FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-17158
AMNEX, INC.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
New York 11-2790221
101 Park Avenue, Suite 2507, New York, New York 10178
(212)867-0166
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock $.001 par value 23,666,803 common shares
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Income - Three and Six months ended
June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 1996 and 1995
Condensed Consolidated Statements of Shareholders'Equity - Six months ended
June 30, 1996
Notes to Condensed Consolidated Financial Statements - June 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Balance Sheets
June 30, December 31,
1996 1995
(Unaudited)
ASSETS (in thousands)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,666 $ 94
Trade receivables, less
allowance for doubtful accounts
of $4,234,000 in 1996 and $2,954,000 in 1995 29,267 17,080
Parts inventory 333 289
Deferred income taxes 121 121
Note receivable 537 1,290
Customer advances 3,226 3,940
Deposits and other current assets 1,374 602
--------- ------
Total current assets 37,524 23,416
Property and equipment, net 14,307 11,595
Deposits and other 2,204 3,953
Intangible assets, net 3,078 1,361
Goodwill, net 28,877 9,255
--------- --------
$ 85,990 $ 49,580
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Short-term debt $ 18,591 $ 11,865
Accounts payable 5,409 4,266
Accrued expenses 12,106 3,200
Accrued commissions 5,011 2,062
Current portion of capital lease obligations 2,022 756
Current portion of long-term debt 771 737
-------- --------
Total current liabilities 43,910 22,886
Long-term debt, due to related parties 1,344
Capital lease obligations 3,278 2,170
Long-term debt, less current portion 5,734 4,132
-------- --------
Total liabilities 54,266 29,188
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par;
authorized 5,000,000 shares 8,882 9,023
Common stock, $.001 par;
authorized 40,000,000, issued 23,685,053
at June 30, 1996 and 19,484,030
shares at December 31, 1995 24 19
Capital in excess of par value 50,633 39,963
Accumulated deficit (27,339) (28,137)
------- -------
32,200 20,868
Less: 18,250 Common Shares held
in treasury, at cost (476) (476)
-------- --------
Total shareholders' equity 31,724 20,392
------- --------
$ 85,990 $ 49,580
======= ======
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statements of Income
For the Three and Six Months Ended June 30, 1996 and 1995
(Unaudited)
(in thousands, except per share amounts)
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $ 26,426 $ 26,323 $ 50,758 $ 50,253
------ ------ ------ ------
Costs and expenses:
Cost of sales 21,828 21,711 41,538 41,105
Selling, general
administrative 3,244 2,966 6,198 5,804
Depreciation and
amortization 457 449 924 891
--- --- --- ---
25,529 25,126 48,660 47,800
------ ------ ------ ------
Operating income 897 1,197 2,098 2,453
Interest expense 559 479 1,104 913
--- --- ---------- --------
Income before income taxes 338 718 994 1,540
Provision for income taxes 61 300 196 670
-- --- -------- --------
Net income $ 277 $ 418 $ 798 $ 870
=== === ======== ========
Preferred share dividend 154 132 308 233
--- --- -------- --------
Net income available for
common shares $ 123 $ 286 $ 490 $ 637
=== === ======== ========
Net income per
common share $ 0.01 $ 0.02 $ 0.02 $ 0.03
==== ==== ==== ====
Weighted average number of shares
outstanding used in computing
net income per
common share: 21,371 18,779 20,923 18,778
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
(in thousands)
1996 1995
-------------- ---------
<S> <C> <C>
Net cash used in operating activities $ (217) $ (3,722)
-------- ---------
Cash flows from investing activities:
Cash on acquisition 476
Proceeds on disposition of assets 2,375
Expenditures for property and equipment (965) (1,511)
------- ---------
Net cash provided by (used in)
investing activities 1,886 (1,511)
----- ---------
Cash flows from financing activities:
Proceeds from sale of Preferred shares 3,052
Proceeds from the exercise of options 133
Borrowings (repayments) under revolving
credit, net 1,550 2,111
Payments on long-term debt (364) (65)
Principal payments under capital
lease obligations (416) (160)
------- ----------
Net cash provided by (used in)
financing activities 903 4,938
----- ---------
Net increase (decrease) in cash
and cash equivalents 2,572 (295)
Cash and cash equivalents at
beginning of period 94 592
------- -------
Cash and cash equivalents
at end of period $ 2,666 $ 297
========= =======
</TABLE>
Supplemental disclosure of cash flow information:
Six months ended June 30, 1996:
1. In January 1996, the holder of an aggregate of 50,000 shares of the Company's
Series E Preferred Stock elected to convert such shares into 50,000
shares of the Company's Common Stock.
2. Interest of approximately $930,000 was paid.
3. Income taxes of approximately $108,000 were paid.
4. Capital lease obligations incurred to acquire property and equipment were
approximately $1,405,000.
5. The Company issued 4,099,086 Common Shares upon acquisition of Capital
Network System, Inc.
Six months ended June 30, 1995:
1. The Company issued 125,000 Common Shares pursuant to an equity participation
agreement.
2. The Company issued 332,500 Common Shares pursuant to the conversion of
33,250 Series B Preferred Shares.
2. Interest of approximately $860,000 was paid.
3. Income taxes of approximately $51,000 were paid.
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statement of Shareholders' Equity
December 31, 1995 through June 30, 1996
(Unaudited)
(in thousands)
Balance, Exercise Conversion Issuance of Balance,
December 31, of Stock of Preferred Common Shares Net June 30,
1995 Options Shares for Acquisiton Income 1996
----------- --------- -------------- -------------- ------- ---------
Common stock,
$.001 par value,
<S> <C> <C> <C> <C> <C> <C>
Shares 19,484 52 50 4,099 23,685
Amount $ 19 $ 1 $ $ 4 $ $ 24
Capital in excess
of par value 39,963 132 141 10,397 50,633
Preferred Stock
Series B 362 362
Preferred Stock
Series D 3,533 3,533
Preferred Stock
Series E 3,052 (141) 2,911
Preferred Stock
Series F 2,076 2,076
Accumulated
Deficit (28,137) 798 (27,339)
Treasury stock (476) (476)
-------- ---------- -------- ---------- ----------- -------
Total shareholders'
equity $ 20,392 $ 133 $ $ 10,401 $ 798 $ 31,724
======= ======== ====== ========= ========= ======
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMNEX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information in response to the requirements of Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
of normal recurring accruals) necessary to present fairly the financial position
as of June 30, 1996; results of operations for the three and six months ended
June 30, 1996 and 1995; cash flows for the six months ended June 30, 1996 and
1995; and changes in shareholders' equity for the six months ended June 30,
1996. For further information, refer to AMNEX's financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1995. The December 31, 1995 balance sheet has been derived from AMNEX's audited
financial statements as of that date.
2. Preferred Stock
In January 1996, the holder of an aggregate of 50,000 shares of the
Company's Series E Preferred Stock elected to convert such shares into 50,000
shares of the Company's Common Stock.
3. Acquisition of Capital Network System Inc.("CNSI")
On April 26, 1996, the stockholders of CNSI signed a Stock Purchase
Agreement (the "Acquisition")with the Company which provides for the exchange of
100% of the common stock of CNSI for AMNEX common stock. There were 4,099,086
shares of unregistered AMNEX Common Stock exchanged with the stockholders of
CNSI in addition to certain payments made and to be made of approximately $1.1
million. The Acquisition closed on June 28, 1996, effective June 30, 1996. The
accompanying financial statements give effect to the acquisition occuring
effective June 30, 1996 and thus no results from operations has been reflected
in the Statement of Operations for the three and six months ended June30, 1996.
The acquisition was accounted for as a purchase.
<TABLE>
<CAPTION>
The estimated purchase price and allocation thereof is presented below:
('OOO's)
<S> <C>
Market value of shares issued $14,859
Less: Discount for unregistered stock based upon
preliminary estimate of independent appraisal (4,458)
Add: Cash consideration to be paid 1,094
------
11,495
Add: Assumption of CNSI affitiate indebtedness which was not acquired 150
Forgiveness for related party receivables - current 409
Forgiveness for related party receivables - long-term 249
Forgiveness of debt due from CNSI affiliate, which was not acquired 540
Employee termination benefits 1,763
Lease termination costs 898
Reduction of switching equipment to net realizable value 1,076
Estimated costs associated with Acquisition Agreement 970
Write-off of deferred financing costs 104
---
Estimated Purchase Price $17,654
Allocation of the purchase price on the basis of fair value in
excess of book value:
Book value of CNSI net assets acquired $(2,467)
Goodwill 20,059
-------
Estimated Purchase Price $17,654
=======
</TABLE>
The proforma unaudited results of operations for the six months ended June 30,
1996 and 1995 assuming the consummation of the CNSI acquisition as of the
beginning of 1996 and 1995 are as follows(in 'OOO's except per share amounts):
1996 1995
Revenues $75,133 $73,654
Net income $ 1,978 $ 982
Net income per Common Share $ 0.08 $ 0.04
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1996 Compared with
Three and Six Months Ended June 30, 1995
Results of Operations
Revenues for the three and six months ended June 30, 1996 and 1995 were
$26.4 million and $26.3 million and $50.7 million and $50.2 million,
respectively. During the first quarter significant bad weather in the Northeast
reduced call counts and minutes. Furthermore, and as predicted revenues from the
Company's core domestic operator services product line continued to decrease
from prior years. This decrease in domestic operator service revenues was $2.3
million and $5.2 million for the three and six months ended June 30 1996 as
compared to the same periods in the prior year and was caused by the factors
detailed below. Offsetting these decreases were improved revenues from long
distance service offerings, including the 1+ coin sent paid product which began
to ramp up in the third quarter of 1995 and increases in the Company's
Integrated Services product lines, including the Crescent Communications
subsidiary which was acquired in the last quarter of 1995. Long distance
revenues increased $2.0 million and $2.7 million, including $1.0 million and
$1.3 million from the 1+ coin sent paid product, for the three and six months
period ended June 30, 1996. The Integrated Services group increased $1.5 million
and $2.7 million as compared to last year for the three and six months ended
June 30, 1996. In addition, during the first quarter of 1996 the Company
recognized revenues of $1.5 million related to the sale of certain internal
processes and related infrastructure, associated with validation and fraud
control. The decrease in operator services revenue has been caused by current
trends impacting the operator services industry, including (i) increases in the
number of consumers who dial access numbers, rather than dialing "0+" and
utilizing the operator services company who provides services for the telephone
used (referred to in the industry as "Dial Around") and (ii) continued efforts
by governmental regulatory agencies to establish maximum rates which may be
charged for "0+" calls ("Rate Caps"). This revenue shift is consistent with the
Company's efforts to move towards being a provider of wholesale services,
seeking to reduce the fixed cost base of the Company and move into new product
lines.
Cost of sales, as a percentage of revenues, was 84.4% and 81.8% for the six
months ended June 30, 1996 and 1995, respectively, after giving effect to the
$1.5 million sale described above. There are several elements affecting this
increase. Commissions increased by 3.8% percentage points from the previous
year. During the first half of 1996, the Company's most significant customer has
increased its effective commission rate with increases in premise imposed fees.
In addition, although the mix of sales has begun to shift to the new product
lines which have lower direct cost of sales and commissions, the Company is in a
transition period through the end of the year and cost of sales will remain
high. The Company's core operator service business, which has the highest
commission rates, still contributes over 84.8% of total revenue. Network costs
have increased due to the expansion of the new 1+ coin product to regions
throughout the country. As new phones are activated and usage begins to ramp up,
these costs will be reduced as a percentage of sales.
Operator wages decreased from a year ago as cost control measures that were
put into place at the end of 1995 have been fully realized. As a percentage to
revenues, operator wages for the period June 30, 1996 and 1995 were 4.2% and
6.1%, respectively. Other components of cost of sales, measured as a percentage
of revenue, showed changes of less than one percent.
Selling, general, and administrative expenses, as a percentage of revenues,
were 12.2% and 11.5%, respectively, for the six months periods ended June 30,
1996 and 1995. These are not substantially different than results for the three
months ended June 30 1996 and 1995. This increase relates primarily to
professional fees for recruitment and legal and accounting fees. In addition,
start up expenses associated with the 1+ coin product and the Company's
acquisition activities have been absorbed into selling, general and
administrative expenses. These costs are expected to decrease in the second half
of the year.
Interest expense increased by approximately $80 thousand and $192 thousand
for the three and six months period ended June 30, 1996 as compared to June 30,
1995. This is due to additional capital lease obligations of the integrated
services product lines and on loans associated with the Crescent acquisition in
October 1995.
<PAGE>
As discussed more fully in Note 3 of the Condensed Consolidated Notes to
the Financial Statements the Company purchased CNSI as of June 28, 1996
effective June 30, 1996. As part of the Company's strategy, this acquisition
provides significant synergies with the existing operating structure of AMNEX,
while expanding business into the more profitable international markets. In
addition, current product lines will be expanded into these new markets, such as
the integrated services products, to further increase returns on these
opportunities. The accompanying financial statements give effect to the
acquisition occuring effective June 30, 1996 and thus no results from operations
has been reflected in the Statement of Operations for the three and six months
ended June 30, 1996.
CNSI's consolidated revenues and results from operations for the year ended
September 30, 1995 were approximately $42 million and $(1.7) million,
respectively. The Company is in the process of consolidating duplicate
facilities, a process which is expected to be substantially completed by
December 31, 1996, and expects significant savings to result thereafter. Note,
however, that prior performance may not be indicative of future results.
The Company's Management has established goals to strategically position
the Company in markets which will lower its cost of sales, improve profit
margins and secure its customer base. This is expected to be achieved in part
through the development and deployment of new technologies as well as through
strategic acquisitions.
As part of this strategy, the Company has entered into multi-year contracts
with several interexchange carriers which allows the Company to provide 1+ coin
signaling and transmission services for inter-LATA traffic from local exchange
carrier pay telephones presubscribed to such carriers. When the conversion of
these telephones is complete (anticipated to be in late 1996), the Company
expects to have in excess of 500,000 public pay telephones utilizing this
service. As of June 30, 1996 634,426 pay phones were under contract to provide
such service, of which 173,410 phones were active.
The Company may enter into other lines of business, through acquisition or
internal development, where such lines of business are expected to meet its
strategic goals.
Liquidity and Capital Resources
The Company had a working capital deficiency of $6.6 million at June 30,
1996, as compared to a working capital of $530 thousand at December 31, 1995.
The change was primarily due to the acquisition of CNSI which, as of the June
28, 1996 closing had a working capital deficiency of approximately $3.5 million.
In addition, acquisition-related accruals for reserves, transaction costs and
obligations totaled another $4.7 million.
The Company experienced a significant improvement in net cash used in
operating activities during the six month period ending June 30, 1996. Net cash
used in operating activities decreased to $(217) thousand as compared to $(3.7)
million for the same period in 1995. The improvement was primarily due to
improved collection efforts of the Company's trade receivables and customer
advances.
The Company is currently negotiating with potential sources of capital and
hopes to raise additional capital during the balance of 1996. There can be no
assurance that the Company will be successful in completing any of the
contemplated financing, but it believes that sufficient cash will be generated
from operating activities to support the Company's operations, including the
CNSI acquisition, through the remainder of 1996.
For a description of the acquisition of CNSI see
Note 3 of the Notes to Condensed Consolidated Financial Statements.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5 Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Stock Purchase Agreement, dated as of April 26, 1996, among
AMNEX, Inc., Robert A. Rowland, Delajane Rowland, Donald D.
Simmons, C. Michael Moehle, Barbara Ann Cromwell, Ellen E. Wood,
Danniel N. Matheson, Capital Network System, Inc.,
Capital Network International, Inc., Capital Network Mexico,
S.A. de C.V., and Point to Point Communications Company.1
2.2 First Amendment to Stock Purchase Agreement, dated as of
June 28, 1996, by and among the foregoing parties as well as
Sirrom Capital Corporation and Spectrum Global Telecommunications
Pty Limited.(1)
3.1 Restated Certificate of Incorporation, as amended. (2)
3.2 By-Laws, as amended. (3)
10.1 Employment Agreement, dated as of June 25, 1996, between the
Company and Peter M. Izzo, Jr.
10.2 Employment Agreement, dated as of June 25, 1996, between the
Company and Kenneth G. Baritz.
10.3 Provision in Stock Option Agreements between the Company and each
of Peter M. Izzo, Jr., Kenneth G. Baritz, Kevin D. Griffo, John
Kane, Amy S. Gross, and Richard L. Stoun with respect to options
granted in 1996.
(b) Reports on form 8-K
No Current Reports on form 8-K were filed by the Company during
the quarter ended June 30, 1996.
______________________
(1) Denotes document filed as an exhibit to the Company's Current Report on
Form 8-K for an event dated June 28, 1996 and incorporated herin by
reference.
(2) Denotes document filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 and incorporated herin
by reference.
(3) Denotes document filed as an exhibit to the Company's Annual Report
on Form 10-K for the Year ended December 31, 1995 and incorporated herin
by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMNEX, INC.
By:__/s/ Peter M. Izzo, Jr.__
Peter M. Izzo, Jr.
President and Chief Executive Officer
Date: August 14,1996
By:__/s/ Richard L. Stoun___
Richard L. Stoun Chief Accounting Officer
Date: August 14, 1996
EMPLOYMENT AGREEMENT
BETWEEN AMNEX, INC.
AND
PETER M. IZZO
This AGREEMENT made this 25th day of June, 1996, by and between AMNEX,
Inc., a New York corporation having an office in Orlando, Florida (sometimes
hereinafter referred to as AMNEX or the Company) and Peter M. Izzo
(sometimes hereinafter referred to as Employee).
WITNESSETH:
WHEREAS, the Company desires to employ the Employee and the Employee
desires to accept employment by the Company and enter into this Agreement; and
WHEREAS, the retention of Employee's services, for and on behalf of the
Company, is of material importance to the preservation and enhancement of the
value of AMNEX;
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
AMNEX and Employee do hereby agree as follows:
1. Employment. The Employee is employed as President and Chief Executive of
the Company from the date hereof through the term of this Agreement. As
President and Chief Executive of the Company, the Employee shall implement
executive policy and other management services on behalf of the Company as would
be customarily performed by persons serving in a similar executive capacity. As
an executive, the Employee shall be responsible for implementing the policies
and directives of the Board of Directors, and shall report only to the Board of
Directors. During the term of this Agreement, there shall be no material
decrease in the duties and responsibilities of the Employee other than provided
herein, unless the parties otherwise agree in writing. During the term of this
Agreement, the Employee shall not be required to relocate his principal place of
employment beyond 50 miles from his current residence in order to perform his
services hereunder.
2. Term. The initial term of employment under this Agreement shall be for a
two year period from the date hereof. This Agreement shall be automatically
renewed or extended for two additional years on each biannual anniversary date
of this Agreement, unless either the Employee or the Company gives written
notice to the other on or before the sixtieth(60th) day prior to such biannual
anniversary date. Such initial term and all such renewal terms are collectively
referred to herein as the term of this Agreement.
3. Standards; Devotion of Time. The Employee shall perform his duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Board of Directors of
the Company. The reasonableness of such standards shall be measured against
standards for executive performance generally prevailing in the
telecommunications services industry. During the employment period, the Employee
shall expend all of his working time for the Company and shall devote his best
efforts, energy and skill to the services of the Company and the promotion of
its interests.promotion of its interests.
4. Compensation. The Company agrees to pay the Employee during the term of
this Agreement a salary at the minimum annual rate of $240,000.00. In the event
that this Agreement is renewed or extended, the Employee's salary will be
reviewed at the time of such renewal and may be increased in an amount to be
determined by the Board of Directors or its Compensation Committee. In
determining the Employee's annual salary increases, if any, the Board of
Directors or its Compensation Committee may compensate the Employee for
increases in the cost of living and also provide for performance or merit
increases to the extent appropriate and when compared to the prevailing
telecommunications services industry for like executive positions. The salary of
the Employee shall not be decreased at any time during the term of this
Agreement from the amount then in effect unless the Employee otherwise agrees in
writing. Participation in deferred compensation, bonus, retirement, and other
employee benefit plans and in fringe benefits shall not reduce the salary
payable to the Employee. The salary under this Section 4 shall be payable to the
Employee biweekly.
5. Bonus. During the term of this Agreement, the Employee shall be entitled
to an annual bonus equal to 3% of AMNEX, Inc.'s consolidated pre-tax profits for
the applicable fiscal year. Such bonus shall be paid to the Employee no later
than thirty (30) days after the release of the audited financial statements
relating to such fiscal year. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such bonuses. Notwithstanding anything herein to the contrary, in the event
that this Agreement expires or terminates prior to the end of any fiscal year
for any reason other than termination of employment "for cause", as such term is
defined herein, then the Employee shall be entitled to a bonus equal to 3% of
AMNEX, Inc.'s consolidated pre-tax profits for the applicable portion of the
fiscal year in which this Agreement was in effect. For purposes hereof, with
respect to such fiscal year in which this Agreement expires or terminates (the
"Termination Year"), the Company's pre-tax profits shall be determined for the
period from the first day of the Termination Year until such expiration or
termination date (the "Termination Date") by multiplying the Company's pre- tax
profits for the period from the first day of the Termination Year until the end
of the fiscal quarter in which the Termination Date falls (the "Termination
Quarter"), as reported in the Company's Form 10-Q for such period, by a
fraction, the numerator of which shall be the number of days from the first day
of the Termination Year until the Termination Date and the denominator of which
shall be the total number of days from the first day of the Termination Year
until the end of the Termination Quarter. To the extent reasonably possible,
such bonus shall be paid concurrently with the severance payments due and owing
under the applicable subsection of Section 10 hereof.
6. Disability. In the event of the inability of Employee to render services
hereunder during the term of the Agreement due to a disability (whether
temporary or permanent), and for so long as such disability continues, Employee
shall continue to receive Employee's salary for a period not to exceed the
remaining term of the Agreement. There shall be deducted from the amount paid to
Employee hereunder during any period of disability any amounts actually paid to
Employee pursuant to any disability insurance or other similar such program
which the Company has instituted or may institute on behalf of its employees for
the purpose of compensating Employee in the event of disability.
7. Additional Compensation and Benefits. During the term of the Agreement,
Employee will be entitled to participate in and receive the benefits of any
stock option, profit sharing, or other plans, benefits and privileges given to
employees and/or executives of the Company or its subsidiaries and affiliates
which may come into existence hereafter, to the extent commensurate with his
then duties and responsibilities, as fixed by the Board of Directors, and to the
extent Employee is otherwise eligible and qualified to so participate in and
receive such benefits or privileges. The Company shall not make any changes in
such plans, benefits or privileges which would adversely affect Employee's
rights or benefits thereunder, unless such change occurs pursuant to a program
applicable to all executives of the Company and does not result in a
proportionately greater adverse change in the rights of or benefits to Employee
as compared with any other executive of the Company. Nothing paid to Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to Employee pursuant
to Section 4 hereof. Nothing herein shall be deemed to imply that Employee is
entitled to receive any stock options (notwithstanding the grant thereof to
other executive employees of the Company or its subsidiaries or affiliates), it
being understood and agreed that the grant thereof is within the sole discretion
of the Board of Directors or its Compensation Committee.
8. Expenses. The Company shall reimburse Employee or otherwise provide for
or pay for all reasonable expenses incurred by Employee in furtherance of or in
connection with the business of the Company including, but not by way of
limitation, an automobile allowance of $1,000.00 per month. In addition, the
Company shall reimburse Employee for all reasonable entertainment expenses
(whether incurred at the Employee's residence, while traveling, or otherwise)
subject to such reasonable limitations as may be established by the Board. If
such expenses are paid in the first instance by Employee, the Company will
reimburse Employee therefor in accordance with its standard expense
reimbursement policy.
9. Vacations. The Employee shall be entitled to annual paid vacations in
accordance with the following schedule:
1 - 2 years of service: 3 weeks per year
3 - 5 years of service: 3 weeks plus 2 days per year
6 - 9 years of service: 4 weeks per year
10+ years of service: 5 weeks per year
The timing of paid vacations shall be scheduled in a reasonable manner. The
Employee shall not be entitled to receive any additional compensation from the
Company on account of his failure to take paid vacation. The Employee shall also
not be entitled to accumulate more than two weeks of unused paid vacation time
from one calendar year to the next.
10. Termination of Employment.
(a) Definitions. For the purposes of this Agreement, the following
definitions shall apply:
(i) A "Change in Control" of the Company shall be deemed to have occurred:
(A) when either the Employee or Chairman of the Board of the Company as of the
date hereof is either removed as a director or not nominated by the Board for
re- election as a director of the Company; (B) when any nominee for election as
a director of the Company contained in the Company's Proxy Statement sent to
shareholders in connection with the Board of Directors' solicitation of proxies
to be voted at any Annual Meeting of Shareholders shall not be so elected by the
shareholders, except where the person elected instead of the nominee is
acceptable to the Employee and Chairman as of the date hereof; (C) upon any
person or entity gaining ownership directly or indirectly of securities that, in
the aggregate, represent over thirty-five percent (35%) of the voting power of
the Company's outstanding securities (whether or not such securities are in fact
voted); or (D) upon the sale or disposition of fifty percent (50%) or more of
the voting securities of any of the Company s subsidiaries or all or
substantially all of the assets of any such subsidiary, except where such sale
or disposition was approved by the Employee; or (E) upon the termination of
employment by the Company other than for cause, or the resignation for good
reason, of the Employee or Chairman serving as of the date hereof.
(ii) Termination "for cause" shall mean termination of the Employee by the
Company because of: (A) conviction of or a plea of nolo contendere to a felony,
or another serious crime which results or is likely to result in material injury
to the Company; (B) breach of fiduciary duty involving personal profit; (C)
continued and habitual neglect to perform material stated duties; or (D)
material breach of any provision of this Agreement.
(iii) Resignation "for good reason" shall mean the resignation of his
employment by the Employee following: (A) a Change in Control of the Company
which, within two years of said Change in Control, results in (i) the assignment
to Employee, without Employee's express written consent, of any duties
materially inconsistent with Employee's positions, duties, responsibilities and
status with the Company immediately prior to a Change in Control of the Company;
or (ii) a material change or reduction in Employee's reporting responsibilities,
titles or offices as in effect immediately prior to a Change in Control of the
Company; or (iii) any removal of Employee from, or any failure to re-elect
Employee to, any of such positions, except in each case in connection with the
Employee's disability or death and except under circumstances which would permit
the termination of Employee's employment for cause; or (B) failure by the
Company to comply with any material provision of this Agreement, which failure
has not been cured within thirty (30) days after a notice of non-compliance has
been given by Employee to the Company.30) days after a notice of non-compliance
has been given by Employee to the Company.
(b) Termination for Cause. The Company may terminate the Employee's
employment at any time for cause. The Employee shall have no right to receive
compensation or other benefits for any period after termination for cause. If,
within thirty (30) days of receipt of notice of termination, the Employee denies
that termination for cause was warranted, the dispute shall be resolved by
submission of the claim to binding arbitration in accordance with the provisions
hereof. The parties agree that the sole determination by the arbitrators shall
be whether the termination of the Employee's employment was for cause. In the
event it is determined that such termination was without cause, Employee shall
be entitled to such relief as is provided for herein with respect thereto. If
the Employee does not deny that termination for cause was warranted within such
thirty (30) day period, the Employee's termination for cause shall be deemed to
be conclusive.
(c) Termination Without Cause. Any termination of employment by the Company
other than termination for cause, including but not limited to, the Company's
failure to renew or extend this Agreement pursuant to Paragraph 2, (which shall
be deemed termination without cause), shall not prejudice the Employee's right
to compensation or other benefits under this Agreement. The parties acknowledge
and agree that damages which will result to Employee for termination without
cause shall be extremely difficult or impossible to establish or prove, and
agree that, unless the termination is for cause, the Company shall be obligated
to make a payment to the Employee as liquidated damages in an amount equal to
the greater of (A) two years' minimum annual salary as set forth in Section 4
hereof and (B) the Employee's total compensation hereunder for the twenty-four
(24) months preceding the termination, provided, however, that in the event that
the Company fails to renew or extend this Agreement and the Employee's
employment continues, then the amount payable to Employee hereunder shall not be
paid until the cessation of Employee's employment. Employee agrees that, except
for such other payments and benefits to which the Employee may be entitled as
expressly provided by the terms of this Agreement, such liquidated damages shall
be in lieu of all other claims, demands or causes of action which Employee may
make by reason of such termination. The liquidated damages amount shall not be
reduced by any compensation which the Employee may receive for any other
employment with another employer after termination of his employment with the
Company. At the election of the Company, the payment of such liquidated damages
shall be made either by a lump sum payment on the Employee's last day of
employment with the Company or over the course of the next twelve months in
equal bimonthly payments in accordance with the Company's then standard payroll
policies and practices. Such bimonthly payments shall be made by wire transfer
to the bank account designated by the Employee. The Company's failure to make
each and every payment when due and the continuance thereof for a period of five
(5) days shall be a material breach of this Agreement and the Employee shall be
entitled to demand and receive in a lump sum all unpaid liquidated damages.lump
sum all unpaid liquidated damages.
(d) Termination upon Death. Employee s employment shall automatically
terminate upon Employee s death, provided, however, that the Employee's wife,
Shiela Izzo, shall be entitled to receive the payments specified under Section
10 (e)(ii) hereof.
(e) Resignation for Good Reason. (i) Employee may resign his employment
hereunder for good reason upon thirty (30) days notice to the Company, stating
in his notice the basis upon which he believes that good reason exists for such
resignation.
(ii) In the event the Employee resigns, the Employee shall be entitled to
receive as a severance payment, or in lieu of a severance payment, payment for
services previously rendered to the Company, a lump sum cash payment equal to
the greater of (A) two years' minimum annual salary as set forth in Section 4
hereof and (B) the Employee's total compensation hereunder applicable to the
twenty-four (24) months preceding such resignation. Payment under this section
shall be in lieu of any amount owed to the Employee as liquidated damages for
termination without cause under Section 10(c) hereof and shall be payable on the
last day of Employee's employment hereunder. However, payment under this section
shall not be reduced by any compensation which the Employee may receive from
other employment with another employer after termination from his employment
with the Company.
(f) Change in Control; Resignation Without Good Reason. If during the term
of this Agreement there is a Change in Control of the Company and the Employee
without good reason resigns his employment within one year after such Change in
Control, the Employee shall be entitled to receive a severance payment pursuant
to Section 10(e)(ii) hereof. Any such resignation shall be on thirty (30) days
notice to the Company.
(g) Other Benefits. In the event liquidated damages and/or severance
payments are payable pursuant to this Section 10, the Employee shall also be
entitled to have any allowances set forth in Section 8 hereof and Employee's
health insurance coverage continue for a period of twelve months. In the event
that any such law or plan may prevent a continuation of Employee's health
insurance for such twelve month period, the Company shall pay for Employee's
C.O.B.R.A. health coverage during such period, or, if earlier, until such time
as Employee becomes eligible to be covered by comparable insurance with another
employer. The Company shall also ensure that all insurance or other provisions
for indemnification, defense or hold harmless of officers or directors of the
Company which are in effect as of the date of the Employee's termination
continue for the benefit of the Employee with respect to all of his acts and
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against action which may be applicable to such acts or
omissions.
(h) Benefit Plans. Notwithstanding any other provisions of this Agreement
or of any other agreement, contract, or understanding heretofore or hereafter
entered into between the Employee and the Company, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section 10 (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company for the direct or indirect provision of
compensation to the Employee (including groups of classes of participants or
beneficiaries of which the Employee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Employee (a "Benefit Plan"), the Employee shall not have any right to
receive any payment or other benefit under this Agreement, or Other Agreement,
or any Benefit Plan if such payment or benefit, taking into account all other
payments or benefits to or for the Employee under this Agreement, all Other
Agreements, and all Benefit Plans, would cause any payment to the Employee under
this Agreement to be considered a "parachute payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended. In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a parachute payment under this Agreement, then the Employee
shall have the right, in his sole discretion, to designate those payments or
benefits under this Agreement, and Other Agreements, and/or any Benefit Plans,
which should be reduced or eliminated so as to avoid having the payment to the
Employee under this Agreement be deemed to be a parachute payment.
11. Confidentiality and Non-Solicitation. The services of the Employee are
unique, extraordinary and essential to the business of the Company, especially
since the Employee shall have access to the Company's customer lists, trade
secrets and other confidential network, financial, legal and operational
information essential to the Company's business. Accordingly, during the term of
this Agreement and thereafter, the Employee agrees not to use, divulge, furnish
or make available to any person or entity any knowledge of or information with
respect to any confidential or otherwise proprietary documents, discussions,
plans, policies, procedures, activities, materials, information or data of the
Company. The Employee further agrees to refrain from engaging in any activity
whatsoever that would tend to disparage or diminish the reputation of the
Company or which would tend to have a detrimental effect upon the interests of
the Company. The Employee has executed or will execute the standard AMNEX
Employee Confidentiality Agreement, which agreement is incorporated herein by
reference and made a part hereof.
The Employee also agrees that, for a period of one (1) year following the
expiration of this Agreement, the Employee shall not, without the prior written
consent of the Company (which consent is approved by the Board), anywhere in the
United States of America, whether individually or as a principal, officer,
employee, partner, director, agent or representative of or consultant for any
entity, (a) cause or seek to persuade any director, officer, employee, customer,
subscriber, account, agent, vendor or supplier of, or consultant to, the Company
to discontinue or modify to the detriment of the Company the status, employment
or relationship of such person or entity with the Company (including, without
limitation, to discontinue or modify to the detriment of the Company the use of
the Company's operator services, long-distance transmission services, 1+ Coin
Services and/or other telecommunications services); (b) hire or retain any such
officer, director or employee; or (c) cause or seek to persuade any prospective
customer, subscriber or account of the Company (which at the date of cessation
of employment with the Company was then actively being solicited by the Company)
to determine not to enter into a business relationship with the Company.
The Employee acknowledges and agrees that, in the event he shall violate
any of the restrictions of this Section 11, the Company will be without an
adequate remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive relief in any court of
competent jurisdiction without the necessity of proving damages and without any
prejudice to any other remedies which it may have at law or in equity. The
Employee acknowledges and agrees that, in addition to any other state having
proper jurisdiction, any such relief may be sought in, and for such purpose the
Employee consents to jurisdiction of, the courts of the State of Florida.
12. Assumption of Agreement. In the event of a Change in Control
transaction to which the Company is a party, the Company shall require that the
acquiring or successor entity, if any, expressly assume the obligations and
entitlement of this Agreement following such change of control. Employee shall
have the right to demand that the Company acknowledge in writing the assumption
of this Agreement, if applicable, within thirty (30) days following receipt of
such demand. Failure of the Company to so act timely in response to such demand
shall be deemed a material breach of this Agreement by the Company, thereby
entitling Employee to resign for good reason in accordance with the provisions
of this Agreement but without providing any further notice of non-compliance and
opportunity for cure.
13. Other Employment. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company except with the prior written consent of the Company (which consent is
approved by the Board).
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in conjunction
with, the interpretation of this Agreement.
15. Notices. Any notice required or permitted to be given pursuant to this
Agreement shall be deemed to have been duly given when delivered by hand or sent
by certified or registered mail, return receipt requested and postage prepaid,
overnight mail or courier or telecopier as follows:
If to the Employee:
805 Meadow Beach Lane
Cutchogue, NY 11935
If to the Company:
100 W. Lucerne Circle
Orlando, FL 32801
Attn: Chairman of the Board
Telecopier Number: (407) 246-0005
or at such other address as any party shall designate by notice to the
other party given in accordance with this Paragraph 15.
16. No Waiver; Entire Agreement. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times. This Agreement constitutes the entire agreement between the parties and
there are no representations, warranties or commitments except as set forth
herein. This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral, of the parties hereto
relating to the matters set forth in this Agreement. This Agreement may be
amended only by a writing executed by the parties hereto.
17. Assignability. This Agreement is personal in nature. The Employee shall
have no right to assign or transfer this Agreement. In the event of any
attempted assignment or transfer by the Employee of his duties and obligations
contrary to this paragraph, all the Employee's rights under this Agreement shall
be forfeited, and the Company shall have no further liability under this
Agreement. The Company may assign or transfer its rights under this Agreement
only to a subsidiary or affiliate of the Company so long as such assignment
shall not substantially change the current status of this Agreement or its place
of performance. No assignment by the Company shall relieve the Company of the
liabilities and responsibilities created by this Agreement, including its
responsibilities under Section 12 hereof.
18. Reformation and Severability. The Employee and the Company agree that
the agreements contained herein shall each constitute a separate agreement
independently supported by good and adequate consideration, shall each be
severable from the other provisions of the Agreement, and shall survive the
Agreement. If a court of competent jurisdiction determines that any term,
provision or portion of this Agreement is void, illegal or unenforceable, the
other terms, provisions and portions of this Agreement shall remain in full
force and effect and the terms, provisions and portions that are determined to
be void, illegal or unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
19. Governing Law. This Agreement shall be governed by the laws of the
United States, where applicable, and otherwise by the laws of the State of
Florida, excluding choice of law principles thereof.
20. Arbitration; Attorneys Fees. (I) Except with regard to Section 11
hereof and any other maters that are not a proper subject of arbitration, all
disputes between the parties hereto concerning the performance, breach,
construction or interpretation of this Agreement or any portion thereof, or in
any manner arising out of this Agreement or the performance thereof, shall be
submitted to binding arbitration in accordance with the rules of the American
Arbitration Association, which arbitration shall be carried out in the manner
hereinafter set forth.
(ii) Within fifteen days after written notice by one party to the other
party of its demand for arbitration, which demand shall set forth the name and
address of its designated arbitrator, the other party shall select its
designated arbitrator and so notify the demanding party. Within fifteen days
thereafter, the two arbitrators so selected shall select the third arbitrator.
The dispute shall be heard by the arbitrators within sixty days after selection
of the third arbitrator. The decision of any two arbitrators shall be binding
upon the parties. In default of either side naming its arbitrator as aforesaid
or in default of the selection of the said third arbitrator as aforesaid, the
American Arbitration Association shall designate such arbitrator upon the
application of either party. The decision of the arbitrators shall be final and
binding upon the Company, its successors and assigns and the Employee.
(iii) The arbitration proceedings shall take place in Orlando, Florida, and
the judgment and determination of such proceedings shall be binding on all
parties hereto. Judgment upon any award rendered by the arbitrators appointed
hereunder may be entered into any court having competent jurisdiction thereof
without any right of appeal therefrom.
(iv) Each party shall pay its or his own expenses of arbitration, and the
expenses of the arbitrators and the arbitration proceeding shall be equally
shared; provided, however, that, (a) if, in the opinion of a majority of the
arbitrators, any claim of defense was unreasonable, the arbitrators may assess,
as part of their award, all or any part of the arbitration expenses of the other
party (including reasonable attorneys fees) and of the arbitrators and the
arbitration proceeding (collectively, the "Arbitration Expenses") against the
party raising such unreasonable claim or defense, and (b) if the arbitrators
rule in favor of the Employee, then the Company shall be obligated to pay all of
the Arbitration Expenses.
21. No Restrictions. The Employee hereby represents that neither the
execution of this Agreement nor his performance hereunder will (a) violate,
conflict with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under the terms, conditions or provisions of any contract,
agreement or other instrument or obligation to which the Employee is a party, or
by which he may be bound, or (b) violate any order, judgment, writ, injunction
or decree applicable to the Employee. In the event of a breach hereof, in
addition to the Company's right to terminate this Agreement, the Employee shall
indemnify the Company and hold it harmless from and against any and all claims,
losses, liabilities and expenses (including reasonable attorney's fees) incurred
or suffered in connection with or as a result of the Company's entering into
this Agreement or employing the Employee hereunder.
22. No Third Party Beneficiaries. Except as provided for in Section 10 (d)
hereof, no person not a party to this Agreement shall have any right to enforce
any of the provisions hereof, there being no third party beneficiaries.
23. Service as Officer of Subsidiaries; Service as Director. During the
employment period, the Employee shall, if elected or appointed, serve as (a) an
officer of any subsidiaries of the Company in existence or hereafter created or
acquired and (b) a Director of the Company and/or any such subsidiaries of the
Company, in each case without any additional compensation for such services.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year above written.
EMPLOYEE AMNEX, Inc.
By: ________________________ By: ____________________
Name: ________________________ Name: ____________________
Date: ________________________ Date: ____________________
EMPLOYMENT AGREEMENT
BETWEEN AMNEX, INC.
AND
KENNETH G. BARITZ
This AGREEMENT made this 25th day of June, 1996, by and between AMNEX,
Inc., a New York corporation having an office in Orlando, Florida (sometimes
hereinafter referred to as AMNEX or the Company) and Kenneth G. Baritz
(sometimes hereinafter referred to as Employee).
WITNESSETH:
WHEREAS, the Company desires to employ the Employee and the Employee
desires to accept employment by the Company and enter into this Agreement; and
WHEREAS, the retention of Employee's services, for and on behalf of the
Company, is of material importance to the preservation and enhancement of the
value of AMNEX;
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
AMNEX and Employee do hereby agree as follows:
1. Employment. The Employee is employed as Chairman of the Board of the
Company from the date hereof through the term of this Agreement. As Chairman of
the Board of the Company, the Employee shall implement executive policy and
other management services on behalf of the Company as would be customarily
performed by persons serving in a similar executive capacity. As an executive,
the Employee shall be responsible for implementing the policies and directives
of the Board of Directors, and shall report only to the Board of Directors.
During the term of this Agreement, there shall be no material decrease in the
duties and responsibilities of the Employee other than provided herein, unless
the parties otherwise agree in writing. During the term of this Agreement, the
Employee shall not be required to relocate his principal place of employment
beyond 50 miles from his current residence in order to perform his services
hereunder.
2. Term. The initial term of employment under this Agreement shall be for a
one year period from the date hereof. This Agreement shall be automatically
renewed or extended for one additional year on each annual anniversary date of
this Agreement, unless either the Employee or the Company gives written notice
to the other on or before the sixtieth(60th) day prior to such anniversary
date. Such initial term and all such renewal terms are collectively referred to
herein as the term of this Agreement.
3. Standards; Devotion of Time. The Employee shall perform his duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Board of Directors of
the Company. The reasonableness of such standards shall be measured against
standards for executive performance generally prevailing in the
telecommunications services industry. During the employment period, the Employee
shall expend all of his working time for the Company and shall devote his best
efforts, energy and skill to the services of the Company and the promotion of
its interests.
4. Compensation. The Company agrees to pay the Employee during the term of
this Agreement a salary at the minimum annual rate of $190,000.00. In the event
that this Agreement is renewed or extended, the Employee's salary will be
reviewed at the time of such renewal and may be increased in an amount to be
determined by the Board of Directors or its Compensation Committee in their sole
discretion. In determining the Employee's annual salary increases, if any, the
Board or its Compensation Committee may compensate the Employee for increases in
the cost of living and also provide for performance or merit increases to the
extent appropriate and when compared to the prevailing telecommunications
services industry for like executive positions. The salary of the Employee shall
not be decreased at any time during the term of this Agreement from the amount
then in effect unless the Employee otherwise agrees in writing. Participation in
deferred compensation, bonus, retirement, and other employee benefit plans and
in fringe benefits shall not reduce the salary payable to the Employee. The
salary under this Section 4 shall be payable to the Employee biweekly.
5. Bonus. During the term of this Agreement, the Employee shall be entitled
to an annual bonus equal to 1% of AMNEX, Inc.'s consolidated pre-tax profits for
the applicable fiscal year. Such bonus shall be paid to the Employee no later
than thirty (30) days after the release of the audited financial statements
relating to such fiscal year. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such bonuses. Notwithstanding anything herein to the contrary, in the event
that this Agreement expires or terminates prior to the end of any fiscal year
for any reason other than termination of employment "for cause", as such term is
defined herein, then the Employee shall be entitled to a bonus equal to 1% of
AMNEX, Inc.'s consolidated pre-tax profits for the applicable portion of the
fiscal year in which this Agreement was in effect. For purposes hereof, with
respect to such fiscal year in which this Agreement expires or terminates (the
"Termination Year"), the Company's pre-tax profits shall be determined for the
period from the first day of the Termination Year until such expiration or
termination date (the "Termination Date") by multiplying the Company's pre- tax
profits for the period from the first day of the Termination Year until the end
of the fiscal quarter in which the Termination Date falls (the "Termination
Quarter"), as reported in the Company's Form 10-Q for such period, by a
fraction, the numerator of which shall be the number of days from the first day
of the Termination Year until the Termination Date and the denominator of which
shall be the total number of days from the first day of the Termination Year
until the end of the Termination Quarter. To the extent reasonably possible,
such bonus shall be paid concurrently with the severance payments due and owing
under the applicable subsection of Section 10 hereof.
6. Disability. In the event of the inability of Employee to render services
hereunder during the term of the Agreement due to a disability (whether
temporary or permanent), and for so long as such disability continues, Employee
shall continue to receive Employee's salary for a period not to exceed the
remaining term of the Agreement. There shall be deducted from the amount paid to
Employee hereunder during any period of disability any amounts actually paid to
Employee pursuant to any disability insurance or other similar such program
which the Company has instituted or may institute on behalf of its employees for
the purpose of compensating Employee in the event of disability.
7. Additional Compensation and Benefits. During the term of the Agreement,
Employee will be entitled to participate in and receive the benefits of any
stock option, profit sharing, or other plans, benefits and privileges given to
employees and/or executives of the Company or its subsidiaries and affiliates
which may come into existence hereafter, to the extent commensurate with his
then duties and responsibilities, as fixed by the Board of Directors, and to the
extent Employee is otherwise eligible and qualified to so participate in and
receive such benefits or privileges. The Company shall not make any changes in
such plans, benefits or privileges which would adversely affect Employee's
rights or benefits thereunder, unless such change occurs pursuant to a program
applicable to all executives of the Company and does not result in a
proportionately greater adverse change in the rights of or benefits to Employee
as compared with any other executive of the Company. Nothing paid to Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to Employee pursuant
to Section 4 hereof. Nothing herein shall be deemed to imply that Employee is
entitled to receive any stock options (notwithstanding the grant thereof to
other executive employees of the Company or its subsidiaries or affiliates), it
being understood and agreed that the grant thereof is within the sole discretion
of the Board of Directors or its Compensation Committee.
8. Expenses. The Company shall reimburse Employee or otherwise provide for
or pay for all reasonable expenses incurred by Employee in furtherance of or in
connection with the business of the Company. In addition, the Company shall
reimburse Employee for all reasonable entertainment expenses (whether incurred
at the Employee's residence, while traveling, or otherwise) subject to such
reasonable limitations as may be established by the Board. If such expenses are
paid in the first instance by Employee, the Company will reimburse Employee
therefor in accordance with its standard expense reimbursement policy.
9. Vacations. The Employee shall be entitled to annual paid vacations in
accordance with the following schedule:
1 - 2 years of service: 3 weeks per year
3 - 5 years of service: 3 weeks plus 2 days per year
6 - 9 years of service: 4 weeks per year
10+ years of service: 5 weeks per year
The timing of paid vacations shall be scheduled in a reasonable manner. The
Employee shall not be entitled to receive any additional compensation from the
Company on account of his failure to take paid vacation. The Employee shall also
not be entitled to accumulate more than two weeks of unused paid vacation time
from one calendar year to the next.
10. Termination of Employment.
(a) Definitions. For the purposes of this Agreement, the following
definitions shall apply:
(i) A "Change in Control" of the Company shall be deemed to have occurred:
(A) when either the CEO of the Company as of the date hereof or the Employee is
either removed as a director or not nominated by the Board for re-election as a
director of the Company; (B) when any nominee for election as a director of the
Company contained in the Company's Proxy Statement sent to shareholders in
connection with the Board of Directors' solicitation of proxies to be voted at
any Annual Meeting of Shareholders shall not be so elected by the shareholders,
except where the person elected instead of the nominee is acceptable to the CEO
as of the date hereof and the Employee; (C) upon any person or entity gaining
ownership directly or indirectly of securities that, in the aggregate, represent
over thirty-five percent (35%) of the voting power of the Company's outstanding
securities (whether or not such securities are in fact voted); (D) upon the sale
or disposition of fifty percent (50%) or more of the voting securities of any of
the Company s subsidiaries or all or substantially all of the assets of any such
subsidiary, except where such sale or disposition was approved by the CEO
serving as of the date hereof; or (E) upon the termination of employment by the
Company other than for cause, or the resignation for good reason, of the CEO
serving as of the date hereof or the Employee.
(ii) Termination "for cause" shall mean termination of the Employee by the
Company because of: (A) conviction of or a plea of nolo contendere to a felony,
or another serious crime which results or is likely to result in material injury
to the Company; (B) breach of fiduciary duty involving personal profit; (C)
continued and habitual neglect to perform material stated duties; or (D)
material breach of any provision of this Agreement.
(iii) Resignation "for good reason" shall mean the resignation of his
employment by the Employee following: (A) a Change in Control of the Company
which, within two years of said Change in Control, results in (i) the assignment
to Employee, without Employee's express written consent, of any duties
materially inconsistent with Employee's positions, duties, responsibilities and
status with the Company immediately prior to a Change in Control of the Company;
or (ii) a material change or reduction in Employee's reporting responsibilities,
titles or offices as in effect immediately prior to a Change in Control of the
Company; or (iii) any removal of Employee from, or any failure to re-elect
Employee to, any of such positions, except in each case in connection with the
Employee's disability or death and except under circumstances which would permit
the termination of Employee's employment for cause; or (B) failure by the
Company to comply with any material provision of this Agreement, which failure
has not been cured within thirty (30) days after a notice of non-compliance has
been given by Employee to the Company.
(b) Termination for Cause. The Company may terminate the Employee's
employment at any time for cause. The Employee shall have no right to receive
compensation or other benefits for any period after termination for cause. If,
within thirty (30) days of receipt of notice of termination, the Employee denies
that termination for cause was warranted, the dispute shall be resolved by
submission of the claim to binding arbitration in accordance with the provisions
hereof. The parties agree that the sole determination by the arbitrators shall
be whether the termination of the Employee's employment was for cause. In the
event it is determined that such termination was without cause, Employee shall
be entitled to such relief as is provided for herein with respect thereto. If
the Employee does not deny that termination for cause was warranted within such
thirty (30) day period, the Employee's termination for cause shall be deemed to
be conclusive.
(c) Termination Without Cause. Any termination of employment by the Company
other than termination for cause, including but not limited to, the Company's
failure to renew or extend this Agreement pursuant to Paragraph 2, (which shall
be deemed termination without cause), shall not prejudice the Employee's right
to compensation or other benefits under this Agreement. The parties acknowledge
and agree that damages which will result to Employee for termination without
cause shall be extremely difficult or impossible to establish or prove, and
agree that, unless the termination is for cause, the Company shall be obligated
to make a payment to the Employee as liquidated damages in an amount equal to
the greater of (A) one year s minimum annual salary as set forth in Section 4
hereof and (B) the Employee's total compensation hereunder for the twelve (12)
months preceding the termination, provided, however, that in the event that the
Company fails to renew or extend this Agreement and the Employee's employment
continues, then the amount payable to Employee hereunder shall not be paid until
the cessation of Employee's employment. Employee agrees that, except for such
other payments and benefits to which the Employee may be entitled as expressly
provided by the terms of this Agreement, such liquidated damages shall be in
lieu of all other claims, demands or causes of action which Employee may make by
reason of such termination. The liquidated damages amount shall not be reduced
by any compensation which the Employee may receive for any other employment with
another employer after termination of his employment with the Company. At the
election of the Company, the payment of such liquidated damages shall be made
either by a lump sum payment on the Employee's last day of employment with the
Company or over the course of the next twelve months in equal bimonthly payments
in accordance with the Company's then standard payroll policies and practices.
Such bimonthly payments shall be made by wire transfer to the bank account
designated by the Employee. The Company's failure to make each and every payment
when due and the continuance thereof for a period of five (5) days shall be a
material 5 breach of this Agreement and the Employee shall be entitled to demand
and receive in a lump sum all unpaid liquidated damages.ee shall be entitled to
demand and receive in a lump sum all unpaid liquidated damages.
(d) Termination upon Death. Employee s employment shall automatically
terminate upon Employee s death, provided, however, that the Employee's wife,
Bonnie Baritz, shall be entitled to receive the payments specified under Section
10 (e)(ii) hereof.
(e) Resignation for Good Reason. (i) Employee may resign his employment
hereunder for good reason upon thirty (30) days notice to the Company, stating
in his notice the basis upon which he believes that good reason exists for such
resignation.
(ii) In the event the Employee resigns, the Employee shall be entitled to
receive as a severance payment, or in lieu of a severance payment, payment for
services previously rendered to the Company, a lump sum cash payment equal to
the greater of (A) one year s minimum annual salary as set forth in Section 4
hereof and (B) the Employee's total compensation hereunder applicable to the
twelve (12) months preceding such resignation. Payment under this section shall
be in lieu of any amount owed to the Employee as liquidated damages for
termination without cause under Section 10(c) hereof and shall be payable on the
last day of Employee's employment hereunder. However, payment under this section
shall not be reduced by any compensation which the Employee may receive from
other employment with another employer after termination from his employment
with the Company.
(f) Change in Control; Resignation Without Good Reason. If during the term
of this Agreement there is a Change in Control of the Company and the Employee
without good reason resigns his employment within one year after such Change in
Control, the Employee shall be entitled to receive a severance payment pursuant
to Section 10(e)(ii) hereof. Any such resignation shall be on thirty (30) days
notice to the Company.
(g) Other Benefits. In the event liquidated damages and/or severance
payments are payable pursuant to this Section 10, the Employee shall also be
entitled to have any allowances set forth in Section 8 hereof and Employee's
health insurance coverage continue for a period of twelve months. In the event
that any such law or plan may prevent a continuation of Employee's health
insurance for such twelve month period, the Company shall pay for Employee's
C.O.B.R.A. health coverage during such period, or, if earlier, until such time
as Employee becomes eligible to be covered by comparable insurance with another
employer. The Company shall also ensure that all insurance or other provisions
for indemnification, defense or hold harmless of officers or directors of the
Company which are in effect as of the date of the Employee's termination
continue for the benefit of the Employee with respect to all of his acts and
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against action which may be applicable to such acts or
omissions.
(h) Benefit Plans. Notwithstanding any other provisions of this Agreement
or of any other agreement, contract, or understanding heretofore or hereafter
entered into between the Employee and the Company, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section 10 (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company for the direct or indirect provision of
compensation to the Employee (including groups of classes of participants or
beneficiaries of which the Employee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Employee (a "Benefit Plan"), the Employee shall not have any right to
receive any payment or other benefit under this Agreement, or Other Agreement,
or any Benefit Plan if such payment or benefit, taking into account all other
payments or benefits to or for the Employee under this Agreement, all Other
Agreements, and all Benefit Plans, would cause any payment to the Employee under
this Agreement to be considered a "parachute payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended. In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a parachute payment under this Agreement, then the Employee
shall have the right, in his sole discretion, to designate those payments or
benefits under this Agreement, and Other Agreements, and/or any Benefit Plans,
which should be reduced or eliminated so as to avoid having the payment to the
Employee under this Agreement be deemed to be a parachute payment.
11. Confidentiality and Non-Solicitation. The services of the Employee are
unique, extraordinary and essential to the business of the Company, especially
since the Employee shall have access to the Company's customer lists, trade
secrets and other confidential network, financial, legal and operational
information essential to the Company's business. Accordingly, during the term of
this Agreement and thereafter, the Employee agrees not to use, divulge, furnish
or make available to any person or entity any knowledge of or information with
respect to any confidential or otherwise proprietary documents, discussions,
plans, policies, procedures, activities, materials, information or data of the
Company. The Employee further agrees to refrain from engaging in any activity
whatsoever that would tend to disparage or diminish the reputation of the
Company or which would tend to have a detrimental effect upon the interests of
the Company. The Employee has executed or will execute the standard AMNEX
Employee Confidentiality Agreement, which agreement is incorporated herein by
reference and made a part hereof.
The Employee also agrees that, for a period of one (1) year following the
expiration of this Agreement, the Employee shall not, without the prior written
consent of the Company (which consent is approved by the Board), anywhere in the
United States of America, whether individually or as a principal, officer,
employee, partner, director, agent or representative of or consultant for any
entity, (a) cause or seek to persuade any director, officer, employee, customer,
subscriber, account, agent, vendor or supplier of, or consultant to, the Company
to discontinue or modify to the detriment of the Company the status, employment
or relationship of such person or entity with the Company (including, without
limitation, to discontinue or modify to the detriment of the Company the use of
the Company's operator services, long-distance transmission services, 1+ Coin
Services and/or other telecommunications services); (b) hire or retain any such
officer, director or employee; or (c) cause or seek to persuade any prospective
customer, subscriber or account of the Company (which at the date of cessation
of employment with the Company was then actively being solicited by the Company)
to determine not to enter into a business relationship with the Company.
The Employee acknowledges and agrees that, in the event he shall violate
any of the restrictions of this Section 11, the Company will be without an
adequate remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive relief in any court of
competent jurisdiction without the necessity of proving damages and without any
prejudice to any other remedies which it may have at law or in equity. The
Employee acknowledges and agrees that, in addition to any other state having
proper jurisdiction, any such relief may be sought in, and for such purpose the
Employee consents to jurisdiction of, the courts of the State of Florida.
12. Assumption of Agreement. In the event of a Change in Control
transaction to which the Company is a party, the Company shall require that the
acquiring or successor entity, if any, expressly assume the obligations and
entitlement of this Agreement following such change of control. Employee shall
have the right to demand that the Company acknowledge in writing the assumption
of this Agreement, if applicable, within thirty (30) days following receipt of
such demand. Failure of the Company to so act timely in response to such demand
shall be deemed a material breach of this Agreement by the Company, thereby
entitling Employee to resign for good reason in accordance with the provisions
of this Agreement but without providing any further notice of non-compliance and
opportunity for cure.
13. Other Employment. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company except with the prior written consent of the Company (which consent is
approved by the Board).
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in conjunction
with, the interpretation of this Agreement.
15. Notices. Any notice required or permitted to be given pursuant to this
Agreement shall be deemed to have been duly given when delivered by hand or sent
by certified or registered mail, return receipt requested and postage prepaid,
overnight mail or courier or telecopier as follows:
If to the Employee:
300 East 75th Street
Apt. 10-N
New York, NY 10021
If to the Company:
100 W. Lucerne Circle
Orlando, FL 32801
Attn: CEO
Telecopier Number: (407) 246-0005
or at such other address as any party shall designate by notice to the
other party given in accordance with this Paragraph 15.
16. No Waiver; Entire Agreement. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times. This Agreement constitutes the entire agreement between the parties and
there are no representations, warranties or commitments except as set forth
herein. This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral, of the parties hereto
relating to the matters set forth in this Agreement. This Agreement may be
amended only by a writing executed by the parties hereto.
17. Assignability. This Agreement is personal in nature. The Employee shall
have no right to assign or transfer this Agreement. In the event of any
attempted assignment or transfer by the Employee of his duties and obligations
contrary to this paragraph, all the Employee's rights under this Agreement shall
be forfeited, and the Company shall have no further liability under this
Agreement. The Company may assign or transfer its rights under this Agreement
only to a subsidiary or affiliate of the Company so long as such assignment
shall not substantially change the current status of this Agreement or its place
of performance. No assignment by the Company shall relieve the Company of the
liabilities and responsibilities created by this Agreement, including its
responsibilities under Section 12 hereof.
18. Reformation and Severability. The Employee and the Company agree that
the agreements contained herein shall each constitute a separate agreement
independently supported by good and adequate consideration, shall each be
severable from the other provisions of the Agreement, and shall survive the
Agreement. If a court of competent jurisdiction determines that any term,
provision or portion of this Agreement is void, illegal or unenforceable, the
other terms, provisions and portions of this Agreement shall remain in full
force and effect and the terms, provisions and portions that are determined to
be void, illegal or unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
19. Governing Law. This Agreement shall be governed by the laws of the
United States, where applicable, and otherwise by the laws of the State of
Florida, excluding choice of law principles thereof.
20. Arbitration; Attorneys Fees. (I) Except with regard to Section 11
hereof and any other maters that are not a proper subject of arbitration, all
disputes between the parties hereto concerning the performance, breach,
construction or interpretation of this Agreement or any portion thereof, or in
any manner arising out of this Agreement or the performance thereof, shall be
submitted to binding arbitration in accordance with the rules of the American
Arbitration Association, which arbitration shall be carried out in the manner
hereinafter set forth.
(ii) Within fifteen days after written notice by one party to the other
party of its demand for arbitration, which demand shall set forth the name and
address of its designated arbitrator, the other party shall select its
designated arbitrator and so notify the demanding party. Within fifteen days
thereafter, the two arbitrators so selected shall select the third arbitrator.
The dispute shall be heard by the arbitrators within sixty days after selection
of the third arbitrator. The decision of any two arbitrators shall be binding
upon the parties. In default of either side naming its arbitrator as aforesaid
or in default of the selection of the said third arbitrator as aforesaid, the
American Arbitration Association shall designate such arbitrator upon the
application of either party. The decision of the arbitrators shall be final and
binding upon the Company, its successors and assigns and the Employee.
(iii) The arbitration proceedings shall take place in Orlando, Florida, and
the judgment and determination of such proceedings shall be binding on all
parties hereto. Judgment upon any award rendered by the arbitrators appointed
hereunder may be entered into any court having competent jurisdiction thereof
without any right of appeal therefrom.
(iv) Each party shall pay its or his own expenses of arbitration, and the
expenses of the arbitrators and the arbitration proceeding shall be equally
shared; provided, however, that, (a) if, in the opinion of a majority of the
arbitrators, any claim of defense was unreasonable, the arbitrators may assess,
as part of their award, all or any part of the arbitration expenses of the other
party (including reasonable attorneys fees) and of the arbitrators and the
arbitration proceeding (collectively, the "Arbitration Expenses") against the
party raising such unreasonable claim or defense, and (b) if the arbitrators
rule in favor of the Employee, then the Company shall be obligated to pay all of
the Arbitration Expenses.
21. No Restrictions. The Employee hereby represents that neither the
execution of this Agreement nor his performance hereunder will (a) violate,
conflict with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under the terms, conditions or provisions of any contract,
agreement or other instrument or obligation to which the Employee is a party, or
by which he may be bound, or (b) violate any order, judgment, writ, injunction
or decree applicable to the Employee. In the event of a breach hereof, in
addition to the Company's right to terminate this Agreement, the Employee shall
indemnify the Company and hold it harmless from and against any and all claims,
losses, liabilities and expenses (including reasonable attorney's fees) incurred
or suffered in connection with or as a result of the Company's entering into
this Agreement or employing the Employee hereunder.
22. No Third Party Beneficiaries. Except as provided for in Section 10 (d)
hereof, no person not a party to this Agreement shall have any right to enforce
any of the provisions hereof, there being no third party beneficiaries.
23. Service as Officer of Subsidiaries; Service as Director. During the
employment period, the Employee shall, if elected or appointed, serve as (a) an
officer of any subsidiaries of the Company in existence or hereafter created or
acquired and (b) a Director of the Company and/or any such subsidiaries of the
Company, in each case without any additional compensation for such services.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year above written.
EMPLOYEE AMNEX, Inc.
By: ________________________ By: ____________________
Name: ________________________ Name: ____________________
Date: ________________________ Date: ____________________
CHANGE OF CONTROL; TERMINATION OF EMPLOYMENT.
(a) In the event of a "change in control" of the Company (as such term is
defined below), the Option shall become fully vested and immediately exercisable
until the Expiration Date. As used in this Agreement, a "change in control"
shall only be deemed to have occurred if any "person" (as such term is defined
in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) hereafter becomes the "beneficial owner" (as such term is defined in Rule
13d-3, promulgated under the 1934 Act) of securities of the Company representing
more than fifty percent (50%) of the Company's then outstanding securities
having the right to vote on the election of directors (calculated in accordance
with the provisions of Rule 13d-3).
(b) In the event the Option becomes exercisable, in whole or in part,
whether through passage of time or acceleration pursuant to a "change in
control", it shall remain exercisable to such extent until the Expiration Date
notwithstanding any subsequent termination of employment with the Company or its
subsidiaries for any reason whatsoever.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000793526
<NAME> AMNEX, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,666,000
<SECURITIES> 0
<RECEIVABLES> 33,501,000
<ALLOWANCES> (4,234,000)
<INVENTORY> 333,000
<CURRENT-ASSETS> 37,524,000
<PP&E> 24,883,000
<DEPRECIATION> (10,576,000)
<TOTAL-ASSETS> 85,990,000
<CURRENT-LIABILITIES> 43,910,000
<BONDS> 0
0
8,882,000
<COMMON> 23,685
<OTHER-SE> 22,818,000
<TOTAL-LIABILITY-AND-EQUITY> 85,990,000
<SALES> 26,426,000
<TOTAL-REVENUES> 26,426,000
<CGS> 21,828,000
<TOTAL-COSTS> 21,828,000
<OTHER-EXPENSES> 3,701,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559,000
<INCOME-PRETAX> 338,000
<INCOME-TAX> 61,000
<INCOME-CONTINUING> 277,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
