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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S 240.14a-11(c) or S 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] No fee required.
[ ] 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, Suite 800
Alexandria, Virginia 22311
October 28, 1997
Dear Fellow Shareholders:
You are cordially invited to attend Comtex Scientific
Corporation's Annual Meeting of Shareholders to be held on
December 11, 1997 at 11:00 a.m. local time at the Radisson Hotel,
5000 Seminary Road, Alexandria, Virginia.
At this meeting, you will be asked to vote, in person or by
proxy, on the following matters: (i) election of the Company's
Board of Directors; (ii) approval of an amendment to the
Company's 1995 Stock Option Plan; (iii) approval of the adoption
of the Company's Employee Stock Purchase Plan; (iv) ratification
of the appointment of Ernst & Young LLP as the Company's
independent accountants; and (v) any other business as may
properly come before the meeting. In addition, we will be
pleased to report on the business of the Company and a discussion
period will be provided for questions and comments of general
interest to shareholders.
Whether or not you are able to attend, it is important that
your shares be represented and voted at this meeting.
Accordingly, please complete, sign and date the enclosed proxy
and mail it in the envelope provided at your earliest
convenience. Your prompt response is very important and would be
greatly appreciated.
Sincerely,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D.
Chairman
/S/ CHARLES W. TERRY
Charles W. Terry
President and
Chief Executive Officer
<PAGE>
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting, please complete,
sign, and return promptly the enclosed proxy in the envelope
provided to ensure that your vote will be counted. You may vote
in person if you so desire even if you have previously sent in
your proxy.
If your shares are held in the name of a bank, brokerage
firm or other nominee, please contact the party responsible for
your account and direct him or her to vote your shares on the
enclosed card.
<PAGE>
COMTEX SCIENTIFIC CORPORATION
Notice of Annual Meeting of Shareholders
December 11, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Comtex Scientific Corporation, a New York
corporation (the "Company"), is scheduled to be held on December
11, 1997 at 11:00 a.m., local time, at the Radisson Hotel located
at 5000 Seminary Road, Alexandria, Virginia 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 approve an amendment to the Company's 1995 Stock
Option Plan to increase the number of shares of Common
Stock reserved for issuance by an additional 1,200,000
shares of Common Stock, as adopted by the Company's
Board of Directors (the "Board") on September 15, 1997;
3. To consider and vote upon a proposal to approve the
Company's 1997 Employee Stock Purchase Plan, as
adopted by the Board on September 15, 1997;
4. To ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal
1998; and
5. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on
October 24, 1997 are entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. All shareholders are
cordially invited to attend the Annual Meeting in person.
However, to assure your representation at the meeting, you are
urged to complete, sign and date the enclosed form of proxy and
return it promptly in the envelope provided. Shareholders
attending the meeting may revoke their proxy and vote in person.
FOR THE BOARD OF DIRECTORS
/S/ S. AMBER GORDON
S. Amber Gordon
Corporate Secretary
Alexandria, Virginia
October 28, 1997
<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
Shareholders to be held on December 11, 1997 at 11:00 a.m. local
time at the Radisson Hotel, 5000 Seminary Road, Alexandria,
Virginia, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Shareholders. The
purposes of the Annual Meeting and the matters to be acted upon
are set forth in the accompanying Notice of Annual Meeting of
Shareholders. The Board of Directors is not currently aware of
any other matters that will come before the meeting.
Proxies for use at the Annual Meeting are being solicited
by the Board of Directors of the Company. These proxy
solicitation materials are first being mailed on or about
November 6, 1997 to all shareholders entitled to vote at the
Annual Meeting. Proxies will be solicited chiefly by mail. The
Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy
material to the beneficial owners of shares and will reimburse
them for their expenses in so doing. Should it appear desirable
to do so in order to ensure adequate representation of shares at
the Annual Meeting, officers, agents and employees of the Company
may communicate with shareholders, banks, brokerage houses and
others by telephone, facsimile or in person to request that
proxies be furnished. All expenses incurred in connection with
this solicitation will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting and a return
envelope for the proxy are enclosed. Shareholders may revoke the
authority granted by their execution of proxies at any time
before their effective exercise by filing with the Secretary of
the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by voting in person at the Annual
Meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with
the choice or instructions specified thereon. If no
specifications are given, the proxies intend to vote the shares
represented thereby in favor of each of the nominees for director
<PAGE>
listed under Election of Directors below and to approve Proposals
No. 2, 3 and 4 as set forth in the accompanying Notice of Annual
Meeting of Shareholders and in accordance with their best
judgment on any other matters which may properly come before the
Annual Meeting.
Record Date and Voting Rights
Only shareholders of record at the close of business on
October 24, 1997 are entitled to notice of and to vote at the
Annual Meeting. As of October 24, 1997, 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.
Proposals Number 2, 3 and 4, proposed amendment of the
Company's 1995 Stock Option Plan, consideration of a proposal to
approve the Company's Employee Stock Purchase Plan and
ratification of Ernst & Young LLP as the Company's independent
accountants, require the approval of the holders of a majority of
the votes cast at the Annual Meeting. For this purpose,
abstentions and non-votes will be deemed shares not voted on such
matters, will not count as votes for or against the proposals,
and will not be included in calculating the number of votes
necessary for the approval of such matters.
All other matters to come before the Annual Meeting 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.
Votes at the Annual Meeting will be tabulated by Inspectors
of Election appointed by the Company.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October
24, 1997 regarding the beneficial ownership of the Company's
Common Stock of (i) each person known to the Company to be the
beneficial owner, within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), of more than 5% of the outstanding shares of Common Stock,
(ii) each director of the Company, (iii) each executive officer
of the Company named in the Summary Compensation Table (see
"Executive Compensation") and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated,
the address of each named beneficial owner is c/o Comtex
Scientific Corporation, 4900 Seminary Road, Suite 800,
Alexandria, Virginia 22311. Except to the extent indicated in
the footnotes, each of the beneficial owners named below has sole
voting and investment power with respect to the shares listed.
The shares shown as beneficially owned by Dr. Gilluly include
certain options, the exercise of which could result in a change
in control of the Company. See "Executive Compensation - Board
of Directors Interlocks and Insider Participation."
<TABLE>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership <F1> of Class
<S> <C> <C>
AMASYS Corporation
4900 Seminary Road, St. 800
Alexandria, VA 22311 4,693,940 <F2><F3> 59.8 %
C.W. Gilluly, Chairman 5,281,006 <F3><F4> 49.8 %
Erik Hendricks, Director 14,999 <F5> *
Robert A. Nigro, Director 79,241 <F5> 1.0 %
Charles W. Terry, Director,
President and
Chief Executive Officer 467,457 <F6> 5.6 %
All Directors and
Executive Officers as a group
(8 Persons) 6,007,401 <F7> 53.4 %
________________________
* Less than 1%.
<PAGE>
<FN>
<F1> Beneficial ownership is direct unless otherwise indicated.
<F2> AMASYS Corporation ("AMASYS") succeeded to the assets and
liabilities of Infotechnology, Inc. ("Infotech"), effective
January 2, 1997, which assets included 4,693,940 shares of
the Company's Common Stock.
<F3> Includes 2,540,503 shares of the Company's Common Stock
which may be acquired by Dr. Gilluly and his wife, Marny
(the "Gillulys"), pursuant to a Stock Option Agreement
among AMASYS, Pacific Telecommunications Systems, Inc., a
wholly owned subsidiary of AMASYS ("PTSI"), and the
Gillulys. See "Executive Compensation - Board of Directors
Interlocks and Insider Participation."
<F4> Includes 2,540,503 shares which may be acquired pursuant to
a Stock Option Agreement between the Company and the
Gillulys. Also includes 200,000 shares which may be
acquired by Dr. Gilluly upon the exercise of vested options
granted under the Comtex Scientific Corporation 1995 Stock
Option Plan.
<F5> Includes 14,999 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan; options with
respect to 6,666 of such shares are subject to shareholder
approval of the proposed amendment to the Company's 1995
Stock Option Plan.
<F6> Includes 458,457 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan; options with
respect to 65,724 of such shares are subject to shareholder
approval of the proposed amendment to the Company's 1995
Stock Option Plan.
<F7> Includes 173,698 shares not reported in Notes (3) through
(6), above, which may be acquired upon the exercise of
vested options granted under the Comtex Scientific
Corporation 1995 Stock Option Plan; options with respect to
71,699 of such shares are subject to shareholder approval
of the proposed amendment to the Company's 1995 Stock
Option Plan.
</TABLE>
<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. Each person
named below is now a director of the Company. In the event any
of these nominees shall be unable to serve as a director, the
shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the
nominee. All nominees have consented to be named and have
indicated their intent to serve if elected. The Board of
Directors has no reason to believe that any of the nominees will
be unable to serve or that any vacancy on the Board of Directors
will occur.
<TABLE>
The names of the nominees and certain other information
about them are set forth below:
<CAPTION>
Director
Nominee Age Since Office Held with
Company
<S> <C> <C> <C>
C.W. Gilluly, Ed.D. 51 1992 Chairman of the Board
Erik Hendricks 53 1991 Director
Robert Nigro 48 1991 Director
Charles W. Terry 46 1994 President and
Chief Executive Officer
</TABLE>
C.W. GILLULY, Ed.D., has served as Chairman of the Board of
the Company since June 1992. Dr. Gilluly served as President of
the Company from June 1992 until May 1993, and as Chief Executive
Officer from June 1992 until September 1997. Dr. Gilluly has
served as Chairman of the Board and President of AMASYS and its
predecessor, Infotechnology, Inc., since June 1992. AMASYS
holds 4,693,940 (approximately 60%) of the issued and outstanding
shares of the Company. 2,540,503 shares of the Company's Common
Stock owned by AMASYS are subject to option by Dr. Gilluly. Dr.
Gilluly and his spouse (the "Gillulys") also directly own options
to acquire an additional 2,540,503 shares of the Company's Common
Stock. See "Executive Compensation - Board of Directors
Interlocks and Insider Participation." Dr. Gilluly also is
<PAGE>
Chief Executive Officer and Chairman of the Board of Hadron,
Inc., a high technology technical services corporation.
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. Mr. Nigro also
serves as a director of AMASYS.
CHARLES W. TERRY was appointed President of the Company in
August 1994 and director in December 1994. Mr. Terry was
appointed Chief Executive Officer in September 1997. From
August 1992 until he joined the Company, Mr. Terry was President
of Corporate Cost Management, Inc., an organization specializing
in cost management and decisions support software for the
healthcare industry. From March 1992 to August 1992, Mr. Terry
served as Vice President of Sales and Marketing for Health
Payment Review, Inc., a corporation specializing in containment
software for health insurance and managed care companies. From
1977 to 1991, Mr. Terry held various key leadership posts in the
fields of development, sales, marketing and general management at
CompuServe, a leading provider of computer-based information and
communication services.
Executive Officers
<TABLE>
The following table contains information as of October 24,
1997 as to the executive officers of the Company who are not also
directors of the Company:
<CAPTION>
Officer Office Held
Name Since With Company
<S> <C> <C>
Donald E. Ziegler 1996 Senior Vice President and
Chief Financial Officer
Deborah W. Ikins 1996 Vice President, Sales
Thomas E. Christian 1996 Vice President and
Chief Information Officer
S. Amber Gordon 1995 Secretary
<PAGE>
DONALD E. ZIEGLER (48) was appointed Senior Vice President,
Chief Financial Officer and Treasurer of the Company in December
1996. From 1982 through 1996, Mr. Ziegler was an executive
officer of Computer Data Systems, Inc. Most recently he served
as Treasurer and Secretary, where he directed corporate finance,
bank relations, insurance and risk management, financial analysis
and tax planning. Mr. Ziegler is a certified public accountant,
and prior to 1982, was with the public accounting firm of Price
Waterhouse LLP.
DEBORAH W. IKINS (40) joined the Company in 1993 and was
appointed Vice President of Sales in December 1996. From 1991
until 1994, Ms. Ikins was with Micro Research Industries, a
division of Telecommunications Industries, Inc., in various sales
and customer service management positions. Prior to Micro
Research, Ms. Ikins served in customer service management
positions with Basis, Inc., a financial database management
company.
THOMAS E. CHRISTIAN (37) joined the Company as Vice
President and Chief Information Officer in December 1996. From
1994 through 1996, Mr. Christian was the Director of Management
and Marketing Information Systems for the National Association of
Broadcasters, and from 1990 through 1994, he worked in various
technical management positions for the American Red Cross.
S. AMBER GORDON (43) was appointed Secretary of the Company in
May 1996. Ms. Gordon is Executive Vice President and Secretary
of Hadron, Inc., which she joined as Vice President in May 1991.
Ms. Gordon receives no compensation from the Company but receives
compensation from Hadron, Inc., who invoices the Company for
time devoted by Ms. Gordon to the Company's affairs.
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 four meetings during
the Company's fiscal year ended June 30, 1997. Each director
attended in person or telephonically at least 75% of the
meetings held by the Board of Directors.
During fiscal year 1997, the Board of Directors' Audit
Committee was comprised of Messrs. Hendricks and Nigro. The Audit
Committee recommends engagement of the Company's independent
auditors, is primarily responsible for approving the services
performed by the Company's independent auditors and for reviewing
and evaluating the Company's accounting principles and its system
of internal accounting controls and has general responsibility in
connection with related matters. The Audit Committee met one
time during fiscal 1997.
<PAGE>
The Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee"), which held two meetings
in fiscal 1997, is comprised of Messrs. Hendricks and Nigro. The
Compensation Committee evaluates management's recommendations and
makes its own recommendations to the Board of Directors
concerning the compensation of the Company's executive officers.
It is also responsible for the formulation of the Company's
executive compensation policy and the research, analysis and
subsequent recommendation regarding the administration of the
Company's 1995 Stock Option Plan.
The Board of Directors does not have a Nominating Committee
or an Executive Committee.
During fiscal year 1997, 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 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 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE DIRECTORS NAMED ON THE ENCLOSED PROXY.
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO THE 1995 STOCK OPTION PLAN
On September 15, 1997, the Board of Directors adopted,
subject to shareholder approval, an amendment to the Comtex
Scientific Corporation 1995 Stock Option Plan to increase the
number of shares reserved for issuance thereunder from 1,200,000
to 2,400,000. At the Annual Meeting, the shareholders are being
asked to approve this amendment to the 1995 Stock Option Plan.
Description of the 1995 Stock Option Plan
The 1995 Stock Option Plan provides for the issuance of
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended and non-qualified stock
options, to purchase (as proposed to be amended) an aggregate of
up to 2,400,000 shares of Common Stock. The 1995 Stock Option
Plan permits the grant of options to key employees, consultants
and directors of the Company.
The 1995 Stock Option Plan is administered by the
Compensation Committee consisting of directors Hendricks and
Nigro. Each of the members of the Committee is a "disinterested"
person for purposes of Rule
16b-3. Subject to the provisions of the 1995 Stock Option Plan,
the Compensation Committee has full and final authority to select
the participants to whom awards are to be granted thereunder, to
grant such awards and to determine the terms and conditions of
such awards, including vesting and exercise price. The 1995
Stock Option Plan also provides that the Compensation Committee
may accelerate the time at which all or a portion of an
optionee's options may be exercised in the event of a change in
control of the Company.
Each option is evidenced by a written agreement in a form
approved by the Compensation Committee. Options granted under
the 1995 Stock Option Plan generally are not transferable by the
optionee other than by will or by the laws of descent and
distribution and each option is exercisable, during the lifetime
of the optionee, only by the optionee. Key employees, including
employee directors, and consultants of the Company or any of its
subsidiaries are eligible to be considered for the grant of
awards under the 1995 Stock Option Plan.
Under the 1995 Stock Option Plan, the exercise price of an
incentive stock option must be at least equal to 100% of the fair
market value of the Common Stock on the date of grant (110% of
the fair market value in the case of options granted to employees
who are 10% shareholders). The exercise price of a non-qualified
stock option must be not less than the par value of a share of
the Common Stock on the date of grant. The term of an incentive
<PAGE>
or non-qualified stock option may not exceed ten years (five
years in the case of an incentive stock option granted to a 10%
shareholder).
Each non-employee director elected or appointed to the
Board of Directors automatically receives on the date of his or
her first initial appointment to the Company's Board of
Directors, an option to purchase 10,000 shares of the Company's
Common Stock (the "Initial Option") at a per share exercise price
equal to the fair market value of the Common Stock on the initial
grant date. Furthermore, each non-employee Director
automatically receives on each anniversary of his initial
election or appointment to the Company's Board of Directors or,
in the case of current directors each anniversary of the date the
1995 Stock Option Plan was adopted by the Board of Directors, an
option to purchase 10,000 shares of the Company's Common Stock
exercisable at a per share value equal to the fair market value
for the Common Stock on the applicable additional grant date to
the extent that options remain available under the 1995 Stock
Option Plan. Subject to acceleration upon the occurrence of
certain prescribed events, such options become exercisable as to
one-third upon the date of grant, one-third upon the first
anniversary of the date of grant and one-third upon the second
anniversary of the date of grant. Each option terminates, to the
extent not exercised prior thereto, upon the earlier to occur of
(i) the tenth anniversary of grant and (ii) ninety days after the
cessation of the optionee's service as a member of the Board of
Directors (to the extent vested upon the date of such cessation).
The Board of Directors may alter, amend, suspend or
terminate the 1995 Stock Option Plan, provided that no such
action shall deprive an optionee, without his consent, of any
option granted to the optionee pursuant to the 1995 Stock Option
Plan or of any of his rights under such option. Provisions
related to automatic grants of options to non-employee directors
may not (with limited exceptions) be amended more frequently than
once every six months and no amendment to such provisions, unless
approved by the shareholders of the Company, shall become
effective earlier than six months after Board of Directors'
approval. Except as provided in the 1995 Stock Option Plan, no
amendment by the Board of Directors, unless taken with the
approval of the shareholders may (i) materially increase the
benefits accruing to participants under the 1995 Stock Option
Plan, (ii) materially increase the number of securities which may
be issued under the 1995 Stock Option Plan or (iii) materially
modify the requirements as to eligibility for participation in
the 1995 Stock Option Plan.
<PAGE>
As all of the directors and executive officers of the
Company are eligible for grants of options under the 1995 Stock
Option Plan, each such person has a personal interest in the
approval of the proposed amendment. On September 15, 1997, the
Compensation Committee approved the grant, to 14 employees of the
Company, of options to acquire up to 266,300 shares of Common
Stock; included in these awards were grants to Mr. Terry of
options to acquire 70,000 shares, to Mr. Ziegler of options to
acquire 35,100 shares, to Ms. Ikins and Mr. Christian of options
for each to acquire 30,000 shares and to Ms. Gordon of options to
acquire 5,000 shares, at an exercise price of $.22 per share.
All of such grants were made subject to shareholder approval of
the amendment proposed hereby; in the event the shareholders do
not approve the proposed amendment, all such grants will be void.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
COMTEX SCIENTIFIC CORPORATION 1995 STOCK OPTION PLAN.
<PAGE>
PROPOSAL NO. 3
APPROVAL OF THE COMTEX SCIENTIFIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
Introduction
The board believes it is desirable that the employees of
the Company and its designated subsidiaries have a financial
interest in the Company's performance. As a result, on September
15, 1997, the Board adopted the Comtex Scientific Corporation
1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"),
subject to the approval of holders of a majority of the
outstanding Common Stock represented at the Annual Shareholders'
Meeting. The Stock Purchase Plan is intended to provide a means
through which the Company can encourage and assist employees of
the Company and its subsidiaries in acquiring a stock ownership
interest in the Company in order to assist the Company and its
subsidiaries in retaining the services of its employees, to
secure and retain the services of new employees, and to provide
incentives for such employees to exert maximum efforts for the
success of the Company.
The following summary of the Stock Purchase Plan is
qualified in its entirety by the full text of the Stock Purchase
Plan, which is attached to this Proxy Statement as Exhibit I.
Capitalized terms used in this proposal but not defined herein
shall have the meanings assigned to them in Exhibit I.
Purpose
The purpose of the Stock Purchase Plan is to provide a
means by which employees of the Company and its subsidiaries can
be given an opportunity to purchase the Company's Common Stock
through payroll deductions. The Stock Purchase Plan is an
employee stock purchase plan under Internal Revenue Code
<PAGE>
(the"Code") Section 423. That section provides certain tax benefits
to employees, as explained below. The Stock Purchase Plan
authorizes the reservation of 400,000 shares of Common Stock for
issuance under the Stock Purchase Plan.
Administration
The Stock Purchase Plan is administered by the Compensation
and Stock Option Committee of the Board (the "Compensation
Committee"). The Compensation Committee has the full power,
discretion and authority to interpret and administer the Stock
Purchase Plan and the rights granted under it. The Compensation
Committee may delegate administrative functions to employees of
the Company.
Eligibility
Once the Stock Purchase Plan becomes effective, any person
who is employed by the Company or its subsidiaries is eligible to
participate in the Stock Purchase Plan on the first day of any
January or July following the employee's commencement of
employment with the Company. An employee is not eligible for the
grant of any rights under the Stock Purchase Plan if, immediately
after such grant, the employee would own, directly or indirectly,
stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or of any parent or
subsidiary of the Company, including any stock that the employee
may purchase under all outstanding options.
Participation in the Plan
Eligible employees become participants in the Stock
Purchase Plan by electing payroll deductions in increments of not
less than $10 per pay period.
Periods of Plan Operation
The Plan will be operated over two semi-annual purchase
periods each year. One period will begin on the first trading
day of January and end on the last trading day of June. The
second period will begin on the first trading day of July and end
on the last trading day of December. The first trading days of
January and July are each a "Grant Date" and the last trading
days of June and December are each an "Investment Date".
Purchase Price
The purchase price per share for the semi-annual period at
which shares are sold under the Stock Purchase Plan equals the
lower of (a) 85% of the fair market value of a share of Common
Stock on the Grant Date for the semi-annual period, or (b) 85% of
the fair market value of a share of Common Stock on the
Investment Date for that semi-annual period.
<PAGE>
The Compensation Committee, at its discretion, may increase the
percentage above 85%.
Payroll Deductions
Payroll deductions are accumulated during each semi-annual
period and applied towards the purchase of Common Stock of the
Company on the Investment Date for that semi-annual period. An
employee may terminate his participation in the Stock Purchase
Plan at any time, but may not participate again until the next
Grant Date. A participant may decrease his or her payroll
deduction one time in each semi-annual period. However, an
election to decrease may not be revoked for the remainder of the
semi-annual period.
Purchase of Stock
By executing an election to participate in the Stock
Purchase Plan, the employee is entitled to purchase shares under
such plan. On each Investment Date, the Company will apply the
funds in the participant's account to the purchase of shares of
its Common Stock in full and fractional shares. If the aggregate
number of shares to be purchased on any Investment Date would
exceed the maximum aggregate number available under the Stock
Purchase Plan, the shares available will be allocated among such
participants in proportion to their contributions during the
semi-annual period. The shares may be purchased from the Company
or on the open market, at the discretion of the Company. If
shares are purchased on the open market, the Company pays any
brokerage and other costs and discount below the market price.
Termination of Employment
An employee's participation in the Stock Purchase Plan will
be terminated when the employee retires, terminates active
employment, or dies. The employee will receive a certificate for
the shares in his Investment Account and a cash refund of his
Payroll Deduction Account.
Restrictions on Transfer
Rights granted under the Stock Purchase Plan are not
transferable and may be exercised only by the person to whom such
rights are granted, except: (a) to the extent that an employee is
permitted to designate a beneficiary as provided in the Stock
Purchase Plan, (b) to the extent permitted by will or the laws of
descent and distribution if no such beneficiary has been
designated, and (c) pursuant to a qualified domestic relations
order.
<PAGE>
Duration, Amendment and Termination
The Compensation Committee or the Board may suspend or
terminate the Stock Purchase Plan at any time. Unless earlier
terminated by action of the Board or the Compensation Committee,
the Stock Purchase Plan will remain in effect until such time as
no shares of Common Stock remain available for issuance under the
Stock Purchase Plan and the Company and employees have no further
rights or obligations under the Stock Purchase Plan.
The Compensation Committee or the Board may amend the Stock
Purchase Plan at any time. Any amendment of the Stock Purchase
Plan must be approved by the shareholders within twelve (12)
months of its adoption by the Board if the amendment would: (a)
increase the number of shares of Common Stock reserved for
issuance under the Stock Purchase Plan (other than for
appropriate adjustments for stock dividend, stock split, reverse
stock split, recapitalization, reorganization, merger,
consolidation, acquisition, separation or like change in the
capital structure of the Company), (b) modify the requirements
relating to eligibility for participation in the Stock Purchase
Plan, or (c) modify any other provision of the Stock Purchase
Plan in a manner that would materially increase the benefits
accruing to participants under the Stock Purchase Plan, if such
approval is required in order to comply with the requirements of
Code Section 423.
Federal Income Tax Information
Rights granted under the Stock Purchase Plan are intended
to qualify under the provisions of Code Sections 421 and 423.
Under these provisions, a participant will be taxed on amounts
withheld for the purchase of shares as if such amounts were
actually received. Other than this tax, no income will be
taxable to a participant until disposition of the shares
acquired, and the method of taxation will depend upon the holding
period of the purchased shares.
If the stock is disposed of at least two years after the
Grant Date and more than one year after the stock is acquired by
the participant on an Investment Date, then the lesser of (a) the
excess of the fair market value of the stock at the time of such
disposition over the purchase price, or (b) the excess of the
fair market value of the stock as of the Grant Date over the
purchase price (determined as of the Grant Date) will be treated
as ordinary income. Any further gain or any loss will be taxed
as a mid-term capital gain or loss if held 18 months or less from
the Investment Date or long-term capital gain or loss if held
more than 18 months from the Investment Date.
<PAGE>
If the stock is sold or disposed of before the expiration
of either of the holding periods described above, then the excess
of the fair market value of the stock on the Investment Date over
the purchase price will be treated as ordinary income at the time
of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance
of any gain will be treated as capital gain. Even if the stock is
later disposed of for less than its fair market value on the date
of purchase, the same amount of ordinary income is attributed to
the participant, and a capital loss will be recognized equal to
the difference between the sales price and the fair market value
of the stock on such purchase date. Any capital gain or loss
will be long-term if the stock is held for more than 18 months,
mid-term if held more than one year, or short-term if held one
year or less.
There are no federal income tax consequences to the Company
by reason of the grant or exercise of rights under the Stock
Purchase Plan. The Company generally is entitled to a deduction
to the extent amounts are taxed as ordinary income to a
participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE COMTEX SCIENTIFIC CORPORATION 1997 EMPLOYEE STOCK PURCHASE
PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst &
Young LLP ("Ernst & Young") as the Company's independent
accountants for the fiscal year ending June 30, 1998. Although
action by the shareholders in this matter is not required, the
Board of Directors believes it is appropriate to seek shareholder
ratification of this appointment in light of the critical role
played by independent accountants in maintaining the integrity of
Company financial controls and reporting.
A representative of Ernst & Young is expected to attend the
Annual Meeting. The representative will have the opportunity to
make a statement, if he or she so desires, and will be available
to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY
FOR FISCAL YEAR 1998.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
</TABLE>
<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, 1997:
<CAPTION>
Annual Compensation Long-Term
Compensation
Awards
Stock
Name and Fiscal Options All Other
Principal Position Year Salary($) Bonus($) Granted Compensation
<S> <C> <C> <C> <C> <C>
C.W. Gilluly, <F1> 1997 $ 49,504 - - -
Chairman and 1996 - - 200,000<F3> -
Chief Executive
Officer 1995 - - - -
Charles W. Terry <F2> 1997 $133,375 $50,939<F4> 127,175<F3> -
President 1996 $125,060 $40,335<F4> 392,733<F3> -
1995 $108,923 - - -
__________________________________
<FN>
<F1> Dr. Gilluly served as President of the Company until May
1993 and continues to serve the Company as its Chairman. He
served as Chief Executive Officer from June 1992 to
September 1997. Dr. Gilluly received no compensation from
the Company for his past services. For fiscal 1997, Dr.
Gilluly received annualized compensation of $50,000 for his
services. See "Executive Compensation - Board of Directors
Interlocks and Insider Participation."
<F2> Mr. Terry was appointed President of the Company in August,
1994. He was appointed Chief Executive Officer in September
1997.
<F3> Options granted pursuant to the Company's 1995 Stock Option
Plan. See "Executive Compensation - Stock Option Grants."
<F4> The Company paid, in fiscal year 1996, a $30,000 bonus
awarded for fiscal 1995 and $10,335 of an $18,325 bonus
awarded for fiscal year 1996. The balance of $7,990 was
paid in fiscal 1997, as well as $42,949 of the $84,115
fiscal year 1997 bonus awarded.
</TABLE>
<PAGE>
Stock Option Grants
<TABLE>
The following table provides details regarding all stock
options granted to the named executive officers during the fiscal
year ended June 30, 1997.
Option Grants in Fiscal Year 1997
<CAPTION>
Number of % of Total Potential
Shares Options Realizable Value at Assumed
Underlying Grant to Annual Rates of Stock Price
Options Employees in Exercise Expiration Appreciation of Option Term <F1>
Name Granted (#) Fiscal Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
C.W. Gilluly - - - - - -
Charles W. Terry 127,175<F2> 33.1% $.19 05/12/2007 $15,196 $38,510
________________________________
<FN>
<F1> Amounts represent hypothetical gains that could be achieved
if exercised at end of the option term. The dollar amounts
under these columns assume 5% and 10% compounded annual
appreciation in the Common Stock from the date the
respective options were granted. These calculations and
assumed realizable values are required to be disclosed
under Securities and Exchange Commission rules and,
therefore, are not intended to forecast possible future
appreciation of Common Stock or amounts that may be
ultimately realized upon exercise. The Company does not
believe this method accurately illustrates the potential
value of a stock option.
<F2> Options vest one-third upon the date of grant, and
one-third each on the first and second anniversaries of the
date of grant, and expire 10 years after the grant date.
The option exercise price is 100% of the fair market value
on the date of grant. Options are exercisable for a period
of 90 days after termination of employment to the extent
vested at that time.
</TABLE>
<PAGE>
Year-End Option Values
The following table sets forth certain information regarding
the value of unexercised options held by the Chairman and Chief
Executive Officer and the President of the Company as of June 30,
1997.
<TABLE>
Fiscal Year-End Option Values
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1997 at June 30, 1997<F1>
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
C.W. Gilluly 2,740,503 0 $ 753,638 0
Charles W. Terry 435,124 84,784 $ 115,844 $15,685
__________________________
<FN>
<F1> Represents the difference between the exercise price of the
outstanding options and the closing bid price of the Common Stock
on June 30, 1997, which was $.375 per share. Options that have
an exercise price greater than the fiscal year-end market value
are not included in the value calculation.
</TABLE>
Stock Option Plan
In October 1995, the Board of Directors approved the Comtex
Scientific Corporation 1995 Stock Option Plan, which was approved
by shareholders in December 1995. The 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.
Compensation of Directors
During fiscal year 1997, the Company's directors were
reimbursed for travel expenses in connection with attendance at
Board of Directors' meetings. Non-employee directors of the
Company also received a fee of $400 for each Board of Directors'
meeting attended. Employee directors did not receive additional
compensation for Board of Directors' meeting attendance. The
Company's directors did not receive any compensation for special
assignments during fiscal year 1997.
<PAGE>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. In May
1997, the Compensation Committee agreed to extend the contract on
an annual basis. The agreement provides that Mr. Terry is to be
paid an annual salary of $139,000, 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 the Company
terminates his employment or determines not to renew his
employment agreement, unless his termination is for reasons of
gross negligence, wilful misconduct, the commission of a felony,
or a crime of moral turpitude. The agreement provided for the
issuance to Mr. Terry of 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. Subject to
shareholder approval of the amendment to the 1995 Stock Option
Plan, in May 1997 and September 1997, the Compensation Committee
recommended, and the Board ratified, the grants to Mr. Terry of
options to acquire an additional 127,125 and 70,000 shares,
respectively, of the Company's Common Stock. 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 believes its compensation policies are
designed to provide competitive levels of compensation that
integrate salary with the Company's annual and long-term
quantitative and qualitative performance factors, reward above-
average corporate performance, recognize individual initiative
and achievements and assist the Company in attracting and
retaining qualified executives.
The Company establishes compensation based on both objective
and subjective criteria. Objective criteria include actual
versus target annual operating budget performance and actual
versus target revenue growth, either as to the Company as a
whole, or as to the officer's particular operating unit.
Subjective performance criteria encompass evaluation of each
officer's initiative and contribution to overall corporate
performance, the officer's managerial ability, and the officer's
performance in any special projects that the officer may have
undertaken.
<PAGE>
The Company also endorses the position that stock ownership
by management and stock-based performance compensation
arrangements are beneficial in aligning managements' and
shareholders' interests in the enhancement of shareholder value
and therefore uses its 1995 Stock Option Plan to recruit and
retain senior management.
1997 Compensation for the Chairman and Chief Executive Officer
Dr. Gilluly, the Company's Chairman and Chief Executive
Officer during fiscal 1997, received $49,504 for his services. In
prior years, Dr. Gilluly did not receive any compensation for his
services. The Company has agreed to compensate Dr. Gilluly at
the rate of $55,000 for the fiscal 1998 year. Dr. Gilluly does
not have an employment agreement or severance agreement with the
Company. Under the Company's executive compensation philosophy
and program, the total compensation mix for senior executives
emphasizes longer-term rewards in the form of stock options. In
1995, the Committee granted Dr. Gilluly non-qualified stock
options, which are now fully vested, under the 1995 Stock Option
Plan to purchase a total of 200,000 shares of the Company's
Common Stock at the market price on the date of grant. No
subsequent grants of options have been made to Dr. Gilluly.
1997 Compensation for the President
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 1997 was determined by the terms
of his employment agreement. The Compensation Committee
believes that Mr. Terry's employment agreement follows the
Company's compensation goals and bases his compensation upon both
objective quantitative performance factors (a bonus based upon
his meeting annual gross revenue and net income goals) and other
non-performance based elements (a base annual salary).
Submitted by the Compensation and Stock Option Committee
Erik Hendricks
Robert A. Nigro
<PAGE>
Board of Directors Interlocks and Insider Participation
General. Dr. Gilluly serves as Chairman of the Board of the
Company. Dr. Gilluly also serves as Chairman and Chief Executive
Officer of AMASYS, the Company's majority (approximately 60%)
shareholder.
AMASYS, in addition to being the Company's majority
shareholder, is also the majority shareholder (approximately 82%)
of Telecommunications Industries, Inc. ("TII"), which has ceased
to conduct business operations. Dr. Gilluly is Chairman and
Chief Executive Officer of TII. Dr. Gilluly is also Chairman and
Chief Executive Officer of Hadron, Inc., of which AMASYS owns
approximately 12% of the outstanding shares. During fiscal year
1997, the following related party transactions occurred.
Corporate Services Provided by/to Hadron, Inc.
The Company contracts with Hadron, Inc. for corporate and
shareholder services. Charges for such services are based on
time and material expended by Hadron personnel in providing such
services and amounted to approximately $34,000 for the fiscal
year ended June 30, 1997. Hadron subleases office space from the
Company at the rental rate paid by the Company to its landlord
and also shares certain office-related expenses. Total service
charges to Hadron during the fiscal year ended June 30, 1997
amounted to approximately $24,000.
Administrative Services Provided by/to AMASYS Corporation.
The Company performed certain general and administrative
services for AMASYS which the Company billed AMASYS approximately
$9,000 during the fiscal year ended June 30, 1997.
TII Sublease
In April 1996, the Company terminated its sublease with TII
and signed a lease directly with the owner of the building for
essentially the identical space it had been renting from TII. To
meet the requirement for the Company to deliver a six-month
facility deposit and a build-out deposit under the new lease, and
to satisfy other MRI liabilities (for which the Company is
indemnified - see Acquisition and Divestiture of Micro Research
Industries, below), the Company executed a demand note in the
amount of $147,422 payable to Dr. Gilluly (the "Gilluly Note").
The Gilluly Note is due on demand but in no event later than
April 11, 1998, and is collateralized by the Company's accounts
receivable, now existing and in the future arising, and all
proceeds of those accounts. The Gilluly Note bears interest on
the principal amount outstanding at a rate of eleven and one half
percent (11.5%) per annum and interest is payable monthly.
Approximately $14,500 of interest expense was incurred on the
Gilluly Note during the year ended June 30, 1997. In September
1997, the Company repaid all principal and interest amounts due
on the Gilluly Note.
<PAGE>
Acquisition and Divestiture of Micro Research Industries
During fiscal year 1995 the Company acquired certain assets
and assumed certain liabilities of TII representing substantially
all the assets of TII's sole operating division, Micro Research
Industries ("MRI") (the "Acquisition"). MRI provided sales,
leasing and maintenance support of computer hardware and software
primarily to the U.S. House of Representatives. At the time of
the Acquisition, Infotech was a majority shareholder of both the
Company and of TII, and C.W. Gilluly served as the Chairman and
Chief Executive Officer of the Company, Infotech and TII. The
terms of the Acquisition, through a related Put Agreement (the
"Put"), provided that the Company could, upon the failure of
certain conditions, require TII to repurchase all or any portion
of the assets acquired and to assume the liabilities related to
MRI. On March 25, 1996, the Company exercised the Put and
transferred to TII all the assets and liabilities associated with
MRI.
In connection with the Acquisition, the Company entered into
a $1 million secured credit facility with Princeton Capital
Finance Company, LLP ("PrinCap"). As partial consideration for
the agreement by Dr. and Mrs. Gilluly to personally guarantee the
PrinCap financing and to make certain loans to TII prior to the
PrinCap financing, Infotech and Pacific Telecommunications
Systems, Inc. ("PTSI"), its wholly-owned subsidiary, granted an
option to the Gillulys, expiring on February 20, 2002, to
purchase 2,540,503 shares of Common Stock of the Company owned by
Infotech and PTSI at an exercise price of $.10 per share.
The Acquisition required the Company to grant to the
Gillulys an option (the "Gilluly Option") to acquire 2,540,503
shares of the Company's Common Stock at an exercise price of $.10
per share. The Gilluly Option expires on February 20, 2002.
Shortly after the Company exercised the Put, TII sold to a
third-party the MRI assets that the Company had transferred to
TII, which sale PrinCap claimed represented an event of default
under the PrinCap Financing Agreement. In July, 1996, the
Company and PrinCap consolidated the $244,449 outstanding under
the PrinCap Financing Agreement into a single Note collateralized
by MRI receivables from the U.S. House of Representatives which
had been pledged to PrinCap. In October, 1996, TII commenced
litigation to collect the MRI receivables collateralizing the
PrinCap Note.
In December 1996, PrinCap commenced legal action against
TII, Infotech, AMASYS and the Company to collect such outstanding
amounts. In February 1997, TII, Infotech, AMASYS and the Company
agreed to a judgment of $271,000 to settle all claims made by
PrinCap. In August, 1997, TII settled the MRI amounts due from
the House of Representatives and paid the final amounts due to
PrinCap, which released the Company from all obligations under
the PrinCap Financing Agreement, and TII from its related
indemnification of the Company.
<PAGE>
The Acquisition also provided for the restructuring of the
Company's previously matured $1,040,000 promissory notes to
Infotech (the "Infotech Notes"), and allowed the Company to
either seek indemnification from TII or reduce the amount of the
Company's indebtedness under the Infotech Notes for costs or
liabilities incurred by the Company in connection with the MRI
business.
As provided in the Acquisition, AMASYS ratified the
restructuring of the Infotech Notes, which reduced the principal
thereof by $150,565. The resulting $889,435 principal was rolled
into a 10% Senior Subordinated and Secured Note due July 1, 2002
(the "AMASYS Note"), subject to future reduction or increase
under certain circumstances. In fiscal year 1996, the Company
reduced by $31,082 the amount it owed under the AMASYS Note for
rent paid to TII's landlord. At June 30, 1997, the AMASYS Note
was further reduced by $125,481 in final resolution of the
amounts due from TII not recovered through collection of the MRI
receivables. The AMASYS Note is secured by a continuing interest
in all receivables, products and proceeds thereof, all purchase
orders and all patents then or in the future held by the Company,
and is subordinated to all senior indebtedness. At June 30,
1997, the Company had accrued interest of $148,157 on the AMASYS
Note.
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
shareholder 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. The Company believes the low
trading volume of the Company's Common Stock during fiscal 1997,
and lack of reliable information regarding such trading in fiscal
1997 and prior years, make any performance graph based on
information available to the Company potentially misleading. The
Company therefore has omitted the performance graph from this
Proxy Statement.
<PAGE>
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's
officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than
10% shareholders are required by the regulation to furnish the
Company with copies of the Section 16(a) forms which they file.
To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company, and written
representations that no other reports were required during the
fiscal year beginning July 1, 1996 and ended June 30, 1997, all
Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial
owners were complied with in a timely manner.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended
to be presented at the Company's 1998 Annual Meeting of
Shareholders must be received by the Company no later than July
10, 1998 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997, including the financial
statements and notes thereto is being mailed to the shareholders
of record along with this Proxy Statement. The Annual Report on
Form 10-K is not incorporated by reference in this Proxy
Statement and is not considered to be part of the proxy material.
The Company will furnish any exhibit described in the list
accompanying the 1997 Form 10-K upon the payment, in advance, of
the specified reasonable fees related to the Company's furnishing
of such exhibit(s). Requests for copies of such report and/or
exhibit(s) should be directed to the Company at its principal
executive offices, 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, Attention: Corporate Secretary.
OTHER MATTERS
The Board of Directors knows of no other business to be
acted upon at the Annual Meeting other than the matters referred
to in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote the shares they represent as
the Board of Directors may recommend.
By Order of the Board of Directors
/S/ S. AMBER GORDON
S. Amber Gordon
Corporate Secretary
Date: October 28, 1997
<PAGE>
APPENDIX A
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMTEX SCIENTIFIC CORPORATION
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 11, 1997
The undersigned appoints Charles W. Terry and S. Amber
Gordon, or either of them, with full power of substitution, to
attend the Annual Meeting of Shareholders of Comtex Scientific
Corporation on December 11, 1997, 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, Erik Hendricks, Robert A. Nigro
and Charles W. Terry
INSTRUCTION: To withhold authority for any individual nominee,
write that nominee's name in the space provided below:
_____________________________________________________________
2. Proposal to amend the Comtex Scientific Corporation 1995
Stock Option Plan to increase the number of shares reserved
for issuance thereunder.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. Proposal to approve the Comtex Scientific Corporation 1997
Employee Stock Purchase Plan.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
<PAGE>
4. Proposal to ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal year
1998.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
5. 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
Shareholder'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 and 4 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(s) above.
<PAGE>
EXHIBIT I
COMTEX SCIENTIFIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
<PAGE> TABLE OF CONTENTS
Page
1. Purpose and Effect of Plan. . . . . . . . . . . . . . . . .1
2. Shares Reserved for the Plan. . . . . . . . . . . . . . . .1
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
4. Administration of the Plan. . . . . . . . . . . . . . . . .3
5. Eligible Employees. . . . . . . . . . . . . . . . . . . . .3
6. Election to Participate . . . . . . . . . . . . . . . . . .4
7. Method of Purchase and Investment Accounts. . . . . . . . .4
8. Stock Purchases . . . . . . . . . . . . . . . . . . . . . .5
9. Limitation on Purchases . . . . . . . . . . . . . . . . . .5
10. Title of Accounts . . . . . . . . . . . . . . . . . . . . .5
11. Rights as a Shareholder . . . . . . . . . . . . . . . . . .5
12. Rights Not Transferable . . . . . . . . . . . . . . . . . .6
13. Change in Capital Structure . . . . . . . . . . . . . . . .6
14. Retirement, Termination and Death . . . . . . . . . . . . .6
15. Amendment of the Plan . . . . . . . . . . . . . . . . . . .7
16. Termination of the Plan . . . . . . . . . . . . . . . . . .7
17. Effective Date of Plan. . . . . . . . . . . . . . . . . . .7
18. Government and Other Regulations. . . . . . . . . . . . . .7
19. Indemnification of Committee. . . . . . . . . . . . . . . .7
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
COMTEX SCIENTIFIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose and Effect of Plan
The purpose of the Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in the
ownership of Common Stock by present and future employees of the
Company and its Subsidiaries. The Plan is intended to comply
with the terms of Code section 423 and Rule 16b-3 of the Act.
2. Shares Reserved for the Plan
There shall be reserved for issuance and purchase by
employees under the Plan an aggregate of Four Hundred Thousand
(400,000) shares of Common Stock, subject to adjustment as
provided in Section 13. Shares subject to the Plan shall be
authorized but unissued shares acquired. Shares needed to
satisfy the needs of the Plan may be newly issued by the Company
or acquired by purchases at the expense of the Company on the
open market or in private transactions, at the discretion of the
Company.
3. Definitions
Where indicated by initial capital letters, the following
terms shall have the following meanings:
(a) Act: The Securities Exchange Act of 1934.
(b) Board: The Board of Directors of the Company.
(c) Code: The Internal Revenue Code of 1986, as amended,
or any subsequently enacted federal revenue law. A reference to
a particular section of the Code shall include a reference to any
regulations issued under the section and to the corresponding
section of any subsequently enacted federal revenue law.
(d) Committee: The committee established pursuant to
Section 4 to be responsible for the general administration of the
Plan.
(e) Common Stock: The Company's Common Stock, $0.01 par
value.
(f) Company: Comtex Scientific Corporation, a New York
corporation, and any successor by merger, consolidation or
otherwise.
<PAGE>
(g) Compensation: The total earnings, prior to
withholding, paid to an Eligible Employee during the applicable
pay period, including bonuses, commissions, overtime and salary
reduction contributions pursuant to a Code section 125 or 401(k) plan.
(h) Custodian: A financial institution or other corporate
entity selected by the Company from time to time to act as
custodian for the Plan.
(i) Eligible Employee: Any employee of the Company or its
Subsidiaries who meets the eligibility requirements of Section 5
and Section 9.
(j) Enrollment Form: The form filed by a Participant with
the Committee authorizing payroll deductions pursuant to Section
6.
(k) Fair Market Value: The closing trading price of the
Common Stock on the NASD OTC Electronic Bulletin Board on the
date in question, or, if the Common Stock was not quoted on such
date, the closing trading price on the last day prior thereto on
which the Common Stock was quoted.
(l) Grant Date: The first business day of each January or
July on which shares of Common Stock are or could be traded on
the NASD OTC Electronic Bulletin Board.
(m) Investment Account: The account established for each
Participant to hold Common Stock purchased under the Plan
pursuant to Section 7.
(n) Investment Date: The last business day of each June
or December on which shares of Common Stock are or could be
traded on the NASD OTC Electronic Bulletin Board.
(o) Parent: Any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, as of
an Investment Date, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
(p) Participant: An Eligible Employee who elects to
participate in the Plan by filing an Enrollment Form pursuant to
Section 6.
(q) Payroll Deduction Account: The account established for
a Participant to hold payroll deductions pursuant to Section 6.
(r) Plan: The "Comtex Scientific Corporation 1997 Employee
Stock Purchase Plan," as set forth herein and as amended from
time to time.
<PAGE> (s) Purchase Price: A percentage of the lower of the Fair
Market Value of a share of Common Stock on the Grant Date or on
the Investment Date. The percentage shall be eighty-five percent
(85%) unless the Committee, in its sole discretion, increases the
percentage at any time. After any such increase, the Committee,
in its sole discretion, may decrease the percentage, but not
below eighty-five percent (85%), at any time. Any increase or
decrease shall be communicated to Eligible Employees not less
than thirty (30) days prior to the first Grant Date affected by
the change.
(t) Subsidiary or Subsidiaries: Any corporation (other
than the Company) in an unbroken chain of corporations beginning
with the Company if, as of an Investment Date, each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
4. Administration of the Plan
The Plan shall be administered by the Committee, consisting
of not less than two members appointed by the Board. The
Committee shall be the Compensation and Stock Option Committee of
the Board unless the Board shall appoint another committee to
administer the Plan. The Board from time to time may appoint
members previously appointed and may fill vacancies, however
caused, in the Committee.
Subject to the express provisions of the Plan, the Committee
shall have the authority to take any and all actions (including
directing the Custodian as to the acquisition of shares)
necessary to implement the Plan and to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to
it, and to make all other determinations necessary or advisable
in administering the Plan. All of such determinations shall be
final and binding upon all persons. A quorum of the Committee
shall consist of a majority of its members and the Committee may
act by vote of a majority of its members at a meeting at which a
quorum is present, or without a meeting by a written consent to
their action taken signed by all members of the Committee. The
Committee may request advice or assistance or employ such other
persons as are necessary for proper administration of the Plan.
The Committee may delegate administration of the Plan to one or
more employees of the Company or any Subsidiary.
<PAGE>
5. Eligible Employees
All employees of the Company or its Subsidiaries shall be
eligible to participate in the Plan as of the first Grant Date
coincident with or following commencement of employment, or as
soon as administratively practicable thereafter. Eligibility to
participate is also subject to the provisions of Section 9.
No director of the Company or of any Subsidiary who is not
an employee shall be eligible to participate in the Plan. No
independent contractor who is not an employee shall be eligible
to participate in the Plan.
6. Election to Participate
Each Eligible Employee may become a Participant by filing
with the Committee an Enrollment Form authorizing specified
regular payroll deductions from his or her Compensation. Such
regular payroll deductions shall be in increments of Ten Dollars
($10.00) subject to a minimum deduction of Ten Dollars ($10.00)
per pay period. All regular payroll deductions shall be credited
to the Payroll Deduction Account that the Company has established
in the name of the Participant. The Board may establish limits
on the amounts of payroll deductions and may change those limits
from time to time.
Original Enrollment Forms for the six month period must be
filed before the Grant Date as prescribed by the Committee.
Failure to file an Enrollment Form within the prescribed filing
period shall preclude the Eligible Employee from participation
until the next Grant Date.
A Participant may cease his or her participation in the Plan
at any time. An Eligible Employee who has ceased to be a
Participant may not again become a Participant until the next
Grant Date. Not more than one (1) time during any semi-annual
period, a Participant may decrease his or her payroll deduction
by filing a new Enrollment Form. The change will be effective as
of the payroll period following the date of the Participant's
election change through the remainder of the semi-annual
period.
<PAGE>
7. Method of Purchase and Investment Accounts
Each Participant having eligible funds in his Payroll
Deduction Account on an Investment Date shall be deemed, without
any further action, to have purchased the number of shares
(excluding fractional shares unless otherwise determined by the
Committee) which the eligible funds in his Payroll Deduction
Account could purchase at the Purchase Price on that Investment
Date. All shares purchased shall be maintained by the Custodian
in a separate Investment Account for each Participant. All cash
dividends paid with respect to shares of the Common Stock shall
be added to a Participant's Payroll Deduction Account and shall
be used to purchase shares of Common Stock for the Participant's
Investment Account. Expenses incurred in the purchase of such
shares shall be paid by the Company.
All dividends of Common Stock distributed in-kind shall be
added to the shares held for a Participant in his Investment
Account. Any distribution of shares with respect to shares of
Common Stock held for a Participant, other than a dividend of
Common Stock, shall be distributed to the Participant as soon as
practicable. Certificates for full shares will be issued and
fractional shares will be sold and the proceeds of sale, less
selling expenses, distributed to the Participant.
8. Stock Purchases
The Custodian shall acquire shares of Common Stock for
Participants as of each Investment Date from the Company or, if
directed by the Committee, by purchases on the open market or in
private transactions using total payroll deduction amounts
received by the Custodian. If shares are purchased in one or
more transactions on the open market or in private transactions
at the direction of the Committee, the Company will pay the
Custodian the difference between the Purchase Price and the price
at which such shares are purchased for Participants.
9. Limitation on Purchases
No Participant may purchase during any one calendar year
under the Plan (or combined with any other plan qualified under
Code section 423) shares of Common Stock having a Fair Market
Value (determined by reference to the Fair Market Value on each
date of purchase) in excess of $25,000. This limitation shall be
interpreted to comply with Code section 423(b)(8).
<PAGE>
A Participant's Payroll Deduction Account may not be used to
purchase Common Stock on any Investment Date to the extent that
after such purchase the Participant would own (or be considered
as owning within the meaning of Code section 424(d)) stock
possessing 5 percent or more of the total combined voting power
of the Company or its Parent or Subsidiary. For this purpose,
stock which the Participant may purchase under any outstanding
option shall be treated as owned by such Participant. As of the
first Investment Date on which this paragraph limits a
Participant's ability to purchase Common Stock, the employee
shall cease to be a Participant.
10. Title of Accounts
The Custodian shall maintain an Investment Account for each
Participant. Each Investment Account shall be in the name of the
Participant or, if he so indicates on his Enrollment Form, in his
name jointly with a member of his family, with right of
survivorship. A Participant who is a resident of a jurisdiction
which does not recognize such a joint tenancy may have an
Investment Account in his name as tenant in common with a member
of his family, without right of survivorship.
11. Rights as a Shareholder
A Participant shall have the right at any time to obtain a
certificate for the full shares of Common Stock credited to his
Investment Account. A Participant shall have the right at any
time to direct that any full shares in his Investment Account be
sold and that the proceeds, less expenses of sale, be remitted to
him. When a Participant ceases to be a Participant, the
Participant may elect to have his shares sold by the Custodian
and the proceeds, after selling expenses, remitted to him or the
Participant may elect to have a certificate for the full shares
of Common Stock credited to his Investment Account forwarded to
him. In either event, the Custodian will sell any fractional
shares held in his Investment Account to the Company and remit
the proceeds of such sale, less selling expenses, and the balance
in his Payroll Deduction Account to him.
As a condition of participation in the Plan, each
Participant agrees to notify the Company if he sells or otherwise
disposes of any of his shares of Common Stock within two years of
the Grant Date on which such shares were purchased.
12. Rights Not Transferable
Rights under the Plan are not transferable by a Participant,
except by will or by the laws of descent and distribution.
<PAGE>
13. Change in Capital Structure
In the event of a stock dividend, spinoff, stock split or
combination of shares, recapitalization or merger in which the
Company is the surviving corporation or other change in the
Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options
or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or
securities of the Company to be subject to the Plan, the maximum
number of shares or securities which may be delivered under the
Plan, the selling price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination
shall be binding on all persons.
If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction
that results in the acquisition of substantially all of the
Company's outstanding stock by a single person or entity, or a
sale or transfer of substantially all of the Company's assets,
the Committee may take such actions with respect to the Plan as
the Committee deems appropriate.
Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of
any Participant, and the Committee's determination shall be
conclusive and binding on all persons for all purposes.
14. Retirement, Termination and Death
In the event of a Participant's retirement, termination of
active employment, or death, the amount in his Payroll Deduction
Account shall be refunded to him, and certificates will be issued
for full shares held in his Investment Account. In the event of
his death, the amount in his Payroll Deduction Account and all
shares in his Investment Account shall be delivered to the
beneficiary designated by the Participant in a writing filed with
the Company. If no beneficiary has been designated, or if the
designated beneficiary does not survive the Participant, such
amount and all shares shall be delivered to his estate.
15. Amendment of the Plan
The Board of Directors may at any time, or from time to
time, amend the Plan in any respect; provided, however, that the
shareholders of the Company must approve any amendment that would
materially (i) increase the benefits accruing to Participants
under the Plan, (ii) increase the number of securities that may
be issued under the Plan, or (iii) modify the requirements as to
eligibility for participation in the Plan.
<PAGE>
16. Termination of the Plan
The Plan and all rights of employees hereunder shall
terminate:
(i) on the Investment Date that Participants become
entitled to purchase a number of shares greater
than the number of reserved shares remaining
available for purchase; or
(ii) at any prior date at the discretion of the Board
of Directors.
In the event that the Plan terminates under circumstances
described in (a) above, reserved shares remaining as of the
termination date shall be issued to Participants on a prorata
basis. Upon termination of the Plan, all amounts in an
employee's Payroll Deduction Account that are not used to
purchase Common Stock will be refunded.
17. Effective Date of Plan
The Plan was approved by the Board of Directors on September
15, 1997 subject to approval by the Company's shareholders, and,
if approved by the Company's shareholders, the Plan shall become
effective on the date designated by the Committee subsequent to
such approval.
18. Government and Other Regulations
The Plan, and the grant and exercise of the rights to
purchase shares hereunder, and the Company's obligation to sell
and deliver shares upon the exercise of rights to purchase
shares, shall be subject to all applicable federal, state and
foreign laws, rules and regulations, and to such approvals by any
regulatory or government agency as may, in the opinion of counsel
for the Company, be required.
19. Indemnification of Committee
Service on the Committee shall constitute service as a
director of the Company so that members of the Committee shall be
entitled to indemnification and reimbursement as directors of the
Company pursuant to its Articles of Incorporation and Bylaws.
20. Governing Law
The Plan shall be construed and administered in accordance
with the laws of the Commonwealth of Virginia.
