<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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):
/x/ $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.
145 HUGUENOT STREET
SUITE 401
NEW ROCHELLE, NEW YORK 10801
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 6, 1998
------------------------
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 its offices located at 145 Huguenot Street, New Rochelle, New
York on August 6, 1998 at 10:00 A.M., local time, for the following purposes:
(1) To elect a Board of Directors consisting of six members.
(2) 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 4,250,000 to 5,750,000.
(3) To act upon a shareholder proposal, if properly presented at the
Meeting
(4) To transact such other business as may properly come before the
Meeting.
Only shareholders of record at the close of business on July 9, 1998 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
By Order of the AMNEX Board of
Directors
Guy A. Longobardo
Secretary
New Rochelle, New York
July 17, 1998
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.
145 HUGUENOT STREET
SUITE 401
NEW ROCHELLE, NEW YORK 10801
------------------------
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 July 9, 1998 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 August 6, 1998 at 10:00 A.M., local time, or any adjournment thereof.
The Proxy and the Proxy Statement were mailed to shareholders on or about July
17, 1998.
All Common 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 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 4,250,000 to 5,750,000 (the 'Option Plan
Amendment'), and AGAINST the shareholder proposal (the 'Shareholder Proposal').
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.
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. Shareholders may
expressly abstain from voting on Proposal 2 and Proposal 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. Since
Proposal 2, the proposed Option Plan Amendment, and Proposal 3, the Shareholder
Proposal, require the approval of a majority of the number of votes of the
outstanding Shares (as defined in 'Security Ownership of Certain Beneficial
Owners and Management' below), abstentions and broker non-votes will have the
effect of negative votes.
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 145 Huguenot Street, Suite 401, New Rochelle, New York 10801,
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 Common 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.
<PAGE>
EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the fiscal years
ended December 31, 1997, 1996 and 1995 concerning executive compensation.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -----------------------------------
AWARDS PAYOUTS
---------- -------
COMMON
RESTRICTED SHARES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
- -------------------------- ---- -------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alan J. Rossi ............ 1997 $158,885 $50,000 -- -- 750,000 -- --
Chairman of the Board 1996 -- -- -- -- -- -- --
and Chief Executive 1995 -- -- -- -- -- -- --
Officer
Peter M. Izzo, Jr. ....... 1997 $241,831 $50,000 -- -- -- -- $ 2,375(2)
President 1996 $223,424 -- -- $ 320,625(1) 325,000 -- $ 2,178(2)
1995 $200,000 $52,083 -- -- 300,000 -- $ 2,000(2)
Kenneth G. Baritz ........ 1997 $161,847 -- -- -- -- -- --
Former Chairman of the 1996 $166,935 -- -- $ 168,750(1) 300,000 -- $ 1,187(2)
Board(1)(3)............. 1995 $132,687 $17,601 -- -- -- -- --
John Kane ................ 1997 $194,246 -- -- -- -- -- --
Former Chief 1996 $154,403 $23,000 -- $ 84,375(1) 275,000 -- --
Operating Officer(1)(4) 1995 $ 80,384 $32,000 -- -- 75,000 -- --
Kevin D. Griffo .......... 1997 $134,845 -- -- -- -- -- $ 1,358(2)
Former President of 1996 $116,592 -- -- $ 84,375(1) 200,000 -- $ 690(2)
American Network 1995 $110,415 -- -- -- 50,000 -- --
Exchange, Inc.(1) (5)
Richard L. Stoun ......... 1997 $128,846 $15,000 -- -- -- -- --
Former Vice President 1996 $110,146 -- -- -- 100,000 -- $ 22,500(6)
Treasurer(6) 1995 -- -- -- -- -- -- --
</TABLE>
- ------------------
(1) In May 1996, the following persons received awards of the following number
of restricted Common Shares: Mr. Izzo -95,000; Mr. Baritz--50,000; Mr.
Kane--25,000; and Mr. Griffo--25,000. Such shares vest to the extent of
one-tenth thereof each year, subject to continued employment and subject to
acceleration under certain circumstances. During 1997, the following shares
vested and were issued: Mr. Izzo 9,500; Mr. Baritz 5,000; Mr. Kane 25,000;
and Mr. Griffo 2,500. During 1997 Messrs. Baritz, Kane, and Griffo resigned
from the Company and accordingly their unvested restricted shares were
cancelled. As of December 31, 1997, the value of Mr. Izzo's unvested
restricted shares was $85,500.
(2) Represents Company matching contributions for its 401(k) plan.
(3) On May 28, 1997, Mr. Baritz resigned.
(4) On March 19, 1997, Mr. Kane resigned.
(5) On December 31, 1997, Mr. Griffo resigned.
(6) 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. On May 8, 1998, Mr. Stoun resigned.
2
<PAGE>
(b) OPTION GRANTS TABLE.
The following table sets forth certain information concerning individual
grants of stock options during the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------- ---------------------
NUMBER OF PERCENT OF
COMMON SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE
NAME GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
- ------------------ ------------- ------------- -------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan J. Rossi..... 350,000(2) 32.9% $2.313 6/2/02 $223,664 $494,238
Alan J. Rossi..... 400,000(3) 37.6% $2.250 6/18/02 $248,653 $549,459
</TABLE>
- ------------------
(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 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 effective as
of June 2, 1998, 1999 and 2000. See paragraph (e) concerning Employment
Contracts under 'Executive Compensation.'
(3) The options are exercisable to the extent of one-third thereof effective as
of June 18, 1997, 1998 and 1999. See paragraph (e) concerning Employment
Contracts under 'Executive Compensation.'
(c) AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUE TABLE
The following table sets forth certain information concerning the value of
unexercised options as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1997 DECEMBER 31, 1997
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------------ ------------------------- -------------------------
<S> <C> <C>
Alan J. Rossi......................................... 133,333/616,667 0/0
Peter M. Izzo, Jr..................................... 523,333/216,667 0/0
Kenneth G. Baritz..................................... 116,667/0 0/0
John Kane............................................. 104,167/0 0/0
Kevin D. Griffo....................................... 116,668/0 0/0
Richard L. Stoun...................................... 33,334/66,666 0/0
</TABLE>
No options were exercised by any of the foregoing persons during the fiscal
year ended December 31, 1997.
(d) COMPENSATION OF DIRECTORS.
Non-employee directors each receive a $2,000 monthly fee for their services
in such capacity.
3
<PAGE>
(e) EMPLOYMENT CONTRACTS: TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
AMNEX is a party to a June 1996 employment agreement with Mr. Izzo that
provides for, among other matters, the following: (i) an initial term ending on
June 25, 1998 (ii) minimum annual compensation of $240,000 (iii) the entitlement
to an annual bonus of 3% of the Company's consolidated pre-tax profits; and (iv)
the entitlement to a severance payment equal to the greater of two year's
minimum annual salary or total compensation for the previous 24 months in the
event Mr. Izzo's employment is terminated without cause, he resigns for good
reason or his employment is terminated following a change in control of AMNEX
(as defined in the employment agreement). Mr. Izzo's employment agreement has
been renewed by the Company, with a term ending on June 25, 2000.
All stock options held by Messrs. Rossi and Izzo will vest upon a change in
control of AMNEX (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 'Security Ownership of Certain Beneficial Owners and
Management'. The restricted Common Shares granted to Mr. Izzo will vest in the
event his employment is terminated without cause, he resigns for good reason or
his employment is terminated following a change in control of AMNEX (as defined
in AMNEX's 1996 Restricted Stock Grant Plan).
REPORT OF AUDIT AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
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 Audit and Compensation Committee of the Board of Directors reviews
salary, bonus and stock award information for competitive companies of
comparable size in similar industries. Based in part on this information, the
Audit and Compensation Committee 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 Audit and Compensation Committee also
assesses each executive officer's individual performance and contribution in
determining bonus levels. The Audit and Compensation Committee 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 Audit and Compensation Committee
determined the compensation payable to Mr. Rossi for the fiscal year ended
December 31, 1997. In establishing Mr.Rossi's annual salary of $270,000, the
Audit and Compensation Committee reviewed salary information for competitive
companies, Mr. Rossi's experience in the telecommunications industry and his
performance as Chairman and Chief Executive Officer of AMNEX since May 1997.
Since the Audit and Compensation Committee believes that the granting of options
to purchase Common Shares is and will provide its executive officers with the
long-term incentive to work for the betterment of AMNEX, Mr. Rossi was granted
options in 1997 under the Option Plan for the purchase of an aggregate of
750,000 Common Shares. See 'Executive Compensation--Option Grants Table'.
The Audit and Compensation Committee also determined the compensation
payable to Peter M. Izzo, Jr., President of AMNEX, for the fiscal year ended
December 31, 1997 and authorized the Company to renew his employment agreement
in June 1998. In establishing Mr. Izzo's annual cash salary of $241,831 for the
1997 fiscal year, 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
from August 1993 to May 1997. In order to link the amount of additional
compensation payable to Mr. Izzo to AMNEX's performance, the Audit and
Compensation Committee 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
4
<PAGE>
year. Such bonus arrangement was provided for in Mr. Izzo's June 1996 employment
agreement. The Company did not have pre-tax profits in 1997; Mr. Izzo was paid a
bonus of $50,000 for such year.
This report has been approved by the Audit and Compensation Committee of
the Board of Directors as of July 1, 1998.
Anne P. Jones
Alan J. Rossi
Harry R. Thompson
A. Jones Yorke, Chairman
Ms. Jones became a member of the Audit and Compensation Committee on April
--------------------------------------------------------------------------
23, 1998.
- ---------
AUDIT AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Among the Audit and Compensation Committee members who participated in
deliberations concerning executive officer compensation during such year was
Alan J. Rossi, Chairman of the Board and Chief Executive Officer of the Company
since May 1997.
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total return, for the
five year period ended December 31, 1997, 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, 1993, and reinvestment of dividends:
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
FOR AMNEX, THE NASDAQ MARKET INDEX AND A PEER GROUP INDEX
AMNEX, INC. PEER GROUP INDEX NASDAQ MARKET INDEX
----------- ---------------- -------------------
1992 100 100 100
1993 188.46 169.4 119.95
1994 180.77 87.1 125.94
1995 276.92 80.39 163.35
1996 188.46 101.2 202.99
1997 61.54 102.9 248.3
The Peer Group Index is comprised of securities of the following companies:
Davel Communications Group, Inc., Intellicall Inc., People's Telephone Company,
Inc., Phoenix Network Inc. and Phonetel Technologies, Inc.
5
<PAGE>
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 June 30, 1998 was 42,294,334. The total
number of Series M Convertible Preferred Shares, stated value $1,000 per share,
of AMNEX (the 'Series M Preferred Shares') outstanding as of June 30, 1998 was
1,701. Each Common Share is entitled to one noncumulative vote. The holders of
Series M Preferred Shares have no voting rights, except as otherwise provided by
the New York Business Corporation Law or the Company's Certificate of
Incorporation, as amended in January 1998 (such rights primarily arising in
connection with, among other things, shareholder authorization of an action
adversely affecting such preferred shareholders' rights or involving an
extraordinary event such as a proposed dissolution of the Company or sale of
substantially all of its assets). Accordingly, the Common Shares are the only
outstanding class of securities of AMNEX entitled to vote at the Meeting or any
Adjournment thereof. Only shareholders of record as of the close of business on
July 9, 1998 will be entitled to vote. The holders of Common Shares entitled to
a majority of the number of votes that may be cast in respect of the Common
Shares outstanding and entitled to vote as of July 9, 1998 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 AMNEX based solely upon
records available to it, certain information as of May 29, 1998 regarding the
beneficial ownership of AMNEX's Common Shares (i) by each person who AMNEX
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
present Director, (iii) by each person listed in the Summary Compensation Table
under 'Executive Compensation' and (iv) by all present executive officers and
Directors as a group:
<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>
Francesco Galesi.......................................... 9,623,446(2) 22.8%
435 East 52nd Street
New York, NY
Robert A. Rowland......................................... 2,570,585(3) 6.1%
1122 Colorado Street
Austin, Texas
Alan J. Rossi............................................. 305,747(4) *
Peter M. Izzo, Jr. ....................................... 670,976(5) 1.6%
Kenneth G. Baritz......................................... 121,667(6) *
John Kane................................................. 129,167(7) *
Kevin D. Griffo........................................... -- --
Richard L. Stoun.......................................... 66,667(8) *
Anne P. Jones............................................. -- --
Harry R. Thompson......................................... 25,000 *
A. Jones Yorke............................................ 25,000 *
All present executive officers and Directors as a group
(9 persons)............................................. 10,758,169(2)(4)(5) 25.5%
</TABLE>
- ------------------
* Less than 1%.
(Footnotes continued on next page)
6
<PAGE>
(Footnotes continued from previous page)
(1) Except as they relate to a particular shareholder, does not give effect to
the possible issuance of Common Shares pursuant to the exercise of
outstanding options and warrants or the conversion of certain outstanding
Preferred Shares or pursuant to contractual commitments.
(2) Includes 2,250,000 Common Shares issuable pursuant to currently exercisable
warrants. Includes 97,500 Common Shares held by Rotterdam Ventures, Inc., a
corporation wholly-owned by Mr. Galesi. Does not include warrant for the
purchase of 500,000 Common Shares held by an irrevocable trust created by
Mr. Galesi, of which the trustee is an employee of Rotterdam and the
beneficiaries are members of Mr. Galesi's immediate family. Mr. Galesi
personally does not have voting or dispositive power with respect to the
Common Shares underlying the warrant held by such trust and, accordingly,
disclaims beneficial ownership of such Common Shares.
(3) Includes 222,205 Common Shares issuable pursuant to currently exercisable
warrants. Of the 2,410,380 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 related matters.
(4) Includes 133,334 Common Shares issuable pursuant to currently exercisable
options.
(5) Includes (i) 95,000 Common Shares held pursuant to a restricted Common Share
grant 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) 523,333 Common Shares issuable pursuant to
currently exercisable options.
(6) Includes (i) 5,000 Common Shares issued in connection with vesting of a
restricted Common Share grant and (ii) 116,667 Common Shares issuable
pursuant to currently exercisable options.
(7) Includes (i) 25,000 Common Shares issued in connection with vesting of a
restricted Common Share grant and (ii) 104,167 Common Shares issuable
pursuant to currently exercisable options.
(8) Represents Common Shares issuable pursuant to currently exercisable options.
SERIES M PREFERRED SHARES
The following table sets forth, to the knowledge of AMNEX based solely upon
records available to it, certain information as of June 30, 1998 regarding the
beneficial ownership of AMNEX's Series M Preferred Shares (i) by each person who
AMNEX 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 M Preferred
Shares. No present Director, person listed in the Summary Compensation Table
under 'Executive Compensation' or present executive officer is the beneficial
owner of Series M Preferred Shares.
<TABLE>
<CAPTION>
NAME OF MANAGEMENT PERSON AND
NAME AND ADDRESS OF NUMBER OF SHARES APPROXIMATE
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS
- --------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Fourteen Hill Capital Ltd...................................... 750 44.1%
1700 Montgomery Street
Suite 250
San Francisco, CA
Pangaea Fund Ltd. ............................................. 951 55.9%
Windermere House
P.O. Box 55-6628
Nassau, Bahamas
</TABLE>
The holders of Series M Preferred Shares have no voting rights, except as
otherwise provided by the New York Business Corporation Law or the Company's
Certificate of Incorporation, as amended in January 1998 (such rights primarily
arising in connection with, among other things, shareholder authorization of an
action adversely affecting such preferred shareholders' rights or involving an
extraordinary event such as a proposed dissolution of the Company or sale of
substantially all of its assets).
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
TRANSACTIONS WITH FRANCESCO GALESI
Stock Exchange Agreement
Pursuant to a Stock Exchange Agreement, dated as of January 7, 1997,
between the Company and Francesco Galesi, a Director of the Company (the 'Stock
Exchange Agreement'), the Company acquired from Mr. Galesi 10% of the
outstanding capital stock of ECI, 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 of the Company which automatically
converted in May 1997 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 the number of
Common Shares authorized for issuance was increased from 40,000,000 to
70,000,000; (ii) Mr. Galesi was issued a warrant which entitles him to purchase
1,500,000 Common Shares (the 'Warrant Shares') at an exercise price of $3.03 per
share (subject to reduction of the exercise price to zero in the event, during
any continuous six month period commencing with January 1, 1997 and ending on
December 21, 1999, the consolidated revenues from operations of ECI are at least
$12,500,000); (iii) Mr. Galesi was granted certain registration rights under the
Securities Act with regard to the Conversion Shares and Warrant Shares; (iv) Mr.
Izzo was elected a Director of ECI; (v) Mr. Galesi was elected a Director of the
Company; (vi) Mr. Galesi agreed that he would utilize ECI 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 ECI capital
stock acquired.
Loans
In June 1997, the Company borrowed $2,000,000 for working capital from an
irrevocable trust established by Mr. Galesi. The working capital loan was due 15
days following demand for repayment, provided for interest at 10% per annum and
was secured by certain accounts receivable. This note was repaid in September
1997.
In consideration for the loan, the Company granted to the Galesi Trust a
warrant for the purchase of 500,000 Common Shares at an exercise price of
$2.3125 per share, such warrant being exercisable through June 2007.
In September 1997, the Company borrowed $500,000 for working capital
purposes from Rotterdam Ventures, Inc. ('Rotterdam'), a company wholly owned by
Mr. Galesi. The note evidencing the loan ('the $500,000 Note') provides for
interest at the rate of 10% per annum and the payment of the principal amount
thereof in September 1998. Payment of the $500,000 Note is secured by a security
interest in certain payphones owned by one of the Company's subsidiaries.
In September 1997, the Company borrowed $800,000 from Rotterdam. The note
evidencing the loan is unsecured, provides for interest at the rate of 6% per
annum and is due in September 1998.
In October and November 1997, the Company borrowed $1,900,000 for working
capital purposes from Rotterdam under unsecured demand promissory notes which
bear interest at the rate of 10% per annum.
In January 1998, Mr. Galesi converted $3,200,000 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 the September, October and November
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, such warrant
being exercisable through January 2003.
In May 1998, the Company borrowed $750,000 from Rotterdam. The loan
provided for interest at a rate equal to the prime rate of interest announced
from time to time by The Chase Manhattan Bank plus one percent. In July 1998 the
Company borrowed $1,500,000 from Mr. Galesi. This loan provided for interest at
a rate equal to the prime rate of interest announced from time to time by The
Chase Manhattan Bank plus one percent, and will, upon expiration of the notice
periods for holders of pre-emptive rights to the Company's capital stock and
subject to the exercise or waiver of such right, contain an option allowing the
holder thereof to convert the principal and any interest accrued and owing under
the note into the Company's Common Stock at a rate of $1.25 per share. $750,000
of the loan from Mr.Galesi replaced the $750,000 loaned to the Company by
Rotterdam.
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<PAGE>
AGREEMENTS WITH GALESI AND FRIEDLI
In June 1997, the Company entered into agreements (the 'Company
Agreements'), that were effected in September 1997 that provided for, among
other things, the repurchase of certain outstanding convertible Preferred
Shares, and the redemption of certain outstanding promissory notes of the
Company, held by clients of Friedli AG ('Friedli Clients'), as discussed below.
The Preferred Shares repurchased were as follows: (i) 1,413,337 Series D
Preferred Shares at a repurchase price of $2.50 per share; (ii) 1,035,000 Series
E Preferred Shares at a repurchase price of $2.8125 per share; and (iii) 415,520
Series F Preferred Shares at a repurchase price of $5.00 per share. The
repurchase prices for the Preferred Shares were equal to the per share
liquidation values of the respective series. In the case of the Series D and
Series E Preferred Shares, in addition to the above amounts, the repurchase
price included an amount equal to accrued but unpaid dividends. The Series F
Preferred Shares did not have any dividend preference. In September 1997, the
Company repurchased these Shares at an aggregate repurchase price of
$10,268,000, including the payment of accrued and unpaid dividends of
$1,748,000.
The Company Agreements also provided for the following: (i) the conversion
of 72,450 Series B Preferred Shares into 724,500 Common Shares; (ii) the payment
of accrued and unpaid dividends with respect to the Series B Preferred Shares
totaling $94,000; (iii) the payment of the principal amount of, and accrued
interest on a certain $325,000 principal amount promissory note of the Company
that was due on May 1, 1997; (iv) the payment by the Company of $1,400,000 in
connection with the prepayment of certain outstanding promissory notes due in
October 1999; (v) the payment by the Company to Peter Friedli and Friedli AG
(collectively with Friedli Corporate Finance Inc., the 'Friedli Group') of an
aggregate of $360,000 representing the settlement of any and all claims for past
due consulting, advisory, investment banking or similar or related fees and
expenses, as well as financial consulting fees for a two year period following
the closing of the Company Agreements; and (vi) the delivery of certain general
releases.
Prior to the execution of the Company Agreements, the holder of a certain
$450,000 principal amount promissory note (the '$450,000 Note') elected to
convert, as of June 30, 1997, $96,000 of the principal amount thereof, together
with accrued and unpaid interest thereon, into 624,000 Common Shares at a
conversion price of $0.20 per share. Contemporaneously with the execution of the
Company Agreements, Mr. Galesi entered into a Note Purchase Agreement with the
holder of the $450,000 Note, as well as with the holder of a $50,000 principal
amount promissory note of the Company (the '$50,000 Note') (also convertible at
a price of $0.20 per share), to purchase the unconverted portion of the $450,000
Note, as well as the $50,000 Note (including all rights with regard to accrued
and unpaid interest), for an aggregate purchase price of $3,863,000 (the 'Note
Purchase Agreement'). Mr. Galesi converted the principal amount of the notes
together with accrued and unpaid interest thereon, into 2,717,326 Common Shares
in September 1997.
In connection with the execution of the Company Agreements and the Note
Purchase Agreement, the holders of the Series B Preferred Shares and the
$450,000 Note agreed that, until at least one year following the closing of the
Company Agreements, they will not sell, transfer or otherwise dispose of any of
the Common Shares issued in connection with the conversion of such Preferred
Shares and the $96,000 principal amount of the $450,000 Note (together with
accrued and unpaid interest thereon). In addition, Mr. Galesi agreed generally
that for the same period of time, he will not sell, transfer or otherwise
dispose of the Common Shares issued to him in connection with the conversion of
the $404,000 principal amount of, and accrued and unpaid interest on, the notes
acquired by him. Further, Friedli Clients who hold approximately 2,750,000
outstanding Common Shares agreed that, from the date of execution of the Company
Agreements until 180 days following the closing thereof, they would not sell,
transfer or otherwise dispose of such Common Shares.
Contemporaneously with the execution of the Company Agreements, the Company
and the Friedli Group agreed to terminate a certain January 13, 1997 agreement
between them which contemplated, among other things, the open market sale by
certain Friedli Clients of an aggregate of 9,000,000 Common Shares. The Company
Agreements, the Note Purchase Agreement and the related documents were executed
by Peter Freidli on behalf of, or as representative of, the various Friedli
Clients.
INDEBTEDNESS OF MANAGEMENT
In January 1997, the Company loaned $150,000 to Kevin D. Griffo, then
President of the Company's TelCom Division. The terms of Mr. Griffo's
resignation from the Company on December 31, 1997 included, among other things,
the cancellation of the loan and the expiration on April 9, 1998 of options,
granted to Mr. Griffo under the Option Plan, that had vested.
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PROPOSAL 1: ELECTION OF DIRECTORS
Six 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 and offices presently held with AMNEX by each nominee, his or
her age as of June 30, 1998 and the year in which he or she 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>
Francesco Galesi....................... 66 Director 1997
Peter M. Izzo, Jr...................... 46 President and Director 1992
Anne P. Jones.......................... 63 Director 1998
Chairman, Chief Executive Officer
Alan J. Rossi.......................... 49 and Director 1997
Harry R. Thompson...................... 67 Director 1997
A. Jones Yorke......................... 67 Director 1997
</TABLE>
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, each of whose
shares are publicly traded. Mr. Galesi also serves on the Board of Directors of
a number of privately-held companies. See 'Certain Relationships and Related
Transactions--Transactions with Management and Others--Transactions with
Francesco Galesi.'
Peter M. Izzo, Jr. has served as President of the Company since May 1997,
having previously served as the Company's President from October 1992 to March
1997, as its Chief Executive Officer from August 1993 to March 1997 and as
Director of the Company since October 1992. From May 1991 to October 1992, Mr.
Izzo served as President of Peconic Communications, a provider of payphones and
interconnect equipment. He served as Vice President of New Product Development
for the Company during 1991. Prior thereto and from 1989, Mr. Izzo was
associated with ANEI 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 payphones. He previously served as Director
of Operations for TFN, Inc., an interexchange carrier, and was employed for 15
years with New York Telephone Company.
Anne P. Jones has served as a Director of the Company since March 1998. She
has been a telecommunications consultant in Washington D.C. since 1994. She
served as a Commissioner of the Federal Communications Commission from 1979 to
1983 when she became a partner in the law firm of Sutherland, Asbill & Brennan,
specializing in communications law and regulatory issues. Ms. Jones had earlier
served as General Counsel of the Federal Home Loan Bank Board (1978-1979) and as
a Director of the Division of Investment Management of the Securities and
Exchange Commission (1976-1978). She is a Director of C-Cor Electronics, Inc.,
the IDS Mutual Fund Group, and Motorola, Inc. She holds BS and LLB degrees from
Boston College and its Law School, respectively.
Alan J. Rossi has served as Chairman of the Board and Chief Executive
Officer of the Company since May 1997. Mr. Rossi has served since July 1996 as
President of ECI, a telecommunications company with principal operations in
Europe. From 1994 to February 1996, he was Group President of Andrew Telecom, a
telecommunications operator that focused its business on Russia and Eastern
Europe as a division of Andrew Corporation. From 1992 to 1994, Mr. Rossi was
Vice President and General Manager of Sprint's global value-
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added services business, with operations located principally in Japan, the
United States and Western Europe. Prior to this, he served as President of the
Argo Group, a United States long distance telephone company that specialized in
serving the needs of large business telecommunications users, and as ITT Corp's
senior telecommunications executive for Central America. Mr. Rossi holds an MBA
degree from the University of London and BS and MS degrees in Electrical
Engineering from Purdue University. Mr. Rossi has also served on the policy
board and faculty of the Center for Advanced Technology in Telecommunications of
the Polytechnic University, New York, and the National University of
Engineering, Peru.
Harry R. Thompson has served as a Director of the Company since July 1997.
Mr. Thompson has served as Managing Director of Swiss Army Brands, Inc., since
December 1994 and previously served as its Chairman from 1989. Since 1985, Mr.
Thompson has been President of the Strategy Group, a business and marketing
consulting firm. Prior to 1985, he served as Director of, and consultant to,
Telus Communications, a long distance telecommunications company. He also served
in senior executive capacities with the Interpublic Group of Companies, Inc., a
leading marketing and communications organization.
A. Jones Yorke has served as a Director of the Company since July 1997. Mr.
Yorke has served since June 1998 as a Director of Auerbach Pollock and
Richardson, Inc., an investment banking firm, and from March 1997 through June
1998 as Chairman of the Board of Weatherly Securities Corp. Between November
1995 and March 1997, he served as President of Coleman & Company Securities,
Inc. and from October 1994 to November 1995, Mr. Yorke was Chairman of the Board
of Auerbach Pollack & Richardson, Inc. Between 1989 and 1995, Mr. Yorke served
as President of Asset Channels, Inc., an investment company. Mr. Yorke had
earlier served as the Executive Director of the Securities and Exchange
Commission and the President of Paine Webber Jackson & Curtis, Inc. Mr. Yorke is
also a Director of Davel Communications Group, Inc., an independent payphone
company.
BOARD COMMITTEES
The Board of Directors has one standing Committee, the Audit and
Compensation Committee. The Committee is chaired by Mr. Yorke. The other members
of the Audit and Compensation Committee are Ms. Jones, Mr. Rossi and Mr.
Thompson.
MEETINGS
The Board held twelve meetings during the year ended December 31, 1997.
Except for A. Jones Yorke (who missed one meeting) all of the Directors of AMNEX
for that year attended all such meetings. The Board also acted on seven
occasions during 1997 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, 1997. 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, 1997, all Section 16(a) filing requirements
applicable to AMNEX's officers, Directors and 10% shareholders were complied
with, except that a Form 3 relating to the appointment of Cynthia I. Terrell as
Chief Financial Officer of the Company was not filed on a timely basis.
PROPOSAL 2: 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 4,250,000 to 5,750,000.
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<PAGE>
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 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, 1998, approximately 445 employees and
four non-employee Directors were eligible to receive options under the Option
Plan.
OPTION GRANTS
As of June 30, 1998, of the 4,250,000 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 4,035,000
Common Shares. On June 2, 1997 pursuant to the Option Plan, the Board granted to
the Chairman of the Board and Chief Executive Officer of the Company, options
for the purchase of 350,000 Common Shares at an exercise price of $2.313 per
share, such price being equal to fair market value at the time of such grant. On
June 18, 1997 pursuant to the Option Plan, the Board granted to the Chairman of
the Board and Chief Executive Officer of the Company, options for the purchase
of 450,000 Common Shares at an exercise price of $2.250 per share, such price
being equal to fair market value at the time of such grant (see 'Executive
Compensation--paragraph (b) Option Grants Table'). In addition, in March 1997,
the Company granted options for the purchase of 50,000 Common Shares, at an
exercise price of $3.625 per share, on July 30, 1997 granted options for the
purchase of 50,000 shares to each of Mr. Thompson and Mr. Yorke, at an exercise
price of $2.563 on July 30, 1997 granted options for the purchase of 50,000
shares to each of Mr. Thompson and Mr. Yorke, at
12
<PAGE>
an exercise price of $2.563 per share, and on October 21, 1997 granted options
to purchase 150,000 to Ms. Terrell, at an exercise price of $2.563 per share.
All of these options were granted in accordance with the Option Plan. Further,
in March 1997, 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. Based on the foregoing, in the event of
shareholder approval of the Option Plan Amendment, options for the purchase of
approximately 1,715,000 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 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 June 30, 1998, the closing sale price for the Company's Common Shares
was $1.125 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.
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
options 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,
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<PAGE>
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 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
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<PAGE>
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 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.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE OPTION
PLAN.
PROPOSAL 3: SHAREHOLDER PROPOSAL
A shareholder has stated his intention to present to bring the following
proposal before the Annual Meeting. The proposal, for which the Board of
Directors and the Company accept no responsibility, is set forth below. The
Board of Directors opposes this proposal for the reasons stated after such
proposal below.
Robert A. Rowland, of 1122 Colorado, Apartment 1002, Austin, Texas 78701,
the record owner of 1,313,130 Shares has submitted the following proposal for
vote by the shareholders:
'WHEREAS, the Board of Directors is meant to be an independent body
elected by shareholders charged by law and shareholders with the duty,
authority and responsibility to formulate and direct corporate policies and
is held to the highest standards of fiduciary care, duty and loyalty:
NOW, THEREFORE, BE IT
'RESOLVED, that the shareholders request that this corporation's Board
of Directors be comprised of a truly independent Board, meaning that the
majority of the Board will be individuals who are not currently employed by
the corporation, do not currently consult with the corporation, have not
been employed by the corporation or have consulted with the corporation
during the past five years, do not own 10% or more of the voting power of
the corporation and are not directly or indirectly related to or affiliated
with any such person.'
Your Board of Directors recommends a vote against this proposal for the
following reasons.
This proposal is sponsored by a shareholder against whom the Company is
involved in litigation in connection with the Company's purchase of Capital
Network System, Inc. in 1996.
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The Company believes that the proposal is not in the best interests of the
Company and its shareholders.
The Company does not oppose the notion of an independent Board which serves
the best interests of the Company's shareholders. Indeed, since the beginning of
1997, the Company's Board of Directors has been expanded from three to six
directors. In the beginning of 1997, before expansion of the Board of Directors,
two of the three directors were company employees; currently four of the six
directors are non-employees of the Company.
The Company disagrees, however, with the proponent's definition of what
constitutes an independent Board. The Company's outside Directors have been
elected because of their integrity, their interest in the Company, and their
skill in areas of expertise that may be beneficial to the Company. The Company
believes that to eliminate from consideration as directors those persons who are
significant shareholders of the Company is contrary to the interests of the
shareholders of the Company as a whole, whose interests are most allied with
those of the shareholder-Director. Further, the Company believes that
eliminating from consideration Directors who may from time to time provide
consulting services to the Company will limit the Company's flexibility to take
advantage of the very Directors elected for their expertise. From time to time
the Company will seek additional help from its Directors, which help may take
substantially more time than that normally required of a Director. In these
circumstances the Company believes that it is equitable for a Director to be
compensated for these efforts.
RECOMMENDATION AND VOTE
THE BOARD OF DIRECTORS BELIEVES IT IS IN THE INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS TO REJECT THE PROPOSAL AND RECOMMENDS A VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
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 recommends a vote AGAINST this proposal.
INDEPENDENT AUDITORS
Ernst & Young LLP served as the independent auditors for the fiscal year
ended December 31, 1997 and has served as the Company's independent auditors
since 1993. The Company has not yet selected auditors for the fiscal year ended
December 31, 1998 and is in the process of obtaining proposals from auditing
firms.
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 approprate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at AMNEX's 1999 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 March 19, 1999 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 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.
16
<PAGE>
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 145 Huguenot Street, Suite 401, New Rochelle, New
York 10801. 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. Any shareholder desiring a copy of the Company's By-Laws will be
forwarded one without charge upon receipt of written request therefor.
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, 2 and 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, 1997 (the 'Form 10-K').
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, 1997 and 1996 and for each of the three years ended December
31, 1997 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.
By Order of the AMNEX Board of
Directors
Guy A. Longobardo
Secretary
New Rochelle, New York
July 17, 1998
17
<PAGE>
AMNEX, INC.
145 Huguenot Street
Suite 401
New Rochelle, New York 10801
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ALAN J. ROSSI, PETER M. IZZO, JR. and GUY A.
LONGOBARDO as Proxies, each with the power to appoint his substitute, and hereby
authorizes them, and each of them, to represent and vote, as designated below,
all the Common Shares of AMNEX, INC, (the 'Company') held of record by the
undersigned on July 9, 1998 at the Annual Meeting of Shareholders to be held on
August 6, 1998 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 and 2, against Proposal 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 AND 2
<TABLE>
<S> <C>
1. Election of
Directors.
FOR all members listed WITHHOLD AUTHORITY
below (except as no vote for all
marked nominees
to the contrary listed below / /
below). / /
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominees,
strike such nominee's name from the list below.)
<TABLE>
<S> <C> <C>
FRANCESCO GALESI PETER M. IZZO, JR. ANNE P. JONES
ALAN J. ROSSI HARRY R. THOMPSON A. JONES YORKE
</TABLE>
(Continued and to be signed on reverse side)
<PAGE>
(Continued from reverse side)
2. 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 4,250,000 to 5,750,000.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'AGAINST' PROPOSAL 3
3. Proposal to adopt shareholder resolution with respect to
composition of Board of Directors.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
DATED: _____________ 1998
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
partnership, 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
