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 S240.14a-11(c) or S240.14a-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:
___________________________________________________________
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, 1998
Dear Fellow Shareholders:
You are cordially invited to attend Comtex Scientific
Corporation's Annual Meeting of Shareholders to be held on
December 11, 1998 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) ratification of the appointment of
Ernst & Young, LLP as the Company's independent accountants; and
(iii) any other business as may properly come before the meeting.
In addition, we will be pleased to report on the business of the
Company and a discussion period will be provided for questions
and comments of general interest to shareholders.
Whether or not you are able to attend, it is important that
your shares be represented and voted at this meeting.
Accordingly, please complete, sign and date the enclosed proxy
and mail it in the envelope provided at your earliest
convenience. Your prompt response is important and would be
appreciated.
Sincerely,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D.
Chairman
/S/ CHARLES W. TERRY
Charles W. Terry
President and
Chief Executive Officer
<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, 1998
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, 1998 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 ratify the selection of Ernst & Young, LLP as
independent accountants for the Company for fiscal
1999; and
3. 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 23, 1998 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, 1998
<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, 1998 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 11, 1998 to all shareholders entitled to vote at the
Annual Meeting. Proxies will be solicited chiefly by mail. The
Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy
material to the beneficial owners of shares and will reimburse
them for their expenses in so doing. Should it appear desirable
to do so in order to ensure adequate representation of shares at
the Annual Meeting, officers, agents and employees of the Company
may communicate with shareholders, banks, brokerage houses and
others by telephone, facsimile or in person to request that
proxies be furnished. All expenses incurred in connection with
this solicitation will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting and a return
envelope for the proxy are enclosed. Shareholders may revoke the
authority granted by their execution of proxies at any time
before their effective exercise by filing with the Secretary of
the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by voting in person at the Annual
Meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with
the choice or instructions specified thereon. If no
specifications are given, the proxies intend to vote the shares
represented thereby in favor of each of the nominees for director
listed under Election of Directors below, to approve Proposal No.
2 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.
<PAGE>
Record Date and Voting Rights
Only shareholders of record at the close of business on
October 23, 1998 are entitled to notice of and to vote at the
Annual Meeting. As of October 23, 1998, 7,912,399 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, the ratification of Ernst & Young, LLP
as the Company's independent accountants and 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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October
23, 1998 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."
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership <F1> of Class
- ------------------- ------------------------- ----------
<S> <C> <C>
AMASYS Corporation 4,693,940<F2><F3> 59.3%
4900 Seminary Road, St.800
Alexandria, VA 22311
C.W. Gilluly, Chairman 5,281,006 <F3><F4> 49.6%
Erik Hendricks, Director 25,001 <F5> *
Robert A. Nigro, Director 89,243 <F5> 1.1%
Charles W. Terry,
Director, President
and Chief Executive Officer 550,183 <F6> 6.5%
Deborah W. Ikins,
Vice President, Sales 100,828 <F7> 1.3%
All Directors and
Executive Officers
as a group
(9 Persons) 6,389,278 <F8> 54.9%
________________________
* Less than 1%.
<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 25,001 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan.
<PAGE>
<F6> Includes 524,183 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan; 9,000 shares
held by Mr. Terry's children under the Uniform Gifts to
Minors Act; 5,000 shares held by Mr. Terry's mother, as to
which Mr. Terry holds dispositive power; and 12,000 shares
held by Mr. Terry's wife, as to which he disclaims
beneficial ownership.
<F7> Includes 97,333 shares which may be acquired upon the
exercise of vested options granted under the Comtex
Scientific Corporation 1995 Stock Option Plan.
<F8> Includes 313,335 shares not reported in Notes (3) through
(7), above, which may be acquired upon the exercise of
vested options granted under the Comtex Scientific
Corporation 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.
The names of the nominees and certain other information
about them are set forth below:
<TABLE>
<CAPTION>
Director
Nominee Age Since Office Held with Company
- ----------- ---- -------- ------------------------
<S> <C> <C> <C>
C.W. Gilluly, Ed.D. 52 1992 Chairman of the Board
Erik Hendricks 54 1991 Director
Robert Nigro 49 1991 Director
Charles W. Terry 47 1994 President,Chief Executive Officer
and Director
</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 59%) 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
Chief Executive Officer and Chairman of the Board of Hadron,
Inc., a corporation that provides teams of technical
professionals to government and commercial clients.
ERIK HENDRICKS has served as a director of the Company
since 1991. Since 1979 he has served as the Executive Director
and Chief Operating Officer of the Pennsylvania Society for the
Prevention of Cruelty to Animals, a non-profit humane society.
<PAGE>
ROBERT A. NIGRO has served as a director of the Company
since 1991. Mr. Nigro is an investment banker who specializes in
corporate development and turnarounds. In April 1995, Mr. Nigro
became Chief Executive Officer of SEI Capital AG. He joined SEI
Investments Company, as Senior Vice President in November 1993.
From 1991 to 1993, Mr. Nigro was Chairman and Chief Executive
Officer of the National Abandoned Property Processing Company.
Mr. Nigro was associated with the First Boston Corporation in
various capacities from 1976 to 1990 including serving as
Managing Director in the New York and Atlanta offices. Mr. Nigro
also serves as a director of AMASYS.
CHARLES W. TERRY was appointed President of the Company in
August 1994 and director in December 1994. Mr. Terry was
appointed Chief Executive Officer in September 1997. From
August 1992 until he joined the Company, Mr. Terry was President
of Corporate Cost Management, Inc., an organization specializing
in cost management and decisions support software for the
healthcare industry. From March 1992 to August 1992, Mr. Terry
served as Vice President of Sales and Marketing for Health
Payment Review, Inc., a corporation specializing in containment
software for health insurance and managed care companies. From
1977 to 1991, Mr. Terry held various key leadership posts in the
fields of development, sales, marketing and general management at
CompuServe, a leading provider of computer-based information and
communication services.
Executive Officers
The following table contains information as of October 23,
1998 as to the executive officers of the Company who are not also
directors of the Company:
<TABLE>
Officer Office Held
Name Since With Company
------- ------- -------------
<S> <C> <C>
Donald E. Ziegler 1996 Senior Vice President and
Chief Financial Officer
Thomas E. Christian 1996 Vice President and
Chief Information Officer
Deborah W. Ikins 1996 Vice President, Sales
Sandra Schulman 1998 Vice President, Marketing
S. Amber Gordon 1995 Corporate Secretary
</TABLE>
<PAGE>
DONALD E. ZIEGLER (49) 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 Coopers LLP.
THOMAS E. CHRISTIAN (38) 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.
DEBORAH W. IKINS (41) joined the Company in 1993 and was
appointed Vice President of Sales in December 1996. From 1991
until 1993, Ms. Ikins was with Micro Research Industries, a
division of Telecommunications Industries, Inc., in various sales
and customer service management positions. Prior to Micro
Research, Ms. Ikins served in customer service management
positions with Basis, Inc., a financial database management
company.
SANDRA SCHULMAN (48) joined the Company in March 1998 as
Director of Marketing and was appointed Vice President of
Marketing in September 1998. In 1996 and 1997, Ms. Schulman was
Vice President, Sales & Marketing of NewsNet, Inc. Ms. Schulman
was with Gaylord Information Systems from 1989 to 1996 serving as
Northeast Sales Manager and Director of Marketing. Prior to
Gaylord, Ms. Schulman served in various sales and sales
management positions with CLSI, Inc., a library software
manufacturer, and Brodart, Inc., a library services company.
S. AMBER GORDON (44) was appointed Corporate Secretary of
the Company in May 1996. Ms. Gordon is Executive Vice President
and Corporate 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.
<PAGE>
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, 1998. Each director
attended in person or telephonically at least 75% of the meetings
held by the Board of Directors.
During fiscal year 1998, 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 1998.
The Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee"), which held two meetings
in fiscal 1998, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE DIRECTORS NAMED ON THE ENCLOSED PROXY.
<PAGE>
PROPOSAL NO. 2
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, 1999. 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 1999.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation paid by the Company to its Chief Executive Officer,
President and the other executive officer of the Company who
received total salary and bonus in excess of $100,000 during the
fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
Awards
Name and Fiscal Stock Options All Other
Principal Position Year Salary($) Bonus($) Granted Compensation
- ------------------ ------ --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
C.W. Gilluly, <F1> 1998 $ 56,082 - - -
Chairman 1997 $ 49,504 - - -
1996 - - 200,000<F4> -
Charles W. Terry <F2> 1998 $141,854 $77,012 70,000<F4> -
President and 1997 $133,375 $84,115 127,175<F4> -
Chief Executive Officer 1996 $125,060 $18,325 392,733<F4> -
Deborah W. Ikins <F3> 1998 $114,611 <F5> $11,205 33,000<F4> -
Vice President, Sales 1997 $ 87,326 <F5> $ 6,250 80,000<F4> -
<FN>
<F1> Dr. Gilluly served as President of the Company until May
1993 and continues to serve the Company as its Chairman.
He served as Chief Executive Officer from June 1992 to
September 1997. See "Executive Compensation - Board of
Directors Interlocks and Insider Participation."
<F2> Mr. Terry was appointed President of the Company in August,
1994. He was appointed Chief Executive Officer in
September 1997.
<F3> Ms. Ikins was appointed Vice President, Sales in December,
1996.
<F4> Options granted pursuant to the Company's 1995 Stock Option
Plan. See "Executive Compensation - Stock Option Grants."
<F5> In fiscal years 1998 and 1997, Ms. Ikins earned base
salaries of $81,923 and $68,096, respectively. She earned
commissions of $32,688 and $19,230 respectively in fiscal
years 1998 and 1997, based on the Company's achieving or
exceeding certain targeted revenue goals.
</TABLE>
<PAGE>
Stock Option Grants
The following table provides details regarding all stock
options granted to the named executive officers during the fiscal
year ended June 30, 1998.
Option Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
% of
Total
Number of Options Potential
Shares Grant to Realiazable Value at Assumed
Underlying Employees Annual Rates of Stock Price
Options in Fiscal Exercise Expiration Appreciation for Option Term <F1>
Name Granted (#) Year Price Date 5% 10%
- ---------------- ----------- --------- -------- ---------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.W. Gilluly - - - - - -
Charles W. Terry 70,000<F2> 24.6% $.22 09/15/2007 $9,685 $24,544
Deborah W. Ikins 33,000<F2> 11.6% $.22 09/15/2007 $4,566 $11,571
_______________________________
<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 named executive
officers as of June 30, 1998.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1998 at June 30, 1998<F1>
--------------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C.W. Gilluly 2,740,503 - $ 665,942 -
Charles W. Terry 500,850 89,058 $ 111,277 $12,227
Deborah W. Ikins 86,333 48,667 $ 15,458 $ 7,087
__________________________
<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, 1998, which was $.343 per share. Options that have
an exercise price greater than the fiscal year-end market value
are not included in the value calculation.
</TABLE>
<PAGE>
Stock Option Plan
In October 1995, the Board of Directors approved the Comtex
Scientific Corporation 1995 Stock Option Plan, which was approved
by shareholders in December 1995. The Plan provides for the
issuance of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and non-qualified stock options
in order to recruit and retain key employees.
Compensation of Directors
During fiscal year 1998, 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 1998.
Employment Agreements
The Company has an employment contract with Mr. Terry, who
was appointed President of the Company in August, 1994. Under
the terms of an agreement dated October 1, 1998, Mr. Terry is
employed for a one-year period, subject to renewal at the
Company's discretion, for two additional one-year terms. The
agreement provides that Mr. Terry is to be paid an initial base
salary of $152,900, subject to annual increases in salary
commensurate with annual increases awarded to other executive
officers of the Company. Mr. Terry is entitled to receive six
months severance pay in the event the Company terminates his
employment or determines not to renew his employment agreement,
unless his termination is for reasons of gross negligence,
willful misconduct, the commission of a felony, or a crime of
moral turpitude. Mr. Terry is eligible to receive a bonus based
upon the achievement of specified annual gross revenue and net
income goals, and to participate in the Company's Stock Option
Plan.
Board of Directors Report on Executive Compensation
General. The Company believes its compensation policies are
designed to provide competitive levels of compensation that
integrate salary with the Company's annual and long-term
quantitative and qualitative performance factors, reward above-
average corporate performance, recognize individual initiative
and achievements and assist the Company in attracting and
retaining qualified executives.
<PAGE>
The Company establishes compensation based on both objective
and subjective criteria. Objective criteria include actual
versus target annual operating budget performance and actual
versus target revenue growth, either as to the Company as a
whole, or as to the officer's particular operating unit.
Subjective performance criteria encompass evaluation of each
officer's initiative and contribution to overall corporate
performance, the officer's managerial ability, and the officer's
performance in any special projects that the officer may have
undertaken.
The Company also endorses the position that stock ownership
by management and stock-based performance compensation
arrangements are beneficial in aligning managements' and
shareholders' interests in the enhancement of shareholder value
and therefore uses its Stock Option and Stock Purchase Plans to
recruit and retain senior management.
1998 Compensation for the Chairman
Dr. Gilluly, the Company's Chairman, served as Chief
Executive Officer until September 1997, and received $56,082 for
his services during fiscal 1998. In 1997, Dr. Gilluly received
$49,504 for his services. The Company has agreed to compensate
Dr. Gilluly for his continuing services as Chairman, at the rate
of $60,500 for fiscal 1999. Dr. Gilluly does not have an
employment agreement or severance agreement with the Company. In
1995, the Committee granted Dr. Gilluly non-qualified stock
options, which are now fully vested, under the 1995 Stock Option
Plan to purchase a total of 200,000 shares of the Company's
Common Stock at the market price on the date of grant. No
subsequent grants of options have been made to Dr. Gilluly.
1998 Compensation for the President and Chief Executive Officer
Mr. Terry was appointed President of the Company in August
1994 and was appointed Chief Executive Officer in September,
1997. In October, 1998, the Company and Mr. Terry renewed a 1994
agreement regarding the terms of Mr. Terry's employment. Mr.
Terry's employment agreement is described in "Executive
Compensation - Employment Agreements," above. Mr. Terry's
compensation during fiscal year 1998 was determined by the terms
of his earlier employment agreement. The Compensation Committee
believes that Mr. Terry's employment agreement follows the
Company's compensation goals and bases his compensation upon both
objective quantitative performance factors (a bonus based upon
his meeting annual gross revenue and net income goals) and other
non-performance based elements (a base annual salary).
Submitted by the Compensation 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 59%)
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 was 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
1998, 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 $27,000 for the fiscal
year ended June 30, 1998. 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, 1998
amounted to approximately $30,000.
Administrative Services Provided by/to AMASYS Corporation.
The Company performed certain general and administrative
services for AMASYS for which the Company billed AMASYS
approximately $4,000 during the fiscal year ended June 30, 1998.
Note Payable
In connection with an office lease, the Company executed a
demand note bearing interest at eleven and one half percent
(11.5%) per annum in the amount of $147,422 payable to Dr.
Gilluly (the "Gilluly Note"), collateralized by the Company's
accounts receivable, now existing and in the future arising, and
all proceeds of those accounts. Approximately $4,000 and $14,500
of interest expense was incurred on the Gilluly Note during the
years ended June 30, 1998 and 1997, respectively. 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 Telecommunications Industries,
Inc. ("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, AMASYS
was a majority stockholder of both the Company and of TII, and
C.W. Gilluly served as the Chairman and Chief Executive Officer
of the Company, AMASYS 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 the Gillulys to personally guarantee the PrinCap
financing and to make certain loans to TII prior to the PrinCap
financing, AMASYS 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 AMASYS 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 amount 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 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.
The Acquisition also provided for the restructuring of the
Company's previously matured 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.
<PAGE>
The then outstanding $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 approximately $31,000 the amount it owed under the AMASYS Note
for rent paid to TII's landlord on behalf of TII. At June 30,
1997, the AMASYS Note was further reduced by approximately
$125,000 in final resolution of the amounts due from TII not
recovered through collection of the MRI receivables, decreasing
the Note to $732,872. 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.
Interest on the note was $73,284, $89,600 and $104,531 for the
years ended June 30, 1998, 1997 and 1996, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related transactions involving
directors of the Company and certain other entities are described
in "Executive Compensation - Board of Directors Interlocks and
Insider Participation."
PERFORMANCE GRAPH
Applicable federal securities laws require the Company to
present in this Proxy Statement a five-year performance graph
comparing the yearly percentage change in the Company's
cumulative total shareholder return with the cumulative total
return of peer issuers or certain other benchmarks. Trading of
the Company's Common Stock, 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 years 1993 through 1996, and lack of reliable
information regarding such trading in fiscal years 1993 through
1996, make any performance graph based on information available
to the Company potentially misleading. The Company therefore has
omitted the performance graph from this Proxy Statement.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's
officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than
10% shareholders are required by the regulation to furnish the
Company with copies of the Section 16(a) forms which they file.
<PAGE>
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, 1997 and ended June 30, 1998, 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 1999 Annual Meeting of
Shareholders must be received by the Company no later than July
10, 1999 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, 1998, 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 1998 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. Amber Gordon
Corporate Secretary
Date: October 28, 1998
<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, 1998
The undersigned appoints Donald E. Ziegler 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, 1998, 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 ratify the selection of Ernst & Young, LLP
as independent accountants for the Company for fiscal
year 1999.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. 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:
<PAGE>
When properly executed, this proxy will be voted in the
manner directed herein. If no direction is made, this proxy
will be voted FOR proposal 2 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>
