SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |x|
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Check the appropriate box:
|_| Preliminary Proxy Statement
|x| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Porta Systems Corporation
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
Porta Systems Corporation
---------------------------------------
(Name of Person Filing Proxy Statement)
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|_| $500 per each party to the controversy pursuant to Exchange Act
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|_| 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:
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2) Aggregate number of securities to which transaction applies:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 7, 1995
------------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of Porta Systems
Corp. (the "Company") will be held at the Board Room of the American Stock
Exchange, 86 Trinity Place, New York, New York, on June 7, 1995, at 3:00 P.M.,
Eastern Daylight Savings Time, for the following purposes:
1. to elect seven directors;
2. to ratify the appointment of KPMG Peat Marwick as independent
auditors of the Company for the fiscal year ending December 31,
1995; and
3. to transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 17, 1995,
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting.
A copy of the Company's Annual Report is being sent together with this
Proxy Statement to all stockholders of record on the Record Date. Additional
copies are available on request. A copy of the Company's list of stockholders as
of the Record Date may be reviewed by any stockholder for any purpose germane to
the Annual Meeting during ordinary business hours at Chemical Bank, Fifteenth
Floor, 450 West 33rd Street, New York, New York, for a period of ten days prior
to the date of the Annual Meeting.
Since it is desirable that as many stockholders as possible be represented
at the Annual Meeting, please complete, sign and return the enclosed proxy
solicited by the Board of Directors of the Company as promptly as possible in
the envelope enclosed for that purpose. Any stockholder giving a proxy may
revoke it at any time before it is exercised. If you attend the meeting, you may
vote in person if you desire to do so even if you have returned a proxy.
By order of the Board of Directors
WILLIAM V. CARNEY
Secretary
Syosset, New York
April 30, 1995
Requests for additional copies of proxy material should be addressed to:
Chemical Bank
450 West 33rd Street
New York, New York 10001
<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
------------------------
PROXY STATEMENT
Dated April 30, 1995
Annual Meeting of Stockholders to Be Held June 7, 1995
------------------------
GENERAL INFORMATION
The accompanying proxy and this Proxy Statement are furnished to the
stockholders of Porta Systems Corp., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies for use at the Annual Meeting (the
"Annual Meeting") of holders of its Common Stock, par value $.01 per share (the
"Common Stock"), to be held at the Board Room of the American Stock Exchange, 86
Trinity Place, New York, New York, at 3:00 P.M., Eastern Daylight Savings Time,
on June 7, 1995, and at any adjournments or postponements thereof. The enclosed
proxy is being solicited by the Board of Directors of the Company.
If a proxy in the accompanying form is duly executed and returned, the
shares represented by the proxy will be voted in accordance with the
instructions indicated thereon. If no instructions are given, proxies will be
voted in accordance with the recommendations of the Board of Directors. Any
stockholder giving a proxy has the power to revoke it at any time before it is
exercised. A proxy may be revoked by written notice to the Company bearing a
later date than the proxy or by the execution and delivery to the Company of a
subsequently dated proxy. Any stockholder attending the Annual Meeting may vote
in person if the stockholder desires to do so, whether or not that stockholder
has previously given a proxy.
This Proxy Statement and the enclosed proxy are first being mailed to
stockholders on or about May 17, 1995.
VOTING SECURITIES
The close of business on April 17, 1995 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. Only holders of record of Common Stock at the close of business
on April 17, 1995 will be entitled to notice of and to vote at the Annual
Meeting. Each stockholder is entitled to one vote for each share of Common Stock
held on April 17, 1995. On that date, the Company had issued and outstanding
7,307,106 shares of Common Stock.
PRINCIPAL HOLDERS OF SECURITIES
AND SECURITY HOLDINGS OF MANAGEMENT
There are no persons known to the Company to be the beneficial owners of 5
percent or more of the outstanding shares of Common Stock.
<PAGE>
The following table sets forth, as of April 25, 1995, the number of
outstanding shares of Common Stock of the Company beneficially owned, directly
or indirectly, by each current director of the Company, the Chief Executive
Officer of the Company and each of the four most highly compensated executive
officers other than the Chief Executive Officer, and all current directors and
officers of the Company as a group.
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock Outstanding
Name Beneficially Owned (1) Common Stock (2)
---- ---------------------- ----------------
<S> <C> <C>
Vincent F. Santullli ....................................... 231,853 (3) 3% (3)
William V. Carney .......................................... 243,864 (4) 3% (4)
Howard D. Brous ............................................ -- --
Warren H. Esanu ............................................ 100 (5)
Herbert H. Feldman ......................................... -- --
Stanley Kreitman ........................................... 3,000 (6) (5)
John J. Gazzo .............................................. 44,025 (7) (5)
Garet M. Romeo ............................................. 67,644 (8) (5)
Michael A. Tancredi ........................................ 72,988 (9) 1% (9)
Vincent H. Catrini ......................................... 5,700 (10) (5)
All current directors and executive officers
as a group (12 persons) .................................. 630,780 (11) 8% (11)
</TABLE>
- - --------------
(1) Except as otherwise indicated each person has the sole power to vote and
dispose of all shares of Common Stock listed opposite his name.
(2) For purposes of calculating the percentage of ownership of each holder of
shares of Common Stock or options exercisable for shares of Common Stock,
the percentage reflected assumes that only such holder exercised such
options.
(3) Includes a total of 59,000 shares beneficially owned by Mr. Santulli
issuable upon the exercise of options granted under the Company's 1986
Stock Option Plan (the "1986 Plan").
(4) Includes a total of 22,500 shares of Common Stock beneficially owned by Mr.
Carney issuable upon the exercise of options granted under the 1986 Plan.
(5) Less than one percent of the outstanding shares of Common Stock. (6)
Includes a total of 3,000 shares of Common Stock beneficially owned by Mr.
Kreitman issuable upon the exercise of options granted by the Company in
connection with Mr. Kreitman's retention by the Company as consultant in
1994.
(7) Includes a total of 22,500 shares of Common Stock beneficially owned by Mr.
Gazzo issuable upon the excercise of options granted under the 1986 Plan.
(8) Includes a total of 42,000 shares beneficially owned by Mr. Romeo issuable
upon the exercise of options granted under the 1986 Plan. Also includes 455
shares of Common Stock owned directly by Mr. Romeo's spouse. Although one
of the executive officers named in the table on page 9, Mr. Romero resigned
as an officer and director of the Company and any of its subsidiaries on
February 24, 1995.
(9) Includes a total of 14,700 shares beneficially owned by Mr. Tancredi
issuable upon the exercise of options granted under the 1986 Plan.
(10) Includes a total of 5,700 shares of Common Stock beneficially owned by Mr.
Catrini issuable upon exercise of options granted under the 1986 Plan.
(11) Includes an aggregate of 153,650 shares issuable upon the exercise of
options granted under the 1986 Plan.
2
<PAGE>
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to serve for the
ensuing year and until their respective successors are elected and qualified.
Proxies cannot be voted for a greater number of persons than the number of
nominees named below.
Should any of the persons described in this Proxy Statement who have been
nominated by the Board of Directors of the Company become unable to accept
election, it is intended that the proxies solicited hereby will be voted for the
balance of those named and for a substitute nominee or nominees designated by
the Board of Directors. The Company knows of no reason why any of the nominees
listed below would be unable to accept election.
Unless authority to do so is expressly withheld by marking the "Against"
box or by writing in the name of the nominee or nominees as to whom authority is
to be withheld on the proxy card forwarded herewith, proxies received in
response to this solicitation will be voted in favor of the election as
directors of the Company of the persons listed below.
<TABLE>
<CAPTION>
Principal Occupation Director
Name of Nominee or Employment Since Age
--------------- -------------------- ------- ---
<S> <C> <C> <C>
Vincent F. Santulli (1) ............... Chairman of the Board, 1970 52
Chief Executive Officer and
Director of the Company
William V. Carney ..................... Vice Chairman, Senior 1970 57
Vice President, Chief
Technical Officer, Secretary
and Director of the Company
Howard D. Brous (1)(2)(3) ............. President and Chief 1989 50
Executive Officer of
H.D. Brous & Co., Inc.,
a New York Stock
Exchange member firm
Warren H. Esanu (1)(2)(3) ............. Of counsel to Esanu 1989 52
Katsky Korins & Siger,
attorneys at law
Herbert H. Feldman (2)(3) ............. President, Alpha Risk 1989 62
Management, Inc.,
independent risk
management consultants
Stanley Kreitman ...................... Vice Chairman, Manhattan 1995 63
Associates, investment
advisors
Michael A. Tancredi ................... Vice President-Finance, 1970 65
Treasurer and Director
of the Company
</TABLE>
- - --------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
Except for Mr. Kreitman, each of the nominees listed above was elected a
director at the last annual meeting of stockholders.
3
<PAGE>
Messrs. Santulli, Carney and Tancredi have each been associated with the
Company as directors and officers for more than five years. Mr. Santulli was
elected President of the Company in June 1977, served as its President until
December 1990 and was elected Chairman of the Board and Chief Executive Officer
in March 1989. Following Mr. Santulli's election as President of the Company in
June 1977, he continued to serve as Treasurer until April 1978, when Mr.
Tancredi was elected Vice President and Treasurer. Mr. Tancredi was elected Vice
President-Finance in March 1984 and he was elected Vice President-Finance and
Administration in November 1989. From June 1977 to February 1984, Mr. Carney
served as Senior Vice President-Operations. In March 1984, Mr. Carney was
elected as Senior Vice President-Manufacturing and, in February 1985, Mr. Carney
was elected Senior Vice President-Connector Products. In January 1988, Mr.
Carney was elected Vice Chairman and Senior Vice President-Mechanical
Engineering. He was elected Senior Vice President in November 1989 and Chief
Technical Officer in December 1990. Mr. Carney has served as Secretary since
June 1977.
From prior to January 1990 to the present, Mr. Brous has been President and
Chief Executive Officer of H.D. Brous & Co., Inc., a New York Stock Exchange
member firm. Mr. Brous has also been general partner of TR Partners, a New York
limited investment partnership, since May 1986, general partner of NJB
Investment Associates, L.P. since 1991 and investment advisor principal of Brous
Advisors, a registered investment advisor, since 1991.
Mr. Esanu has been of counsel to Esanu Katsky Korins & Siger, attorneys at
law, since prior to January 1990. Mr. Esanu has also been President of Chrysalis
Management Corp., a real estate services firm, Vice President-Real Estate
Management of Elmira Realty Management, Inc., a real estate management company,
and President of Turnpike Real Estate Management, Inc., a real estate management
company, since prior to January 1989. Mr. Esanu is general partner and limited
partner of two single purpose real estate partnerships which during 1992 and
1993, respectively, filed for protection under Chapter 11 of the Federal
Bankruptcy Code. Mr. Esanu acts as attorney for Mr. Brous, a director of the
Company, and certain entities affiliated with Mr. Brous. During 1994, Esanu
Katsky Korins & Siger provided legal services to the Company and is expected to
do so in 1995.
Mr. Feldman has been President of Alpha Risk Management, Inc., independent
risk management consultants, since prior to January 1990. He is its sole
stockholder. Alpha Risk Management, Inc. provides the Company with ongoing risk
management services relating to its corporate insurance coverage for a monthly
retainer of $3,000. The agreement has been canceled is cancelable by either
party upon ten days prior notice.
Mr. Kreitman has been Vice Chairman of Manhattan Associates, a firm of
investment advisors, from February 1994 to the present. From prior to January
1990 to January 1994, he was President of United States Banknote Corp. During
1994, Mr. Kreitman provided consulting services to the Company under an
agreement pursuant to which he was paid $5,000.The agreement has been cancelled.
Several complaints alleging class actions have been filed against the
Company. Seven such actions pending in the U.S. District Court for the Eastern
District of New York have been consolidated, and on or about November 11, 1994
plaintiffs filed a revised third consolidated amended and supplemental class
action complaint. The amended complaint alleges violations by the defendants of
the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 10b-5 thereunder, and Section
20(a) of the Exchange Act, as well as breach of fiduciary duties by the
individual defendants based upon the Company's April 1, 1993 announcement that a
sale of a line test system previously recorded during 1992 was being reversed in
the fourth quarter of 1992 and that the Company would suffer a loss for the year
ended December 31, 1992. The amended complaint also alleges that certain other
public statements by the Company during 1992 were false, and further alleges
that the Company and certain other named defendants knew or should have known
that statements contained in various of the Company's public filings and press
releases misrepresented material facts concerning the Company and its financial
4
<PAGE>
prospects, resulting in the Company's reported revenues and profits for the
second and third quarters of 1992 being misstated, and the market price of the
Company's Common Stock being artificially inflated during the purported class
period. The plaintiffs seek, among other things, unspecified money damages.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established Executive, Compensation
and Audit Committees.
The Executive Committee was formed to exercise between meetings of the
Board of Directors all the powers of the Board of Directors in the conduct of
the Company's business to the full extent permitted by Delaware law. The
Executive Committee's present members are Messrs. Santulli, Brous and Esanu.
The Compensation Committee has been empowered to approve the compensation
of all senior Company employees, as well as to administer the Company's 1986
Stock Option Plan. See "Report of the Compensation Committee" below. The
Compensation Committee's present members are Messrs. Feldman, Esanu and Brous.
Mr. Feldman is its chairman.
The Audit Committee's principal responsibilities are to review the terms of
the engagement of the Company's independent accountants, review the Company's
policies and procedures with respect to internal auditing, accounting and
financial controls and review and discuss the Company's independent accountants'
reports and recommendations. The Audit Committee's present members are Messrs.
Feldman, Esanu and Brous. Mr. Esanu is its chairman.
Excluding actions by unanimous written consent, during 1994, the Board of
Directors held a total of seven meetings, the Executive Committee held no
meetings, the Audit Committee held a total of five meetings and the Compensation
Committee held no meetings. Each of the nominees for director attended at least
90 percent of the aggregate number of meetings of the Board of Directors and the
committees on which he served held during the period he served as such.
The Company does not have a nominating committee of the Board of Directors.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company receives an annual fee
of $16,000 for serving as a director of the Company, and each chairman of a
standing committee of the Board of Directors receives an additional annual fee
of $3,000. Each director receives a supplemental fee of $1,200 for each meeting
he attends of the Board of Directors or of any of its committees.
EXECUTIVE COMPENSATION
Nothwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following reports and
the performance graph appearing herein shall not be incorporated by reference
into any such filings.
Description of Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") consists entirely of independent, non-employee directors. The role
of the Committee, among other things, is to review and approve the broad
compensation policies of the Company with respect to its executives and various
components of the total compensation of the executive officers. The Committee
also examines and approves the elements of the Company's variable compensation
plans. The various components of executive compensation include the following:
5
<PAGE>
Base Salary. Base salaries for executives and all other salaried employees
are paid within salary ranges established for each position. Each employee's
salary, including executives' salaries, is based on an annual assessment of
competitive pay and his or her contribution to the business.
Bonuses. The Company awards bonuses to executive officers and other
employees who have made a contribution to the Company's operations. The award of
bonuses to the Chief Executive Officer and the Chief Operating Officer is based
solely on certain corporate financial performance criteria, including return on
sales, return on equity and growth in sales compared to the previous year.
Bonuses awarded to other executive officers are based on corporate financial
performance criteria and individual performance.
Stock Options. The Company has in effect the 1986 Stock Option Plan (the
"1986 Plan"), which was approved by the Board of Directors on March 16, 1986 and
by the Company's stockholders on May 14, 1986 and amended as to the number of
shares available for grant thereunder on May 24, 1989 and May 23, 1991 by vote
of the Company's stockholders. As amended, the 1986 Plan permits the grant of
options to purchase up to 850,000 shares of Common Stock to employees of the
Company and its 50% or more owned subsidiaries whom the Committee determines are
eligible for such grants.
The Company views stock options as a competitively appropriate component of
total compensation which provide long-term incentives, linking the interests of
executives and other employees receiving grants with those of the Company's
stockholders. Because of their long-term nature and the linkage of executive and
stockholder interests, stock options are the Company's only long-term incentive
compensation program. Generally, grants have not been made to executive officers
since 1989, although grants have been made to other employees from time to time
since 1989, including a grant of options to certain executive officers prior to
their election as executive officers and a grant of options to purchse an
aggregate of 10,000 shares awarded in April 1994 to two newly elected executive
officers.
Supplementary Group Life and Long-Term Disability Insurance. The Company
makes available supplementary group life insurance coverage and special
long-term disability coverage to certain employees, including Messrs. Santulli,
Romeo, Carney, Gazzo and Catrini. Supplementary group life insurance coverage is
in an amount of $500,000 for each executive. The group life insurance benefit
provided to all employees is in an amount equal to twice an employee's salary,
with a maximum benefit of $250,000.
401(k) Plan. Effective as of November 1, 1986, the Company adopted a cash
or deferred savings plan (the "401(k) Plan") under section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"). Under the 401(k) Plan,
an employee who has completed at least one month of credited service and is at
least 20 1/2 years of age may elect to have the Company deduct under a salary
reduction agreement up to 15% of the employee's compensation (subject to
limitations contained in the Code) and contribute this sum on behalf of the
employee to the 401(k) Plan instead of paying it to him. The participating
employee is not taxed on that contribution. Through December 31, 1994, the
Company matched each participant's contribution by making a second contribution
out of accumulated earnings or profits by an amount equal to 75% of the amount
which the participant elected to defer in the 401(k) Plan, but only up to the
first 6% of compensation that the participant deferred.
The Company may also make such additional contributions to the 401(k) Plan
as it determines in its discretion, subject to limitations imposed by the Code.
Each participant in the 401(k) Plan is entitled to make a voluntary
contribution, also subject to limitations imposed by the Code. The participant's
interest in these contributions, plus any earnings thereon, are held in his
account under the 401(k) Plan and this account is at all times fully (100%)
vested and nonforfeitable. Moneys in the account are invested, as the
participant directs, in one or more of the following funds currently being
offered: (1) a money market fund, (2) a government securities fund, (3) a mutual
fund investing in common stocks and (4) a guaranteed investment contract.
6
<PAGE>
Subject to certain rules, a participant may make withdrawals from the
amount of voluntary contributions held in his account. However, withdrawals of
contributions deferred under Section 401(k) of the Code before age 59 1/2 are
permitted only for hardship or in certain other cases and are subject to a 10%
early withdrawal tax unless used for deductible medical expenses. Distributions
are made at retirement or earlier termination of employment, including as a
result of disability or death.
Supplemental Management Compensation Program. The Company maintains a
supplemental management compensation program for certain management employees of
the Company designed to provide current and post-employment benefits in the
event of their retirement or death. The supplemental management compensation
program is comprised of a supplemental retirement income program and an equity
split-dollar program. The Company expects that substantially all of the entire
cost of these programs to the Company will eventually be recovered through the
receipt of proceeds of life insurance on the lives of covered employees. The
Company's 1994 premium payments with respect to Messrs. Santulli, Romeo, Carney
and Gazzo are reflected in the Summary Compensation Table under "All Other
Compensation".
The supplemental retirement income program is intended to provide a
participating employee or his heirs or distributees annual retirement income
equal to 50% of the employee's 1984 base salary. Payments under the program will
be made only after a participant's employment with the Company terminates and
then for a period of fifteen years following the earlier of his attainment of
age 65 or his death.
The equity split-dollar program permits participating employees to acquire
additional whole life insurance coverage (subject to medical examination) on a
basis pursuant to which the Company participates in the payment of premiums and
the receipt of policy proceeds. The program is structured so that the Company
will recover from the policy proceeds the full amount of premiums it has paid on
each policy. Annual benefits under this program are determined by standard
actuarial computations of the full amount of insurance coverage purchased as
reduced by any recovery by the Company of the full amount of premiums paid on
the policy. The amount of insurance coverage purchased to date has been
determined by applying a participant's pro rata share of aggregate 1984 base
salary compensation as of April 1, 1984 of the covered group to the overall 1984
Company budget of $100,000 for premiums under this program and the supplemental
retirement income program to determine the premium amount allocable to any
participant and thereafter securing insurance coverage obtainable in 1984 for
such premium, given the age and medical history of the participant. All policies
under this program provide that a participant with fewer than 10 years
employment with the Company must endorse the policy in its entirety to the
Company upon termination of his employment prior to 10 years with the Company
and that, in any case, the Company will recover from policy proceeds the full
amount of paid premiums. Messrs. Santulli, Romeo, Carney, Gazzo and one other
executive officer currently participate in this program. In 1989, Mr. Romeo's
agreement was amended to provide that, upon a change of control (defined in a
manner similar to that discussed below under Executive Continuation Agreements),
all benefits are immediately vested notwithstanding his termination of
employment prior to 10 years with the Company.
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee endorses the principles of executive
compensation described above.
As part of its responsibilities, the Committee meets each December to
determine the base salary of the senior executives of the Company for the next
year and bonuses for the current year. The Committee also meets, from time to
time, to determine whether individual grants of stock options should be awarded
to senior executives as well as to other employees of the Company. In
discharging these responsibilities, the Committee reviews the performance of the
Company relative to its goals. In addition, with the assistance of the Chief
Executive Officer, the Committee reviews the individual performance of the other
senior executive officers. The Committee also evaluates the performance of the
Chief Executive Officer and the Chief Operating Officer, as reflected in the
financial performance of the Company, to determine base salary and bonus. The
Committee subsequently reports on its evaluation and compensation determinations
to the other non-employee directors.
Based on the performance of the Company in 1993, the Committee determined
that, generally, no bonuses would be paid to employees, including the Chief
Executive Officer and other executive officers for 1994, although a limited
numnber of special bonuses were paid in respect of 1993 to certain employees.
Based on the performance of the Company in 1994, the Committee determined that,
generally, no bonuses would be paid to employees, including the Chief Executive
Officer and other executive officers. No base salaries of senior executive
officers were increased for 1993 or 1994.
Compensation Committee
Herbert H. Feldman, Chairman
Howard D. Brous
Warren H. Esanu
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company and its
subsidiaries to its Chief Executive Officer and its four most highly compensated
executive officers, other than the Chief Executive Officer, whose salary and
bonus exceeded $100,000 for the most recent fiscal year.
8
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
---------------------------------- ---------------------
Other Options/ All Other
Annual Restricted SARs Compen-
Name and Compensa- Stock (Number sation
Principal Position Year Salary Bonus(1) tion(2) Awards of Shares) (2)
------------------ ---- ------ -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Vincent F. Santulli ......... 1994 $275,000 0 0 0 0 $48,959
Chairman of the Board 1993 $275,000 0 $867 0 0 $50,716
and Chief Executive 1992 $280,288 0 0 0 0 $36,602
Officer
Garet M. Romeo .............. 1994 $211,000 0 0 0 0 $43,112
President and Chief 1993 $211,000 0 $801 0 0 $42,927
Operating Officer 1992 $217,519 0 0 0 0 $32,402
William V. Carney .......... 1994 $162,000 0 0 0 0 $35,840
Vice Chairman, 1993 $162,000 0 $396 0 0 $36,410
Senior Vice President 1992 $165,115 0 0 0 0 $29,834
and Secretary
John J. Gazzo ............... 1994 $140,000 0 0 0 0 $36,477
Vice President 1993 $140,000 0 $266 0 0 $36,929
1992 $142,692 0 0 0 0 $32,830
Vincent H. Catrini .......... 1994 $135,750 0 0 0 5,000 $ 6,885
Vice President 1993 $129,351 0 0 0 0 $ 5,775
1992 $ 82,642 0 0 0 0 $ 4,218
</TABLE>
- - --------------
(1) Bonus earned for the year shown, whether or not paid in such year.
(2) "All Other Compensation" includes the Company's match with respect to 75%
of the amount which the executive participant elected to defer pursuant to
the Company's 401(k) plan, up to the first 6% of compensation deferred by
the participant, premiums paid with respect to the equity split dollar
program, group life insurance in amounts greater than that available to
all employees and special long term disability coverage and amounts equal
to market interest on certain preexisting borrowings in connection with
awards under the Company's 1984 Employee Incentive Plan as follows:
<TABLE>
<CAPTION>
Mr. Mr. Mr. Mr. Mr.
Santulli Romeo Carney Gazzo Catrini
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Company 401(k) Match ...................... $ 6,929 $ 6,430 $ 6,785 $ 5,941 $5,940
Premiums
Equity Split Dollar ..................... $28,659 $23,253 $21,037 $25,193 --
Group Life Insurance .................... $ 945 $ 945 $ 945 $ 945 $ 945
Special Long Term Disability ............ $ 1,397 $ 2,294 $ 2,038 $ 1,009 --
Forgiveness of Interest
Employee Debentures ..................... $11,029 $10,190 $ 5,035 $ 3,389 --
</TABLE>
During 1994, options to purchase 5,000 shares of Common Stock were granted
to Mr. Catrini.
9
<PAGE>
<TABLE>
<CAPTION>
Potential Realizable
Number of Value at Assumed Annual
Common Percentage of Rates of Stock Price
Shares Total Options Appreciation for
Underlying Granted to Option Term
Options Employees Exercise -----------------------
Name Granted in 1994 Price 5% 10%
---- ---------- ------------- -------- --- ---
<S> <C> <C> <C> <C> <C>
Vincent H. Catrini... 5,000 50% $9.875 $20,100 $46,843
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES
(AS OF DECEMBER 31, 1994)
Value of In the
No. of Unexercised Money Unexercised
Options at Year End Options at Year End
Shares ---------------------- -------------------
Acquired Value Exercis- Unexer- Exercis- Unexer-
Name on Exercise Realized able (#) cisable (#) able ($) cisable ($)
---- ----------- -------- -------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vincent F. Santulli .................. 0 0 59,000 37,500 0 0
Garet M. Romeo ....................... 0 0 42,000 24,000 0 0
William V. Carney .................... 0 0 22,500 15,000 0 0
John J. Gazzo ........................ 0 0 22,500 15,000 0 0
Vincent H. Catrini ................... 0 0 5,700 2,500 0 0
</TABLE>
Executive Continuation Agreements. The Company is a party to Executive
Continuation Agreements with Messrs. Santulli, Carney, Gazzo and Catrini as well
as with other senior officers. The agreements provide that, in the event that a
change of control of the Company occurs and the executive's employment with the
Company is subsequently terminated by the Company other than for cause, death or
disability, or is terminated by the executive as a result of a substantial
alteration in the executive's duties, compensation or other benefits, the
executive shall be entitled to the payment by the Company of an amount equal to
the executive's monthly salary at the rate in effect as of the date of the
executive's termination (or, if higher, as in effect immediately prior to the
change in control) plus the pro rata monthly amount of the executive's most
recent annual bonus paid immediately before the change of control multiplied, in
the case of Mr. Santulli, by 24 and, in the case of Messrs. Carney, Gazzo and
Catrini and the other participants, by 18. For purposes of the agreements, a
change of control is defined as one which would be required to be reported in
response to the proxy rules under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the acquisition of beneficial ownership, directly or
indirectly, by a person or group of persons of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities, or, during any period of two consecutive years, if
individuals who at the beginning of such period constituted the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof unless the election of each new director was nominated or ratified by at
least two-thirds of the directors then still in office who were directors at the
beginning of the period. The change in control must occur during the term of the
agreement, which in each case is currently through December 31, 1995 and is
renewed automatically unless the Company gives 60 days written notice prior to
January 1 of any year of its election not to renew the agreement. If such a
change of control occurs during the effectiveness of the agreement, any
10
<PAGE>
termination during the twenty-four months following the change of control, in
the case of Mr. Santulli and during the eighteen months following the change of
control, in the case of Messrs. Carney, Gazzo and Catrini and the other
participants, will result in the compensation described above.
Employment Agreements. The Company has entered into employment agreements
with Messrs. Santulli, Carney, Gazzo and Catrini as well as with certain other
senior officers. The agreements provide for initial terms of two years (four
years in the case of Mr. Santulli, three in the case of Mr. Carney) and
automatic annual renewals unless the Company gives 90 days written notice (180
days for Mr. Santulli, and 120 days for Mr. Carney) prior to January 1 of any
year of its election not to renew the agreement. Any voluntary termination of
employment by an individual executive can only be effected upon six months'
prior written notice to the Company. Each of the agreements provides for annual
review of each executive's salary by the Board of Directors. No executive's
salary may be set at a level less than that last fixed by the Board except if,
and to the extent that, salaries payable to all executive officers of the
Company are reduced on a uniform or percentage basis. Each agreement terminates
upon the death or disability of an executive, in which event the Company is
obligated to pay the executive or his or her estate a payment equal to three
months salary. The Company may terminate any employment agreement with or
without cause (as defined in the agreements) on ten days' written notice. In the
event of a termination for cause, the Company is not obligated to make any
severance or other payments to the executive. Upon a termination without cause,
an executive is entitled to receive as a severance payment his or her then
current salary for a period of six months following the date of termination plus
an additional period equal to one month for each full year of service with the
Company up to a maximum total of 24 months. Mr. Santulli's agreement provides
that in the event of a termination without cause he shall receive 30 months'
severance plus one month for each full year of service with the Company up to a
total maximum of 42 months' severance. Mr. Carney would receive 18 months'
severance plus one month for each full year of service with the Company up to a
total maximum of 30 months' severance. In the event that an executive is covered
by an executive severance agreement which provides for payments upon termination
subsequent to a change of control of the Company, the severance arrangements
described in this paragraph would not be applicable if the executive became
entitled to receive severance payments under the executive severance agreement.
The employment agreements also contain non-competition, confidentiality and
non-solicitation covenants applicable to each executive.
Mr. Romeo also has a similar contract which provides that in the event of a
termination without cause he shall receive 18 months' severance plus one month
for each full year of service with the Company up to a total maximum of 30
months' severance. Mr. Romeo resigned as an officer and director of the Company
and any subsidiaries for which he served as an officer or director on February
24, 1995. His employment with the Company will terminate on June 30, 1995.
Borrowings From the Company in Connection with the Company's 1984 Employee
Incentive Plan. In connection with the award of Employee Debentures under the
Company's 1984 Employee Incentive Plan (the "1984 Plan"), which has now been
terminated, the Board of Directors authorized the Company to offer loans to
employees receiving awards to facilitate the purchase of the Employee Debentures
in 1985 and 1986. Also, the Board of Directors authorized an extension of the
maturity of loans to employees who had received award of Series A and Series B
Employe Debentures and who chose to convert such series A and Series B Employee
Debentures into shares of Common Stock but not sell such shares at April 1,
1992. $137,870.11, $127,380, $62,940.70 and $42,360.08 borrowed by Messrs.
Santulli, Romeo, Carney and Gazzo, respectively, in connection with such
conversions of Series A and Series B Debentures is outstanding as of April 17,
1995. In addition, principal amounts of $42,360.08 each are outstanding in
respect of such loans to Michael A. Tancredi who also is an executive officer of
11
<PAGE>
the Company as well as to a former executive officer of the Company. Such
extension loans are due April 1, 1997 and bore a floating interest rate which
was subject to adjustment each July 1 and January 1 based on a rate equal to 110
percent of the average market yield during the six month period ending on the
preceding April 1 and October 1 on outstanding marketable obligations of the
United States with periods to maturity of three years or less. Payment of such
interest from April 1, 1992 was forgiven by action of the Board of Directors in
1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, Herbert H. Feldman, Howard D. Brous and Warren H. Esanu served
as members of the Company's Compensation Committee. During 1994, Alpha Risk
Management, Inc., an independent risk management consulting company of which Mr.
Feldman is president and sole shareholder, received an aggregate of $36,000 in
retainer fees in connection with its provision of ongoing risk management
services relating to the Company's corporate insurance coverage. Also during
1994, the law firm of which Mr. Esanu is a member provided legal services to the
Company and is expected to do so duirng 1995.
12
<PAGE>
PERFORMANCE GRAPH
The following graph shows changes over the past five years in the value of
$100 invested in: (a) Porta Systems Corp. Common Stock; (b) The Standard and
Poors 500 Index and (c) an SIC peer group consisting of five companies whose
principal business activity is the manufacture of communications equipment:
Andrew Corp., DSC Communications Corp., M/A-Com Inc., Northern Telecom Limited
and Scientific Atlanta, Inc.
The year-end values of each investment are based on the share price
appreciation plus the monthly reinvestment of dividends. Total shareholders
returns from each investment can be calculated from the year-end investment
values shown beneath the graph provided below.
TOTAL RETURN TO SHAREHOLDERS
December 31, 1989 to December 31, 1994
[THE FOLLOWING PARAGRAPH WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL]
S&P Communications
Date Porta Systems Corp. S&P 500 Index Equipment Manufacturers
- - ---- ------------------- ------------- -----------------------
1989 100 100 100
1990 116.36 96.89 111.39
1991 179.09 126.42 172.52
1992 109.09 136.05 186.08
1993 73.64 149.76 179.02
1994 36.36 151.74 204.21
<TABLE>
<CAPTION>
Indexed/Cumulative Returns
Base ------------------------------------------------------
Period Return Return Return Return Return
Company/Index Name 1989 1990 1991 1992 1993 1994
- - ------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Porta Systems Corp. .................. 100 116.36 179.09 109.09 73.64 36.36
S&P 500 Index ........................ 100 96.89 126.42 136.05 149.76 151.74
S&P Communications Equipment
Manufacturers ...................... 100 111.39 172.52 186.08 179.02 204.21
</TABLE>
This total shareholders return model assumes reivested dividends.
Prepared by Standard & Poor's Compustat, a division of McGraw-Hill.
13
<PAGE>
ELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick, independent
certified public accountants, to serve as auditors for the Company for the
fiscal year ending December 31, 1995. A representative of KPMG Peat Marwick is
expected to be present at the Annual Meeting, with the opportunity to make a
statement if he or she desires to do so, and will be available to respond to
appropriate questions. KPMG Peat Marwick are considered by the Board of
Directors to be well qualified to serve as the Company's auditors, and
ratification by stockholders of their selection is therefore recommended.
Proxies received in response to this solicitation will, in the absence of
contrary specification, be voted in favor of such ratification.
1996 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1996 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's proxy statement, the
proposals must be received by the Company at its principal office in Syosset,
New York prior to December 30, 1995.
OTHER MATTERS
The expenses of preparing, printing and mailing this notice of meeting and
proxy material and all other expenses of soliciting proxies will be borne by the
Company. In addition to the solicitation of proxies by the use of the mails,
directors, officers and regular employees of the Company, who will receive no
compensation in addition to their regular salary, may solicit proxies by mail,
telegraph, telephone or personal interview. The Company has retained Morrow &
Co., Inc. to aid in the solicitation of proxies, for which the Company will pay
an estimated $5,000 plus expenses. In addition, the Company will reimburse
brokerage firms, banks, trustees, nominees and other persons holding shares of
Common Stock of record for the expense of forwarding proxy material to the
beneficial owners of shares.
Management does not know of any matters to be presented at the meeting
other than those described herein. However, if any other matters properly come
before the meeting, the holders of proxies solicited by the Board of Directors
of the Company intend to exercise their discretion in voting on the other
matters.
By order of the Board of Directors
WILLIAM V. CARNEY
Secretary
April 30, 1995
14
<PAGE>
APPENDIX A
<TABLE>
<S> <C>
PORTA SYSTEMS CORP.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
Revoking any such prior appointments, the undersigned appoints Vincent F. Santulli, William V. Carney and Michael A. Tancredi,
or a majority of such thereof as shall act (or if only one shall act, then that one), proxies with full power of substitution, to
vote all the common stock of Porta Systems Corp. (the "Company") registered in the name of the undersigned at the Annual Meeting of
Stockholders to be held at the Board Room of the American Stock Exchange, 86 Trinity Place, New York, New York on June 7, 1995 at
3:00 P.M., Eastern Daylight Savings Time, and at any adjournments thereof, on the matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND A SPACE FOR YOUR VOTE ARE SET FORTH ON THE REVERSE SIDE. PLEASE VOTE, SIGN AND
RETURN PROMPTLY.
Receipt is acknowledged of the Notice of Annual Meeting and Proxy Statement dated April 30, 1995.
Dated: , 1995
----------------------------------------
----------------------------------------------------
----------------------------------------------------
THIS PROXY MUST BE SIGNED
EXACTLY AS NAME APPEARS
HEREON.
Executors, administrators, trustees, etc., should
give full title as such. If the signer is a
corporation, please sign full corporate name by a
duly authorized officer.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
If this proxy is properly executed, the shares of common stock represented hereby will be voted for Items 1 and 2 in accordance with
the instructions on this proxy. If no instructions are given, such shares will be voted FOR the election of all nominees for
director, and FOR ratification of the appointment of KPMG Peat Marwick as the independent auditors for the year ending December 31,
1995 and in the discretion of the proxies upon any other matter which may properly come before the meeting.
PLEASE MARK YOUR CHOICE LIKE THIS / / IN BLUE OR BLACK INK.
------------------ ----------
Account Number Common
(Mark only one)
1. Election of Directors (Nominees: V.F. Santulli, W.V. Carney, M.A. Tancredi, H.D. Brous, S. Kreitman, W.H. Esanu, H.H. Feldman).
/ / FOR all nominees listed above / / AGAINST all nominees
TO VOTE AGAINST any nominee write the nominee's name in the space below.
2. Ratification of appointment of KPMG Peat Marwick, certified public accountants, as the independent auditors for the Company for
the fiscal year ending December 31, 1995.
/ / FOR / / AGAINST / / ABSTAIN
3. In accordance with their discretion, upon such other matters as may properly come before the meeting.
</TABLE>
<PAGE>
APPENDIX B
<TABLE>
<S> <C>
PORTA SYSTEMS CORP. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
Revoking any such prior appointments, the undersigned appoints Vincent F. Santulli, William V. Carney and Michael A. Tancredi,
or a majority of such thereof as shall act (or if only one shall act, then that one), proxies with full power of substitution, to
vote all the common stock of Porta Systems Corp. (the "Company") registered in the name of the undersigned at the Annual Meeting of
Stockholders to be held at the Board Room of the American Stock Exchange, 86 Trinity Place, New York, New York on June 7, 1995 at
3:00 P.M., Eastern Daylight Savings Time, and at any adjournments thereof, on the matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND A SPACE FOR
YOUR VOTE ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/X/ Please mark
your votes
as this
----------
COMMON
If this proxy is properly executed, the shares of common stock represented hereby will be voted for Items 1 and 2 in accordance with
the instructions on this proxy. If NO instructions are given, such shares will be voted FOR the election of all nominees for
director, and FOR ratification of the appointment of KPMG Peat Marwick as the independent auditors for the year ending December 31,
1995 and in the discretion of the proxies upon any other matter which may properly come before the meeting.
FOR AGAINST
all nominees all nominees FOR AGAINST ABSTAIN
Item 1 - Election of / / / / Item 2 - Ratification of / / / / / /
Directors (Nominees: V.F. the appointment of KPMG
Santulli, W.V. Carney, Peat Marwick, certified
M.A. Tancredi, H.D. public accountants, as
Brous, W.H. Esanu, H.H. the independent auditors
Feldman, S. Kreitman TO for the Company for the
VOTE AGAINST any nominee fiscal year ending
write the nominee's name December 31, 1995.
in the space below.
- - ----------------------------------------------------------------
Item 3 - In accordance
with their discretion,
upon such other matters as
may properly come before
the meeting.
Receipt is hereby
acknowledged of the Porta
Systems Corp. Notice of
Annual Meeting and Proxy
Statement dated April 30,
1995.
Signature(s) Date
---------------------------------------------------------------------------------------------------- -----------
THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREON. Executors, administrators, trustees, etc. should give full title as such.
If the signer is a corporation, please sign full corporate name by a duly authorized officer.
</TABLE>
