<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission File Number: 0-17158
--------
AMNEX, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
NEW YORK 11-2790221
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
145 HUGUENOT STREET, NEW ROCHELLE, NY 10801
- -------------------------------------------------------------------------------
(Address of Principal Executive Officer) (Zip Code)
(914) 235-1003
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (X) Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. ( ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: Common Stock, $.001 par
value; 42,323,653 shares at June 30, 1998.
<PAGE>
FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27a of the Securities Act of 1933 and Section 21e of the
Securities Exchange Act of 1934 regarding events, conditions, and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons reviewing this
report are cautioned that any forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are discussed herein
and also include general economic factors and conditions that may directly or
indirectly impact the Company's financial condition or results of operation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH
THREE AND SIX MONTHS ENDED JUNE 30, 1997
RESULTS OF OPERATIONS
For the three months ended June 30, 1998, the Company had an operating loss of
$1,549,000 as compared to operating income of $654,000 for the three months
ended June 30, 1997. For the six months ended June 30, 1998 the Company's
operating loss totaled $3,200,000 as compared to $206,000 operating income for
the same period last year. The operating loss for the three months and six
months ended June 30, 1998 was attributable to reduced revenue in both the
periods. For the three months ended June 30, 1998 revenue declined $10,008,000
to $21,015,000 as compared to revenue of $31,023,000 for the June 1997
quarter. For the six months ended June 30, 1998, revenue declined $19,155,000
to $43,195,000 from $62,350,000 for the comparable period in 1997. The decline
for both the three and six month periods was primarily attributable to a
decline in operator services revenue.
Cost of sales for the three months ended June 30, 1998 represented 75% of
revenue as compared to 70% of revenue for the same period last year. For the
six months ended June 30, 1998 costs of sales was 76% of revenue as compared
to 73% for the six months ended June 30, 1997. The increase for both the three
and six month period ended June 30, 1998 resulted from the decline in revenue
in the 1998 periods.
Selling, general and administrative expenses declined to $4,160,000 for the
three months ended June 30, 1998 as compared to $6,318,000 for the three
months ending June 30, 1997, representing 20% of revenue in both periods.
Year-to-date, selling, general and administrative expenses totaled $8,633,000
or 20% of revenue, as compared to $11,323,000, or 18% of revenue, in the 1997
six-month period. The Company's effective cost control efforts and its 1997
restructuring plan have enabled it to continue to reduce its spending levels
in 1998.
Interest expense increased to $1,017,000 for the three months ended June 30,
1998 from $857,000 for the three months ended June 30, 1997. The increase
reflects increased borrowings related to the issuance of 8-1/2% Convertible
Subordinated Notes ("Notes") in the aggregate principal amount of $15 million
on September 30, 1997. For the six months ended June 30, 1998 interest expense
totaled $2,395,000 as compared to $1,692,000 for the comparable period in
1997. The increase is due to the Notes and an interest charge related to
warrants issued in connection with the conversion, in January 1998, of
$3,200,000 in unpaid notes into 2,758,620 Common Shares of the Company, by
Francesco Galesi, a Director of the Company.
1
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $15,246,000 at June 30, 1998
versus a $20,062,000 deficiency at December 31, 1997. The improvement was
primarily due to $6,238,000 in cash received in January and February 1998 in
connection with the issuance of Preferred and Common Stock of the Company and
the conversion of $3,200,000 in debt into Common Shares of the Company in
January 1998. The Company is continuing to pursue alternate and additional
financing from several different sources and believes additional financing
will be obtained to meet its current and future obligations.
The Company has in place a lending agreement with one of its billing and
collection agents under which advances of up to $21 million are provided based
on eligible receivables. Such receivables are purchased by the billing and
collection agent, with recourse, at the approximate rate of 76% of the gross
amount thereof. The Company pays interest under this agreement at prime plus
1.5% per annum. At June 30, 1998, the amount due under this agreement was
$6,264,000. The lending agreement extends through February 2000.
The Company has a $5,000,000 revolving line of credit (the "Line of Credit")
which provides borrowings based on a percentage of eligible receivables and
interest at a rate equal to the prime rate plus 1% per annum. At June 30,
1998, the amount due under this agreement was $3,397,000.
2
<PAGE>
AMNEX, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
1998 1997
---- ----
(unaudited)
Assets
Current assets:
Cash $ 1,199 $ 1,309
Trade receivables, less allowance for
doubtful accounts of $3,100
as of June 30, 1998 and $3,784
as of December 31, 1997 15,364 14,653
Parts inventory 1,060 936
Deferred income taxes 1,665 1,665
Customer advances 663 631
Prepaid expenses and other current assets 2,077 1,928
------- -------
Total current assets 22,028 21,122
Investment in unconsolidated subsidiaries 5,091 5,091
Property and equipment, net 23,528 24,004
Intangible assets, net 9,288 9,655
Goodwill, net 28,023 28,599
Other assets 2,739 3,116
------- -------
Total Assets $90,697 $91,587
======= =======
F-1
<PAGE>
AMNEX, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Short-term debt $ 9,661 $ 11,020
Accounts payable 8,047 8,291
Accrued expenses 5,369 6,139
Accrued network expenses 2,914 2,115
Accrued commissions 1,529 2,006
Accrued taxes payable 1,456 1,788
Due to related party 1,948 4,397
Current portion of capital lease obligations 1,404 1,882
Current portion of long-term debt 4,946 3,546
-------- --------
Total current liabilities 37,274 41,184
Capital lease obligations 1,065 1,357
Long-term debt 24,472 25,188
Minority interest 513 424
Compensation payable 312 312
Obligations under non-compete agreement -- 1,314
Common stock subject to redemption 3,250 3,250
Commitments and contingencies
Shareholders' equity:
Series M Preferred Stock, authorized 2,000 shares, issued and
outstanding 1,701 shares at June 30, 1998 and 1,000 shares
at December 31, 1997 (liquidation preference $1,000) 1,644 940
Common Stock, $.001 par; authorized 70,000,000, issued 42,341,903 at
June 30, 1998 and 34,083,129 at December 31, 1997 42 34
Capital in excess of par value 75,925 65,597
Accumulated deficit (53,324) (47,537)
-------- --------
24,287 19,034
Less 18,250 common shares held in treasury, at cost (476) (476)
-------- --------
Total shareholders' equity 23,811 18,558
-------- --------
Total liabilities and shareholders' equity $ 90,697 $ 91,587
======== ========
</TABLE>
See accompanying notes.
F-2
<PAGE>
AMNEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 21,015 $ 31,023 $ 43,195 $ 62,350
Costs and expenses:
Costs of sales 15,867 21,871 32,677 45,229
Selling, general and administrative 4,160 6,318 8,633 11,323
Depreciation and amortization 2,537 2,180 5,085 4,192
Restructuring charge -- -- -- 1,400
-------------------------- --------------------------
22,564 30,369 46,395 62,144
Operating income (loss) (1,549) 654 (3,200) 206
Interest expense 1,017 857 2,395 1,692
-------------------------- --------------------------
Loss before income taxes
and minority interest (2,566) (203) (5,595) (1,486)
Minority interest in income (loss)
of subsidiaries (7) 14 1 (9)
-------------------------- --------------------------
Loss before income taxes (2,559) (217) (5,596) (1,477)
Provision for income taxes 75 50 150 100
-------------------------- --------------------------
Net loss $ (2,634) $ (267) $ (5,746) $ (1,577)
========================== ==========================
Preferred share dividend $ 21 $ 154 $ 41 $ 308
-------------------------- --------------------------
Net loss available for
common shares $ (2,655) $ (421) $ (5,787) $ (1,885)
========================== ==========================
Basic and diluted loss per
common share $ (.06) $ (.01) $ (.14) $ (.07)
========================== ==========================
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMNEX, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
DECEMBER 31, 1997 THROUGH JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Preferred Capital in Total
$.001 Par Value Stock Excess of Accumulated Treasury Shareholders'
Shares Amount Series M Par Value Deficit Stock Equity
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 34,083,129 $ 34 $ 940 $ 65,597 $ (47,537) $ (476) $ 18,558
Issuance of common shares 5,460,362 5 7,131 7,136
Issuance of preferred shares 750 750
Conversion of preferred shares 41,827 (46) (46)
Conversion of debt 2,758,620 3 3,197 3,200
Issuance of warrants
Preferred stock dividends (41) (41)
Net loss (5,746) (5,746)
----------------------------------------------------------------------------------------
Balance, June 30, 1998 42,341,903 $ 42 $ 1,644 $ 75,925 $ (53,324) $ (476) $ 23,811
========================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMNEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(5,746) $(1,577)
Adjustments to reconcile loss to net cash
used in operating activities:
Depreciation and amortization 5,085 4,191
Minority interest (89) (14)
Provision for losses on receivables (684) (382)
Changes in assets and liabilities:
Trade receivables (27) (5,143)
Parts inventory (124) (119)
Customer advances, prepaid expenses and
other current assets (181) (1,239)
Other assets 377 (552)
Accounts payable and accrued expenses (1,024) 3,736
--------------------
Net cash used in operating activities (2,413) (1,099)
--------------------
Cash flows from investing activities
Purchase of business, net of cash acquired -- (881)
Purchase of payphones (2,186) (475)
Expenditures for property and equipment (1,054) (1,290)
--------------------
Net cash used in investing activities (3,240) (2,646)
Cash flows from financing activities
Net proceeds from sale of common stock 5,488 2
Proceeds from sale of Preferred shares 750 --
Proceeds from the exercise of common stock options -- 37
Proceeds from related party debt 750 --
Proceeds from long-term debt 1,816 --
Borrowings (repayments) under revolving credit, net (1,359) 2,159
Payments on long-term debt (1,132) (1,099)
Principal payments under capital lease obligations (770) (1,097)
--------------------
Net cash provided by financing activities 5,543 2
--------------------
Net decrease in cash (110) (3,743)
Cash at beginning of period 1,309 4,947
--------------------
Cash at end of period $ 1,199 $ 1,204
====================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Supplemental disclosure of cash flow information:
(In thousands, except share data)
Six months ended June 30, 1998:
1. The Company issued 526,168 Common Shares pursuant to an agreement with
Teleplus, Inc.
2. The Company issued 2,758,620 Common Shares pursuant to the conversion of
$3,200 in notes.
(See shareholders' equity note.)
3. The Company issued 41,827 Common Shares pursuant to the conversion of 49
Series M Preferred Shares.
4. The Company issued 15,385 Common Shares pursuant to an agreement among
the Company, National Telecom USA, Inc. and Brian E. King.
5. Interest of $1,068 was paid.
6. Income taxes of approximately $311 were paid.
Six months ended June 30, 1997:
1. The Company issued 100,000 Series L Preferred Shares convertible into
1,500,000 Common Shares.
2. The Company issued 810,797 Common Shares pursuant to the conversion of
78,750 Series G Preferred Shares.
3. The Company issued 1,500,000 Common Shares pursuant to the conversion of
100,000 Series L Preferred Shares.
4. The Company issued 94,369 Common Shares for the acquisition of pay
telephones.
5. The Company issued 526,168 Common Shares pursuant to agreement with
Teleplus, Inc.
6. The Company issued 624,000 Common Shares pursuant to the conversion of
$96 of debt plus accrued interest thereon.
7. The Company issued 155,000 Common Shares pursuant to the exercise of
155,000 warrants.
8. The Company issued 24,500 Common Shares pursuant to the 1996 Restricted
Stock Grant.
9. Interest of approximately $1,748 was paid.
10. Income taxes of approximately $321 were paid.
F-6
<PAGE>
AMNEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information in response to the requirements of Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position as of June 30, 1998;
results of operations for the three and six months ended June 30, 1998
and 1997; cash flows for the six months ended June 30, 1998 and 1997;
and changes in shareholders' equity for the six months ended June 30,
1998. For further information, refer to AMNEX's financial statements and
notes thereto included in the Company's Form 10-K for the year ended
December 31, 1997. The December 31, 1997 balance sheet has been derived
from AMNEX's audited financial statements as of that date. Certain prior
year amounts were reclassified to conform with the current year
presentation.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information, which significantly changes
the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports to shareholders. SFAS No. 131
is effective for annual periods beginning after December 15, 1997 and
interim periods beginning in the second year of application. The Company
intends to adopt the provisions of this standard in 1998 and does not
expect its application to have a material impact on the financial
statements of the Company.
3. SHAREHOLDERS' EQUITY
In January 1998, the Company received net proceeds of $750 in connection
with the issuance of 750 shares of Series M Convertible Preferred Stock
and the issuance of warrants to purchase 45,000 shares of the Company's
Common Stock at $2.65 per share. The Series M Convertible Preferred
Stock has the following rights and preferences, among others: (i) 5%
cumulative dividend payable quarterly, (ii) the right to convert each
share into Common Stock of the Company at a conversion price that is the
lesser of (a) the average of the lowest five closing bid prices during
the thirty trading day period before conversion notice was sent or (b)
$2.65; and (iii) a liquidation preference equal to the stated value plus
all accrued and unpaid dividends. The Series M Preferred Shareholders
have no voting rights.
During January and February 1998, the Company received $5,624 in
proceeds in connection with several stock purchase agreements under
which the Company issued 4,918,809 shares of its Common Stock at prices
ranging from $1.10 and $1.16 per share. Certain restrictions were placed
on the resale of these shares for a one year period from the date of
issuance.
In January 1998, Francesco Galesi, a Director of the Company, converted
$3,200 in unpaid notes into 2,758,620 Common Shares of the Company at
the then current market price of the Company's Common Stock. In
consideration for these 1997 loans, the Company granted to Mr. Galesi a
warrant for the purchase of 750,000 Common Shares at an exercise price
of $1.50 per share.
F-7
<PAGE>
AMNEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
4. LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share for the quarters and six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net loss $ (2,634) $ (267) $ (5,746) $ (1,577)
Preferred stock dividends 21 154 41 308
------------ ------------ ------------ ------------
Numerator for basic and diluted loss per share -
loss available to common stockholders (1) $ (2,655) $ (421) $ (5,787) $ (1,885)
============ ============ ============ ============
Denominator:
Denominator for basic and diluted loss per
share - weighted-average shares 42,303,349 29,058,761 40,897,102 28,328,062
============ ============ ============ ============
Basic and diluted loss per share $ (.06) $ (.01) $ (.14) $ (.07)
============ ============ ============ ============
</TABLE>
(1) For all periods stock options, warrants, preferred stock and its
related dividends, and convertible debentures were excluded from
computation as they were antidilutive.
5. RELATED PARTY TRANSACTION
In May 1998, the Company borrowed $750 for working capital purposes from
Rotterdam Ventures, Inc., a company wholly-owned by Mr. Galesi, under an
unsecured demand promissory note which bears interest at prime plus 1% per
annum. (See subsequent events note.)
6. SUBSEQUENT EVENTS
In July 1998, pursuant to an Asset Purchase Agreement, the Company acquired
2,300 payphones. The Asset Purchase Agreement provides for an aggregate
consideration of $8,510, including cash of $600 and debt assumed of $7,910. In
connection with this acquisition, Mr. Galesi loaned the Company $1,500 under
an agreement whereby the May 1998 $750 unsecured promissory note was paid and
a new $1,500 note, secured by assets of the Company, was issued. The $1,500
note is convertible into Common Shares at the conversion rate of $1.25 per
share.
In August 1998, the Company borrowed $500,000 for working capital purposes
from Mr. Galesi under an unsecured demand promissory note that bears interest
at prime plus 2% per annum.
F-8
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
(a) None.
(b) None.
(c) Previously reported.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
(a) None.
(b) None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
quarter ended June 30, 1998.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Demand Promissory Note, dated as of May 12, 1998, between the
Company and Rotterdam Ventures, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMNEX, INC.
August 14, 1998 By: /s/ Alan J. Rossi
------------------
Alan J. Rossi
Chairman of the Board and
Chief Executive Officer
August 14, 1998 By: /s/ Cynthia I. Terrell
-----------------------
Cynthia I. Terrell
Vice President and
Chief Financial Officer
4
EXHIBIT 10.1
MAY 12, 1998
$750,000.00
DEMAND PROMISSORY NOTE
AMNEX, INC., a New York corporation ("AMNEX"), AMERICAN NETWORK
EXCHANGE, INC., a Delaware corporation and wholly-owned subsidiary of AMNEX
("ANEI"), and CRESCENT PUBLIC COMMUNICATIONS INC., a New York corporation and
wholly-owned subsidiary of AMNEX ("Crescent" and collectively with AMNEX and
ANEI, the "Makers"), for value received, hereby jointly and severally promise
to pay to the order of ROTTERDAM VENTURES, INC., a New York corporation (the
"Holder"), within fifteen (15) days following the date of receipt of demand
for payment (the "Due Date"), at the offices of the Holder indicated in
paragraph 5 hereof the aggregate principal sum of SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($750,000) in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts and to pay interest on such principal sum from the date hereof
at a fluctuating rate per annum at all times equal to the prime rate of
interest announced from time to time by The Chase Manhattan Bank plus one
percent (1%) (the "Note Rate"). Accrued interest on the unpaid principal
balance of this Demand Promissory Note ("Note") shall be payable on the first
business day of each month commencing July 1, 1998, and on the Due Date.
1. REGISTERED OWNER. The Makers may consider and treat the person in whose
name this Note shall be registered as the absolute owner thereof for all
purposes whatsoever (whether or not this Note shall be overdue) and the
Makers shall not be affected by any notice to the contrary. The
registered owner of this Note shall have the right to transfer it by
assignment and the transferee thereof upon his registration as owner of
ths Note, shall become vested with all the powers and rights of the
transferor. Registration of any new owner shall take place upon
presentation of this Note to AMNEX at its offices together with an
assignment duly authenticated. In case of transfers by operation of law,
the transferee shall notify the Makers of such transfer and of his
address, and shall submit appropriate evidence regarding the transfer so
that this Note may be registered in the name of the transferee. This
Note is transferable only on the books of the Makers by the holder
hereof in person or by attorney, on the surrender hereof duly endorsed.
Communications sent to any registered owner shall be effective as
against all holders or transferees of this Note not registered at the
time of sending the communication.
2. REDEMPTION. The Holder, by its acceptance of this Note, hereby
acknowledges that, at any time, and from time to time, notwithstanding
the lack of demand for payment on the part of the Holder, any of the
Makers may, at its option, by written notice given to the Holder, elect
to redeem and prepay all or any portion of the outstanding principal
indebtedness evidenced by this Note, together with accrued interest
thereon, without premium or penalty. Any such notice of a Maker's
election to redeem and prepay as provided for hereinabove shall be given
not less than five (5) days prior to the date fixed in such notice as
the date for redemption of this Note (the "Redemption Date").
3. DEFAULT RATE OF INTEREST: LATE CHARGE. In the event the Makers shall
fail to pay all or any portion of the principal amount hereof on or
before the Due Date, any such unpaid amount shall bear interest, for
each day from the Due Date, until paid in full, at a fluctuating rate
per annum at all times equal to the Note Rate plus five percent (5%)
instead of the Note Rate as hereinabove provided, payable upon demand.
In the event the Makers shall fail to pay timely any other amount due
hereunder, the Makers, jointly and severally, agree to make a payment,
in addition to all other required payments hereunder, equal to two
percent (2%) of the overdue payment.
<PAGE>
4. APPLICABLE LAW. This Note is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of
New York, excluding choice of law rules thereof.
5. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the
provisions of this Note shall be in writing and shall be deemed to have
been duly given or made for all purposes when hand delivered or sent by
certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier, or telecopier as follows:
If to Holder at: Building 6, East Road
Rotterdam Industrial Park
Schenectady, New York 12306
Attention: David M. Buicko,
Executive Vice President
Telecopier Number: (518)356-5334
With a copy to: Steven K. Porter, Esquire
Rotterdam Industrial Park
Westcott Road, Building 6
Schenectady, New York 12306
Telecopier Number: (518)357-2534
If to AMNEX at: 145 Huguenot Street
New Rochelle, New York 10801
Attention: Chairman
Telecopier Number: (914)235-1339
With a copy to: Guy Longobardo, Esquire
145 Huguenot Street
New Rochelle, New York 10801
If to ANEI at: 100 West Lucerne Circle, Suite 600
Orlando, Florida 32801
Attention: President
Telecopier Number: (407)481-2560
With a copy to: Guy Longobardo, Esquire
145 Huguenot Street
New Rochelle, New York 10801
If to Crescent at: 6 Nevada Drive, Building C
Lake Success, New York 11042
Attention: President
Telecopier Number: (516)326-7987
With a copy to: Guy Longobardo, Esquire
145 Huguenot Street
New Rochelle, New York 10801
<PAGE>
or any such other address as the Holder or any Maker may specify by
notice given to the other party in accordance with this paragraph 5.
6. MISCELLANEOUS. This Note constitutes the rights and obligations of the
Holder and the Makers. No provision of this Note may be modified except
by an instrument in writing signed by the party against whom the
enforcement of any modification is sought.
Payment of interest due under this Note prior to the Due Date or
Redemption Date, as the case may be, shall be made to the registered holder of
this Note. Payment of principal and interest due hereunder on the Due Date or
Redemption Date, as the case may be, shall be made to the registered holder of
this Note in accordance with the terms hereof following presentation of this
Note upon or after such applicable date. No interest shall be due on this Note
for such period of time that may elapse between the Due Date or Redemption
Date, as the case may be, and its presentation for payment.
No recourse shall be had for the payment of the principal of or interest
on this Note against any officer, director or agent of any Maker, past,
present or future, all such liability of the officers, directors and agents
being waived, released and surrendered by the Holder hereof by the acceptance
of this Note.
IN WITNESS WHEREOF, the Makers have caused this Note to be signed on its
behalf in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
AMNEX, INC.
By:
---------------------------------------
Name: Cynthia I. Terrell
Title: Chief Financial Officer
AMERICAN NETWORK EXCHANGE, INC.
By:
---------------------------------------
Name: Cynthia I. Terrell
Title: Chief Financial Officer
CRESCENT PUBLIC COMMUNICATIONS INC.
By:
---------------------------------------
Name: Cynthia I. Terrell
Title: Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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0
1,644
<COMMON> 75,967
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<TOTAL-LIABILITY-AND-EQUITY> 90,697
<SALES> 0
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