<PAGE>
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-
12
COMTEX SCIENTIFIC CORPORATION
(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] $125 per Exchange Act Rule 0-11(c) (1) (ii), 14a-6(i) (1),
14-a-6(i) (2) or Item 22 (a) (2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i) (3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and 0-11
1) Title of each class of securities to which transaction
applies:
___________________________________________________________
2) Aggregate number of securities to which transaction
apples:
___________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
___________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________
<PAGE>
5) Total fee paid:
___________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a) (2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________
2) Form, Schedule or Registration Statement No. :
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
<PAGE>
COMTEX SCIENTIFIC CORPORATION
4900 Seminary Road
Alexandria, Virginia 22311
November 9, 1995
Dear Stockholder:
You are cordially invited to attend Comtex Scientific
Corporation's Annual Meeting of Stockholders to be held on
December 18, 1995 at 11:00 a.m. local time at the Ramada Inn
Alexandria, 4641 Kenmore Avenue, Alexandria, Virginia 22304.
You are being asked to elect the Company's Board of
Directors, to ratify the appointment of Coopers & Lybrand, L.L.P
as accountants, to adopt the Company's 1995 Stock Option Plan, to
approve an increase in the number of authorized shares of common
stock of the Company and to approve a proposed amendment of the
Company's Certificate of Incorporation to eliminate the personal
liability of directors of the Company under certain
circumstances. In addition, we will be pleased to report on the
affairs of the Company and a discussion period will be provided
for questions and comments of general interest to stockholders.
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 very important and would be
greatly appreciated.
Sincerely,
C.W. Gilluly, Ed.D.
Chairman and
Chief Executive Officer
Charles W. Terry
President
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.<PAGE>
COMTEX SCIENTIFIC CORPORATION
Notice of Annual Meeting of Stockholders
December 18, 1995
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Comtex Scientific Corporation, a New York
corporation (the "Company"), is scheduled to be held on December
18, 1995 at 11:00 a.m., local time, at the Ramada Inn Alexandria
located at 4641 Kenmore Avenue, Alexandria, Virginia 22304 for
the following purposes:
1. To elect four 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 consider and vote on the ratification of Coopers &
Lybrand, L.L.P. as independent accountants for the
Company for fiscal year 1996.
3. To consider and vote on the adoption of the Comtex
Scientific Corporation 1995 Stock Option Plan.
4. To consider and vote on a proposal to increase the
number of authorized shares of common stock of the
Company from 10,000,000 to 18,000,000.
5. To consider and vote on a proposed amendment of the
Company's Certificate of Incorporation to eliminate the
personal liability of directors of the Company under
certain circumstances.
6. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only stockholders of record at the close of business on
November 3, 1995 are entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. All stockholders 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. Stockholders
attending the meeting may revoke their proxy and vote in person.
FOR THE BOARD OF DIRECTORS
Thomas Wollman
Secretary
Alexandria, Virginia
November 9, 1995<PAGE>
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
Stockholders to be held on December 18, 1995 at 11:00 a.m. local
time at the Ramada Inn Alexandria, 4641 Kenmore Avenue,
Alexandria, Virginia, or at any adjournment thereof, pursuant to
the accompanying Notice of Annual Meeting of Stockholders. The
purposes of the Annual Meeting and the matters to be acted upon
are set forth in the accompanying Notice of Annual Meeting of
Stockholders. 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 9, 1995 to
all stockholders 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 stockholders, 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. Stockholders 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 to approve Proposals No. 1, 2, 3, 4 and 5 as
set forth in the accompanying Notice of Annual Meeting of
Stockholders and in accordance with their best judgment on any
other matters which may properly come before the meeting.
1<PAGE>
Record Date and Voting Rights
Only stockholders of record at the close of business on
November 3, 1995 are entitled to notice of and to vote at the
Annual Meeting. As of the record date, 7,854,667 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 Number 2, consideration of ratification of Coopers
& Lybrand, L.L.P. as independent accountants, and Proposal Number
3, consideration of adoption of the Comtex Scientific Corporation
1995 Stock Option Plan, 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 matters.
Proposal Number 4, consideration of a proposed amendment of
the Company's Certificate of Incorporation to increase the number
of authorized shares of common stock of the Company from
10,000,000 to 18,000,000, and Proposal Number 5, consideration of
a proposed amendment of the Company's Certificate of
Incorporation to eliminate the personal liability of directors of
the Company under certain circumstances, require the approval of
the holders of a majority of the shares entitled to vote at the
Annual Meeting. For this purpose, abstentions and non-votes
will be deemed shares voted against such matters.
Votes at the Annual Meeting will be tabulated by Inspectors
of Election appointed by the Company.
2<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of November 3,
1995 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 (the "Exchange Act"), of more
than 5% of the outstanding shares of common stock, (ii) each
director of the Company, (iii) each executive officer or former
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."
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership <F2> of Class
<S> <C> <C>
Infotechnology, Inc. 4,693,940 <F3><F4> 59.8%
120 Wall Street
New York, NY 10005
C.W. Gilluly, 5,214,339 <F4><F5> 49.5%
Chairman of the
Board and Chief
Executive Officer
Erik Hendricks, 2,500 <F6> <F1>
Director
Robert A. Nigro, 66,742 <F7> <F1>
Director
Charles W. Terry, 130,911 <F8> 1.6%
Director and
President
All Directors and 5,419,825 <F9> 50.8%
Executive Officers
as a group
3<PAGE>
<FN>
<F1> Less than 1%.
<F2> Beneficial ownership is direct unless otherwise
indicated.
<F3> Infotechnology, Inc. ("Infotech") filed for
reorganization under Chapter 11 of the federal
Bankruptcy Code on March 5, 1991.
<F4> 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 Infotech, Pacific Telecommunications
Systems, Inc., a wholly owned subsidiary of Infotech
("PTSI"), and the Gillulys. See "Executive
Compensation - Board of Directors Interlocks and
Insider Participation."
<F5> Includes 2,540,503 shares which may be acquired
pursuant to a Stock Option Agreement between the
Company and the Gillulys. Also includes 133,333 shares
which may be acquired by Dr. Gilluly upon the exercise
of vested options granted under the Comtex Scientific
Corporation 1995 Stock Option Plan, which is subject to
stockholder approval. See "Proposal No. 3 - Adoption
of Comtex Scientific Corporation 1995 Stock Option
Plan." Dr. Gilluly also owns less than 5% of the
outstanding common stock of Infotech.
<F6> Includes 2,500 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan, which is
subject to stockholder approval.
<F7> Includes 2,500 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan, which is
subject to stockholder approval.
<F8> Includes 130,911 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan, which is
subject to stockholder approval.
<F9> Includes shares referred to in Notes (F4) through (F8),
above.
</FN>
</TABLE>
4<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Four 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. 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 as of November 9, 1995:
<TABLE>
<CAPTION>
Nominee Age Office Held with Company
<S> <C> <C>
C.W. Gilluly, Ed.D. 49 Chairman of the Board and
Chief Executive Officer
Erik Hendricks 51 Director
Robert Nigro 46 Director
Charles W. Terry 44 President
</TABLE>
C.W. GILLULY, Ed.D., has served as Chairman of the Board and
Chief Executive Officer of the Company since June 1992. Dr.
Gilluly served as President of the Company from June 1992 to May
1993. Since 1984, he has been President of the Micro Research
Industries ("MRI") division of Telecommunications Industries,
Inc. ("TII"). MRI provides computer services to the U.S. House
of Representatives. Dr. Gilluly has been President of TII since
1989. TII is an 82% owned subsidiary of Infotech, the Company's
majority stockholder. The Company acquired certain assets of
TII, including the MRI division, pursuant to an Asset Purchase
Agreement entered into on May 16, 1995. See "Executive
Compensation - Board of Directors Interlocks and Insider
Participation." Dr. Gilluly has served as President of Infotech
since June 1992. Dr. Gilluly also is Chief Executive Officer and
Chairman of the Board of Hadron, Inc., a high technology
information management concern. Infotech owns approximately 13.5%
of the outstanding stock of Hadron, Inc.
5<PAGE>
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 joined SEI Corporation, a diversified
financial services, asset management and technology 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 Corporation ("NAPPCO"). NAPPCO is
a privately held company that provides specialized services in
the field of unclaimed financial property and escheat. 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.
CHARLES W. TERRY was appointed President of the Company in
August 1994 and director in December 1994. 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 management at CompuServe, a
leading provider of computer-based information and communication
services.
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 five meetings during
the Company's fiscal year ended June 30, 1995. Each director
attended in person or telephonically at least 75% of the meetings
held by the Board of Directors.
During fiscal year 1995, the directors were reimbursed for
travel expenses in connection with attendance at Board of Direc-
tors' meetings. Additionally, non-employee directors of the
Company received a fee of $400 in cash 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 amounts
for special assignments during fiscal year 1995.
The Board of Directors did not have any committees during
fiscal year 1995.
6<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
THE DIRECTORS NAMED ON THE ENCLOSED PROXY.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors has appointed the firm of Coopers &
Lybrand, L.L.P. ("Coopers") as the Company's independent
accountants for fiscal year 1996. Although action by the
stockholders in this matter is not required, the Board of
Directors believes that it is appropriate to seek stockholder
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 Coopers will be in attendance at the
Annual Meeting on December 18, 1995. The representative will
have the opportunity to make a statement, if desired, and will be
available to respond to appropriate questions from stockholders.
On July 5, 1994, the Company and its independent
accountants, Arthur Andersen & Co. ("Andersen"), mutually agreed
to terminate the engagement of Andersen to audit the Company's
financial statements for the fiscal year ended June 30, 1994.
The reports of Andersen on the Company's financial statements for
the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. However, the
audit report in the Company's Annual Report on Form 10-K for the
years ended June 30, 1993 and 1992 referred to an uncertainty as
to the Company's ability to continue as a going concern.
In connection with the audits of the Company's financial
statements for each of the two fiscal years ended June 30, 1993
and 1992, and in the subsequent interim period, there were no
disagreements with Andersen on any matters of accounting
principles or practices, financial statement disclosure or
auditing scope and procedures which, if not resolved to the
satisfaction of Andersen would have caused Andersen to make
reference to the matter in their report.
On July 5, 1994, Coopers was engaged to audit the Company's
financial statements for its fiscal year ended June 30, 1994.
The Board of Directors of the Company approved the change in
accountants. The Company had authorized Andersen, the Company's
former auditors, to respond fully to the inquiries of Coopers.
The Company did not contact Coopers during the Company's two most
recent fiscal years, or any subsequent interim period, regarding
(i) any disagreement with Andersen or (ii) the application of
accounting principles to a specified transaction or the type of
7<PAGE>
audit opinion that might be rendered on the Company's financial
statements. Prior to its engagement, Coopers was neither asked
for, nor had it expressed any opinion of, any accounting issues
concerning the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
COOPERS & LYBRAND, L.L.P. AS INDEPENDENT ACCOUNTANTS FOR FISCAL
YEAR 1996.
PROPOSAL NO. 3
ADOPTION OF COMTEX SCIENTIFIC CORPORATION 1995 STOCK OPTION PLAN
On October 12, 1995, the Board of Directors adopted the
Comtex Scientific Corporation 1995 Stock Option Plan (the
"Plan"), subject to stockholder approval. The Board of Directors
believes that approval of the Plan will serve the best interests
of the Company and its stockholders by permitting the Company to
utilize stock options as a means to attract and retain key
employees, consultants and directors to the Company who are in a
position to contribute materially to the successful conduct of
the business and affairs of the Company and, in addition, to
stimulate in such individuals an increased desire to render
greater service to the Company. The availability of options also
is important in that it provides the Company an alternative or
additional means of compensating such employees. The full text
of the Plan is set forth in Appendix A to this
Proxy Statement and the following summary is qualified in its
entirety by reference thereto.
Description of the 1995 Stock Option Plan
The Plan provides for the issuance of incentive stock
options within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") and non-
qualified stock options, to purchase an aggregate of up to
1,200,000 shares of common stock. The Plan permits the grant of
options to key employees, consultants and directors of the
Company.
The Plan will be administered by Messrs. Hendricks and
Nigro, who will serve as the Plan's administrators (the
"Administrators"). Each of the Administrators is a
"disinterested" person for purposes of Rule 16b-3 promulgated
under the Exchange Act. Subject to the provisions of the Plan,
the Administrators have 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 Plan also
provides that the Administrators may accelerate the time at which
all or a portion of an optionee's options may be exercised in the
8<PAGE>
event of a change in control of the Company as described in
greater detail in Appendix A.
Each option will be evidenced by a written agreement in a
form approved by the Administrators. Options granted under the
Plan generally will not be transferable by the optionee other
than by will or by the laws of descent and distribution and each
option will be 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 Plan.
Under the Plan, the exercise price of an incentive stock
option will be required to 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% stockholders). The exercise price of a non-qualified
stock option will be required to be not less than the par value,
nor greater than the fair market 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%
stockholder).
During the term of the Plan, each non-employee director
elected or appointed to the Board of Directors (other than non-
employee directors holding office on the date of adoption of the
Plan, whose initial grants are discussed below) will
automatically receive on the date of his first initial
appointment to the Board of Directors, an option to purchase
2,500 shares of the common stock(the "Initial Option") at a per
share exercise price equal to the fair market value of the common
stock on the date of grant. Subject to acceleration upon the
occurrence of certain prescribed events, such option becomes
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 non-employee director holding office on the date of
adoption of the Plan by the Board of Directors receives on such
date two options, each to purchase 2,500 shares of the common
stock at a per share exercise price equal to the fair market
value of the common stock on such date. Subject to acceleration
upon the occurrence of certain prescribed events, one of such
options becomes exercisable as to two-thirds on the date of
grant, and becomes exercisable as to the remaining one-third on
the first anniversary of the date of grant (the "Two-Thirds
Option"), and the other option becomes 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 (the "One-Third Option").
9<PAGE>
Each non-employee director (including non-employee directors
holding office on the date of adoption of this Plan) will
automatically receive on each anniversary of his initial election
or appointment to the Board of Directors or, in the case of non-
employee directors holding office as of the date of adoption of
this Plan each anniversary of such date, an option to purchase
2,500 shares of the common stock exercisable at a per share value
equal to the fair market value for the common stock on the
applicable additional grant date. Subject to acceleration upon
the occurrence of certain prescribed events, each such option
becomes 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.
The Two-Thirds Options terminates, to the extent not
exercised prior thereto, upon the earlier to occur of (i) the
fourth anniversary of the date 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). All other options granted to non-employee directors
(including, without limitation, the One-Thirds Options)
terminate, to the extent not exercised prior thereto, upon the
earlier to occur of (i) the fifth anniversary of the date 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 Plan, provided that no such action may deprive an
optionee, without his consent, of any option granted to the
optionee pursuant to the 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 stockholders
of the Company, may become effective earlier than six months
after Board of Directors' approval. Except as provided in the
Plan, no amendment by the Board of Directors, unless taken with
the approval of the stockholders may (i) materially increase the
benefits accruing to participants under the Plan, (ii) materially
increase the number of securities which may be issued under the
Plan or (iii) materially modify the requirements as to
eligibility for participation in the Plan. The Plan will
terminate ten years after approval by the Board of Directors.
On October 12, 1995, the Administrators granted to Mr.
Terry, President of the Company, subject to stockholder approval
of the Plan, an incentive option to purchase 392,733 shares of
common stock, at an exercise price per share of $0.10, which is
equal to or greater than the fair market value of the common
stock on the date of grant. This option will be exercisable over
a two year period with one-third being exercisable upon the date
10<PAGE>
of grant, one-third becoming exercisable on August 1, 1996 and
one-third on August 1, 1997.
On October 12, 1995, the Administrators also granted to Dr.
Gilluly, Chairman and Chief Executive Officer of the Company and
Thomas Wollman, Chief Financial Officer and Secretary of the
Company, incentive options to purchase 200,000 and 8,000 shares,
respectively, of common stock, at an exercise price per share of
$0.10, which is equal to or greater than the fair market value of
the common stock on the date of grant. Options granted to Dr.
Gilluly and Mr. Wollman will be exercisable over a two year
period with two-thirds being exercisable upon the date of grant,
and the final one-third exercisable upon the first anniversary of
the grant.
By virtue of the option grants described above, each of the
Company's directors has a personal interest in adoption of the
1995 Stock Option Plan.
On October 12, 1995, the Administrators granted incentive
options to purchase a total of 300,000 shares of common stock to
eight other key employees and consultants of the Company.
Federal Income Tax Consequences
An employee will not incur federal income tax when he is
granted a nonqualified stock option or an incentive stock option.
Upon exercise of a nonqualified option, an employee generally
will recognize ordinary compensation income, which is subject to
income tax withholding by the Company, equal to the difference
between the fair market value of the common stock on the date of
the exercise and the option price. When an employee exercises an
incentive stock option, he generally will not recognize income,
unless he is subject to the alternative minimum tax.
The Company usually will be entitled to a business expense
deduction at the time and in the amount that the recipient of an
incentive award recognizes ordinary compensation income in
connection therewith. As stated above, this usually occurs upon
exercise of nonqualified options. In some cases, such as the
exercise of a nonqualified option, the Company's deduction is
contingent upon the Company's meeting withholding tax
requirements. No deduction is allowed in connection with an
incentive stock option, unless the employee disposes of common
stock received upon exercise in violation of the holding period
requirements. Moreover, there can be circumstances when the
Company may not be entitled to a deduction for certain transfers
of common stock or payments to an employee upon the exercise of
an incentive award that has been accelerated as a result of a
change of control.
11<PAGE>
In addition to the limitations described above on the
Company's right to a corresponding business expenses deduction,
the Internal Revenue Code generally imposes a $1 million
limitation on the amount of annual compensation deduction
allowable to a publicly held company in respect of its chief
executive officer and its other four most highly paid executive
officers. An exception is provided for certain performance based
compensation if certain shareholder approval and outside director
administration requirements are satisfied. Because of certain
interpretational issues under the new statute, and in the absence
of final Internal Revenue Service regulations, there can be no
assurance that incentive awards under the 1995 Plan will qualify
for this exception. Proposed regulations would include stock
options and stock appreciation rights, but exclude restricted
stock from the exception.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF
THE COMTEX SCIENTIFIC CORPORATION 1995 STOCK OPTION PLAN.
12<PAGE>
PROPOSAL NO. 4
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved and recommends that
Article 3 of the Certificate of Incorporation of the Company be
amended to increase the authorized shares of common stock from
10,000,000 to 18,000,000.
The proposed increase in the authorized common stock will be
accomplished by amending Article 3 of the Certificate of
Incorporation in its entirety to read as follows:
THIRD: The total number of shares which the Corporation
shall have the authority to issue is 18,000,000 shares of
common stock with a par value of $.01 per share.
On November 3, 1995, 7,854,667 shares of common stock were
outstanding, and 1,200,000 shares have been reserved for issuance
pursuant to the Company's 1995 Stock Option Plan, leaving 945,333
shares available for issuance. The proposed increase in the
authorized common stock will provide the Company greater
flexibility to issue common stock for appropriate corporate
purposes. Among the purposes for which such additional
authorized stock could be issued are the acquisition of desirable
businesses, the sale of shares for cash, and issuances in
connection with stock options, stock splits and stock dividends.
The Company also requires additional shares to meet its
obligation pursuant to options to purchase up to 2,540,503 shares
of common stock issued to Dr. Gilluly, the Chairman and Chief
Executive Officer of the Company, and his wife in connection with
a financing transaction. See "Executive Compensation - Board of
Directors Interlocks and Insider Participation." Dr. Gilluly
therefore has a personal interest in approval of the proposed
increase in the number of the Company's authorized shares.
Approval of the proposed amendment to the Certificate of
Incorporation will allow the Board of Directors to issue
additional shares without further stockholder action, subject to
applicable law and the rules or regulations (including those of
the National Association of Securities Dealers, Inc.) to which
the Company may be subject. The additional shares may be issued
at such times, for such purposes and for such consideration as
the Board of Directors deems appropriate. Stockholders do not
presently have preemptive rights with respect to the current
authorized common stock. Stockholders do not have dissenter's or
appraisal rights as a result of the submission or authorization of the
proposed amendment. The Company has no present arrangements,
commitments or understandings with respect to the sale of any
additional shares, except in connection with certain options
13<PAGE>
granted, subject to stockholder approval, pursuant to the
Company's 1995 Stock Option Plan and options granted to Dr.
Gilluly and his wife in connection with a financing transaction.
Although a proposal to increase the authorized capital stock
of a company may be construed as having an anti-takeover effect,
neither the management of the Company nor its Board of Directors
views this proposal in that perspective. The proposal has not
been prompted by an effort by anyone to gain control of the
Company, and the Company is not aware of any such attempt.
However, under certain circumstances, the Company could use the
additional shares to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company by, for
example, privately placing such shares with purchasers who might
side with the Board of Directors in opposing a hostile takeover
bid. The additional shares could also be used to dilute the
stock ownership of a person or entity seeking to gain control of
the Company. Such uses of the common stock could render more
difficult or discourage a tender offer or other attempt to
acquire control if such transaction were to be opposed by the
Board of Directors. The Board of Directors is not aware of any
pending or threatened effort to obtain control of the Company.
Infotech, the Company's majority stockholder, has entered
into an agreement with the Company to vote, and to cause its
wholly owned subsidiary PTSI to vote, their shares of Company
stock in favor of increasing the authorized shares of capital
stock of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL NO. 5
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO ADD
A NEW ARTICLE ELIMINATING PERSONAL LIABILITY OF
DIRECTORS UNDER CERTAIN CIRCUMSTANCES
The Board of Directors has approved and recommends that a
new Article be added to the Certificate of Incorporation of the
Company limiting the extent to which the directors of the Company
may be liable for damages to the Company or its stockholders.
Reasons for Proposal
The proposed amendment to the Company's Certificate of
Incorporation is intended to implement an amendment to the New
York Business Corporation Law (the "NYBCL") enacted in July 1987
in response to increased concern about the legal exposure of
directors, the changed market for directors' and officers'
14<PAGE>
liability insurance, and the potential cost to New York
corporations (and therefore their stockholders) of their
indemnification obligations. Since the early 1980s,
investigations, claims, actions, suits or proceedings (including
stockholder derivative actions) ("Proceedings") seeking to impose
liability on directors of publicly held corporations, have become
increasingly common. Such Proceedings are typically extremely
expensive, whatever their eventual outcome. In view of the costs
and uncertainties of litigation in general, it is often prudent
to settle Proceedings in which claims against a director are
made. Settlement amounts, even if immaterial to the corporation
involved and minor compared to the enormous amounts frequently
claimed, often exceed the financial resources of most individual
director defendants. As a result, an individual may conclude
that potential exposure to the costs and risks of Proceedings in
which he or she may become involved may exceed any benefit to him
or her from serving as a director of a public corporation. This
is particularly true for directors who are not also officers or
employees of the corporation concerned.
Compounding the problem has been the increasing difficulty
and expense of obtaining directors' and officers' liability
insurance ("D&O" insurance) that protects directors from personal
losses resulting from Proceedings involving them by reason of
their service as directors. The Company does not currently have
D&O insurance. The Company's By-laws require indemnification of
directors to the fullest extent permitted by law. Thus, the
Company is self-insured with respect to director liability.
Description of Proposed Amendment.
The 1987 amendment to the NYBCL, among other things, permits
a corporation, upon receipt of stockholder approval, to add a
provision to its certificate of incorporation eliminating the
personal liability of its directors to the corporation or its
stockholders for damages for breach of duty in such capacity.
Such a provision, however, may not eliminate the liability of any
director (i) if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law, or
that he personally gained, in fact, a financial profit or other
advantage to which he was not legally entitled, or that his acts
violated Section 719 of the NYBCL (imposing certain requirement
with respect to dividends, distributions, stock repurchases and
loans to directors) or (ii) for any act or omission prior to the
adoption of a provision authorized by the amendment to the NYBCL.
The proposed amendment to the Company's Certificate of
Incorporation, following the provisions of the 1987 amendment to
the NYBCL, eliminates director liability for acts occurring after
the proposed amendment becomes effective to the fullest extent
from time to time permitted by the NYBCL, thus automatically
15<PAGE>
incorporating any future statutory revisions with respect to
director liability. The Board of Directors believes that the
proposed amendment is desirable so that the Company can continue
to attract and retain responsible individuals to serve as its
directors, in light of the present difficult environment in which
directors must serve, and in order to reduce the Company's
monetary exposure under its indemnification obligations.
The text of the proposed amendment is as follows:
The liability of the Corporation's directors to the
Corporation or its stockholders for any breach of duty in
such capacity shall be eliminated to the fullest extent
permitted by the Business Corporation Law of the State of
New York, as it exists on the date hereof or as it may
hereafter be amended. No amendment to or repeal of this
Article shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for
or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
Effect of Proposal
If the stockholders approve the proposed amendment, the
Company's directors will not be liable for monetary damages even
if they should fail, through negligence or gross negligence, to
satisfy their duty of care. However, the charter amendment will
not affect the right of stockholders to pursue equitable
remedies, such as an action to enjoin or rescind a transaction
involving a breach of a director's duty of care (although such
remedies may not always be available), and the amendment in no
way affects a director's liability under the Federal securities
laws. The potential outcome of any litigation arising under the
statute cannot be predicted with certainty. Although the
amendment will eliminate the liability of directors who are also
officers of the Company for actions taken in their capacity as
directors, it will not affect their liability for actions taken
in their capacity as officers. If approved by the stockholders,
the amendment will be delivered promptly to the New York
Department of State for filing and will be effective when filed.
The Company has not received notice of any Proceeding to
which the proposed amendment might apply. In fact, no
stockholder's derivative action has ever been brought against a
Company director as such. In addition, the amendment is not
being proposed in response to any specific resignation, threat of
resignation or refusal to serve by any director or potential
director.
The Board of Directors and management recognize that if the
proposed amendment is adopted, its principal effect would be that
the stockholders of the Company will be giving up potential
16<PAGE>
future causes of action for damages against directors for breach
of fiduciary duty. It should be noted that the Board of
Directors has a personal interest in having the stockholders
approve the proposed amendment, at the potential expense of the
Company and its stockholders. However, given the difficult
environment and potential for incurring liabilities currently
facing directors of publicly held corporations, the Company
believes that the proposed amendment is in the best interests of
the Company and its stockholders since it should protect the
Company's ability to attract and retain qualified directors and
will reduce the Company's monetary exposure under its
indemnification obligations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION TO ELIMINATE THE
PERSONAL LIABILITY OF DIRECTORS UNDER CERTAIN CIRCUMSTANCES.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation paid by the Company to its Chief Executive Officer
and President for the three fiscal years ended June 30, 1995:
<TABLE>
<CAPTION>
Name and
Principal Position Annual Compensation
Year Salary($)
<S> <C> <C>
C.W. Gilluly, 1995 <F1> 0
Chairman and Chief 1994 0
Executive Officer 1993 0
Charles W. Terry, 1995 <F2> $108,923
President
<FN>
<F1> Dr. Gilluly served as President of the Company until
May 1993 and continues to serve the Company as its
Chairman and Chief Executive Officer. Dr. Gilluly
received no compensation from the Company for his past
services as President. Dr. Gilluly also has never
received compensation for his services as Chief
Executive Officer. Dr. Gilluly receives compensation
17<PAGE>
in excess of $100,000 annually from MRI, which was
acquired by the Company, subject to a put option,
during fiscal year 1995. See "Executive Compensation -
Board of Directors Interlocks and Insider
Participation."
<F2> Mr. Terry was appointed President of the Company in
August, 1994, after the end of fiscal year 1994.
</FN>
</TABLE>
Executive Officers
The executive officers of the Company are Dr. Gilluly, the
Chairman and Chief Executive Officer of the Company, Mr. Terry,
the President of the Company and Thomas Wollman, the Chief
Financial Officer and Secretary of the Company. Neither Dr.
Gilluly nor Mr. Wollman are employees of, or received during
fiscal year 1995 any compensation from, the Company.
Biographical information concerning Dr. Gilluly and Mr. Terry is
provided in "Proposal No. 1 - Election of Directors," above. Mr.
Wollman, who is 34 years old, was appointed Chief Financial
Officer and Secretary of the Company in May 1993. Since 1985,
Mr. Wollman has served in various accounting positions with TII
and was appointed Chief Financial Officer of TII in June 1993.
Mr. Wollman also has served as Controller of Infotech since June,
1993, and serves as Acting Chief Financial Officer of Hadron,
Inc. Mr. Wollman receives no compensation from the Company; Mr.
Wollman receives compensation from Hadron, Inc., and TII.
Pursuant to an agreement between the Company and TII, TII
invoices the Company for time devoted by Mr. Wollman to the
Company's affairs. See "Board of Directors Interlocks and
Insider Participation - TII Sublease."
Stock Option Plan
In October 1995, the Board of Directors approved the Comtex
Scientific Corporation 1995 Stock Option Plan. The new 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, and is subject to stockholder approval. The terms of
the new Plan are summarized in "Proposal No. 3 - Adoption of
Comtex Scientific Corporation 1995 Stock Option Plan."
Compensation of Directors
During fiscal year 1995, 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 in cash for each Board of
18<PAGE>
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 1995.
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 a letter agreement dated July 19, 1994, Mr. Terry
was 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 annual salary
of $120,000, 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 that the Company terminates his employment or
determines not to renew his employment agreement, unless his
termination is for reasons of gross negligence, wilful misconduct
or the commission of a felony or crime of moral turpitude. The
agreement also provides for the issuance to Mr. Terry of non-
qualified options to acquire 392,733 shares of the Company's
common stock; the option is to vest in equal amounts over a
three-year period, and the exercise price is to be determined in
accordance with the terms of the Company stock plan pursuant to
which the options are granted. Mr. Terry is eligible to receive
a bonus based upon the achievement of specified annual gross
revenue and net income goals.
Board of Directors Report on Executive Compensation
General. The Company's believes that 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.
19<PAGE>
The Company also endorses the position that stock ownership
by management and stock-based performance compensation
arrangements are beneficial in aligning managements' and
stockholders' interests in the enhancement of stockholder value.
The Company has proposed that stockholders adopt a new stock
incentive plan. See "Proposal No. 3 - Adoption of Comtex
Scientific Corporation 1995 Stock Option Plan."
1995 Compensation for Mr. Terry. Mr. Terry was appointed
President of the Company in August 1994. In July, 1994, the
Company and Mr. Terry entered into a letter 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
1995 was determined by the terms of his employment agreement.
The Company believes that Mr. Terry's employment agreement bases
his compensation upon 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 BOARD OF DIRECTORS
C.W. Gilluly
Charles W. Terry
Erik Hendricks
Robert A. Nigro
Board of Directors Interlocks and Insider Participation
General. During fiscal year 1995, compensation decisions
were made by the Company's Board of Directors, the members of
which were Dr. Gilluly, the Company's Chairman and Chief
Executive Officer, Mr. Terry, the Company's President, Erik
Hendricks and Robert Nigro. All Board members participated in
discussions of executive officer compensation. Dr. Gilluly
formerly served as President of the Company. Dr. Gilluly also
serves as Chairman and Chief Executive Officer of Infotech, the
Company's majority (approximately 60%) stockholder, as well as
Chairman and Chief Executive Officer of TII. The majority
stockholder (approximately 82%) of TII is Infotech. During
fiscal year 1995, Infotech, TII and the Company engaged in the
transactions described below.
TII Sublease. The Company subleases office space from TII.
Pursuant to an agreement entered into in September, 1993, the
Company and TII may perform programming, marketing, and general
and administrative tasks for each other. TII and Comtex also are
entitled to use each other's office equipment and accessories.
Under the Company's agreement with TII, the Company subleases
space from TII at the rental rate paid by TII to its landlord (an
unaffiliated party). The agreement also specifies billing rates
20<PAGE>
for services performed by non-support staff labor, and payment
terms for office supplies and equipment maintenance contracts.
Princeton Capital Financing. In February, 1995, the Company
entered into a Contracts Financing Agreement with Princeton
Capital Finance Company, L.L.C. ("PrinCap") dated February 17,
1995 (the "PrinCap Financing Agreement"). The PrinCap Financing
Agreement provides a $1 million credit facility secured by
approved inventory, unbilled accounts receivable and billed
accounts receivable to support both the MRI business and the
Company's other business. Under the PrinCap Financing Agreement,
PrinCap agreed to finance approved inventory and unbilled
accounts receivable at an annualized interest rate equal to the
prime rate, as defined in THE WALL STREET JOURNAL on the date of
borrowing, plus four percent (4%), and billed accounts receivable
at an annualized interest rate equal to the prime rate plus three
percent (3%). In order to obtain the PrinCap financing, PrinCap
required a corporate guarantee from TII, a cross-guarantee from
Infotech and a $1,000,000 limited personal guarantee from Dr.
Gilluly and his wife. As partial consideration for the agreement
by the Gillulys to personally guarantee the PrinCap financing and
to make certain loans to TII prior to the PrinCap financing, Dr.
Gilluly and his wife received options to acquire shares of the
Company's common stock. These options are described below in
"Board of Directors Interlocks and Insider Participation -
Acquisition by the Company of Certain Assets of TII - 4.
Purchase Price - Options to Acquire Company Stock."
Acquisition by the Company of Certain Assets of TII. During
fiscal year 1995, the Company negotiated and consummated (subject
to a "put" right to reverse the transaction, as discussed below)
the acquisition (the "MRI Acquisition") of certain assets of TII.
The assets acquired included substantially all of the assets of
TII's sole operating division, MRI. MRI's business consists of
providing sales, leasing and maintenance support of integrated
information systems, computer hardware and software primarily to
the U.S. House of Representatives.
The Company has the right, under certain circumstances, to
require TII to repurchase TII assets acquired by the Company, and
to require TII to re-assume TII liabilities assumed by the
Company. The Company has not yet determined whether to exercise
this "put" right. The Company has determined, because of the
existence of the put right, not to reflect assets acquired, and
liabilities assumed, from TII in its financial statements, and
not to reflect the results of operations of the acquired MRI
business in its financial statements.
21<PAGE>
The following is a summary of certain provisions of the
material agreements relating to the MRI transaction.
1. Pre-Closing Operations of MRI
On February 17, 1995, the Board of Directors of the Company
authorized the MRI Acquisition. In anticipation of the closing
of the transaction, and to preserve the MRI assets, the Company
entered into an Operating Agreement with TII effective as of
February 17, 1995. Pursuant to the Operating Agreement, TII
delegated its full right and authority to operate and manage its
business to the Company. The Company operated the business of
TII from February 17, 1995 until the closing of the MRI
Acquisition on May 16, 1995.
2. Purchase Price - General
On May 16, 1995, the Company entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") with TII pursuant to
which the Company acquired on that date substantially all of the
assets, and assumed certain liabilities, of TII.
The consideration for the TII assets was (i) the tangible
book value of the purchased assets as of the closing plus (ii)
$200,000. The tangible book value of the assets, as of the
closing, was stipulated to be $2,092,700. As discussed below, to
the extent the difference between the amount of TII liabilities
assumed by the Company and the tangible book value of the assets
as of the closing exceeds $150,565, the Company is entitled to a
reduction in certain indebtedness of the Company to Infotech.
The Asset Purchase Agreement provides that the purchase
price is to be paid by (i) the assumption by the Company of
certain liabilities of TII (the amount of which, as of the
closing, was stipulated to be $2,243,265), (ii) the granting by
the Company to TII of options to acquire common stock of the
Company, (iii) at TII's request, the granting by the Company to
Dr. Gilluly and his wife of options to acquire common stock of
the Company and (iv) the principal reduction of the indebtedness
owed by the Company to Infotech. The Company has utilized the
acquired TII assets to conduct the MRI business.
3. Purchase Price - Assumption of Certain TII Liabilities
As partial consideration for the TII assets, the Company
assumed all debts, liabilities or other obligations of TII
related to the assets acquired, including without limitation
$50,000 owed to Dr. Gilluly. The amount of assumed liabilities
was stipulated in the Asset Purchase Agreement to be $2,243,265.
The Company did not assume liabilities related to (i) a note and
other payables of TII owed to Infotech in the aggregate amount of
approximately $4,114,000, (ii) other TII liabilities which were
22<PAGE>
not directly related to the MRI business and which totaled
approximately $490,000 and (iii) certain amounts payable in
excess of $100,000 from TII to the Federal Deposit Insurance
Corporation.
4. Purchase Price - Options to Acquire Company Stock
As additional consideration for the TII assets, the Company
issued to TII and, at the request of TII, to the Gillulys options
to purchase common stock of the Company pursuant to two Stock
Option Agreements dated May 16, 1995 (the "Comtex/TII Option
Agreement" and the "Comtex/Gilluly Option Agreement,"
respectively). As partial consideration for the agreement by the
Gillulys to personally guarantee the PrinCap financing and to
make certain loans to TII prior to the PrinCap financing,
Infotech and PTSI, Infotech's wholly-owned subsidiary, granted to
the Gillulys options to purchase common stock of the Company
owned by Infotech and PTSI pursuant to a Stock Option Agreement
dated May 16, 1995 (the "Infotech/PTSI/Gilluly Option Agreement"
and, together with the Comtex/TII Option Agreement and
Comtex/Gilluly Option Agreement, the "Stock Option Agreements").
Each Stock Option Agreement contained formulae for
determining the number of shares, and exercise price per share,
thereunder, based upon certain factors. The number of such
shares, and the exercise price per share for each Stock Option
Agreement has now been computed and is as follows: the Comtex/TII
Option Agreement, no shares; the Comtex/Gilluly Option Agreement,
2,540,503 shares at $.10 per share; and the Infotech/PTSI/Gilluly
Option Agreement, 2,540,503 shares at $.10 per share.
5. Purchase Price - Restructure of Indebtedness
The final component of the consideration in the MRI
Acquisition involved a restructure of certain indebtedness of the
Company to Infotech. Prior to the closing of the MRI
Acquisition, the Company had been in default under certain
promissory notes executed by the Company and payable to Infotech
in the aggregate principal amount of $1,040,000 (the "1986
Infotech Notes") which matured on June 23, 1991. In partial
consideration for the Company's assumption of certain liabilities
of TII, Infotech agreed to (i) waive the Company's existing
defaults under the 1986 Infotech Notes, (ii) forgive $150,565 of
the outstanding principal balance thereof and (iii) amend,
consolidate and restate the 1986 Infotech Notes as an Amended,
Consolidated and Restated 10% Senior Subordinated and Secured
Note (the "Amended Infotech Note").
The Amended Infotech Note is in the principal amount of
$889,435, carries an interest rate of ten percent (10%) on the
unpaid principal balance and is due on July 1, 2002. The Amended
Infotech Note is collateralized by a continuing collateral
23<PAGE>
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.
Interest on the Amended Infotech Note is payable quarterly
commencing on June 30, 1995. The Amended Infotech Note is
subordinated in right of payment to the prior payment in full of
all Senior Indebtedness of the Company. The term "Senior
Indebtedness" includes the principal and interest charges,
existing or hereafter incurred on the Company's obligations,
including indebtedness arising from the PrinCap Financing
Agreement.
In conjunction with the Amended Infotech Note, the Company
and Infotech entered into an Agreement dated May 16, 1995 whereby
Infotech agreed to reduce the outstanding principal of the
Amended Infotech Note in certain circumstances. These
circumstances include payments made by the Company to satisfy
certain conditions set forth in the Asset Purchase Agreement,
losses incurred by the MRI business during a specified period of
time or any losses, and liabilities or expenses incurred by the
Company arising from any inaccuracy or breach of any
representations or warranties contained in the Asset Purchase
Agreement. The principal of the Amended Infotech Note may be
increased in the event that Dr. Gilluly and his wife exercise
certain options to purchase common stock of the Company owned by
Infotech and granted to the Gillulys, because the Gillulys may
pay all or a portion of the exercise price of such options by
assignment of indebtedness resulting from advances by the
Gillulys to the MRI business. Dr. Gilluly has made advances to
the MRI business in an outstanding principal amount, as of the
date of this Proxy Statement, of approximately $235,000.
6. "Put" Agreement
Because the Company agreed to close the MRI Acquisition
prior to the satisfaction of all conditions to closing, the Asset
Purchase Agreement permits the Company, in the event certain
conditions are not satisfied prior to December 31, 1995, to
require TII to repurchase all or any portion of the TII assets
acquired by the Company pursuant to the Asset Purchase Agreement
in accordance with a Put Agreement dated May 16, 1995, between
the Company and TII. These conditions include (i) the
satisfactory examination of the MRI business and assets by the
Company, including the right to inspect and copy the financial
and corporate books and records of TII and such other data and
information as the Company may reasonably request, (ii) the
receipt by the Company of Uniform Commercial Code and lien
searches or other evidence reflecting the status of title to the
assets satisfactory to the Company, (iii) the receipt of all
requisite approvals and consents from creditors of TII,
governmental and regulatory authorities, and any other third
parties whose approval or consent is required, and (iv)
24<PAGE>
compliance in all respects with all laws, rules and regulations
applicable to the transaction.
If the put is exercised, TII is obligated to pay the Company
an amount equal to the portion of the purchase price attributable
to the assets being sold back to TII plus interest at the rate of
10% per annum on such portion of the purchase price, minus the
amount of net revenues, if any, derived by the Company from the
purchased assets. TII also is required to assume any and all
liabilities and obligations related to or arising from the assets
sold back to TII.
In the event all conditions are not satisfied on or before
December 31, 1995, and the Company fails or elects not to
exercise the put option on or before February 16, 1995, the
Company will be deemed to have waived the unsatisfied
condition(s) and have no further right to exercise the put
option, and the principal amount outstanding from the Company to
Infotech will be reduced and forgiven by Infotech by and to the
extent of the amount paid by the Company, at its sole option, in
excess of the agreed consideration in order to satisfy the
unsatisfied condition(s).
25<PAGE>
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 performance graph comparing the
yearly percentage change in the Company's cumulative total
stockholder return with the cumulative total return of peer
issuers or certain other benchmarks. Trading of the Company's
common stock, since it was delisted from the Nasdaq Stock Market
in October 1990, has been limited and sporadic. To the Company's
knowledge, during calendar year 1995 a only a small number of
trades have been completed. The Company believes that the low
trading volume of the Company's common stock and lack of reliable
information regarding such trading make any performance graph
based on information available to the Company potentially
misleading. The Company therefore has determined to omit 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% stockholders 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 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, 1994 and ended June 30, 1995, all
Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial
owners were complied with.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended
to be presented at the Company's 1996 Annual Meeting of
Stockholders must be received by the Company no later than July
12, 1996 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
26<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, including the financial
statements and notes thereto is being mailed to the stockholders
of record along with this Proxy Statement. Requests for copies
of such report and/or exhibit(s) should be directed to the
Company at 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
Thomas Wollman
Secretary
Date: November 9, 1995
27<PAGE>
APPENDIX A
COMTEX SCIENTIFIC CORPORATION
1995 STOCK OPTION PLAN
SECTION 1. Purpose of the Plan. The purpose of this Comtex
Scientific Corporation 1995 Stock Option Plan ("Plan") is to
encourage ownership of common stock, $.01 par value ("Common
Stock"), of Comtex Scientific Corporation, a New York corporation
(the "Company"), by eligible key employees, directors and
consultants of the Company and its Affiliates (as defined below)
and to provide increased incentive for such employees, directors
and consultants to render services and to exert maximum effort
for the business success of the Company. In addition, the
Company expects that the Plan will further strengthen the
identification of employees, directors and consultants with the
stockholders. Certain options to be granted under this Plan are
intended to qualify as Incentive Stock Options ("ISOs") pursuant
to Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), while other options granted under this Plan will be
nonqualified options which are not intended to qualify as ISOs
("Nonqualified Options"), either or both as provided in the
agreements evidencing the options as provided in Section 6
hereof. As used in this Plan, the term "Affiliates" means any
"parent corporation" of the Company and any "subsidiary
corporation" of the Company within the meaning of Code Sections
424(e) and (f), respectively.
SECTION 2. Administration of the Plan.
(a) Administrators. The Plan shall be administered by
administrators (the "Administrators") designated by the
Board of Directors of the Company (the "Board"), and
consisting of not fewer than two members of the Board.
Pursuant to Rule 16b-3 of the Securities Exchange Act of
1934, as amended ("Exchange Act"), no director shall serve
as an administrator unless he is a "disinterested person"
within the meaning of said Rule 16b-3.
(b) Administrators' Action. The Administrators shall
hold meetings at such times and places as they may
determine. A majority of Administrators shall constitute a
quorum, and all determinations of the Administrators shall
be made by not less than a majority thereof. Any decision
or determination reduced to writing and signed by a majority
of the Administrators shall be fully effective as if it had
been made by a majority vote of the Administrators at a
meeting duly called and held. The Administrators may
designate the Secretary of the Company or other Company
employees to assist the Administrators in the administration
28<PAGE>
of the Plan, and may grant authority to such persons to
execute award agreements or other documents on behalf of the
Administrators and the Company. Any duly constituted
committee of the Board satisfying the qualifications of this
Section 2 may be appointed as the Administrators.
(c) Administrators' Expenses. All expenses and
liabilities incurred by the Administrators in the
administration of the Plan shall be borne by the Company.
The Administrators may employ attorneys, consultants,
accountants or other persons.
SECTION 3. Stock Reserved for the Plan. Subject to
adjustment as provided in Section 6(k) hereof, the maximum number
of shares of Common Stock for which options granted hereunder may
be exercised shall be 1,200,000. The shares subject to the Plan
shall consist of authorized but unissued shares of Common Stock
and such number of shares shall be and is hereby reserved for
sale for such purpose. Any of such shares which may remain
unsold and which are not subject to outstanding options at the
termination of the Plan shall cease to be reserved for the
purpose of the Plan, but until termination of the Plan or the
termination of the last of the options granted under the Plan,
whichever last occurs, the Company shall at all times reserve a
sufficient number of shares to meet the requirements of the Plan.
Should any option expire or be cancelled prior to its exercise in
full, the shares theretofore subject to such option may again be
made subject to an option under the Plan.
SECTION 4. Eligibility.
(a) The persons eligible to participate in the Plan as
a recipient of options ("Optionee") shall include only key
employees, directors and consultants of the Company or its
Affiliates at the time the option is granted. An employee
or consultant who has been granted an option hereunder may
be granted an additional option or options, if the
Administrators shall so determine.
(b) During the term of the Plan, each non-employee
director elected or appointed to the Board (other than non-
employee directors holding office on the date of adoption of
this Plan, whose initial grants are discussed below) will
automatically receive on the date of his first initial
appointment to the Board, an option to purchase 2,500 shares
of the Common Stock (the "Initial Option") at a per share
exercise price equal to the fair market value of the Common
Stock on the date of grant. Subject to acceleration upon
the occurrence of certain prescribed events, such option
becomes exercisable as to one-third upon the date of grant,
one-third upon the first anniversary of the date of grant
-29- 29<PAGE>
and one-third upon the second anniversary of the date of
grant.
Each non-employee director holding office on the date of
adoption of this Plan by the Board shall receive on such
date two options, each to purchase 2,500 shares of the
Common Stock at a per share exercise price equal to the fair
market value of the Common Stock on such date. Subject to
acceleration upon the occurrence of certain prescribed
events, one of such options shall become exercisable as to
two-thirds on the date of grant, and shall become
exercisable as to the remaining one-third on the first
anniversary of the date of grant (the "Two-Thirds Option"),
and the other option shall 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 (the "One-Third
Option").
Each non-employee director (including non-employee directors
holding office on the date of adoption of this Plan) will
automatically receive on each anniversary of his initial
election or appointment to the Board or, in the case of non-
employee directors holding office as of the date of adoption
of this Plan each anniversary of such date, an option to
purchase 2,500 shares of the Common Stock exercisable at a
per share value equal to the fair market value for the
Common Stock on the applicable additional grant date.
Subject to acceleration upon the occurrence of certain
prescribed events, each such option shall 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.
The Two-Thirds Options shall terminate, to the extent not
exercised prior thereto, upon the earlier to occur of (i)
the fourth anniversary of the date of grant and (ii) ninety
days after the cessation of the Optionee's service as a
member of the Board (to the extent vested upon the date of
such cessation). All other options granted to non-employee
directors (including, without limitation, the One-Thirds
Options) shall terminate, to the extent not exercised prior
thereto, upon the earlier to occur of (i) the fifth
anniversary of the date of grant and (ii) ninety days after
the cessation of the Optionee's service as a member of the
Board (to the extent vested upon the date of such
cessation).
-30- 30<PAGE>
SECTION 5. Grant of Options.
(a) Administrators' Discretion. The Administrators
shall have sole and absolute discretionary authority (i) to
determine, authorize, and designate those key employees,
directors and consultants of the Company or its Affiliates
who are to receive options under the Plan, (ii) to determine
the number of shares of Common Stock to be covered by such
options and the terms thereof, and (iii) to determine the
type of option granted: ISO, Nonqualified Option or a
combination of ISO and Nonqualified Options; provided that a
non-employee director may not receive any ISOs. The
Administrators shall thereupon grant options in accordance
with such determinations as evidenced by a written option
agreement. Subject to the express provisions of the Plan,
the Administrators shall have discretionary authority to
prescribe, amend and rescind rules and regulations relating
to the Plan, to interpret the Plan, to prescribe and amend
the terms of the option agreements (which need not be
identical) and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(b) Stockholder Approval. All options granted under
this Plan are subject to, and may not be exercised before,
the approval of this Plan by the affirmative vote of the
holders of a majority of the votes cast at a meeting of the
stockholders or by written consent in accordance with the
laws of the State of New York. If such approval by the
stockholders of the Company is not forthcoming, all options
previously granted under this Plan shall be void.
(c) Limitation on Incentive Stock Options. The
aggregate fair market value (determined in accordance with
Section 6(b) of this Plan at the time the option is granted)
of the Common Stock with respect to which ISOs may be
exercisable for the first time by any Optionee during any
calendar year under all such plans of the Company and its
Affiliates shall not exceed $100,000.
SECTION 6. Terms and Conditions. Each option granted under
the Plan shall be evidenced by an agreement, in a form approved
by the Administrators, which shall be subject to the following
express terms and conditions and to such other terms and
conditions as the Administrators may deem appropriate.
(a) Option Period. The Administrators shall promptly
notify the Optionee of the option grant and a written
agreement shall promptly be executed and delivered by and on
behalf of the Company and the Optionee, provided that the
option grant shall expire if a written agreement is not
signed by said Optionee (or his agent or attorney) and
returned to the Company within 60 days from date of receipt
-31- 31<PAGE>
by the Optionee of such agreement. The date of grant shall
be the date the option is actually granted by the
Administrators, even though the written agreement may be
executed and delivered by the Company and the Optionee after
that date. Each option agreement shall specify the period
for which the option thereunder is granted (which in no
event shall exceed ten years from the date of grant) and
shall provide that the option shall expire at the end of
such period. If the original term of an option is less than
ten years from the date of grant, the option may be amended
prior to its expiration, with the approval of the
Administrators and the Optionee, to extend the term so that
the term as amended is not more than ten years from the date
of grant. In the case of an ISO granted to an individual
who, at the time of grant, owns stock comprising more than
10 percent of the total combined voting power of all classes
of stock of the Company or its Affiliate ("Ten Percent
Stockholder"), such period shall not exceed five years from
the date of grant.
(b) Option Price. The purchase price of each share of
Common Stock subject to each option granted pursuant to the
Plan shall be determined by the Administrators at the time
the option is granted and, in the case of ISOs, shall not be
less than 100% of the fair market value of a share of Common
Stock on the date the option is granted, as determined by
the Administrators. In the case of an ISO granted to a Ten
Percent Stockholder, the option price shall not be less than
110% of the fair market value of a share of Common Stock on
the date the option is granted. The purchase price of each
share of Common Stock subject to a Nonqualified Option under
this Plan shall be determined by the Administrators prior to
granting the option. The Administrators shall set the
purchase price for each share subject to a Nonqualified
Option at such price as the Administrators in their sole
discretion shall determine, provided that the purchase price
of each share of Common Stock subject to a Nonqualified
Option shall not be greater than the fair market value of a
share of Common Stock on the date the option is granted as
determined by the Administrators.
For all purposes under the Plan, the fair market value
of a share of Common Stock on a particular date shall be
equal to the average of the reported high and low bid prices
of the Common Stock for the preceding ten (10) days. In the
event the Common Stock is not actively traded at the time a
determination of its value is required to be made hereunder,
the determination of its fair market value shall be made by
the Administrators in such manner as it deems appropriate.
-32- 32<PAGE>
(c) Exercise Period. The Administrators may provide
in the option agreement that an option may be exercised in
whole, immediately, or is to be exercisable in increments.
However, no portion of any option may be exercisable by an
Optionee prior to the approval of the Plan by the
stockholders of the Company.
(d) Procedure for Exercise. Options shall be
exercised by the delivery of written notice to the Secretary
of the Company setting forth the number of shares with
respect to which the option is being exercised. Such notice
shall be accompanied by cash or cashier's check, bank draft,
postal or express money order payable to the order of the
Company, or at the option of the Administrators, in Common
Stock theretofore owned by such Optionee (or any combination
of cash and Common Stock). Notice may also be delivered by
telefax provided that the purchase price of such shares is
delivered to the Company via wire transfer on the same day
the telefax is received by the Company. The notice shall
specify the address to which the certificates for such
shares are to be mailed. An Optionee shall be deemed to be
a stockholder with respect to shares covered by an option on
the date the Company receives such written notice and such
option payment.
As promptly as practicable after receipt of such written
notification and payment, the Company shall deliver to the
Optionee certificates for the number of shares with respect
to which such option has been so exercised, issued in the
Optionee's name or such other name as Optionee directs;
provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Optionee at the address
specified pursuant to this Section 6(d).
(e) Termination of Employment or Service. If an
employee or consultant to whom an option is granted ceases
to be employed or engaged by the Company for any reason
other than death or disability or if a director to whom an
option is granted ceases to serve on the Board for any
reason other than death or disability, any option which is
exercisable on the date of such termination of employment or
engagement or cessation of service from the Board shall
expire ninety (90) days following such date of such
termination of employment or engagement or cessation of
service from the Board.
(f) Disability or Death of Optionee. In the event of
the determination of disability or death of an Optionee
under the Plan while he is employed or engaged by the
Company or while he serves on the Board, the options
-33- 33<PAGE>
previously granted to him may be exercised (to the extent he
would have been entitled to do so at the date of the
determination of disability or death) at any time and from
time to time, within a three-month period after such
determination of disability or death, by the former
employee, director or consultant, the guardian of his
estate, the executor or administrator of his estate or by
the person or persons to whom his rights under the option
shall pass by will or the laws of descent and distribution,
but in no event may the option be exercised after its
expiration under the terms of the option agreement. An
Optionee shall be deemed to be disabled if, in the opinion
of a physician selected by the Administrators, he is
incapable of performing services for the Company of the kind
he was performing at the time the disability occurred by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be
of long, continued and indefinite duration. The date of
determination of disability for purposes hereof shall be the
date of such determination by such physician. The
Administrators, in their sole discretion, may allow an
Optionee to exercise all or a portion of the Options granted
but unexercised for a longer period than three months after
disability or death.
(g) Assignability. An option shall not be assignable
or otherwise transferable except by will or by the laws of
descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, as amended, or the
rules thereunder. During the lifetime of an Optionee, an
option shall be exercisable only by him.
(h) Incentive Stock Options. Each option agreement
may contain such terms and provisions as the Administrators
may determine to be necessary or desirable in order to
qualify an option designated as an incentive stock option.
(i) No Rights as Stockholder. No Optionee shall have
any rights as a stockholder with respect to shares covered
by an option until the option is exercised by the written
notice and accompanied by payment as provided in clause (d)
above.
(j) Extraordinary Corporate Transactions. The
existence of outstanding options shall not affect in any way
the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations, exchanges, or other changes in the
Company's capital structure or its business, or any merger
or consolidation of the Company, or any issuance of Common
Stock or other securities or subscription rights thereto, or
-34- 34<PAGE>
any issuance of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise. If
the Company recapitalizes or otherwise changes its capital
structure, or merges, consolidates, sells all of its assets
or dissolves (each of the foregoing a "Fundamental Change"),
then thereafter upon any exercise of an option theretofore
granted, the Optionee shall be entitled to purchase under
such option, in lieu of the number of shares of Common Stock
as to which option shall then be exercisable, the number and
class of shares of stock and securities to which the
Optionee would have been entitled pursuant to the terms of
the Fundamental Change if, immediately prior to such
Fundamental Change, the Optionee had been the holder of
record of the number of shares of Common Stock as to which
such option is then exercisable. If (i) the Company shall
not be the surviving entity in any merger or consolidation
(or survives only as a subsidiary of another entity), (ii)
the Company sells all or substantially all of its assets to
any other person or entity (other than a wholly-owned
subsidiary), (iii) any person or entity (including a "group"
as contemplated by Section 13(d) (3) of the Exchange Act)
acquires or gains ownership or control of (including,
without limitation, power to vote) more than 50% of the
outstanding shares of Common Stock, (iv) the Company is to
be dissolved and liquidated, or (v) as a result of or in
connection with a contested election of directors, the
persons who were directors of the Company before such
election shall cease to constitute a majority of the Board,
the Administrators, in their sole discretion, may accelerate
the time at which all or a portion of an Optionee's Options
may be exercised for a limited period of time before or
after a specified date.
(k) Changes in Company's Capital Structure. If the
outstanding shares of Common Stock or other securities of
the Company, or both, for which the option is then
exercisable shall at any time be changed or exchanged by
declaration of a stock dividend, stock split, or combination
of shares, the number and kind of shares of Common Stock or
other securities which are subject to the Plan or subject to
any options theretofore granted, and the option prices,
shall be appropriately and equitably adjusted so as to
maintain the proportionate number of shares or other
securities without changing the aggregate option price.
(l) Acceleration of Options. Except as hereinbefore
expressly provided, (i) the issuance by the Company of
shares of stock of any class of securities convertible into
-35- 35<PAGE>
shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares
or other securities, (ii) the payment of a dividend in
property other than Common Stock or (iii) the occurrence of
any similar transaction, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares
of Common Stock subject to options theretofore granted or
the purchase price per share, unless the Administrators
shall determine in their sole discretion that an adjustment
is necessary to provide equitable treatment to the Optionee.
Notwithstanding anything to the contrary contained in this
Plan, the Administrators may in their sole discretion
accelerate the time at which any option may be exercised,
including, but not limited to, upon the occurrence of the
events specified in this Section 6.
SECTION 7. Amendments or Termination. The Board may amend,
alter or discontinue the Plan, but no amendment or alteration
shall be made which would impair the rights of any Optionee,
without his consent, under any option theretofore granted, or
which, without the approval of the stockholders, would: (i)
except as is provided in Section 6(k) of the Plan, increase the
total number of shares reserved for the purposes of the Plan,
(ii) change the class of persons eligible to participate in the
Plan as provided in Section 4 of the Plan, (iii) extend the
applicable maximum option period provided for in Section 6(a) of
the Plan, (iv) extend the expiration date of this Plan set forth
in Section 14 of the Plan, (v) except as provided in Section 6(k)
of the Plan, decrease to any extent the option price of any
option granted under the Plan or (vi) withdraw the administration
of the Plan from the Administrators.
SECTION 8. Compliance With Other Laws and Regulations. The
Plan, the grant and exercise of options thereunder, and the
obligation of the Company to sell and deliver shares under such
options, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion
of any registration or qualification of such shares under any
federal or state law or issuance of any ruling or regulation of
any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable. Any
adjustments provided for in subparagraphs 6(j), (k) and (l) shall
be subject to any shareholder action required by New York
corporate law.
-36- 36<PAGE>
SECTION 9. Purchase for Investment. Unless the options and
shares of Common Stock covered by this Plan have been registered
under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person
exercising an option under this Plan may be required by the
Company to give a representation in writing that he is acquiring
such shares for his own account for investment and not with a
view to, or for sale in connection with, the distribution of any
part thereof.
SECTION 10. Taxes.
(a) The Company may make such provisions as it may
deem appropriate for the withholding of any taxes which it
determines is required in connection with any options
granted under this Plan.
(b) Notwithstanding the terms of Paragraph 11(a), any
Optionee may pay all or any portion of the taxes required to
be withheld by the Company or paid by him in connection with
the exercise of a nonqualified option by electing to have
the Company withhold shares of Common Stock, or by
delivering previously owned shares of Common Stock, having a
fair market value, determined in accordance with Paragraph
6(b), equal to the amount required to be withheld or paid.
An Optionee must make the foregoing election on or before
the date that the amount of tax to be withheld is determined
("Tax Date"). All such elections are irrevocable and
subject to disapproval by the Administrators.
SECTION 11. Replacement of Options. The Administrators from
time to time may permit an Optionee under the Plan to surrender
for cancellation any unexercised outstanding option and receive
from the Company in exchange an option for such number of shares
of Common Stock as may be designated by the Administrators. The
Administrators may, with the consent of the person entitled to
exercise any outstanding option, amend such option, including
reducing the exercise price of any option to not less than the
fair market value of the Common Stock at the time of the
amendment and extending the term thereof.
SECTION 12. No Right to Company Employment. Nothing in this
Plan, or as a result of any option granted pursuant to this Plan,
shall confer on any individual any right to continue in the
employ of the Company or interfere in any way with the right of
the Company to terminate an individual's employment at any time.
The option agreements may contain such provisions as the
Administrators may approve with reference to the effect of
approved leaves of absence.
-37- 37<PAGE>
SECTION 13. Liability of Company. The Company and any
Affiliate which is in existence, or hereafter comes into
existence, shall not be liable to an Optionee or other persons as
to:
(a) The Non-Issuance of Shares. The non-issuance or
sale of shares as to which the Company has been unable to
obtain from any regulatory body having jurisdiction the
authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and
(b) Tax Consequences. Any tax consequence expected,
but not realized, by any Optionee or other person due to the
exercise of any option granted hereunder.
SECTION 14. Effectiveness and Expiration of Plan. The Plan
shall be effective on the date the Board adopts the Plan. If the
stockholders of the Company fail to approve the Plan within
twelve months of the date the Board approved the Plan, the Plan
shall terminate and all options previously granted under the Plan
shall become void and of no effect. The Plan shall expire ten
years after the date the Board approves the Plan and thereafter
no option shall be granted pursuant to the Plan.
SECTION 15. Non-Exclusivity of the Plan. Neither the
adoption by the Board, nor the submission of the Plan to the
stockholders of the Company for approval, shall be construed as
creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including
without limitation, the granting of restricted stock or stock
options otherwise than under the Plan, and such arrangements may
be either generally applicable or applicable only in specific
cases.
SECTION 16. Governing Law. This Plan and any agreements
hereunder shall be interpreted and construed in accordance with
the laws of the State of New York and applicable federal law.
SECTION 17. Cashless Exercise. The Administrators also may
allow cashless exercises as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Administrators
determine to be consistent with the Plan's purpose and applicable
law. The proceeds from such a payment shall be added to the
general funds of the Company and shall be used for general
corporate purposes.
-38- 38<PAGE>
APPENDIX B
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMTEX SCIENTIFIC CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
DECEMBER 18, 1995
The undersigned appoints Thomas Wollman or S. Amber
Gordon, or either of them, with full power of substitution, to
attend the Annual Meeting of Stockholders of Comtex Scientific
Corporation on December 18, 1995, 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 FOUR nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the FOUR nominees listed
below
C.W. Gilluly, Ed. D., Charles W. Terry, Erik Hendricks
and Robert A. Nigro
INSTRUCTION: To withhold authority for any individual nominee,
write that nominee's name in the space provided below:
_________________________________________________________________
2. Proposal to ratify the selection of Coopers & Lybrand,
L.L.P. as independent accountants for the Company for fiscal
year 1996.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. Proposal to adopt the Comtex Scientific Corporation 1995
Stock Option Plan.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
4. Proposal to amend the Certificate of Incorporation of the
Company to increase the number of authorized shares of
common stock of the Company to 18,000,000.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
-39-<PAGE>
5. Proposal to amend the Certificate of Incorporation of the
Company to eliminate the personal liability of directors of
the Company under certain circumstances.
[ ] 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.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
__________________________________
Stockholder's Signature
__________________________________
Joint Holder's Signature
(If applicable)
Date: ___________________________
When properly executed, this proxy will be voted in the
manner directed herein. If no direction is made, this proxy will
be voted FOR proposals, 2, 3, 4 and 5 and FOR the election of the
nominees of the Board of Directors in the election of directors
and in accordance with the judgment of the person(s) voting the
proxy upon such other matters properly coming before the meeting
and any adjournments thereof. Please sign exactly as name(s)
appear above.
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