SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14A-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Porta Systems Corp.
(Name of Registrant as Specified in its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table 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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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| 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:
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<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 31, 1997
----------
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of Porta
Systems Corp., a Delaware corporation (the "Company"), will be held at the
Company's corporate offices at 575 Underhill Boulevard, Syosset, New York, on
July 31, 1997, at 8:30 A.M., Eastern Daylight Savings Time, for the following
purposes:
1. To elect eight (8) directors to serve until the 1998 Annual Meeting of
Stockholders and until their successors shall be elected and
qualified;
2. To approve an amendment to the 1996 Stock Option Plan which, among
other things, increases the number of shares of Common Stock subject
to such plan from 100,000 shares to 450,000 shares;
3. To approve an amendment to the Company's certificate of incorporation
to decrease the number of authorized shares of Common Stock, par value
$.01 per share, to 20,000,000 shares from 40,000,000 shares.
4. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the year ending December 31, 1997; and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 2, 1997, 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 the Company's corporate office at 575
Underhill Boulevard, Syosset, N.Y., for a period of ten days prior to the date
of the Annual Meeting.
By order of the Board of Directors
MICHAEL A. TANCREDI
Secretary
Syosset, New York
June 10, 1997
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY,
AND CERTAIN OF THE MATTERS REQUIRE THE APPROVAL OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK. IN ORDER THAT YOUR VOTE IS COUNTED AT
THE ANNUAL MEETING, PLEASE EXECUTE, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT
THE ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE PROXY
STATEMENT.
<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
----------
PROXY STATEMENT
1997 Annual Meeting of Stockholders
----------
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 1997 Annual Meeting
of Stockholders (the "Annual Meeting") of holders of its Common Stock, par value
$.01 per share (the "Common Stock"), to be held at the Company's corporate
offices at 575 Underhill Boulevard, Syosset, New York, at 8:30 A.M., Eastern
Daylight Savings Time, on July 31, 1997, and at any adjournments or
postponements thereof. The enclosed proxy is being solicited by the Board of
Directors of the Company.
At the Annual Meeting, stockholders will vote on (a) the election of eight
(8) directors to serve until the 1998 Annual Meeting of Stockholders and until
their successors shall be elected and qualified, (b) the approval of an
amendment to the 1996 Stock Option Plan which, among other things, increases the
number of shares of Common Stock subject to such plan from 100,000 shares to
450,000 shares; (c) the approval of an amendment to the Company's certificate of
incorporation to decrease the number of authorized shares of Common Stock, par
value $.01 per share, to 20,000,000 shares from 40,000,000 shares, (d) the
ratification of the appointment of BDO Seidman, LLP as the Company's independent
auditors for the year ending December 31, 1997, and (e) the transaction of such
other business as may properly come before the meeting or any adjournment
thereof. The Board of Directors does not know of any other matters which will be
voted upon at the Annual Meeting.
Stockholders are encouraged to review the detailed discussion presented in
this Proxy Statement and either return the completed and executed proxy or
attend the Annual Meeting.
Record Date, Outstanding Shares, Voting Rights and Proxies
Stockholders of record at the close of business on June 2, 1997 (the
"Record Date"), are entitled to notice and to vote at the Annual Meeting. As of
the close of business on the Record Date there were outstanding 2,191,896 shares
of Common Stock of the Company. The holders of the Common Stock are entitled to
one vote for each share owned of record on the Record Date.
The presence in person or by proxy of holders of a majority of the shares
of voting stock of the Company entitled to be voted will constitute a quorum for
the transaction of business at the Annual Meeting. If a stockholder files a
proxy or attends the Annual Meeting, his or her shares are counted as being
present at the Annual Meeting for purposes of determining whether there is
quorum, even if the stockholder abstains from voting on all matters. The vote
required for the election of directors and approval of other proposals is set
forth in the discussion of each proposal.
<PAGE>
Each stockholder of the Company is required to complete, sign, date and
return the enclosed proxy without delay in order to ensure that his or her
shares are voted at the Annual Meeting. The return of a signed proxy will not
affect a stockholder's right to attend the Annual Meeting and vote in person.
Any stockholder giving a proxy has the right to revoke it at any time before it
is exercised by executing and returning a proxy bearing a later date, by giving
a written notice of revocation to the Secretary of the Company, or by attending
the Annual Meeting and voting in person. There is no required form for a proxy
revocation. All properly executed proxies not revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein.
If a proxy is signed and returned, but no specification is made with
respect to any or all of the proposals listed therein, the shares represented by
such proxy will be voted for all the proposals, including the Election of
Directors. Abstentions and broker non-votes are not counted as votes "for" or
"against" a proposal, but where the affirmative vote on the subject matter is
required for approval, abstentions and broker non-votes are counted in
determining the number of shares present or represented.
This proxy statement and the Annual Report to Stockholders for 1996 are
being mailed to stockholders on or about June 10, 1997.
Cost of Solicitation
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,
telecopier, 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 $3,500 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.
2
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
AND SECURITY HOLDINGS OF MANAGEMENT
There are no persons known to the Company to be the beneficial owners of
five percent (5%) or more of the outstanding shares of Common Stock.
The following table sets forth, as of June 2, 1997, the number of
outstanding shares of Common Stock of the Company beneficially owned by each
current director of the Company, the Chief Operating Officer of the Company and
each of the four most highly compensated executive officers other than the Chief
Operating Officer, and all current directors and officers of the Company as a
group.
Percentage of
Shares of Common Stock Outstanding
Name Beneficially Owned (1) Common Stock
----- --------------------- -------------
William V. Carney.................... 48,023 (2) 2.2%
Seymour Joffe........................ 32,000 *
Howard D. Brous ..................... 37,200 (3) *
Warren H. Esanu ..................... 30,000 *
Herbert H. Feldman................... 2,000 (4) *
Stanley Kreitman .................... 2,500 (5) *
Robert Schreiber..................... 2,000 *
Michael A. Tancredi ................. 14,127 (6) *
Edward B. Kornfeld................... 3,000 (7) *
John J. Gazzo........................ 7,537 (8) *
All current directors and
executive officers as a
group (15 persons)................ 148,952 6.9%
- ----------
* Less than 1%
(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) Includes 3,750 shares of Common Stock issuable upon the exercise of options
held by Mr. Carney.
(3) Represents 2,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Brous.
(4) Represents 2,000 shares of Common Stock issuable upon exercise of options
held by Mr. Feldman.
(5) Represents 2,500 shares of Common Stock issuable upon exercise of options
held by Mr. Kreitman.
(6) Includes 2,470 shares of Common Stock issuable upon the exercise of options
held by Mr. Tancredi.
(7) Represents 3,000 shares issuable upon exercise of options held by Mr.
Kornfeld.
(8) Includes 3,750 shares of Common Stock issuable upon the exercise of options
held by Mr. Gazzo.
ELECTION OF DIRECTORS
Directors of the Company are elected annually by the stockholders to serve
until the next annual meeting of stockholders and until their respective
successors are duly elected. The by-laws of the Company provide that the number
of directors comprising the whole board shall be determined from time to time by
the Board of Directors. The Board of Directors has established the size of the
board at eight directors and is recommending that the eight incumbent directors
of the Company be re-elected. If any nominee becomes unavailable for any
3
<PAGE>
reason, a situation which is not anticipated, a substitute nominee may be
proposed by the Board of Directors, and any shares represented by proxy will be
voted for any substitute nominee, unless the Board reduces the number of
directors.
Messrs. William V. Carney, Michael A. Tancredi, Howard D. Brous, Warren H.
Esanu, Herbert H. Feldman and Stanley Kreitman were elected at the 1996 Annual
Meeting of Stockholders, for which proxies were solicited. Mr. Esanu resigned
from the board in October 1996 and was reelected by the board in April 1997. Mr.
Seymour Joffe was elected to the board in October 1996. Mr. Robert Schreiber was
elected to the board in April 1997.
<TABLE>
<CAPTION>
Principal Occupation Director
Name of Nominee or Employment Since Age
--------------- ------------------- ------- ---
<S> <C> <C> <C>
William V. Carney (1).......................... Chairman of the Board 1970 60
and Chief Executive Officer
of the Company
Seymour Joffe.................................. President and Chief 1996 67
Operating Officer of
the Company
Michael A. Tancredi............................ Senior Vice President, 1970 67
Secretary and Treasurer of
the Company
Howard D. Brous (1) (2) (3).................... President and Chief 1989 51
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 1997 54
Katsky Korins & Siger,
attorneys at law
Herbert H. Feldman (1) (2) (3)................. President, Alpha Risk 1989 63
Management, Inc.,
independent risk
management consultants
Stanley Kreitman (1) (2) (3)................... Vice Chairman, Manhattan 1995 64
Associates, investment advisors
Robert Schreiber (1) (2) (3)................... Chief Executive Officer of 1997 64
BLS Communications, Ltd.
</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.
Mr. Carney has been Chairman of the Board and Chief Executive Officer since
October 1996. He was Vice Chairman from 1988 to October 1996, Senior Vice
President from 1989 to October 1996, Chief Technical Officer since 1990 and
Secretary from 1977 to October 1996. He also served as Senior Vice
President-Mechanical Engineering from 1988 to 1989, Senior Vice
President-Connector Products from 1985 to 1988, Senior Vice
President-Manufacturing from 1984 to 1985 and Senior Vice President-Operations
from 1977 to 1984.
4
<PAGE>
Mr. Joffe was elected President and Chief Operating Officer in October of
1996. Mr. Joffe, who served as director of the Company from 1987 to 1992, has
most recently served the Company as senior consultant to its Operations Support
Systems (OSS) business. Mr. Joffe has been Chairman of JSI International, Inc.
which represents companies in the marketing and positioning of high-tech
products and services in the Asia Pacific area.
Mr. Tancredi has been Senior Vice President, Secretary and Treasurer since
January 1997. He has been Vice President-Administration since 1995 and Treasurer
since 1978, having served as Vice President-Finance and Administration from 1989
to 1995 and Vice President-Finance from 1984 to 1989.
Mr. Brous has been President and Chief Executive Officer of H. D. Brous &
Co., Inc., a New York Stock Exchange member firm for more than the past five
years.
Mr. Esanu was Chairman of the Board of the Company from March 1996 to
October 1996 and director from 1989 to 1996, and re-appointed to the Board of
Directors in April of 1997. He has been of counsel to Esanu Katsky Korins &
Siger, attorneys at law, for more than the past five years. Mr. Esanu is also a
founding partner and Chairman of Paul Reed Smith Guitars Limited Partnership
(Maryland), a leading manufacturer of premium-priced electrical guitars. He is
also a senior officer and director of a number of privately held real estate
management companies.
Mr. Feldman has been President of Alpha Risk Management, Inc., independent
risk management consultants, for more than the past five years. He is its sole
stockholder.
Mr. Kreitman has been Vice Chairman of Manhattan Associates, a firm of
investment advisors, since February 1994. For more than five years prior
thereto, he was President of United States Banknote Corp.
Mr. Schreiber has been Chief Executive Officer of BLS Communications for
more than the past five years.
The Board of Directors recommends a vote FOR the nominees listed above.
Approval Required
Provided that a quorum is present at the Annual Meeting, the eight
directors receiving the most votes are elected as directors for a term of one
year and until their successors are elected and qualified.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established Executive, Compensation
and Audit Committees.
The Executive Committee exercises all the powers of the Board of Directors
in the conduct of the Company's business to the full extent permitted by
Delaware law between meetings of the Board of Directors. The Executive
Committee's present members are Messrs. Carney, Brous, Esanu, Feldman, Kreitman
and Schreiber.
The Compensation Committee has been empowered to approve the compensation
of all senior Company employees, as well as to administer the Company's 1996
Stock Option Plan. See "Report of the Compensation Committee" below. The
Compensation Committee's present members are Messrs. Brous, Esanu, Feldman,
Kreitman and Schreiber. Mr. Feldman is its chairman.
The Audit Committee's principal responsibilities are to review the terms of
the engagement of the Company's independent auditors, review the Company's
policies and procedures with respect to internal auditing, accounting and
financial controls and review and discuss the Company's independent auditors'
reports and recommendations. The Audit Committee's present members are Messrs.
Kreitman, Brous, Esanu, Feldman and Schreiber. Mr. Kreitman is its chairman.
5
<PAGE>
Excluding actions by unanimous written consent, during 1996, the Board of
Directors held six meetings, the Executive Committee held no meetings, the Audit
Committee held four meetings and the Compensation Committee held three meetings.
Each of the nominees for director attended at least 75% of the aggregate number
of meetings of the Board of Directors and the committees on which he served that
were 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 and the Chairman
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 Board and each committee meeting attended.
EXECUTIVE OFFICERS
Set forth below are the executive officers of the Company and information
concerning those officers who are not also directors of the Company.
Name Position
---- --------
William V. Carney ........... Chairman of the Board and Chief Executive Officer
Seymour Joffe ............... President and Chief Operating Officer
Michael A. Tancredi ......... Senior Vice President, Secretary and Treasurer
Edward B. Kornfeld .......... Senior Vice President-Operations and Chief
Financial Officer
John J. Gazzo ............... Senior Vice President
Prem G. Chandran ............ Vice President
Edmund A. Chiodo ............ Vice President
David L. Rawlings ........... Vice President
William J. Novelli .......... Vice President
Warren Marcus ............... Vice President
Gerald C. Hammond ........... Vice President
Mr. Kornfeld was elected a Senior Vice President-Operations in 1996. He has
served as Vice President-Finance and Chief Financial Officer of the Company
since October 1995. Prior to his election to this position, Mr. Kornfeld held
positions with several companies for more than five years, including Excel
Technology Inc. (Quantronix Corp.) and Anorad Corporation.
Mr. Gazzo was elected Senior Vice President in March 1996. He has been Vice
President-Marketing of the Company since April 1993 and was general manager of
its Porta Electronics Division from November 1989 to April 1993; he was the
Company's Vice President-Research and Development from March 1984 to November
1989 and was Vice President-Engineering from February 1978 to February 1984.
Prior to that time, he was Chief Engineer of the Company.
Mr. Chandran was elected Vice President in December 1995. Mr. Chandran had
been with the Company as Assistant Vice President of Engineering since 1991.
6
<PAGE>
Mr. Chiodo was elected Vice President in March 1996. Mr. Chiodo had been
with the Company since 1980. During that time he has held various positions in
the Company, most recently as Assistant Vice President of OSS operations.
Mr. Rawlings was elected Vice President in March 1996. Mr. Rawlings has
been the Assistant Vice President of Research and Development-Copper Products
since 1992.
Mr. Novelli was elected Vice President in December 1996. Mr. Novelli has
been the Assistant Vice President of Sales and Marketing-Copper Products since
1989.
Mr. Marcus has been Vice President-International Sales since May 1996. He
served as a consultant to the Company from April 1993 to May 1996. He served
prior as a Vice President-Joint Ventures.
Mr. Hammond has been employed by the Company as an Assistant Vice
President-Research and Development since September 1992. He was elected as Vice
President-Strategic Development in March 1997.
EXECUTIVE COMPENSATION
Notwithstanding 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 in this Proxy Statement 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 of five 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:
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 issued options under its 1996 Stock Option Plan.
See "Amendment to the 1996 Stock Option Plan" for information concerning options
issued to officers and directors of the Company.
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.
7
<PAGE>
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. Carney and
Gazzo. Supplementary group life insurance coverage is in an amount of $500,000
for each executive, and is in addition to the group life insurance benefit
provided to all employees, which is 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 salary (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 the employee. The participating employee is
not taxed on that contribution. For the year ended December 31, 1996, the
Company matched each participant's contribution by matching a contribution in an
amount equal to 25% of the amount which the participant elected to defer in the
401(k) Plan. The Plan provides that in no case is the amount contributed by the
Company permitted to be greater than 25% of 6% of the participant's salary.
Supplemental Management Compensation Programs. The Company provides
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 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
1996 premium payments with respect to Messrs. Carney and Gazzo are included in
the Summary Compensation Table under the heading "All Other Compensation."
The supplemental retirement income program is intended to provide a
participating employee or his heirs or distributes annual retirement income
equal to 50% of the employee's 1984 base salary. Payments under the program will
be made 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. The Company
will recover from policy proceeds the full amount of paid premiums. Messrs.
Carney, Gazzo and one other executive officer currently participate in this
program.
8
<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 both 1995 and 1996, the
Committee determined that, generally, no bonuses would be paid to employees,
including the Chief Executive Officer and other executive officers for such
years.
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, and one other person
who was an executive officer during a portion of the year, whose salary and
bonus earned exceeded $100,000 for the most recent fiscal year.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- ---------------------
Other Restricted Options, All Other
Annual Stock SARs Compen-
Name and Compensa- Awards (Number sation
Principal Position Year Salary Bonus tion (Dollars) of Shares) (1)
----------------- ---- ------ -------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William V. Carney (2)......... 1996 $ 170,038 -- -- -- -- $ 31,685
Chairman of the Board 1995 162,000 -- -- -- -- 35,750
and Chief Executive Officer 1994 162,000 -- -- -- -- 35,840
Seymour Joffe................. 1996 35,346 -- -- -- -- 35,531
President and 1995 -- -- -- -- -- 5,000
Chief Operating Officer
Warren H. Esanu(2)............ 1996 110,769 -- -- -- -- 1,327
Chairman of the Board 1995 -- -- -- -- -- --
1994 -- -- -- -- -- --
Vincent F. Santulli (2)....... 1996 55,288 -- -- -- -- 90,431
Chairman of the Board 1995 275,000 -- -- -- -- 50,868
and Chief Executive Officer 1994 275,000 -- -- -- -- 48,959
Edward B. Kornfeld............ 1996 147,489 -- -- -- -- 2,026
Senior Vice President, 1995 30,153 -- -- -- 3,000 --
Operations 1994 -- -- -- -- -- --
Chief Financial Officer
John J. Gazzo ................ 1996 141,836 -- -- -- -- 25,535
Senior Vice President 1995 140,000 -- -- -- -- 31,455
OSS Division 1994 140,000 -- -- -- -- 36,477
Michael A. Tancredi .......... 1996 122,618 -- -- -- -- 1,830
Senior Vice President, 1995 122,000 -- -- -- -- 6,930
Secretary and Treasurer 1994 122,000 -- -- -- -- 6,930
Edmund Chiodo................. 1996 113,437 -- -- -- -- 1,678
Vice President Operations 1995 107,000 -- -- -- -- 6,930
OSS Division 1994 105,930 -- -- -- -- 6,930
</TABLE>
- ----------
(1) "All Other Compensation" includes severance payments, to the extent
applicable, the Company's payment to the executive's account pursuant to
the Company's 401(k) Plan, 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 set forth
on the table below.
(2) Mr. Santulli resigned as Chairman of the Board, Chief Executive Officer and
as a director effective April 1, 1996. Mr. Esanu was Chairman of the Board
from April 1996 until October 1996. Mr. Carney, who was Vice Chairman until
October 1996, was elected Chairman of the Board and Chief Executive Officer
in October 1996.
10
<PAGE>
Set forth below is a chart which shows the component of "All Other
Compensation" listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Mr. Mr. Mr. Mr. Mr. Mr. Mr.
Carney Esanu Santulli Kornfeld Gazzo Tancredi Chiodo
------- ------ ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Company 401(k) Match........... $2,210 $1,327 -- $2,026 $2,210 $1,830 $1,678
Equity Split Dollar............ 21,062 -- 28,038 -- 17,486 -- --
Supplemental Insurance........ 3,378 -- 2,364 -- 2,450 -- --
Forgiveness of Interest on
Employee Debentures ......... 5,035 -- 11,029 -- 3,389 -- --
Consulting Fees................ -- -- 49,000 -- -- -- --
</TABLE>
Certain of the Company's officers named in the Summary Compensation Table
or their affiliates are parties to employment, consulting or other agreements
providing for compensation during and after their employment with the Company.
See "Compensation Committee Interlocks and Insider Participation".
Employment Agreements. The Company has employment agreements with Messrs.
Carney, Joffe, Kornfeld, Tancredi and Gazzo. The agreements continue on a
year-to-year basis, for January 1 of each year, unless terminated by the Company
on prior notice of not less than 120 days for Mr. Carney, 90 days for Messrs.
Tancredi and Gazzo and 60 days for Messrs. Joffe and Kornfeld. Salary is
determined by the Board of Directors, except that the salary may not be reduced
except as a part of a salary reduction program applicable to all executive
officers. Upon death or termination of employment as a result of a disability,
the officer or his estate is to receive a payment equal to three months salary.
Upon a termination without cause, Mr. Carney is entitled to receive his then
current salary for 18 months plus one month for each full year of service with
the Company up to a total maximum of 30 months. Mr. Gazzo and Mr. Tancredi are
entitled to receive as a severance payment his 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, and Mr. Kornfeld is entitled to receive as a severance
payment his then current salary for a period of twelve months plus an additional
period equal to one month for each year of severance up to a maximum total of 24
months. In the event that an executive is covered by an executive severance
agreement, including the Salary Continuation Agreements (as described below),
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 is entitled to severance payments under the
executive severance agreement.
Salary Continuation Agreements. The Company is a party to Salary
Continuation Agreements with Messrs. Carney, Kornfeld, Tancredi and Gazzo. The
Salary Continuation 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 by
18. For purposes of the Salary Continuation 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
11
<PAGE>
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
Salary Continuation Agreement, which in each case is currently through December
31, 1996 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
Salary Continuation Agreement, any termination during the eighteen months
following the change of control will result in the compensation described above.
Borrowings From the Company in Connection with the Company's 1984 Employee
Incentive Plan. In connection with the award of certain debentures to employees
(the "Employee Debentures") under the Company's 1984 Employee Incentive Plan
(the "1984 Plan"), which has terminated, the Board of Directors authorized the
Company in 1985 and 1986 to offer loans to employees receiving awards to
facilitate the purchase of such Employee Debentures. Also, the Board of
Directors authorized an extension of the maturity of loans to certain employees
who elected to convert certain Employee Debentures into Common Stock.
Accordingly, loans of $62,940 and $42,360, borrowed by Messrs. Carney and Gazzo,
respectively, in connection with such conversion, were outstanding as of April
17, 1997. Such extension loans are due April 1, 1999 and bear floating interest
at a rate which is subject to adjustment each July 1 and January 1 based on a
rate equal to 110% of certain United States government obligations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Herbert H. Feldman, Howard D. Brous, Warren H. Esanu and
Stanley Kreitman served as members of the Company's Compensation Committee.
During 1996, 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. The arrangement is cancelable by either party upon
ten days prior notice. Also during 1996, the law firm of Esanu Katsky Korins &
Siger, to which Mr. Esanu is of counsel, provided legal services to the Company,
for which it received fees of $790,000. Esanu Katsky Korins & Siger is
continuing to render legal services to the Company during 1997.
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
Poor's 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
stockholder returns from each investment can be calculated from the year-end
investment values shown beneath the graph provided below.
TOTAL RETURN TO STOCKHOLDERS
December 31, 1990 to December 31, 1995
[The following table represents a line chart in the printed material]
Indexed/Cumulative Returns
<TABLE>
<CAPTION>
Base
Period Return Return Return Return Return
Company/Index Name 1991 1992 1993 1994 1995 1996
- ------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Porta Systems Corp. ............... 100 60.91 41.12 20.30 2.79 1.32
S&P 500 Index ..................... 100 107.62 118.46 120.03 165.13 203.05
S&P Communications Equipment
Manufacturers ................... 100 107.86 103.76 118.37 177.14 207.46
</TABLE>
This total stockholder return model assumes reinvested dividends in Porta
Systems Corp.
Prepared by Standard & Poor's Compustat, a division of McGraw-Hill.
13
<PAGE>
AMENDMENT TO THE 1996 STOCK OPTION PLAN
The Board of Directors believes that in order to attract and retain the
services of executive and other key employees and outside directors, it is
necessary for the Company to have the ability and flexibility to provide a
compensation package which compares favorably with those offered by other
companies. Accordingly, in April 1996, the Board of Directors adopted, and in
June 1996 the stockholders approved, the 1996 Stock Option Plan (the "1996
Plan"), covering 100,000 shares of Common Stock. The Board of Directors believes
that an increase in the number of shares of Common Stock subject to options
available under the 1996 Plan is in the best interest of the Company and its
stockholders. Accordingly, in May 1997, the Board of Directors approved, subject
to stockholder approval, an amendment to the 1996 Plan increasing the number of
shares subject to options from 100,000 shares to 450,000 shares of Common Stock.
The Company had another stock option plan, the 1986 stock option plan (the
"1986 Plan"), pursuant to which options to purchase 170,000 shares of Common
Stock could be granted. The 1986 Plan expired in March 1996. As of May 31, 1997,
an aggregate of 16,397 shares of Common Stock had been issued pursuant to the
1986 Plan and 16,397 shares of Common Stock were subject to outstanding options
under such plan.
The 1996 Plan does not have an expiration date except that incentive stock
options, as defined in Section 422 of the Internal Revenue Code of 1986, as
amended, cannot be issued subsequent to ten years from the date the 1996 Plan
was approved by the Board of Directors. Set forth below is a summary of the 1996
Plan, but this summary is qualified in its entirety by reference to the full
text of the 1996 Plan, a copy of which is filed as Exhibit A to this Proxy
Statement.
The 1996 Plan, as amended, is authorized for 450,000 shares of Common
Stock. As of May 31, 1997, no shares of Common Stock had been issued pursuant to
the 1996 Plan, 87,448 shares of Common Stock were subject to options under the
1996 Plan, none of which options were exercisable.
The 1996 Plan provides for the automatic grant to non-management directors
of non-qualified options to purchase 2,000 shares of Common Stock on May 1st of
each year. Such options have an exercise price equal to the average closing
price of the Common Stock on the last ten trading days in April of such year.
Messrs. Howard D. Brous, Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman
and Robert Schreiber are the present directors who qualify as non-management
directors under the 1996 Plan. The 1996 Plan imposes no limit on the number of
officers and other key employees to whom awards may be made. Messrs. William V.
Carney, Seymour Joffe and Michael A. Tancredi, who are officers and directors,
as well as six other officers of the Company are eligible for options under the
1996 Plan.
The amendment to the 1996 Plan also provides for the grant of a
non-qualified stock option to each non-employee director to purchase 15,000
shares of Common Stock at $1.50 per share, which was the fair market value on
May 8, 1997, the date the amendment was approved by the Board of Directors. Such
options have a term of ten years. The non-employee directors who received such
options were Messrs. Brous, Esanu, Feldman, Kreitman and Schreiber.
Options under the 1996 Plan may be granted to key employees, including
officers and directors of the Company and its subsidiaries, except that members
and alternate members of the stock option committee are not eligible for options
under the 1996 Plan other than the automatic grant of options described above or
pursuant to the amendment to the 1996 Plan.
The 1996 Plan is to be administered by a committee of at least two
disinterested directors to be appointed by the Board (the "Committee"). Any
member or alternate member of the Committee shall not be eligible to receive
options under the 1996 Plan (except as to the automatic grant of options to
non-management directors,
14
<PAGE>
as described above) or under any plan of the Company or any of its affiliates.
The Committee has broad discretion in determining the persons to whom stock
options are to be granted, the terms and conditions of the grant, including
whether the option is a nonqualified stock option or an incentive stock option,
the exercise price and term and the restrictions and forfeiture conditions. If
no committee is appointed, the functions of the committee shall be performed by
the Board of Directors. The Compensation Committee serves as the Committee under
the 1996 Plan.
Tax consequences of awards provided under the 1996 Plan are dependent upon
the type of options granted. The grant of an incentive or nonqualified stock
options does not result in any taxable income to the recipient or deduction to
the Company. Upon exercise of a nonqualified stock option, the recipient
recognizes income in the amount by which the fair market value on the date of
exercise exceeds the exercise price of the option, and the Company receives a
corresponding tax deduction. In the case of incentive stock options, no income
is recognized to the employee, and no deduction is available to the Company, if
the stock issued upon exercise of the option is not transferred within two years
from the date of grant or one year from the date of exercise, whichever occurs
later. However, the exercise of an incentive stock option may result in
additional taxes through the application of the alternative minimum tax. In the
event of a sale or other disqualifying transfer of stock issued upon exercise of
an incentive stock option, the employee realizes income, and the Company
receives a tax deduction, equal to the amount by which the lesser of the fair
market value at the date of exercise or the proceeds from the sale exceeds the
exercise price. When compensation is to be recognized by the employee,
appropriate arrangements are to be made with respect to the payment of
withholding tax.
The following table sets forth information concerning options granted
during the year ended December 31, 1996 pursuant to the 1996 Plan. No stock
appreciation rights ("SARs") were granted.
Option Grants in Year Ended December 31, 1996
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Shares Granted to
Underlying Employees in Exercise Price
Options Granted Fiscal Year Per Share Expiration Date
--------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
William V. Carney ................... 3,750 4.7 2.00 8/7/02
Seymour Joffe ....................... 35,000 44.2 2.375 10/16/02
Warren H. Esanu ..................... -- -- -- --
Vincent F. Santulli ................. -- -- -- --
Edward B. Kornfeld .................. 3,000 3.8 2.00 8/7/02
19,000 24.0 2.375 10/16/02
Michael A. Tancredi ................. 2,470 3.1 2.00 8/7/02
John J. Gazzo ....................... 3,750 4.7 2.00 8/7/02
Edmund A. Chiodo .................... 438 0.6 2.00 8/7/02
All current executive officers ...... 71,378 90.1 -- --
All non-officer directors(1) ........ 6,000 7.6 3.6875 5/1/02
All other employees ................. 1,830 2.3 -- --
</TABLE>
- ----------
(1) Represents options automatically granted to non-employee directors pursuant
to the 1996 Plan.
15
<PAGE>
The following table sets forth information concerning the exercise of
options and warrants during the year ended December 31, 1996 and the year-end
value of options held by the Company's officers named in the Summary
Compensation Table. No SARs have been granted.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
Fiscal Year End Fiscal Year End
------------------ ------------------
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
----- -------------- -------- ------------------ ------------------
<S> <C> <C> <C> <C>
William V. Carney................... -- -- 3,750/ --/
3,750 --
Seymour Joffe....................... -- -- --/ --/
35,000 --
Warren H. Esanu.................... -- -- --/ --/
2,000 --
Vincent F. Santulli................. -- -- --/ --/
-- -- --
Edward B. Kornfeld.................. -- -- 3,000/ --/
-- -- 22,000 --
John J. Gazzo....................... -- -- 3,750/ --/
-- -- 3,750 --
Michael A. Tancredi................ -- -- 2,470/ --/
-- 2,470
Edmund Chiodo...................... -- -- 438/ --/
-- -- 438 --
</TABLE>
The adoption of the amendment to the Company's 1996 Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock.
Proxies received in response to this solicitation will, in the absence of
contrary specification, be voted in favor of the approval of amendment to the
1996 Plan.
The Board of Directors recommends a vote FOR the amendment to the 1996
Plan.
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATON
The Board of Directors has proposed an amendment to the Company's
certificate of incorporation which would amend the Company's certificate of
incorporation by decreasing the number of authorized shares of Common Stock, par
value $.01 per share, from 40,000,000 shares to 20,000,000 shares. The adoption
of the amendment would not effect any change in the Company's outstanding Common
Stock.
Financial Statements
The audited financial statements for the year ended December 31, 1996 and
1995 together with the related Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are included in the Annual Report,
and unaudited financial statements together with the related Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
are included in the Company's Form 10-Q Quarterly Report for the three months
ended March 31, 1997, are incorporated by reference in this Proxy Statement.
16
<PAGE>
Vote Required
The amendment to the certificate of incorporation requires the approval of
the holders of a majority of the outstanding shares of Common Stock.
Discussion of the Amendment
At the 1996 Annual Meeting, the stockholders approved an amendment to the
Company's certificate of incorporation which increased the number of authorized
shares of Common Stock from 20,000,000 shares to 40,000,000 shares. At such
meeting, the stockholders also approved a one-for-five reverse split of the
Common Stock. The Board of Directors believes that the number of presently
authorized shares of Common Stock is in excess of the Company's present
requirements and that any increase in the number of authorized shares in excess
of 20,000,000 shares should require the approval of the stockholders of the
Company. In addition, the Company believes that the reduction in outstanding
shares of Common Stock could provide the Company with considerable savings in
franchise taxes.
The rights of the holders of Common Stock will not be affected by the
amendment.
The Board of Directors recommends a vote FOR the amendment to the Company's
certificate of incorporation.
SELECTION OF INDEPENDENT AUDITORS
It is proposed that the stockholders ratify the selection of BDO Seidman,
LLP as the independent public accountants for the Company for the year ended
December 31, 1997. The Audit Committee and the Board of Directors have approved
the selection of BDO Seidman, LLP as the Company's independent public auditors.
However, in the event approval of the proposal is not obtained, the selection of
the independent auditors will be reconsidered by the Board of Directors.
BDO Seidman, LLP was the independent certified public accountants for 1996
and 1995. At no time since their engagement have they had any direct or indirect
financial interest in or any connection with the Company or any of its
subsidiaries other than as independent auditors.
Representatives of BDO Seidman, LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they so desire. Such
representatives are also expected to be available to respond to appropriate
questions.
The Company's independent public accountants for the year ended December
31, 1994 was KPMG Peat Marwick LLP, whose report on such financial statements is
included in the Company's annual report on Form 10-K for the year ended December
31, 1996. Representatives of such firm are not expected to be present at the
Annual Meeting.
The Company changed accountants following the issuance by the Securities
and Exchange Commission of an order directing a private investigation of the
Company arising out of the position of the SEC staff that the independence of
KPMG Peat Marwick LLP was adversely impacted by certain relationships involving
such firm and KPMG BayMark Strategies LLC, and Mr. Edward R. Olson, the
president of KPMG BayMark Strategies LLC who was serving as the Company's
interim president and chief operating officer. The decision to change
accountants was made by the Company's Audit Committee and approved by the Board
of Directors. There were no disagreements with KPMG Peat Marwick LLP, whether or
not resolved, on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
17
<PAGE>
Vote Required
The proposal to ratify the selection of BDO Seidman, LLP as the Company's
independent auditors requires the approval of a majority of the shares of Common
Stock present and voting, provided that a quorum is present.
The Board of Directors recommends a vote FOR the ratification of BDO
Seidman, LLP as the Company's independent auditors.
INCORPORATION BY REFERENCE
The Company incorporates into this Proxy Statement the audited financial
statements for the years ended December 31, 1996 and 1995 together with the
related Management's Discussion and Analysis of Liquidity and Capital Resources
and Results of Operations, which are included in the Annual Report, and
unaudited financial statements together with the related Management's Discussion
and Analysis of Liquidity and Capital Resources and Results of Operations which
are included in the Company's Form 10-Q Quarterly Report for the three months
ended March 31, 1997. A copy of the Annual Report is being mailed to
stockholders of record on the Record Date concurrently with the mailing of this
Proxy Statement. Additional copies of the Annual Report will be provided by the
Company without charge upon request. Copies of the Form 10-Q for the quarter
ended March 31, 1997, without exhibits, will also be provided without charge
upon request. Requests for copies of the Annual Report or Form 10-Q should be
made as provided under "Other Matters".
OTHER MATTERS
Any proposal which a stockholder wishes to present at the 1998 Annual
Meeting of Stockholders must be received by the Company at its executive offices
at 575 Underhill Boulevard, Syosset, New York 11791, not later than January 31,
1998.
Copies of the Company's Form 10-K for the year ended December 31, 1996 and
Form 10-Q for the quarter ended March 31, 1997, without exhibits, may be
obtained without charge by writing to Mr. Michael A. Tancredi, Senior Vice
President, Secretary and Treasurer, Porta Systems Corp., 575 Underhill
Boulevard, Syosset, New York 11791. Exhibits will be furnished upon request and
upon payment of a handling charge of $.25 per page, which represents the
Company's reasonable cost of furnishing such exhibits.
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than as set forth in this Proxy Statement. However, if any
matters properly come before the meeting, the holders of proxies solicited by
the Board of Directors intend to exercise their discretion in voting on such
other matters.
By order of the Board of Directors
MICHAEL A. TANCREDI
Secretary
June 10, 1997
18
<PAGE>
PROXY PORTA SYSTEMS CORP.
1997 ANNUAL MEETING OF STOCKHOLDERS--JULY 31, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William V. Carney and Seymour Joffe or
either one of them acting in the absence of the other, with full power of
substitution or revocation, proxies for the undersigned, to vote at the 1997
Annual Meeting of Stockholders of Porta Systems Corp. (the "Company"), to be
held at 8:30 a.m., local time, on Thursday, July 31, 1997, at the offices of the
Corporation at 575 Underhill Boulevard, Syosset, New York 11791, and at any
adjournment or adjournments thereof, according to the number of votes the
undersigned might cast and with all powers the undersigned would possess if
personally present.
(1) To elect the following eight (8) directors:
William V. Carney, Seymour Joffe, Michael A. Tancredi, Howard D. Brous,
Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman and Robert Schreiber.
[ ] FOR all nominees listed above (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name below.
________________________________________________________________________________
(2) To approve an amendment to the 1996 Stock Option Plan which, among other
things increases the number of shares of Common Stock subject to such plan
from 100,000 to 450,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To approve an amendment to the Company's certificate of incorporation to
decrease the number of authorized shares of Common Stock, par value $.01
per share, to 20,000,000 shares from 40,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) To ratify the appointment of BDO Seidman, LLP as the Company's independent
auditors for the year ending December 31, 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
(5) In their discretion, upon the transaction of such other business as may
properly come before the meeting.
All of the above as set forth in the Proxy Statement, dated June 10, 1997
The shares represented by this proxy will be voted on Items 1, 2, 3 and 4
as directed by the stockholder, but if no direction is indicated, will be voted
FOR Items 1,2,3 and 4.
If you plan to attend the meeting please indicate below:
I plan to attend the meeting [ ]
Dated:............................, 1997
........................................
........................................
(Signature(s))
Please sign exactly as name(s) appear
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
Please date, sign and mail this proxy in
the enclosed envelope, which requires no
postage if mailed in the United States.
