SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMNEX, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/_/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ 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 No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
AMNEX, INC.
101 Park Avenue
New York, New York 10178
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 14, 1997
To the Shareholders of AMNEX, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of AMNEX, INC., a New York corporation (the "Company" or "AMNEX"),
will be held at the offices of the Company's wholly-owned subsidiary, American
Network Exchange, Inc., 100 West Lucerne Circle, Orlando, Florida, on May 14,
1997 at 11:00 A.M., local time, for the following purposes:
(1) To elect a Board of Directors consisting of three members.
(2) To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized Common Shares from 40,000,000 to 70,000,000
(the "Authorized Share Increase").
(3) Subject to shareholder approval of the Authorized Share Increase, to
approve an amendment to the Company's 1992 Stock Option Plan to increase the
number of Common Shares authorized to be issued thereunder from 2,250,000 to
4,250,000.
(4) To transact such other business as may properly come before the
Meeting.
Only shareholders of record at the close of business on April 23, 1997 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
Attached to the accompanying Proxy Statement as Exhibit A and incorporated
herein by reference are Sections 2 and 10 of Article II of the Company's
By-Laws. Such By-Law sections were amended by the Board of Directors of the
Company in August 1996 and March 1997 to, among other things, provide for a
procedure for shareholder nominations to the Board of Directors and to grant
discretion to the Board of Directors to determine the date of the Company's
annual meeting of shareholders.
By Order of the AMNEX Board
Amy S. Gross
Secretary
New York, New York
May 3, 1997
================================================================================
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO DATE AND
SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF AMNEX,
AND RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. A
SHAREHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN
NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING
THE MEETING AND VOTING IN PERSON.
================================================================================
<PAGE>
AMNEX, INC.
101 Park Avenue
New York, New York 10178
PROXY STATEMENT
Soliciting, Voting and Revocability of Proxy
This Proxy Statement is being mailed to all shareholders of record of
AMNEX, Inc. (the "Company" or "AMNEX") at the close of business, New York time,
on April 23, 1997 in connection with the solicitation by the Board of Directors
of Proxies to be voted at the Annual Meeting of Shareholders (the "Meeting") to
be held on May 14, 1997 at 11:00 A.M., local time, or any adjournment thereof.
The Proxy and the Proxy Statement were mailed to shareholders on or about May 3,
1997.
All shares represented by Proxies duly executed and received will be voted
on the matters presented at the Meeting in accordance with the instructions
specified in such Proxies. Proxies so received without specified instructions
will be voted (1) FOR the nominees named therein to AMNEX's Board of Directors,
(2) FOR the proposal to amend the Certificate of Incorporation to increase the
number of authorized Common Shares from 40,000,000 to 70,000,000 (the
"Authorized Share Increase"), and (3) FOR the proposal to amend the Company's
1992 Stock Option Plan (the "Option Plan") to increase the number of Common
Shares (as defined below) authorized to be issued thereunder from 2,250,000 to
4,250,000 (the "Option Plan Amendment"). The Board does not know of any other
matters that may be brought before the Meeting nor does it foresee or have
reason to believe that Proxy holders will have to vote for substitute or
alternate nominees to the Board. In the event that any other matter should come
before the Meeting or any nominee is not available for election, the persons
named in the enclosed Proxy will have discretionary authority to vote all
Proxies not marked to the contrary with respect to such matters in accordance
with their best judgment.
Shareholders may expressly abstain from voting on Proposals 2 and 3 by so
indicating in the Proxy. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted as present in the tabulation of votes on
each of the proposals presented to shareholders. Broker non-votes are not
counted for the purpose of determining whether a particular proposal has been
approved. With regard to Proposal 1, the election of Directors, votes may be
cast in favor or withheld; votes that are withheld will have no effect as
Directors shall be elected by a plurality of the votes cast in favor. Since both
Proposal 2, the proposed Authorized Share Increase, and Proposal 3, the proposed
Option Plan Amendment, require the approval of a majority of the number of votes
of the outstanding Shares (as defined in "Voting Securities and Security
Ownership of Certain Beneficial Owners and Management" below), abstentions and
broker non-votes will have the effect of a negative vote.
<PAGE>
Any person giving a Proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. The Proxy may be revoked
by filing with AMNEX written notice of revocation or a fully executed Proxy
bearing a later date. The Proxy may also be revoked by affirmatively electing to
vote in person while in attendance at the Meeting. However, a shareholder who
attends the Meeting need not revoke a Proxy given and vote in person unless the
shareholder wishes to do so. Written revocations or amended Proxies should be
sent to AMNEX at 101 Park Avenue, Suite 2507, New York, New York 10178,
Attention: Corporate Secretary.
This Proxy is being solicited by the AMNEX Board of Directors. AMNEX will
bear the cost of the solicitation of Proxies, including the charges and expenses
of brokerage firms and other custodians, nominees and fiduciaries for forwarding
Proxy materials to beneficial owners of AMNEX Shares. Solicitations will be made
primarily by mail, but certain Directors, officers or employees of AMNEX may
solicit Proxies in person or by telephone, telecopier or telegram without
special compensation.
A list of shareholders entitled to vote at the Meeting will be available
for examination by any shareholder at the Meeting.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information for the fiscal years
ended December 31, 1996, 1995 and 1994 concerning the compensation of Peter M.
Izzo, Jr., then Chief Executive Officer of the Company, and the persons who were
the Company's four most highly compensated executive officers (other than Mr.
Izzo) during the 1996 fiscal year:
2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Annual Long-Term
Compensation Compensation
Awards
- ----------------------------------------------------------------------------------------------------------------------------
Common
Restricted Shares
Name and Principal Stock Underlying All Other
Position Year Salary Bonus Award(s) Options Compensation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Izzo, Jr. 1996 $223,424 -- $320,625(2) 325,000(3) $2,178(4)
President and Chief ---------------------------------------------------------------------------------------------------
Executive Officer(1) 1995 $200,000 $52,083 -- 300,000 $2,000(4)
---------------------------------------------------------------------------------------------------
1994 $200,204 $36,204 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz 1996 $166,935 -- $168,750(2) 300,000(3) $1,187(4)
Chairman of the ---------------------------------------------------------------------------------------------------
Board(5) 1995 $132,687 $17,601 -- -- --
---------------------------------------------------------------------------------------------------
1994 $120,061 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
John Kane 1996 $154,403 $23,000(8) $84,375(2) 275,000(3) --
Chief Operating ---------------------------------------------------------------------------------------------------
Officer(6) 1995 $80,384(7) $32,000(8) -- 75,000 --
---------------------------------------------------------------------------------------------------
1994 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo 1996 $116,592 -- $84,375(2) 200,000(3) $690(4)
President of American ---------------------------------------------------------------------------------------------------
Network Exchange, Inc. 1995 $110,415 -- -- 50,000 --
---------------------------------------------------------------------------------------------------
1994 -- (9) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun 1996 $110,146 -- -- 100,000 $22,500(10)
Vice President - ---------------------------------------------------------------------------------------------------
Finance, Treasurer 1995 -- (10) -- -- -- --
and Chief Accounting ---------------------------------------------------------------------------------------------------
Officer 1994 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective March 1997, Mr. Izzo assumed the position of President of the
Company's PubCom Division.
(2) In May 1996, the following persons received awards of the following number
of restricted Common Shares under the Company's 1996 Restricted Stock Grant
Plan (the "Grant Plan"): Mr. Izzo - 95,000; Mr. Baritz - 50,000; Mr. Kane -
25,000; and Mr. Griffo - 25,000. One- tenth of such shares vest each year,
subject to continued employment and subject to acceleration under certain
circumstances. Dividends are payable with respect to such shares. As of
December 31, 1996, no restricted shares had vested and such shares had the
following respective values: Mr. Izzo - $290,938; Mr. Baritz - $153,125;
Mr. Kane - $76,563; and Mr. Griffo - $76,563.
(3) Of such number of shares underlying options, the following number are
subject to shareholder approval of both the Authorized Share Increase (to
increase the number of authorized Common Shares of the Company) and the
Option Plan Amendment (to increase
3
<PAGE>
the number of Common Shares authorized for issuance under the Option Plan):
Mr. Izzo - 250,000; Mr. Baritz - 250,000; Mr. Kane - 50,000; and Mr. Griffo
- 100,000.
(4) Represents matching contributions by the Company under its 401(k) plan.
(5) Effective March 1997, Mr. Baritz was appointed Chief Executive Officer of
the Company.
(6) Effective March 1997, Mr. Kane assumed the position of Executive Vice
President for Business Development.
(7) Mr. Kane joined the Company in June 1995.
(8) The bonus paid to Mr. Kane for 1995 and 1996 was based on the development
of the Company's business regarding long distance calls that are paid by
coins deposited in public pay telephones (commonly referred to as "1+
Coin").
(9) Mr. Griffo joined the Company in January 1995.
(10) Mr. Stoun joined the Company in January 1996. The amount under "All Other
Compensation" for 1996 represents a "signing bonus" paid in 1997 to Mr.
Stoun following his completion of one year of continuous employment with
the Company.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning individual
grants of stock options under the Option Plan during the fiscal year ended
December 31, 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (1)
- -------------------------------------------------------------------------------------------------------------------------------
Number of
Common Percent of
Shares Total Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5% 10%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Izzo, Jr. 75,000(2) 3.2% $3.375 05/23/01 $69,934 $154,535
- -------------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. 250,000(3) 10.5% $2.75 12/20/01 $187,944 $419,726
- -------------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz 50,000(2) 2.1% $3.375 05/23/01 $46,623 $103,024
- -------------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz 250,000(3) 10.5% $2.75 12/20/01 $189,944 $419,726
- -------------------------------------------------------------------------------------------------------------------------------
John Kane 100,000(4) 4.2% $3.25 02/12/01 $89,792 $198,416
- -------------------------------------------------------------------------------------------------------------------------------
John Kane 25,000(5) 1.1% $3.375 05/23/01 $23,311 $51,512
- -------------------------------------------------------------------------------------------------------------------------------
John Kane 100,000(6) 4.2% $2.875 11/08/01 $79,431 $175,522
- -------------------------------------------------------------------------------------------------------------------------------
John Kane 50,000(3) 2.1% $2.75 12/20/01 $37,989 $83,945
- -------------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo 100,000(7) 4.2% $3.25 02/12/01 $89,792 $198,416
- -------------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo 100,000(3) 4.2% $2.75 12/20/01 $75,977 $167,890
- -------------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun 100,000(7) 4.2% $3.25 02/12/01 $89,792 $198,416
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- ----------
(1) The potential realizable value is calculated based on the term of the
option at the time of grant (five years). Stock price appreciation of 5%
and 10% is assumed pursuant to rules promulgated by the Securities and
Exchange Commission (the "SEC") and does not represent the Company's
prediction of its stock price performance.
(2) The options are exercisable to the extent of one-third thereof from and
after each of May 23, 1997, 1998 and 1999. See "Employment Contracts;
Termination of Employment and Change-in-Control Arrangements".
(3) The options are exercisable to the extent of one-third thereof from and
after each of December 20, 1997, 1998 and 1999 and are subject to
shareholder approval of the Authorized Share Increase (to increase the
number of authorized Common Shares) and the Option Plan Amendment (to
increase the number of Common Shares authorized for issuance under the
Option Plan). See "Employment Contracts; Termination of Employment and
Change-in-Control Arrangements", "Amendment to Certificate of Incorporation
to Increase Authorized Common Shares" and "Amendment to 1992 Stock Option
Plan to Increase Authorized Shares".
(4) The options are exercisable to the extent of one-eighth thereof from and
after June 1, 1996, one-sixth thereof from and after February 12, 1997,
one-eighth thereof from and after June 1, 1997, one-twelfth thereof from
and after February 12, 1998 and one-half thereof from and after June 1,
1998. See "Employment Contracts; Termination of Employment and Change-
in-Control Arrangements".
(5) The options are exercisable to the extent of one-third thereof from and
after February 12, 1998 and two-thirds thereof from and after February 12,
1999. See "Employment Contracts; Termination of Employment and
Change-in-Control Arrangements".
(6) The options are exercisable to the extent of one-third thereof from and
after each of November 8, 1997, 1998 and 1999. See "Employment Contracts;
Termination of Employment and Change-in-Control Arrangements".
(7) The options are exercisable to the extent of one-third thereof from and
after each of February 12, 1997, 1998 and 1999. See "Employment Contracts;
Termination of Employment and Change-in-Control Arrangements".
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth certain information concerning the value of
options unexercised as of December 31, 1996:
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Number of Common Shares
Underlying Unexercised Options at Value of Unexercised in-the-Money
December 31, 1996 Options at December 31, 1996
- --------------------------------------------------------------------------------------------------------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter M. Izzo, Jr. 415,000 / 325,000 (1) $60,938 / $78,125
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz 100,000 / 300,000 (1) $6,250 / $78,125
- --------------------------------------------------------------------------------------------------------------------------
John Kane 50,000 / 300,000 (1) $16,406 / $50,781
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo 25,000 / 225,000 (1) -0- / $31,250
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0-/ 100,000 -0- / -0-
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) The number of Common Shares underlying options unexercisable as of December
31, 1996 include options for the following numbers that are subject to
shareholder approval of the Authorized Share Increase (to increase the
number of authorized Common Shares) and the Option Plan Amendment (to
increase the number of Common Shares authorized for issuance under the
Option Plan): Mr. Izzo - 250,000; Mr. Baritz - 250,000; Mr. Kane - 50,000;
and Mr. Griffo - 100,000. See "Employment Contracts; Termination of
Employment and Change-in-Control Arrangements", "Amendment to Certificate
of Incorporation to Increase Authorized Common Shares" and "Amendment to
1992 Stock Option Plan to Increase Authorized Shares".
No options were exercised by any of the foregoing persons during the fiscal
year ended December 31, 1996.
Compensation of Directors
Directors are not entitled to receive any compensation for services
rendered in the capacity of Director. However, Michael V. Dettmers, a Director
of the Company during 1996 and Chief Operating Officer of the Company since
March 1997, provided consulting services to the Company during 1996 in the area
of organizational design and development and received the following
compensation: (i) $130,000; and (ii) a stock option under the Option Plan
(subject to shareholder approval of the Authorized Share Increase and the Option
Plan Amendment) for the purchase of 50,000 Common Shares at an exercise price of
$2.75 per share. See "Amendment to Certificate of Incorporation to Increase
Authorized Common Shares" and "Amendment to 1992 Stock Option Plan to Increase
Authorized Shares".
Employment Contracts; Termination of Employment and Change-in-Control
Arrangements
The Company is a party to employment agreements with Messrs. Izzo, Baritz,
Kane and Griffo that provide for, among other matters, the following: (i) an
initial term ending on June 25, 1997 (except that for Mr. Izzo the initial term
ends on June 25, 1998 and for Mr. Kane the initial term ends on October 1,
1998); (ii) minimum annual compensation as follows: Mr. Izzo - $240,000;
6
<PAGE>
Mr. Baritz - $190,000; Mr. Kane - $180,000; and Mr. Griffo - $150,000; (iii) the
entitlement by such persons to an annual bonus as follows: Mr. Izzo - 3% of the
Company's consolidated pre-tax profits; Mr. Baritz - 1% of the Company's
consolidated pre-tax profits; and Messrs. Kane and Griffo participation in a
bonus pool equal to an aggregate of 3% of the Company's consolidated pre-tax
profits (but for Mr. Kane in no event less than 1% of such profits); and (iv)
the entitlement of such persons to a severance payment in the event that the
executive officer's employment is terminated without cause, he resigns for good
reason or his employment is terminated following a change in control of the
Company (as defined in the respective employment agreements) equal to generally
the greater of one year's minimum annual salary and the employee's total
compensation for the previous 12 months (except that, for Mr. Izzo, the figures
are two years and 24 months, respectively).
All stock options held by Messrs. Izzo, Baritz, Kane, Griffo and Stoun will
vest upon a change in control of the Company (as defined in their respective
stock option agreements). Once and to the extent the options vest, whether by
passage of time or upon a change in control, they will not terminate
notwithstanding termination of employment for any reason. See "Voting Securities
and Security Ownership of Certain Beneficial Owners and Management".
The restricted Common Shares granted to Messrs. Izzo, Baritz, Kane and
Griffo in 1996 (see the Summary Compensation Table) will vest in the event the
executive officer's employment is terminated without cause, he resigns for good
reason or his employment is terminated following a change in control of the
Company (as defined in the Grant Plan).
Compensation Report of the Board of Directors
During the fiscal year ended December 31, 1996, the obligations of the
Compensation Committee of the Board of Directors were performed by the Board as
a whole.
AMNEX's executive compensation program is designed to attract, motivate and
retain management with incentives linked to financial performance and enhanced
shareholder value. AMNEX's compensation program consists of four elements: a
cash salary, a cash incentive bonus, stock option grants and restricted stock
grants.
The Board reviews salary, bonus and stock award information for competitive
companies of comparable size in similar industries. Based in part on this
information, the Board generally sets salaries at levels comparable to those of
such comparable companies. Bonuses generally are linked to Company performance
during the year and thus align the interest of executive officers with that of
the shareholders. The Board also assesses each executive officer's individual
performance and contribution in determining bonus levels. The Board ties the
AMNEX stock option and restricted stock grant programs to incentives that
motivate its executive officers to improve the long-term market performance of
AMNEX's Common Shares.
In accordance with the foregoing, the Board determined the compensation
payable to Peter M. Izzo, Jr., President and Chief Executive Officer of AMNEX
for the fiscal year ended December
7
<PAGE>
31, 1996, and authorized the Company to enter into an employment agreement with
Mr. Izzo in June 1996. In establishing Mr. Izzo's annual cash salary of $223,424
for such year ($240,000 per annum pursuant to his June 1996 employment
agreement), the Board reviewed salary information for competitive companies, Mr.
Izzo's experience in the telecommunications industry and his performance as
President of AMNEX since October 1992 and Chief Executive Officer since August
1993. In order to link the amount of additional compensation payable to Mr. Izzo
to AMNEX's performance, the Board also determined that Mr. Izzo should be
entitled to receive a bonus equal to 3% of AMNEX's pre-tax net profits for the
applicable year. Such bonus arrangement was provided for in Mr. Izzo's
employment agreement. Due to the Company's net loss for the fiscal year ended
December 31, 1996, Mr. Izzo was not entitled to receive a bonus for such year.
Since the Board believes that the granting of options to purchase Common
Shares is and will provide Mr. Izzo with the long-term incentive to work for the
betterment of AMNEX, Mr. Izzo was granted options in 1996 under the Option Plan
for the purchase of an aggregate of 325,000 Common Shares, 250,000 of which are
subject to shareholder approval of both Proposal 2, the Authorized Share
Increase (to increase the number of authorized Common Shares), and Proposal 3,
the Option Plan Amendment (to increase the number of Common Shares authorized
for issuance under the Option Plan).
The Board also believes that the granting of restricted Common Shares under
the Grant Plan to Mr. Izzo provides him with an added incentive to contribute to
the long-term growth of AMNEX since such grants vest over a ten year period
(subject to acceleration under certain circumstances). Based on such belief, in
1996, Mr. Izzo was granted 95,000 restricted Common Shares under the Grant Plan.
This report has been approved by the Board of Directors as of April 21,
1997.
Kenneth G. Baritz
Michael V. Dettmers
Francesco Galesi
Peter M. Izzo, Jr.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1996, the functions of the
Compensation Committee of the Board of Directors of the Company were performed
by the Board as a whole. Among the Board members who participated in
deliberations of the Board concerning executive officer compensation during such
year were Peter M. Izzo, Jr., Chief Executive Officer of the Company during 1996
and, effective March 1997, President of the Company's PubCom Division, Kenneth
G. Baritz, Chairman of the Board of the Company, and, effective March 1997,
Chief Executive Officer of the Company, and Michael V. Dettmers, a Director of
the Company during such year and Chief Operating Officer of the Company since
March 1997, who provided consulting services to the Company during 1996 in the
area of organizational design and development (see "Compensation of Directors").
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total return, for the
five year period ended December 31, 1996, for the Common Shares, the Nasdaq
Market Index and a peer group, in each case assuming an investment of $100 in
AMNEX Common Shares or the index at the close of business on the last trading
day prior to January 1, 1992, and reinvestment of dividends:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------------------------------------------------
Company/Index 1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AMNEX, Inc. 100.00 21.67 40.83 39.17 60.00 40.83
- -------------------------------------------------------------------------------------------------------------------------
Nasdaq Market 100.00 100.98 121.13 127.17 154.96 204.98
Index
- -------------------------------------------------------------------------------------------------------------------------
Peer Group 100.00 114.90 155.02 143.57 195.93 159.19
Index (1)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Peer Group Index is comprised of securities of the following companies:
Communications Central, Inc., Davel Communications Group, Inc., Frontier Corp.,
Intellicall Inc., People's Telephone Company, Inc., Phoenix Network Inc. and
Phonetel Technologies, Inc.
VOTING SECURITIES AND
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The total number of Common Shares, par value $.001 per share, of AMNEX (the
"Common Shares") outstanding as of April 23, 1997 was 27,707,391. The total
number of Series B Preferred Shares, par value $.001 per share, of AMNEX (the
"Series B Preferred Shares") outstanding as of April 23, 1997 was 72,450. The
total number of Series D Preferred Shares, par value $.001 per share, of AMNEX
(the "Series D Preferred Shares") outstanding as of April 23, 1997 was
1,413,337. The total number of Series E Preferred Shares, par value $.001 per
share, of AMNEX (the "Series E Preferred Shares") outstanding as of April 23,
1997 was 1,035,000. The total number of Series F Preferred Shares, par value
$.001 per share, of AMNEX (the "Series F Preferred Shares") as of April 23, 1997
was 415,250. The total number of Series G Preferred Shares, par value $.001 per
share, of AMNEX (the "Series G Preferred Shares") as of April 23, 1997 was
16,250. The total number of Series L Preferred Shares, par value $.001 per
share, of AMNEX (the "Series L Preferred Shares") as of April 23, 1997 was
100,000. Each Common Share is entitled to one noncumulative
9
<PAGE>
vote, each Series B Preferred Share is entitled to ten noncumulative votes, each
Series D Preferred Share is entitled to six noncumulative votes, each Series E
Preferred Share is entitled to one noncumulative vote, each Series F Preferred
Share is entitled to one noncumulative vote, each Series G Preferred Share is
entitled to approximately 5.69 noncumulative votes, and each Series L Preferred
Share is entitled to 15 noncumulative votes. The Common Shares, Series B
Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F
Preferred Shares, Series G Preferred Shares and Series L Preferred Shares
(collectively, the "Shares") are the only outstanding classes and series,
respectively, of securities of AMNEX entitled to vote. Accordingly, giving
effect to the ten-for-one voting rights of the Series B Preferred Shares, the
six-for-one voting rights of the Series D Preferred Shares, the one-for-one
voting rights of the Series E Preferred Shares, the one-for-one voting rights of
the Series F Preferred Shares, the approximately 5.69-for-one voting rights of
the Series G Preferred Shares and the 15-for-one voting rights of the Series L
Preferred Shares, the total number of votes of the Shares entitled to vote at
the Meeting is 39,954,689. Only shareholders of record as of the close of
business on April 23, 1997 will be entitled to vote. The holders of Shares
entitled to a majority of the number of votes that may be cast in respect of the
Shares outstanding and entitled to vote as of April 23, 1997, or Shares entitled
to 19,977,345 or more votes, must be present at the Meeting in person or by
Proxy in order to constitute a quorum for the transaction of business.
Common Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Common Shares (i) by each
person who the Company believes may be considered under the rules and
regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Common Shares, (ii) by each current Director, (iii) by each person
listed in the Summary Compensation Table under "Executive Compensation" and (iv)
by all current executive officers and Directors as a group:
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person
and Name and Address of Number of Shares Approximate
Beneficial Owner Beneficially Owned Percentage of Class (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spring Technology Corp. (2) 3,854,421 (3)(4) 12.3%
- --------------------------------------------------------------------------------------------------------------------------
Robert A. Rowland 2,474,891(5) 8.8%
1122 Colorado Street
Austin, Texas
- --------------------------------------------------------------------------------------------------------------------------
Mellon Bank Corporation 1,742,000(6) 6.2%
Mellon Bank, N.A.
The Dreyfus Corporation
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------
Cofinvest 97 Ltd. (2) 1,725,787(3)(7) 6.1%
- --------------------------------------------------------------------------------------------------------------------------
Brian E. King 1,682,989 6.0%
675 Morris Avenue
Springfield, New Jersey
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. 537,040(8) 1.9%
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz 375,667(9) 1.3%
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo 108,334(10) *
- --------------------------------------------------------------------------------------------------------------------------
John Kane 98,166(11) *
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun 33,334(12) *
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0-(13) --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and 1,239,239(8)(9)(10) 4.3%
Directors as a group (8 persons) (11)(12)(13)
(14)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Less than 1%
(1) Except as they relate to a particular shareholder, does not give effect to
the possible issuance of up to approximately 17,000,000 Common Shares
pursuant to the exercise of outstanding options and warrants or the
conversion of outstanding Preferred Shares and promissory notes of the
Company (certain of which are exercisable or convertible only in the event
of, among
11
<PAGE>
othermatters, shareholder approval of the Authorized Share Increase and the
Option Plan Amendment) or pursuant to contractual commitments. See
"Employment Contracts; Termination of Employment and Change-in-Control
Arrangements", "Amendment to Certificate of Incorporation to Increase
Authorized Common Shares" and "Amendment to 1992 Stock Option Plan to
Increase Authorized Shares".
(2) Address is c/o Friedli Corporate Finance AG ("Friedli AG"), Freigutstrausse
5, Zurich, Switzerland.
(3) The Company has been advised by Friedli AG that, to its knowledge, the
Common Shares reflected above as being beneficially owned by Spring
Technology Corp. ("Spring") and Cofinvest 97 Ltd. ("Cofinvest") are held by
such entities as nominees for certain overseas banking institutions which,
in turn, hold such securities as nominees for the benefit of others (the
"Ultimate Common Beneficial Owners"). The Company has been advised further
by Friedli AG that, to its knowledge, none of the Ultimate Common
Beneficial Owners is the beneficial owner of more than 5% of the
outstanding Common Shares of the Company. See "Certain Relationships and
Related Transactions".
(4) Includes 632,500 and 152,500 Common Shares issuable pursuant to the
conversion of Series B Preferred Shares and Series F Preferred Shares,
respectively, and 2,868,545 Common Shares issuable pursuant to the
conversion of an outstanding promissory note of the Company (including
accrued interest). The Company believes that Friedli AG may have the right
to cause the conversion of such Series B Preferred Shares and promissory
note into Common Shares.
(5) Includes 222,205 Common Shares issuable pursuant to currently exercisable
warrants. Of the 2,252,686 other Common Shares beneficially owned by Mr.
Rowland, 1,035,250 are currently held in escrow as security for
indemnification claims that may be brought in connection with the Company's
acquisition of Capital Network System Inc. and other related entities.
(6) Based upon Schedule 13G filed with the SEC. Pursuant to the Schedule 13G,
(i) of the reported shares, each of Mellon Bank Corporation and Mellon
Bank, N.A. has sole voting power over 1,742,000 shares, sole dispositive
power over 42,000 shares and shared dispositive power over 1,700,000
shares, and The Dreyfus Corporation has sole voting power and shared
dispositive power over 1,700,000 shares; (ii) all of the reported shares
are beneficially owned by Mellon Bank Corporation and its direct or
indirect subsidiaries in their various fiduciary capacities; (iii) no one
individual account holds an interest of 5% or more; and (iv) the filing of
the Schedule 13G should not be construed as an admission that Mellon Bank
Corporation or its direct or indirect subsidiaries are, for purposes of
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the beneficial owners of any of the reported shares.
(7) Includes 127,402 Common Shares issuable pursuant to the conversion of
Series D Preferred Shares and 358,585 Common Shares issuable pursuant to
the conversion of an outstanding promissory note of the Company (including
accrued interest). The Company believes that Friedli AG may have the right
to cause the conversion of such Preferred Shares and promissory note into
Common Shares.
(8) Includes (i) 95,000 Common Shares held pursuant to a restricted Common
Share grant under the Grant Plan which vests to the extent of one-tenth
each year, commencing May 23, 1997,
12
<PAGE>
subject to continued employment and subject to acceleration under certain
circumstances, and (ii) 440,000 Common Shares issuable pursuant to options
that are exercisable currently or within 60 days.
(9) Includes (i) 50,000 shares held pursuant to a restricted Common Share grant
under the Grant Plan which vests to the extent of one-tenth each year,
commencing May 23, 1997, subject to continued employment and subject to
acceleration under certain circumstances, and (ii) 141,667 Common Shares
issuable pursuant to options and warrants that are exercisable currently or
within 60 days.
(10) Represents (i) 25,000 shares held pursuant to a restricted Common Share
grant under the Grant Plan which vests to the extent of one-tenth each
year, commencing May 23, 1997, subject to continued employment and subject
to acceleration under certain circumstances, and (ii) 83,334 Common Shares
issuable pursuant to currently exercisable options.
(11) Includes (i) 25,000 shares held pursuant to a restricted Common Share grant
under the Grant Plan which vests to the extent of one-tenth each year,
commencing May 23, 1997, subject to continued employment and subject to
acceleration under certain circumstances, and (ii) 66,666 Common Shares
issuable pursuant to currently exercisable options.
(12) Represents Common Shares issuable pursuant to currently exercisable
options.
(13) Excludes 1,500,000 Common Shares issuable upon the conversion of 100,000
outstanding Series L Preferred Shares of the Company held by Mr. Galesi,
which Series L Preferred Shares are mandatorily convertible into such
Common Shares in the event the Company shall increase its number of
authorized Common Shares to permit such conversion, as well as to satisfy
other outstanding rights to acquire Common Shares of the Company (e.g. if
the shareholders approve the Authorized Share Increase). Also excludes
1,500,000 Common Shares issuable upon the exercise of a certain warrant
held by Mr. Galesi for the purchase of 100,000 Series L Preferred Shares of
the Company, which warrant is exercisable for the purchase of 1,500,000
Common Shares in the event of the aforementioned increase in authorized
Common Shares. See "Certain Relationships and Related Transactions".
(14) Includes (i) 25,000 shares held pursuant to a restricted Common Share grant
under the Grant Plan which vests to the extent of one-tenth each year,
commencing May 23, 1997, subject to continued employment and subject to
acceleration under certain circumstances, and (ii) 61,667 Common Shares
issuable pursuant to options that are exercisable currently or within 60
days.
Series B Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series B Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series B Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned (1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Friedli Corporate Finance AG 72,450(2) 100%
Freigutstrausse 5
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Spring Technology Corp. 63,250(3) 87.3%
c/o Friedli Corporate Finance AG
Freigutstrausse 5
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Banca Novara 9,200(3) 12.7%
Usteristrasse 9
Postfach
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors -0- --
as a group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Holders of Series B Preferred Shares are entitled to ten votes for each
Series B Preferred Share held.
(2) The Company believes that Friedli AG or an affiliate thereof may have the
right to vote and dispose of, or otherwise control, all of the outstanding
Series B Preferred Shares. Friedli AG does not own any Series B Preferred
Shares of record and the Company has been advised by Friedli AG that it
disclaims beneficial ownership of such shares.
(3) The Company has been advised by Friedli AG that, to its knowledge, the
Series B Preferred Shares reflected above as being beneficially owned by
Spring and Banca Novara are held by such entities either as nominees for
certain overseas banking institutions which, in turn, hold such securities
as nominees for the benefit of others, or as nominees for the benefit of
others. See "Certain Relationships and Related Transactions".
14
<PAGE>
Series D Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series D Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series D Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned (1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Friedli Corporate Finance AG 1,413,337(2) 100%
Freigutstrausse 5
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Experta Treuhand AG 365,000(3) 25.8%
Posttach 970
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Logitech Corp. (4) 343,334(3) 24.3%
- --------------------------------------------------------------------------------------------------------------------------
Barclays Bank (Schweiz) AG 203,500(3) 14.4%
Schutzengasse 21
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Eagle Growth Ltd. (4) 199,100(3) 14.1%
- --------------------------------------------------------------------------------------------------------------------------
Cofinvest 97 Ltd. (4) 127,402(3) 9.0%
- --------------------------------------------------------------------------------------------------------------------------
Bordier & Cie (4) 110,000(3) 7.8%
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors -0- --
as a group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
- ----------
(1) Holders of Series D Preferred Shares are entitled to six votes for each
Series D Preferred Share held.
(2) The Company believes that Friedli AG or an affiliate thereof may have the
right to vote and dispose of, or otherwise control, all of the outstanding
Series D Preferred Shares. Friedli AG does not own any Series D Preferred
Shares of record and the Company has been advised by Friedli AG that it
disclaims beneficial ownership of such shares.
(3) The Company has been advised by Friedli AG that, to its knowledge, the
Series D Preferred Shares reflected above as being beneficially owned by
Experta Treuhand AG, Logitech Corp. ("Logitech"), Barclays Bank (Schweiz)
AG, Eagle Growth Ltd., Cofinvest and Bordier & Cie are held by such
entities either as nominees for certain overseas banking institutions
which, in turn, hold such securities as nominees for the benefit of others,
or as nominees for the benefit of others. See "Certain Relationships and
Related Transactions".
(4) Address is c/o Friedli Corporate Finance AG, Freigutstrausse 5, Zurich,
Switzerland.
Series E Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series E Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series E Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned(1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Friedli Corporate Finance AG (2) 1,035,000(2) 100%
Freigutstrausse 5
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
I.A.A.C. International 360,000(4) 34.8%
Automotive Advisors Corp.,
Panama(3)
- --------------------------------------------------------------------------------------------------------------------------
Hans-Juergen Benze 215,000 20.8%
100 Jericho Quad
Jericho, New York
- --------------------------------------------------------------------------------------------------------------------------
Finanzverwaltung Des Kantons Zurich 200,000(4) 19.3%
Vermogensverwaltung
Walcheplatz 1
Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------------
Infidar AG (3) 75,000(4) 7.2%
- --------------------------------------------------------------------------------------------------------------------------
Experta Trustee Co., Ltd.(3) 60,000(4) 5.8%
- --------------------------------------------------------------------------------------------------------------------------
Stephan Wullinger 55,000 5.3%
c/o Reich, a division of Fahnenstock
and Company Inc.
780 Third Avenue
New York, New York
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors as -0- --
a group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) Holders of Series E Preferred Shares are entitled to one vote for each
Series E Preferred Share held.
17
<PAGE>
(2) The Company believes that Friedli AG or an affiliate thereof may have the
right to vote and dispose of, or otherwise control, all of the outstanding
Series E Preferred Shares. Friedli AG does not own any Series E Preferred
Shares of record and the Company has been advised by Friedli AG that it
disclaims beneficial ownership of such shares.
(3) Address is c/o Friedli Corporate Finance AG, Freigutstrausse 5, Zurich,
Switzerland.
(4) The Company has been advised by Friedli AG that, to its knowledge, the
Series E Preferred Shares reflected above as being beneficially owned by
I.A.A.C. International Automotive Advisors Corp., Panama, Finanzverwaltung
Des Kantons Zurich, Infidar AG, and Experta Trustee Co., Ltd. are held by
such entities either as nominees for certain overseas banking institutions
which, in turn, hold such securities as nominees for the benefit of others,
or as nominees for the benefit of others. See "Certain Relationships and
Related Transactions".
Series F Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series F Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series F Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned(1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spring Technology Corp.(2) 152,500(3) 36.7%
- --------------------------------------------------------------------------------------------------------------------------
Joyce Ltd.(2) 150,000(3) 36.1%
- --------------------------------------------------------------------------------------------------------------------------
Logitech Corp. (2) 105,250(3) 25.3%
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors -0- --
as a group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- ----------
(1) Holders of Series F Preferred Shares are entitled to one vote for each
Series F Preferred Share held.
(2) Address is c/o Friedli Corporate Finance AG, Freigutstrausse 5, Zurich,
Switzerland.
(3) The Company has been advised by Friedli AG that, to its knowledge, the
Series F Preferred Shares reflected above as being beneficially owned by
Spring, Joyce Ltd. and Logitech are held by such entities as nominees for
certain overseas banking institutions which, in turn, hold such securities
as nominees for the benefit of others. See "Certain Relationships and
Related Transactions".
Series G Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series G Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series G Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned(1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Southbrook International Investments Ltd. 27,500(2) 100%
c/o Trippoak Advisors, Inc.
630 Fifth Avenue
New York, New York
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
Francesco Galesi -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors as a -0- --
group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Holders of Series G Preferred Shares are entitled to approximately 5.69
votes for each Series G Preferred Share held.
19
<PAGE>
(2) Subsequent to March 31, 1997 and prior to the April 23, 1997 record date
for the Meeting, Southbrook International Investments Ltd. ("Southbrook")
exercised its right to convert 11,250 Series G Preferred Shares into Common
Shares. Accordingly, as of the close of business on April 23, 1997,
Southbrook beneficially owned 16,250 Series G Preferred Shares.
Series L Preferred Shares
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of March 31, 1997
regarding the beneficial ownership of the Company's Series L Preferred Shares
(i) by each person who the Company believes may be considered under the rules
and regulations of the SEC to be the beneficial owner of more than 5% of its
outstanding Series L Preferred Shares, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name of Management Person and
Name and Address of Beneficial Number of Shares Approximate
Owner Beneficially Owned (1) Percentage of Class
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Francesco Galesi 200,000(2) 100%
c/o Galesi Group
Rotterdam Industrial Park
Wescott Road, Building 6
Schenectady, New York
- --------------------------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kenneth G. Baritz -0- --
- --------------------------------------------------------------------------------------------------------------------------
Kevin D. Griffo -0- --
- --------------------------------------------------------------------------------------------------------------------------
John Kane -0- --
- --------------------------------------------------------------------------------------------------------------------------
Richard L. Stoun -0- --
- --------------------------------------------------------------------------------------------------------------------------
All executive officers and Directors as 200,000(2) 100%
a group (8 persons)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Holders of Series L Preferred Shares are entitled to 15 votes for each
Series L Preferred Share held.
(2) Includes 100,000 Series L Preferred Shares issuable pursuant to currently
exercisable warrants. See "Certain Relationships and Related Transactions".
20
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Galesi
Pursuant to a Stock Exchange Agreement, dated as of January 7, 1997,
between the Company and Francesco Galesi, the Company acquired from Mr. Galesi
10% of the outstanding capital stock of Galesi Telecom International, Inc.
("GTI"), a telecommunications company controlled by him. Pursuant to the terms
of the Stock Exchange Agreement, (i) Mr. Galesi was issued 100,000 Series L
Preferred Shares which have the following rights and preferences: (a) the right
to receive dividends on an equal basis per share with the holders of the
Company's Common Shares; (b) voting rights based on the number of Common Shares
into which the Series L Preferred Shares are convertible; (c) the mandatory
conversion of the Series L Preferred Shares into an aggregate of 1,500,000
Common Shares (the "Conversion Shares") upon the filing of a certificate of
amendment to the Certificate of Incorporation of the Company pursuant to which
there shall be authorized a sufficient number of Common Shares for issuance upon
the conversion of the Series L Preferred Shares as well as upon the exercise of
all outstanding purchase, exchange or conversion rights for the acquisition of
Common Shares (see "Amendment to Certificate of Incorporation to Increase
Authorized Common Shares"); and (d) a liquidation preference, on an equal basis
per share with the holders of shares of the other outstanding series of
Preferred Shares (an aggregate of $4,545,000); (ii) Mr. Galesi was issued a
warrant for the purchase of 100,000 Series L Preferred Shares (the "Warrant
Preferred Shares") (or, if the above certificate of amendment is filed,
1,500,000 Common Shares (the "Warrant Common Shares")) for an aggregate exercise
price of $4,545,000 (subject to reduction to zero in the event that, during any
continuous six-month period commencing on January 1, 1997 and ending on December
31, 1999, the consolidated revenues from operations of GTI are at least
$12,500,000); (iii) Mr. Galesi was granted certain rights with regard to
registration under the Securities Act of 1933, as amended (the "Securities
Act"), the Conversion Shares and Warrant Common Shares (or, if such certificate
of amendment shall not have theretofore been filed, the Series L Preferred
Shares and Warrant Preferred Shares); (iv) Mr. Izzo was elected a Director of
GTI; (v) Mr. Galesi was elected a Director of the Company; (vi) Mr. Galesi
agreed that he would utilize GTI as his sole vehicle with regard to the conduct
of international telecommunications business; (vii) Mr. Galesi agreed to a two
year lock-up with regard to any securities acquired from the Company pursuant to
the transaction; and (viii) Mr. Galesi granted the Company certain "tag along"
rights with regard to the sale of the GTI capital stock acquired by the Company.
Friedli
Pursuant to an Agreement, dated as of January 13, 1997, among the Company,
Friedli AG, Friedli Corporate Finance Inc. and Peter Friedli (collectively, the
"Friedli Group") (the "Friedli Agreement"), the Friedli Group agreed to use its
best efforts to cause certain securityholders of the Company (the "Holders") to
sell, under certain circumstances and upon certain terms as set forth therein,
up to 9,000,000 Common Shares (either through the sale of outstanding Common
Shares
21
<PAGE>
held by such securityholders or following the conversion into Common Shares of
certain promissory notes and Preferred Shares of the Company held by them). See
"Voting Securities and Security Ownership of Certain Beneficial Owners and
Management".
Pursuant to the Friedli Agreement, the Company has agreed, under certain
circumstances and subject to the conditions set forth therein, that it will (i)
repurchase any convertible securities that are subject to the provisions of the
Friedli Agreement, at an effective as converted purchase price of $3.50 per
share, to the extent the underlying Common Shares are not sold pursuant to the
Friedli Agreement; (ii) pay to the holders of the Preferred Shares of the
Company that are subject to the provisions of the Friedli Agreement a cash
payment in lieu of accrued dividends; (iii) pay to Friedli AG, in settlement of
any and all claims of the Friedli Group for consulting, advisory, investment
banking or similar or related fees and expenses, the sum of $375,000; (iv) agree
to offer to the holders of the Company's Series F Preferred Shares the right to
exchange such shares for an equal number of Series K Preferred Shares of the
Company, the only difference between such series being that the Series K
Preferred Shares would have a conversion price of $3.50 per share in contrast
with the $5.00 per share conversion price for the Series F Preferred Shares; and
(v) agree to redeem certain outstanding promissory notes of the Company in the
aggregate principal amount of $1,400,000 that are due in October 1999 and are
payable to certain clients of the Friedli Group in connection with the Company's
acquisition of Crescent Communications, Inc. In addition, pursuant and subject
to the terms of the Friedli Agreement, the parties agreed to exchange mutual
general releases under certain circumstances (the Company release to include,
among others, the Holders). The Friedli Agreement is subject to termination
under certain circumstances. See "Amendment to Certificate of Incorporation to
Increase Authorized Common Shares".
National
Effective February 28, 1997, American Network Exchange, Inc., a
wholly-owned subsidiary of the Company ("ANEI"), entered into a Renewal and
Modification Agreement (the "Renewal Agreement") with National Telecom USA, Inc.
("National") with regard to a certain Prime COCOT Aggregator Agreement (the
"Aggregator Agreement") and a certain Settlement Agreement previously entered
into between the parties. The Company has been advised that Brian E. King
("King"), a principal shareholder of the Company (see "Voting Securities and
Security Ownership of Certain Beneficial Owners and Management"), is the
President and sole shareholder of National.
Pursuant to the Aggregator Agreement, National, which owns, leases or
otherwise controls private pay phones (the "National Phones") and is an
aggregator of long distance and operator- assisted traffic generated by the
National Phones, engaged ANEI as the principal provider of direct dial long
distance and operator-assisted services (collectively, "Services") to the
National Phones. Pursuant to the Settlement Agreement, the parties settled
certain claims made against each other with respect to the Aggregator Agreement.
Pursuant to the Renewal Agreement, as amended, among other matters, (i) the
term of the Aggregator Agreement was extended through February 28, 2007, subject
to earlier termination under certain circumstances, (ii) ANEI was engaged as the
exclusive provider of Services to the National Phones; (iii) ANEI assumed
National's obligation to provide certain services and administrative
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<PAGE>
support, and pay commissions and other compensation, to National's customers;
(iv) ANEI was given the exclusive right to manage the business and operations of
National; (v) ANEI agreed to pay to National a minimum amount of $2,250,000;
(vi) ANEI agreed to pay to National a reduced monthly payment equal to the
greater of $7,500 or .5% of Billed Revenues (as defined in the Renewal
Agreement) during the first three years of the term of the Renewal Agreement,
subject to adjustment at the end of such period; (vii) ANEI was granted a right
of first refusal by King with regard to business opportunities for the reselling
of long distance and operator-assisted traffic generated by private pay phones;
and (viii) the parties settled all outstanding liabilities and obligations under
the Settlement Agreement.
Contemporaneously with the execution of the Renewal Agreement, the Company
purchased certain furniture and equipment from National for an aggregate
purchase price of $160,000 and entered into a five-year real property lease with
an entity affiliated with King that provides for a rental of $72,000 per year.
The Company believes that the terms of the Renewal Agreement and related
transactions were no more favorable to National and King than those that the
Company would have offered to unrelated parties.
Indebtedness of Management
In January 1997, the Company loaned $150,000 to Kevin D. Griffo, President
of the Company's TelCom Division. The loan is repayable, together with interest
at the rate of 5.77% per annum, to the extent of one-half of any and all
bonuses, and all amounts due upon termination of employment, that are payable to
him, but, in any event, within five years from the date of the loan. As security
for the repayment of the loan, Mr. Griffo has pledged to the Company all of his
right, title and interest in and to the 25,000 restricted Common Shares
previously granted to him under the Grant Plan (see Summary Compensation Table
under "Executive Compensation") as well as any and all Common Shares that may be
issued to him upon his exercise of options to purchase such shares.
PROPOSAL 1: ELECTION OF DIRECTORS
Three Directors are to be elected at the Meeting to serve until the next
annual meeting of shareholders and until their respective successors have been
elected and have qualified, or until their earlier resignation or removal. If
for some unforeseen reason one or more of the nominees is not available as a
candidate for Director, the Proxies may be voted for such other candidate or
candidates as may be nominated by the Board. The Board will consider shareholder
recommendations for Board positions that are made in writing to AMNEX's Chief
Executive Officer (see "Shareholder Proposals").
Nominees for Director
All nominees are currently Directors of AMNEX. The following table sets
forth the position
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and offices presently held with AMNEX by each nominee, his age as of March 31,
1997 and the year in which he became a Director. Proxies not marked to the
contrary will be voted in favor of their election. There are no family
relationships among any of AMNEX's executive officers and Directors.
<TABLE>
<CAPTION>
======================================================================================================
Positions and Offices Presently Year Became
Name Age Held with the Company a Director
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kenneth G. Baritz 40 Chairman, Chief Executive Officer 1992
and Director
- ------------------------------------------------------------------------------------------------------
Peter M. Izzo, Jr. 45 President of PubCom Division and 1992
Director
- ------------------------------------------------------------------------------------------------------
Francesco Galesi 66 Director 1997
======================================================================================================
</TABLE>
Kenneth G. Baritz was appointed Chief Executive Officer of the Company in
March 1997. Mr. Baritz has also served as the Company's Chairman since January
1994 and as a Director of the Company since October 1992. Mr. Baritz served from
October 1989 through December 1993 as a Vice President of Bear, Stearns & Co.,
Inc., an investment banking firm. From April 1987 to October 1989, he was a Vice
President of Shearson Lehman Brothers, also an investment banking firm. In 1994,
without admitting or denying that he had committed any violations, Mr. Baritz
consented to a censure and a 90 day suspension from employment with a New York
Stock Exchange member firm for conduct inconsistent with just and equitable
principles of trading involving certain brokerage transactions completed in 1989
and 1991. Mr. Baritz is also a member of the Boards of Directors of a number of
privately-held companies.
Peter M. Izzo, Jr. has served as President of the Company's PubCom Division
since March 1997 and as a Director of the Company since October 1992. Mr. Izzo
previously served as the Company's President from October 1992 to March 1997 and
as its Chief Executive Officer from August 1993 to March 1997. From May 1991 to
October 1992, Mr. Izzo served as President of Peconic Communications, a provider
of pay phones and interconnect equipment. He served as Vice President of New
Product Development for the Company during 1991. Prior to such time and from
1989, Mr. Izzo was associated with American Network Exchange Inc., a
wholly-owned subsidiary of the Company, last serving as Executive Vice President
- - Operations. During 1987 and 1988, Mr. Izzo was Vice President of Network
Operations at Elcotel, a manufacturer of private pay phones. He previously
served as Director of Operations for TFN, Inc., an interexchange carrier, and
was employed for 15 years with New York Telephone Company.
Francesco Galesi has served as a Director of the Company since January
1997. Since 1969, Mr. Galesi has served as Chairman of the Galesi Group, which
includes companies engaged in telecommunications, manufacturing, real estate and
logistic management. Mr. Galesi is also currently a Director of Walden
Residential Properties, Inc., a real estate company, and WorldCom,
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<PAGE>
Inc., a telecommunications company, the shares of each of which are publicly
traded. Mr. Galesi also serves on the Boards of Directors of a number of
privately-held companies.
Board Committees
Currently, there are no standing committees of the Board of Directors;
instead, all functions are performed by the Board as a whole.
Meetings
The Board held thirteen meetings during the year ended December 31, 1996.
All of the Directors of AMNEX for that year attended all such meetings. The
Board also acted on four occasions during 1996 by unanimous written consent in
lieu of a meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act ("Section 16") requires that reports of
beneficial ownership of common stock and preferred stock and changes in such
ownership be filed with the SEC by Section 16 "reporting persons", including
Directors, certain officers, holders of more than 10% of the outstanding common
stock or preferred stock and certain trusts of which reporting persons are
trustees. AMNEX is required to disclose in this Proxy Statement each reporting
person whom it knows to have failed to file any required reports under Section
16 on a timely basis during the fiscal year ended December 31, 1996. To AMNEX's
knowledge, based solely on a review of copies of Forms 3, 4 and 5 furnished to
it and written representations that no other reports were required, during the
fiscal year ended December 31, 1996, AMNEX's officers, Directors and 10%
shareholders complied with all Section 16(a) filing requirements applicable to
them.
PROPOSAL 2: AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON SHARES
On April 21, 1997, the Board, by unanimous vote, adopted resolutions
approving and submitting to a vote of the shareholders an amendment to Article 4
of the Company's Certificate of Incorporation to increase the number of
authorized Common Shares from 40,000,000 to 70,000,000 (the "Authorized Share
Increase"). The relative rights and limitations of the Common Shares would
remain unchanged under the amendment. The Board believes such action to be in
the best interest of the Company so as to make additional Common Shares
available for acquisitions, financings, present and future employee benefit
programs and other corporate purposes. As discussed below, certain arrangements
are currently in place, and a transaction contemplated, that will be affected by
approval of the Authorized Share Increase.
The additional Common Shares resulting from the shareholder approval of the
Authorized Share Increase may be issued from time to time as the Board of
Directors may determine without further action of the shareholders of the
Company. Although the Board has no current plans to
25
<PAGE>
utilize such shares to entrench present management, it may, in the future, be
able to use the additional Common Shares on their own, or together with the
Company's authorized Preferred Shares, as a defensive tactic against hostile
takeover attempts. The authorization of such additional Common Shares will have
no current anti-takeover effect. No hostile takeover attempts are, to
management's knowledge, currently threatened. Except as described under
"Executive Compensation-Employment Contracts; Termination of Employment and
Change-in-Control Arrangements" and "Shareholder Proposals", there are no
provisions in the Company's Certificate of Incorporation or By-Laws or other
material agreements to which the Company is a party that would, in management's
judgment, have an anti-takeover effect.
As indicated above, the Company is currently authorized to issue 40,000,000
Common Shares. As of April 23, 1997, there were 27,707,391 Common Shares issued
and outstanding. In addition, as of such date, the Company had reserved the
remaining 12,292,609 Common Shares for issuance pursuant to the exercise of
outstanding options and warrants or the conversion of outstanding Preferred
Shares and promissory notes, or pursuant to contractual commitments.
Accordingly, without an increase in the number of authorized Common Shares, the
Company will be unable to issue any Common Shares (except for the Common Shares
that are reserved as indicated above), grant any options, warrants or other
rights for the purchase of Common Shares or issue any securities convertible
into or exchangeable for Common Shares.
In addition to the 12,292,609 Common Shares reserved for issuance, the
Company has granted the following options and issued the following convertible
Preferred Shares that will be affected by an increase in the number of Common
Shares authorized for issuance: (i) in December 1996 and March 1997, pursuant to
the Option Plan, the Company granted options for the purchase of an aggregate of
1,895,000 Common Shares (see "Executive Compensation - Option Grants in Last
Fiscal Year" and "Amendment to 1992 Stock Option Plan to Increase Authorized
Shares - Option Grants"); such options were granted subject to shareholder
approval of (a) a certificate of amendment to the Company's Certificate of
Incorporation (such as the one contemplated by the proposal discussed herein)
pursuant to which there shall be authorized a sufficient number of Common Shares
for issuance upon the exercise of such options as well as upon the exercise of
all outstanding purchase, exchange or conversion rights for the acquisition of
Common Shares; and (b) an increase in the number of Common Shares authorized for
issuance under the Option Plan from 2,250,000 to 4,250,000 (see "Amendment to
1992 Stock Option Plan to Increase Authorized Shares"); and (ii) in January
1997, the Company issued to Francesco Galesi 100,000 Series L Preferred Shares
which are mandatorily convertible into 1,500,000 Common Shares in the event of
the filing by the Company of the above certificate of amendment; in addition,
contemporaneously, the Company issued to Mr. Galesi a warrant for the purchase
of 100,000 Series L Preferred Shares at an exercise price of $45.45 per share
which, automatically upon the filing of such certificate of amendment, shall
become exercisable instead for the purchase of 1,500,000 Common Shares at an
exercise price of $3.03 per share (in each case subject to reduction to zero
under certain circumstances) (see "Certain Relationships and Related
Transactions").
In addition, the Company is presently contemplating an offering of
convertible subordinated
26
<PAGE>
debt securities in the approximate principal amount of $50,000,000 to certain
institutional and qualified investors in the United States and certain investors
outside the United States. It is contemplated that, if the financing is
undertaken, the securities offered will not be registered under the Securities
Act and neither such securities nor the underlying Common Shares may be offered
or sold in the United States absent registration under the Securities Act or an
exemption from the registration requirements thereof. It is contemplated further
that, in connection with the offering of the debt securities, the Company will
agree to file a shelf registration statement under the Securities Act with
respect to such debt securities and Common Shares within a short period of time
after completion of such offering so as to permit the purchasers of such debt
securities to resell such debt securities and the Common Shares issuable upon
conversion thereof pursuant to an effective registration statement. Any such
resale will only be made by means of a prospectus satisfying the requirements of
the Securities Act. The exact aggregate principal amount of such debt
securities, interest rate on such debt securities, price and other provisions
relating to conversion of such debt securities into Common Shares and the other
terms of such debt securities and the terms of such registration will be
determined in light of market conditions at the time of the offering. Although
the terms of the contemplated offering have not been fixed, the Company
anticipates that the conversion price for the debt securities would be between
18% and 22% in excess of market value of a Common Share at the time of issuance.
In such event, based upon the contemplated size of the offering, the Company
anticipates that the number of Common Shares that would need to be reserved upon
conversion of the debt securities would in all likelihood be between 13,000,000
and 15,000,000. The Company has no firm commitment for the purchase of any such
debt securities. No assurance can be given that the Company will undertake such
offering or, if undertaken, that it will consummate such financing to the extent
or on the terms contemplated or anticipated or otherwise.
The proceeds of any such financing are intended to be used to repurchase
certain outstanding convertible promissory notes and Preferred Shares, and
prepay certain other outstanding promissory notes, held by clients of Friedli AG
(see "Voting Securities and Security Ownership of Certain Beneficial Owners and
Management"), and to provide funds for acquisitions and any short-term working
capital needs. There are no definitive arrangements in place with respect to
acquisitions which would require the use of any such cash proceeds or any of the
additional authorized Common Shares.
The principal amounts and maturity dates of, and conversion prices for, the
promissory notes to be repurchased are as follows: (i) $500,000 due within 90
days of demand, plus accrued interest of approximately $147,500 through April
15, 1997, convertible at a price of $.20 per share into approximately 3,237,500
Common Shares; and (ii) $325,000 due May 1, 1997, plus accrued interest of
approximately $50,900 through April 15, 1997, convertible at a price of $2.8125
per share into approximately 133,650 Common Shares. The series and liquidation
values of, and conversion prices for, the Preferred Shares to be repurchased are
as follows: (i) 72,450 Series B Preferred Shares, valued at $5.00 per Series B
Preferred Share, convertible at a price of $.50 per Common Share into 724,500
Common Shares; (ii) 1,413,337 Series D Preferred Shares, valued at $2.50 per
Series D Preferred Share, convertible at a price of $2.50 per Common Share into
1,413,337 Common Shares;
27
<PAGE>
(iii) 1,035,000 Series E Preferred Shares, valued at $2.8125 per Series E
Preferred Share, convertible at a price of $2.8125 per Common Share into
1,035,000 Common Shares; and (iv) 415,250 Series F Preferred Shares, valued at
$5.00 per Series F Preferred Share, convertible at a price of $5.00 per Common
Share into 415,250 Common Shares. All such Preferred Shares carry voting rights
equal to the number of Common Shares into which they are convertible, except
that the Series D Preferred Shares have six-for-one voting rights. It is
anticipated that the convertible promissory notes, together with accrued
interest, and Preferred Shares would be repurchased at an approximate purchase
price of $3.50 per underlying Common Share (except that, with respect to the
Series F Preferred Shares, the repurchase price would be equal to the face value
thereof). Such aggregate repurchase obligation is anticipated to be
approximately $26,600,000, including the payment by the Company to the holders
of the Preferred Shares of an amount equal to accrued but unpaid dividends. The
Company is seeking the agreement of the holders of the promissory notes and
Preferred Shares to the sale of such securities upon the above terms and subject
to the consummation of the contemplated offering. In connection with such
agreement, the Company is seeking to obtain irrevocable proxies from such
holders with respect to the voting of any and all Common Shares and Preferred
Shares held by them at the Meeting. In addition, in connection with such
agreement, it is contemplated that the Company will prepay the principal amounts
of, and accrued and unpaid interest on, certain promissory notes in the
aggregate outstanding principal amount of $1,400,000 that are currently due on
October 4, 1999. No definitive arrangements are in place with respect to the
repurchase of the outstanding promissory notes and Preferred Shares, and no
assurances can be given that such transaction will occur upon the terms
contemplated or otherwise.
As indicated above, in the event the proposal to approve the Authorized
Share Increase is approved, no further authorization is required or will be
solicited from the shareholders with respect to the issuance by the Company of
any of the additional Common Shares authorized thereby or any shares, rights,
options, warrants or other securities or obligations convertible into, or
exchangeable for, such additional authorized Common Shares. This will be the
case regardless of whether the contemplated convertible debt offering is
undertaken and/or the contemplated repurchase occurs.
Shareholders of the Company do not currently possess, nor upon the approval
of the proposed Authorized Share Increase will they acquire, preemptive rights,
that would entitle such persons, as a matter of right, to subscribe for the
purchase of any shares, rights, warrants or other securities or obligations
convertible into, or exchangeable for, securities of the Company.
Recommendation and Vote
The affirmative vote of the holders of a majority of the votes of the
outstanding Shares of the Company present in person or by Proxy and entitled to
vote on the proposal at the Meeting is required for approval of this proposal.
The Board of Directors recommends a vote FOR approval of the proposed amendment
to the Certificate of Incorporation.
28
<PAGE>
PROPOSAL 3: AMENDMENT TO 1992 STOCK OPTION PLAN
TO INCREASE AUTHORIZED SHARES
The Company's Board of Directors deems it advisable to increase the number
of Common Shares authorized for issuance upon the exercise of options granted
under the Company's 1992 Stock Option Plan from 2,250,000 to 4,250,000 (subject
to shareholder approval of the Authorized Share Increase) (see "Amendment to
Certificate of Incorporation to Increase Authorized Common Shares").
Description of the Plan
The following statements include summaries of certain provisions of the
Option Plan. The statements do not purport to be complete and are qualified in
their entirety by reference to the provisions of the Option Plan, a copy of
which is available at the offices of the Company.
Purpose
The purpose of the Option Plan is to advance the interests of the Company
by inducing persons or entities of outstanding ability and potential to join and
remain with, or provide consulting or advisory services to, the Company, by
encouraging and enabling eligible employees, non-employee Directors, consultants
and advisors to acquire proprietary interests in the Company, and by providing
such employees, non-employee Directors, consultants and advisors with an
additional incentive to promote the success of the Company.
Administration
The Option Plan provides for its administration by the Board or by a
committee (the "Stock Option Committee") consisting of at least three persons
chosen by the Board of Directors. The Board or the Stock Option Committee has
authority (subject to certain restrictions) to select from the group of eligible
employees, non-employee Directors, consultants and advisors the individuals or
entities to whom options will be granted, and to determine the times at which
and the exercise price for which options will be granted. The Board or the Stock
Option Committee is authorized to interpret the Option Plan and the
interpretation and construction by the Board or the Stock Option Committee of
any provision of the Option Plan or of any option granted thereunder shall be
final and conclusive. The receipt of options by Directors or any members of the
Stock Option Committee shall not preclude their vote on any matters in
connection with the administration or interpretation of the Option Plan.
Nature of Options
The Board or Stock Option Committee may grant options under the Option Plan
which are intended to either qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") ("Incentive Stock Options"), or not so
29
<PAGE>
qualify ("Nonstatutory Stock Options"). The Federal income tax consequences
relating to the grant and exercise of Incentive Stock Options and Nonstatutory
Stock Options are described below under "Federal Income Tax Consequences."
Eligibility
Subject to certain limitations as set forth in the Option Plan, options to
purchase shares may be granted thereunder to persons or entities who, in the
case of Incentive Stock Options, are employees (including Directors and
officers) of either the Company or its subsidiaries. In the case of Nonstatutory
Stock Options, employees (including Directors and officers) or non-employee
Directors of, or certain consultants or advisors to, the Company or its
subsidiaries are eligible. At April 15, 1997, approximately 445 employees and
one non-employee Director were eligible to receive options under the Option
Plan.
Option Grants
As of December 20, 1996, of the 2,250,000 Common Shares authorized for
issuance upon exercise of options granted under the Option Plan, the Company had
granted options (net of cancellations) for the purchase of approximately
2,100,000 Common Shares. On December 20, 1996, following the Board's adoption of
an amendment to the Option Plan to increase the number of Common Shares
authorized to be issued thereunder to 4,250,000 (subject to shareholder approval
of the Authorized Share Increase and the Option Plan Amendment), pursuant to the
Option Plan as so amended, the Board granted to certain executive officers
options for the purchase of an aggregate of 700,000 Common Shares at an exercise
price of $2.75 per share, such price being equal to fair market value at the
time of grant (see "Executive Compensation - Option Grants in Last Fiscal
Year"). In addition, contemporaneously, the Company granted options to other
employees and certain consultants for the purchase of an aggregate of
approximately 995,000 Common Shares at an exercise price of $2.75 per share.
Further, in March 1997, (i) in connection with the Company's acquisition of Sun
Tel Inc., the Company granted an option for the purchase of 50,000 Common Shares
at an exercise price of $3.8125 per share and (ii) in connection with Mr.
Dettmers' appointment as Chief Operating Officer of AMNEX, the Company granted
him an option for the purchase of 150,000 Common Shares at an exercise price of
$3.625 per share. All such options, which generally have a five-year term and
generally are exercisable to the extent of one-third thereof over a three year
period, are subject to shareholder approval of the Authorized Share Increase
(see "Amendment to Certificate of Incorporation to Increase Authorized Common
Shares") and the Option Plan Amendment. Based on the foregoing, in the event of
shareholder approval of the Authorized Share Increase and the Option Plan
Amendment, options for the purchase of approximately 255,000 Common Shares would
be available for future grant under the Option Plan.
Option Price
The option price of the Common Shares subject to an Incentive Stock Option
or, with regard to officers, Directors and other persons subject to the
short-swing profit restrictions of Section 16 ("Insiders"), a Nonstatutory Stock
Option, may not be less than the fair market value (as such term
30
<PAGE>
is defined in the Option Plan) of the Common Shares on the date upon which such
option is granted.
In addition, in the case of a recipient of an Incentive Stock Option who,
at the time the option is granted, possesses more than 10% of the total combined
voting power of all classes of stock of the Company (a "10% Shareholder"), the
option price of the shares subject to such option must be at least 110% of the
fair market value of the Common Shares on the date upon which such option was
granted.
The option price of shares subject to a Nonstatutory Stock Option (other
than for an Insider) will be determined by the Board of Directors or the Stock
Option Committee at the time of grant and need not be equal to or greater than
the fair market value for the Company's Common Shares.
On April 30, 1997, the closing sale price for the Company's Common Shares
was $2-3/8 per share.
Exercise of Options
An option granted under the Option Plan may be exercised by the delivery by
the holder thereof to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
option is being exercised. Such notice must be accompanied, or followed within
ten days, by payment of the full option price of such shares which must be made
by the holder's delivery of (i) a check payable to the order of the Company in
such amount or (ii) previously acquired Common Shares, the fair market value of
which shall be determined as of the date of exercise.
Duration of Options
No Incentive Stock Option and, with regard to Insiders, no Nonstatutory
Stock Option granted under the Option Plan may be exercisable after the
expiration of ten years from the date of its grant. However, if an Incentive
Stock Option is granted to a 10% Shareholder, such option may not be exercisable
after the expiration of five years from the date of its grant.
Nonstatutory Stock Options granted under the Option Plan, other than to an
Insider, may be of such duration as shall be determined by the Board or the
Stock Option Committee.
Non-Transferability
Options granted under the Option Plan are not transferable otherwise than
by will or the laws of descent and distribution and such options are
exercisable, during a holder's lifetime, only by the optionee.
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<PAGE>
Death, Disability or Termination of Employment
Subject to the terms of the stock option agreement pursuant to which
options are granted, if the employment of an employee or the services of a
non-employee Director, consultant or advisor is terminated for cause, or such
employment or services is terminated voluntarily, any options held by such
persons or entities expire immediately. If such employment or services terminate
other than by reason of death or disability, voluntarily by the employee,
non-employee Director, consultant or advisor or for cause, then, subject to the
terms of the stock option agreement pursuant to which options are granted, such
option may be exercised at any time within three months after such termination,
but in no event after the expiration of the option. For purposes of the Option
Plan, the retirement of an individual either pursuant to a pension or retirement
plan adopted by the Company or at the normal retirement date prescribed from
time to time by the Company is deemed to be a termination of such individual's
employment other than voluntarily by the employee or for cause.
Subject to the terms of the stock option agreement pursuant to which
options are granted, if an option holder under the Option Plan (i) dies while
employed by the Company or its subsidiary or while serving as a non-employee
Director of, or consultant or advisor to, the Company or its subsidiary, or (ii)
dies within three months after the termination of his employment or services
other than voluntarily or for cause, then such option may be exercised by the
estate of the employee, non-employee Director, consultant or advisor, or by a
person who acquired such option by bequest or inheritance from the deceased
option holder, at any time within one year after his death.
Subject to the terms of the stock option agreement pursuant to which
options are granted, if the holder of an option under the Option Plan ceases
employment or services because of permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) while employed by, or while serving as
a non-employee Director of, or consultant or advisor to, the Company or its
subsidiary, then such option may be exercised at any time within one year after
his termination of employment, termination of Directorship, or termination of
consulting or advisory arrangement or agreement due to the disability.
Amendment and Termination
The Option Plan (but not options previously granted thereunder) will
terminate on May 25, 2002, ten years from the date that it was adopted by the
Board. Subject to certain limitations, the Option Plan may be amended or
modified from time to time or terminated at an earlier date by the Board or the
shareholders.
Federal Income Tax Consequences
Nonstatutory Stock Options
Under the Code and the Treasury Department Regulations (the "Regulations"),
a Nonstatutory Stock Option does not ordinarily have a "readily ascertainable
fair market value" when
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<PAGE>
it is granted. This rule will apply to the Company's grant of Nonstatutory Stock
Options. Consequently, the grant of a Nonstatutory Stock Option to an optionee
will result in neither income to the optionee nor a deduction to the Company.
Instead, the optionee will recognize compensation income at the time the
optionee exercises the Nonstatutory Stock Option in an amount equal to the
excess, if any, of the then fair market value of the shares issued to the
optionee over the option price. Subject to the applicable provisions of the Code
and the Regulations regarding withholding of tax, a deduction will be allowable
to the Company in the year of exercise in the same amount as is includable in
the optionee's income.
For purposes of determining the optionee's gain or loss on the sale or
other disposition of the shares issued to the optionee upon exercise of a
Nonstatutory Stock Option, the optionee's basis in such shares will be the sum
of the option price plus the amount of compensation income recognized by the
optionee on exercise. Such gain or loss will be capital gain or loss and will be
long-term or short-term depending upon whether the optionee held the shares for
more than one year or one year or less.
Incentive Stock Options
Options granted under the Option Plan which qualify as Incentive Stock
Options under Section 422 of the Code will be treated as follows:
Except to the extent that the alternative minimum tax rule described below
applies, no tax consequences will result to the optionee or the Company from the
grant of an Incentive Stock Option to, or the exercise of an Incentive Stock
Option by, the optionee. Instead, the optionee will recognize gain or loss when
the optionee sells or disposes of the shares issued upon exercise of the
Incentive Stock Option. For purposes of determining such gain or loss, the
optionee's basis in such shares will be the option price. If the date of sale or
disposition of such shares is at least two years after the date of the grant of
the Incentive Stock Option, and at least one year after the issuance of the
shares to the optionee upon exercise of the Incentive Stock Option, the optionee
will realize long-term capital gain treatment upon their sale or disposition.
The Company generally will not be allowed a deduction with respect to an
Incentive Stock Option. However, if an optionee fails to meet the foregoing
holding period requirements (a so-called disqualifying disposition), any gain
recognized by the optionee upon the sale or disposition of the shares issued to
the optionee upon exercise of an Incentive Stock Option will be treated in the
year of such sale or disposition as ordinary income, rather than capital gain,
to the extent of the excess, if any, of the fair market value of the shares at
the time of exercise (or, if less, in certain cases the amount realized on such
sale or disposition) over their option price, and in that case the Company will
be allowed a corresponding deduction.
For purposes of the alternative minimum tax, the amount, if any, by which
the fair market value of the shares issued to the optionee upon such exercise
exceeds the option price will be included in determining the optionee's
alternative minimum taxable income. In addition, for
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<PAGE>
purposes of such tax, the basis of such shares will include such excess.
To the extent that the aggregate fair market value (determined at the time
the option is granted) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by the optionee during any calendar
year exceeds $100,000, such options will not be Incentive Stock Options. In this
regard, upon the exercise of an option which is deemed, under the rule described
in the preceding sentence, to be in part an Incentive Stock Option and in part a
Nonstatutory Stock Option, under existing Internal Revenue Service guidelines,
the Company may designate which shares issued upon exercise of the option are
treated as issued upon the exercise of Incentive Stock Options and which shares
are treated as issued upon the exercise of Nonstatutory Stock Options. In the
absence of such designation, a pro rata portion of each share issued is to be
treated as issued pursuant to the exercise of an Incentive Stock Option and the
balance of each share treated as issued pursuant to the exercise of a
Nonstatutory Stock Option.
Recommendation and Vote
The affirmative vote of the holders of a majority of the votes of the
outstanding Shares of the Company present in person or by Proxy and entitled to
vote on the proposal at the Meeting is required for approval of this proposal.
Such approval is also contingent upon shareholder approval of the Authorized
Share Increase (see "Amendment to Certificate of Incorporation to Increase
Authorized Common Shares"). The Board recommends a vote FOR approval of the
proposed amendment to the Option Plan.
INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since
1993 and has been selected as the Company's independent auditors for the fiscal
year ending December 31, 1997.
A representative of Ernst & Young LLP is expected to be present at the
Meeting, will have the opportunity to make a statement, if such representative
so desires, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intend to be presented at AMNEX's 1998 Annual Meeting
of Shareholders pursuant to the provisions of Rule 14a-8 of the SEC, promulgated
under the Exchange Act, must be received by the Secretary of AMNEX at the
principal executive offices of AMNEX by January 3, 1998 for inclusion in AMNEX's
Proxy Statement and form of Proxy relating to such meeting.
In order for a shareholder to nominate a candidate for Director, under the
Company's By-Laws, timely notice of the nomination must be received by the
Company in advance of the meeting. Ordinarily, such notice must be received at
the principal executive offices of the Company (as
34
<PAGE>
provided below) not less than 60 days nor more than 90 days prior to the
meeting; however, in the event that less than 70 days' notice of the date of the
meeting is given to shareholders and public disclosure of the meeting date,
pursuant to a press release, is either not made or is made less than 70 days
prior to the meeting date, notice by such shareholder to be timely made must be
so received no later than the close of business on the tenth day following the
earlier of the day on which such notice of the date of the meeting was mailed to
shareholders or the day on which such public disclosure was made. The
shareholder filing the notice of nomination must describe various matters,
including such information as (a) the name, age, business and residence
addresses, occupation or employment and shares held by the nominee; (b) any
other information relating to such nominee required to be disclosed in a Proxy
Statement; and (c) the name, address and shares held by the shareholder.
In order for a shareholder to bring other business before an annual meeting
of shareholders, under the Company's By-Laws, timely notice must be received by
the Company within the time limits described above. A shareholder's notice must
set forth as to each matter the shareholder proposes to bring before the annual
meeting certain information regarding the proposal, including (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at such meeting; (b) the name and address
of such shareholder proposing such business; (c) the class and number of shares
of the Company which are beneficially owned by such shareholder; and (d) any
material interest of such shareholder in such business. These requirements are
separate from and in addition to the requirements a shareholder must meet to
have a proposal included in the Company's Proxy Statement.
Any notice given pursuant to the foregoing requirements must be sent to the
Secretary of the Company at 101 Park Avenue, Suite 2507, New York, New York
10178. Any shareholder desiring a copy of the Company's By-Laws will be
forwarded one without charge upon receipt of written request therefor.
The foregoing is only a summary of the provisions of the Company's By-Laws
that relate to shareholder nominations for Director and shareholder proposals.
Reference is made to the pertinent By-Law provisions attached as Exhibit A
hereto.
OTHER BUSINESS
While the accompanying Notice of Annual Meeting of Shareholders provides
for the transaction of such other business as may properly come before the
Meeting, the Company has no knowledge of any matters to be presented at the
Meeting other than those listed as items 1 through 3 in the notice. However, the
enclosed Proxy gives discretionary authority in the event that any other matters
should be presented.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement is accompanied by a copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "Form 10-K").
35
<PAGE>
The following information from the Form 10-K, as filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, is hereby incorporated by
reference into this Proxy Statement:
(i) the consolidated financial statements of the Company as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 included
in Item 14(a) thereof; and
(ii) "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7 thereof.
The following additional information from the Company's Current Report on
Form 8-K for an event dated June 28, 1996, as amended, as filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, is hereby incorporated by
reference into this Proxy Statement:
(i) the consolidated financials statements of Capital Network System Inc.
("CNSI") as of September 30, 1995 and 1994 and for each of the three years ended
September 30, 1995 included in Item 7(a) thereof;
(ii) the consolidated financial statements of CNSI as of June 30, 1996 and
for the nine months ended June 30, 1996 and 1995 included in Item 7(a) thereof;
and
(iii) the pro forma consolidated financial statements of the Company as of
June 30, 1996 and for the six months ended June 30, 1996 and twelve months ended
December 31, 1995 included in Item 7(b) thereof.
By Order of the AMNEX Board
Amy S. Gross
Secretary
New York, New York
May 3, 1997
36
<PAGE>
AMNEX, INC.
101 Park Avenue
New York, New York 10178
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints KENNETH G. BARITZ, PETER M. IZZO, JR. and
AMY S. GROSS as Proxies, each with the power to appoint his or her substitute,
and hereby authorizes them, and each of them, to represent and vote, as
designated below, all the Common Shares and/or Series B Preferred Shares and/or
Series D Preferred Shares and/or Series E Preferred Shares and/or Series F
Preferred Shares and/or Series G Preferred Shares and/or Series L Preferred
Shares of AMNEX, INC. (the "Company") held of record by the undersigned on April
23, 1997 at the Annual Meeting of Shareholders to be held on May 14, 1997 or any
adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted for Proposals 1, 2 and 3 and in favor of any proposal to adjourn the
meeting in order to allow the Company additional time to obtain sufficient
Proxies with regard thereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 and 3
1. Election of Directors.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below). |_| listed below. |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike such nominee's name from the list below.)
KENNETH G. BARITZ PETER M. IZZO, JR. FRANCESCO GALESI
2. Proposal to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized Common Shares from 40,000,000
to 70,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve an amendment to the Company's 1992 Stock Option Plan
to increase the number of Common Shares authorized to be issued thereunder from
2,250,000 to 4,250,000.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
DATED:..............., 1997
Please sign exactly as name appears below. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by the President or other
authorized officer. If a partner ship, please sign in full
partnership name by general partner or other authorized
person. If a limited liability company, please sign in full
limited liability company name by manager or other
authorized person.
Signature
Signature, if held jointly
Print Name(s)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
<PAGE>
EXHIBIT A
AMNEX, INC.
BY-LAWS
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2. Annual Meeting
The annual meeting of shareholders shall be held on the 3rd Tuesday in June
of each year, if not a legal holiday, and, if a legal holiday, then on the next
business day thereafter, or on such other date as shall be determined by the
Board of Directors, and the shareholders shall then elect a Board of Directors
and transact such other business as may properly be brought before the meeting.
To be properly brought before an annual meeting, business must be (a) specified
in the notice of meeting (or any supplement thereto) given by, at the direction
of or upon authority granted by the Board of Directors, (b) otherwise brought
before the meeting by, at the direction of or upon authority granted by the
Board of Directors, or (c) subject to ARTICLE II, Section 10 hereof, otherwise
properly brought before the meeting by a shareholder. For business to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the Company. To
be timely, a shareholder's notice must be received at the principal executive
offices of the Company not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that, in the event that less than 70 days' notice of
the date of the meeting is given to shareholders and public disclosure of the
meeting date, pursuant to a press release, is either not made or is made less
than 70 days prior to the meeting date, then notice by the shareholder to be
timely must be so received not later than the close of business on the tenth day
following the earlier of (a) the day on which such notice of the date of the
annual meeting was mailed to shareholders or (b) the day on which any such
public disclosure was made.
A shareholder's notice to the Secretary must set forth as to each matter
the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting, and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Company's books, of the shareholder proposing
such business, (c) the class and number of shares of the Company which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the By-Laws to the
contrary, but subject to ARTICLE II, Section 10 hereof, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 2,
and, if he should so determine, he shall so declare to the meeting, and any such
business not properly brought before the meeting shall not be transacted.
<PAGE>
Section 10. Notice and Qualification of Shareholder Nominees to Board
Only persons who are nominated in accordance with the procedures set forth
in this Section 10 shall be qualified for election as Directors. Nominations of
persons for election to the Board of Directors of the Company may be made at a
meeting of shareholders by or at the direction of the Board of Directors or by
any shareholder of the Company entitled to vote for the election of Directors at
the meeting who complies with the procedures set forth in this Section 10. In
order for persons nominated to the Board of Directors, other than those persons
nominated by or at the direction of the Board of Directors, to be qualified to
serve on the Board of Directors, such nomination shall be made pursuant to
timely notice in writing to the Secretary of the Company. To be timely, a
shareholder's notice must be received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that, in the event that less than 70 days' notice of the date
of the meeting is given to shareholders and public disclosure of the meeting
date, pursuant to a press release, is either not made or is made less than 70
days prior to the meeting date, then notice by the shareholder to be timely must
be so received not later than the close of business on the tenth day following
the earlier of (a) the day on which such notice of the date of the meeting was
mailed to shareholders or (b) the day on which such public disclosure was made.
A shareholder's notice to the Secretary must set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a Director (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Company which are beneficially owned by such
person and (iv) any other information relating to such person that is required
to be disclosed in solicitation of proxies for election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended from time to time (including,
without limitation, such documentation as is required by Regulation 14A to
confirm that such person is a bona fide nominee); and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on the Company's
books, of such shareholder and (ii) the class and number of shares of the
Company which are beneficially owned by such shareholder. At the request of the
Board of Directors, any person nominated by the Board of Directors for election
as a Director shall furnish to the Secretary of the Company that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee. No person shall be qualified for election as a Director of the
Company unless nominated in accordance with the procedures set forth in this
Section 10. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with
procedures prescribed by the ByLaws, and, if he should so determine, he shall so
declare to the meeting, and the defective nomination shall be disregarded.
