and to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NAME CHANGE
PROPOSAL.
PROPOSAL NO. 3
AMENDMENT TO THE 1995 STOCK OPTION PLAN
On September 13, 1999, the Board of Directors adopted, subject
to shareholder approval, an amendment to the Comtex Scientific
Corporation 1995 Stock Option Plan to increase the number of shares
reserved for issuance thereunder from 2,400,000 to 3,400,000. At
the Annual Meeting, the shareholders are being asked to approve
this amendment to the 1995 Stock Option Plan.
DESCRIPTION OF THE 1995 STOCK OPTION PLAN
The 1995 Stock Option Plan provides for the issuance of
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended and non-qualified stock
options, to purchase (as proposed to be amended) an aggregate of up
to 3,400,000 shares of Common Stock. The 1995 Stock Option Plan
permits the grant of options to key employees, consultants and
directors of the Company.
The 1995 Stock Option Plan is administered by the Compensation
Committee consisting of directors Hendricks, Nigro and Sanders.
Each of the members of the Committee is a "disinterested" person
for purposes of Rule 16b-3. Subject to the provisions of the 1995
Stock Option Plan, the Compensation Committee has full and final
authority to select the participants to whom awards are to be
granted thereunder, to grant such awards and to determine the terms
and conditions of such awards, including vesting and exercise
price. The 1995 Stock Option Plan also provides that the
Compensation Committee may accelerate the time at which all or a
portion of an optionee's options may be exercised in the event of
a change in control of the Company.
Each option is evidenced by a written agreement in a form
approved by the Compensation Committee. Options granted under the
1995 Stock Option Plan generally are not transferable by the
optionee other than by will or by the laws of descent and
distribution and each option is exercisable, during the lifetime of
the optionee, only by the optionee. Key employees, including
employee directors, and consultants of the Company or any of its
subsidiaries are eligible to be considered for the grant of awards
under the 1995 Stock Option Plan.
Under the 1995 Stock Option Plan, the exercise price of an
incentive stock option must be at least equal to 100% of the fair
market value of the Common Stock on the date of grant (110% of the
fair market value in the case of options granted to employees who
are 10% shareholders). The exercise price of a non-qualified stock
option must be not less than the par value of a share of the Common
Stock on the date of grant. The term of an incentive or non-
qualified stock option may not exceed ten years (five years in the
case of an incentive stock option granted to a 10% shareholder).
Each non-employee director elected or appointed to the Board
of Directors automatically receives on the date of his or her first
initial appointment to the Company's Board of Directors, an option
to purchase 10,000 shares of the Company's Common Stock (the
"Initial Option") at a per share exercise price equal to the fair
market value of the Common Stock on the initial grant date.
Furthermore, each non-employee Director automatically receives on
each anniversary of his initial election or appointment to the
Company's Board of Directors or, in the case of current directors
each anniversary of the date the 1995 Stock Option Plan was adopted
by the Board of Directors, an option to purchase 10,000 shares of
the Company's Common Stock exercisable at a per share value equal
to the fair market value for the Common Stock on the applicable
additional grant date to the extent that options remain available
under the 1995 Stock Option Plan. Subject to acceleration upon the
occurrence of certain prescribed events, such options become
exercisable as to one-third upon the date of grant, one-third upon
the first anniversary of the date of grant and one-third upon the
second anniversary of the date of grant. Each option terminates,
to the extent not exercised prior thereto, upon the earlier to
occur of (i) the tenth anniversary of grant and (ii) ninety days
after the cessation of the optionee's service as a member of the
Board of Directors (to the extent vested upon the date of such
cessation).
The Board of Directors may alter, amend, suspend or terminate
the 1995 Stock Option Plan, provided that no such action shall
deprive an optionee, without his consent, of any option granted to
the optionee pursuant to the 1995 Stock Option Plan or of any of
his rights under such option. Provisions related to automatic
grants of options to non-employee directors may not (with limited
exceptions) be amended more frequently than once every six months
and no amendment to such provisions, unless approved by the
shareholders of the Company, shall become effective earlier than
six months after Board of Directors' approval. Except as provided
in the 1995 Stock Option Plan, no amendment by the Board of
Directors, unless taken with the approval of the shareholders may
(i) materially increase the benefits accruing to participants under
the 1995 Stock Option Plan, (ii) materially increase the number of
securities which may be issued under the 1995 Stock Option Plan or
(iii) materially modify the requirements as to eligibility for
participation in the 1995 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO
THE COMTEX SCIENTIFIC CORPORATION 1995 STOCK OPTION PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst & Young
LLP ("Ernst & Young") as the Company's independent accountants for
the fiscal year ending June 30, 2000. Although action by the
shareholders in this matter is not required, the Board of Directors
believes it is appropriate to seek shareholder ratification of this
appointment in light of the critical role played by independent
accountants in maintaining the integrity of Company financial
controls and reporting.
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 BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR
FISCAL YEAR 2000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information
concerning all compensation paid by the Company to its Chief
Executive Officer, President and the other executive officer of the
Company who received total salary and bonus in excess of $100,000
during the fiscal year ended June 30, 1999:
Annual Compensation Long-Term
Compensation
Awards
Name and Fiscal Stock Options All Other
Principal Position Year Salary($) Bonus($) Granted Compensation
C.W. Gilluly <F1>
Chairman 1999 $61,553 - - -
1998 $56,082 - - -
1997 $49,504 - - -
Charles W. Terry <F2> 1999 $154,897 $103,851 736,500<F5> -
President and 1998 $141,854 $ 77,012 70,000<F4> -
Chief ExecutiveOfficer 1997 $133,375 $ 84,115 127,175<F4> -
Deborah W. Ikins <F3> 1999 $128,295<F7> $ 11,205 95,500<F6> -
Executive Vice President 1998 $114,611<F7> $ 11,205 33,000<F4> -
1997 $ 87,326<F7> $ 6,250 80,000<F4> -
<FN>
<F1> Dr. Gilluly served as President of the Company until May 1993
and continues to serve the Company as its Chairman. He served
as Chief Executive Officer from June 1992 to September 1997.
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. Ikins was appointed Executive Vice President in May, 1999.
<F4> Options granted pursuant to the Company's 1995 Stock Option
Plan. See "Executive Compensation - Stock Option Grants."
<F5> Includes 60,000 shares which were granted pursuant to the
Company's 1995 Stock Option Plan and 676,500 shares which were
granted pursuant to a transfer by Dr. Gilluly of options held
by Dr. Gilluly that were previously granted by Comtex.
<F6> Includes 85,000 shares which were granted pursuant to the
Company's 1995 Stock Option Plan and
10,500 shares which were granted pursuant to a transfer by Dr.
Gilluly of options held by Dr. Gilluly that were previously
granted by Comtex.
<F7> In fiscal years 1999, 1998 and 1997, Ms. Ikins earned base
salaries of $95,025, $81,923 and $68,096, respectively. She
earned commissions of $33,270, $32,688 and $19,230
respectively in fiscal years 1999, 1998 and 1997, based on the
Company's achieving or exceeding certain targeted revenue
goals.
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, 1999.
OPTION GRANTS IN FISCAL YEAR 1999
Number of % of Total Options
Shares Underlying Granted to Employees Exercise Expiration
Name Options Granted (#) in Fiscal Year Price Date
- ------------- ------------------- -------------------- -------- ----------
C.W. Gilluly - - - -
Charles W. Terry 60,000 <F2> 16.3% $ .36 09/15/2008
676,500 <F3> <F3> $ .10 02/20/2002
Deborah W. Ikins 35,000 <F2> 9.5% $ .36 09/15/2008
50,000 <F2> 13.5% $2.22 05/07/2009
10,500 <F3> <F3> $ .10 02/20/2002
<FN>
<F2> Options vest one-third upon the date of grant, and one-third
each on the first and second 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> Represents shares underlying options previously issued to Dr. Gilluly
outside of the Company's Stock Option Plan which Dr. Gilluly
transferred to certain employees of the Company during the year
independent of grants by the Company of options under the Company's
Stock Option Plan. These options vest upon the Company's reaching
certain revenue goals.
Potential
Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation for Option Term <F1>
---------------------------------
5% 10%
----------- -----------
C.W. Gilluly - -
Charles W. Terry $ 5,968 $ 34,424
$ 18,690 $ 107,816
Deborah W. Ikins $ 3,481 $ 20,081
$ 30,667 $ 176,905
$ 290 $ 1,673
<FN>
<F1> Amounts represent hypothetical gains that could be achieved
if exercised at 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.
YEAR-END OPTION VALUES
The following table sets forth certain information regarding
the value of unexercised options held by the named executive
officers as of June 30, 1999.
FISCAL YEAR-END OPTION VALUES
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1999 at June 30, 1999 <F1>
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- ------------- ----------- -------------
C.W. Gilluly 1,983,003 - $ 3,886,686 -
Charles W. Terry 811,400 515,000 $ 1,568,256 $ 995,992
Deborah W. Ikins 150,050 30,450 $ 280,835 $ 53,585
<FN>
<F1> Represents the difference between the exercise price of the
outstanding options and the closing bid price of the Common Stock
on June 30, 1999, which was $2.06 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
Scientific Corporation 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.
COMPENSATION OF DIRECTORS
During fiscal year 1999, 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 $400 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 special
assignments during fiscal year 1999.
EMPLOYMENT AGREEMENTS
The Company has an employment contract with Mr. Terry, who was
appointed President of the Company in August, 1994. Under the
terms of an 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
provides that Mr. Terry is to be paid an initial base salary of
$160,545, subject to annual increases in salary commensurate with
annual increases awarded to other executive officers of the
Company. 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, 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.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
General. The Company believes its compensation policies are
designed to provide competitive levels of compensation that
integrate salary with the Company's annual and long-term
quantitative and qualitative performance factors, 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.
In addition to the amounts described above, Dr. Sanders also
provides consulting to the Company on business and financial
matters for which he receives a monthly retainer of $2,500.
1999 COMPENSATION FOR THE CHAIRMAN
Dr. Gilluly, the Company's Chairman, served as Chief Executive
Officer until September 1997, and received $61,553 for his services
during fiscal 1999. In 1998 and 1997, Dr. Gilluly received $56,082
and $49,504 for his services, respectively. The Company has agreed
to compensate Dr. Gilluly for his continuing services as Chairman,
at the rate of $60,500 for fiscal 2000. 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 market price on the date of grant. No subsequent
grants of options have been made to Dr. Gilluly.
1999 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. Mr. Terry's
employment agreement is described in "Executive Compensation -
Employment Agreements," above. Mr. Terry's compensation during
fiscal year 1999 was determined by the terms of his earlier
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 his 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 D. Sanders, Ph.D.
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, the Company's majority (approximately ____%)
shareholder.
Dr. Gilluly is also Chairman and Chief Executive Officer of
Hadron, Inc., of which AMASYS owns approximately ___% of the
outstanding shares. During fiscal year 1999, the following related
party transactions occurred.
Corporate Services Provided by/to Hadron, Inc.
During fiscal 1999, the Company contracted with Hadron, Inc.
for corporate and shareholder services. Charges for such services
were based on time and material expended by Hadron personnel in
providing such services and amounted to approximately $20,000 for
the fiscal year ended June 30, 1999.
Administrative Services Provided by/to AMASYS Corporation.
The Company performed certain general and administrative
services for AMASYS for which the Company billed AMASYS
approximately $200 during the fiscal year ended June 30, 1999.
Note Payable to AMASYS
At the end of the year, the Company executed an amended Note
Payable to Affiliate with AMASYS to incorporate outstanding
interest of approximately $254,000 into the principal amount of the
note payable to AMASYS.
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
Applicable federal securities laws require the Company to present
in this Proxy Statement a five-year performance graph comparing the
yearly percentage change in the Company's cumulative total
shareholder return with the cumulative total return of peer issuers
or certain other benchmarks. Trading of the Company's Common
Stock, from the time it was delisted from the Nasdaq Stock Market
through December 1998, was very limited. The Company believes the
low trading volume of the Company's Common Stock during fiscal
years 1995 through 1998, and lack of reliable information regarding
such trading in fiscal years 1995 through 1996, make any
performance graph based on information available to the Company
potentially misleading. The Company therefore has omitted the
performance graph from this Proxy Statement.
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, 1998 and ended June 30, 1999, 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.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be
presented at the Company's 2000 Annual Meeting of Shareholders must
be received by the Company no later than July 10, 2000 in order
that they may be included in the proxy statement and form of proxy
relating to that meeting.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999, including the financial statements
and notes thereto is being mailed to the shareholders of record
along with this Proxy Statement. The Annual Report on Form 10-K 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 1999 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
[INSERT SIGNATURE]
S. Amber Gordon
Corporate Secretary
Date: October 28, 1999