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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14A-6(e)(2))
[x] 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
[ ] 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:_____________________________________________
2) Form, Schedule or Registration Statement No.:_______________________
3) Filing Party:_______________________________________________________
4) Date Filed:_________________________________________________________
-1-
<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 23, 1998
----------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Porta Systems Corp., a Delaware corporation (the
"Company"), will be held at the offices of the Company, 575 Underhill Boulevard,
Syosset, New York 11791 on Tuesday, June 23, 1998, at 8:30 A.M. local time, for
the purpose of considering and acting upon the following matters:
1. The election of nine (9) directors to serve until the 1999 Annual
Meeting of Stockholders and until their successors shall be elected
and qualified;
2. The approval of BDO Seidman, LLP as the Company's independent
auditors for the year ending December 31, 1998; and
3. The transaction of such other and further business as may properly
come before the meeting.
The Board of Directors of the Company has fixed the close of business on
April 30, 1998 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 to Stockholders for 1997 is being mailed with this
Proxy Statement. Additional copies are available upon request. A list of
stockholders eligible to vote at the Annual Meeting will be available for
inspection during normal business hours for purposes germane to the meeting
during ordinary business hours at the Company's corporate offices at 575
Underhill Boulevard, Syosset, New York 11791 during the ten days prior to the
date of the Annual Meeting.
The enclosed Proxy Statement contains information pertaining to the
matters to be voted on at the Annual Meeting.
By order of the Board of Directors
MICHAEL A. TANCREDI
Secretary
Syosset, New York
May 22, 1998
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY.
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
1998 Annual Meeting of Stockholders
----------
GENERAL INFORMATION
The accompanying proxy and this Proxy Statement are furnished in
connection with the solicitation by the Board of Directors of Porta Systems
Corp., a Delaware corporation (the "Company"), of proxies for use at the
Company's 1998 Annual Meeting of Stockholders (the "Annual Meeting"), to be held
at the Company's executive office at 575 Underhill Boulevard, Syosset, New York
11791 on Tuesday, June 23, 1998 at 8:30 A.M. or at any adjournment thereof. This
Proxy Statement and the related proxy and the 1997 Annual Report to Stockholders
(the "Annual Report") are being mailed to stockholders of the Company on or
about May 22, 1998.
At the Annual Meeting, stockholders will vote on (a) the election of nine
(9) directors to serve until the 1999 Annual Meeting of Stockholders and until
their successors shall be elected and qualified, (b) the approval of BDO
Seidman, LLP, as the Company's independent auditors for the year ending December
31, 1998, and (c) the transaction of such other and further business as may
properly come before the meeting. 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 April 30, 1998 (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 9,298,713 shares
of the Company's common stock, par value $.01 per share, ("Common Stock"). 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 a
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.
Each stockholder of the Company is requested 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.
<PAGE>
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. Where the affirmative vote on a proposal is required for
approval, abstentions and broker non-votes are counted in determining the number
of shares present or represented.
Cost of Solicitation
The Company will bear the costs of soliciting proxies. In addition to the
solicitation of proxies by mail, directors, officers and 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 will request that brokers and other custodians, nominees and fiduciaries
forward proxy material to the beneficial holders of the Common Stock held of
record by such persons, where appropriate, and will, upon request, reimburse
such persons for their reasonable out-of-pocket expenses incurred in connection
therewith.
PRINCIPAL HOLDERS OF SECURITIES
AND SECURITY HOLDINGS OF MANAGEMENT
The following table sets forth, as of April 30, 1998, based upon
information provided by such persons, the number of outstanding shares of Common
Stock of the Company beneficially owned by each person known by the Company to
own beneficially at least 5% of the Company's Common Stock, each current
director of the Company, the Company's chief executive officers and each of the
four most highly compensated officers other than the chief executive 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 ..................... 137,423(2) 1.5%
Seymour Joffe ......................... 94,196(3) 1.0%
Michael A. Tancredi ................... 58,827(4) *
Howard D. Brous ....................... 19,000(5) *
Warren H. Esanu ....................... 57,000(6) *
Herbert H. Feldman .................... 19,000(7) *
Stanley Kreitman ...................... 19,500(8) *
Robert Schreiber ...................... 19,000(9) *
Edward B. Kornfeld .................... 48,000(10) *
John J. Gazzo ......................... 25,087(11) *
Lloyd I. Miller, III .................. 1,742,978(12) 18.6%
4550 Gordon Drive
Naples, Florida 34102
Helix Investment Partners, L.P. ....... 1,369,698(13) 14.7%
1930 Century Park West
Los Angeles, California 90067
All directors and officers as
a group (17 individuals) ........... 2,240,011(14) 22.9%
- ----------
* Less than 1%
2
<PAGE>
(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 93,150 shares of Common Stock issuable upon the exercise of
options held by Mr. Carney and 1,186 shares of Common Stock pledged to the
Company to secure certain obligations to the Company.
(3) Includes 3,500 shares of Common Stock owned by Mr. Joffe's wife, 19,196
shares of Common Stock owned by Joffe Marketing International, Inc.
("JMI"), and 67,500 shares of Common Stock issuable upon the exercise of
options held by Mr. Joffe. JMI is owned 80% by Mr. Joffe and 20% by an
unrelated Party. Mr. Joffe disclaims beneficial ownership of the shares
owned by (a) JMI except to the extent of his equity interest therein and
(b) his wife.
(4) Includes 47,170 shares of Common Stock issuable upon the exercise of
options held by Mr. Tancredi and 798 shares of Common Stock pledged to the
Company to secure certain obligations to the Company.
(5) Represents shares of Common Stock issuable upon the exercise of options
held by Mr. Brous.
(6) Includes 27,000 shares of Common Stock issuable upon the exercise of (a)
options held by Mr. Esanu and (b) a warrant held by Elmira Realty
Management Corp. Pension and Profit Sharing Plan (the "ERMC Plan"). Under
the terms of the ERMC Plan, Mr. Esanu has sole voting and dispositive
power with respect to the shares issuable upon the exercise of the
warrant.
(7) Represents shares of Common Stock issuable upon the exercise of options
held by Mr. Feldman.
(8) Represents shares of Common Stock issuable upon the exercise of options
held by Mr. Kreitman.
(9) Represents shares of Common Stock issuable upon the exercise of options
held by Mr. Schreiber.
(10) Represents shares of Common Stock issuable upon the exercise of options
held by Mr. Kornfeld.
(11) Includes 11,900 shares of Common Stock issuable upon the exercise of
options held by Mr. Gazzo.
(12) Represents (a) 34,246 shares of Common Stock owned by Mr. Miller, (b)
1,633,732 shares of Common Stock held by the following: Milfam I, L.P.
(694,502 shares), Milfam II, L.P. (110,462 shares), the Lloyd I. Miller,
Trust A-4 (464,063 shares), the Lloyd A. Miller, Trust C (363,705 shares),
and Mr. Miller's wife (1,000 shares), and (c) 75,000 shares of Common
Stock shares of Common Stock issuable upon exercise of warrants held by
the Lloyd I Miller III Keogh Plan (25,000 shares), the Lloyd I. Miller,
Trust A-2 (25,000 shares) and three family trusts and two custodianships
under the uniform gift to minors acts for his minor children (25,000
shares in the aggregate). Mr. Miller is (i) the investment adviser for the
Lloyd I. Miller, Trust A-2, the Lloyd I. Miller, Trust A-4, and the Lloyd
I. Miller, Trust C, (ii) the manager of the managing general partner of
Milfam I, L.P. and Milfam II, L.P., and (iii) the trustee of trusts and
custodian of accounts for the benefit of his family members. The trustee
of the Lloyd I. Miller, Trusts A-2, A-4 and C is PNC Bank, National
Association. As a result of his investment advisory agreement, Mr. Miller
has shared voting and dispositive power as to the shares held by Trust
A-2, Trust A-4 and Trust C. He also has shared voting and dispositive
power as to the shares issuable upon the exercise a warrant held by the
Lloyd I. Miller Trust f/b/o Kimberly Miller. Mr. Miller has sole voting
and dispositive power as to the shares of Common Stock and shares issuable
upon the exercise of warrants held in custodial accounts and by the other
trusts, except for the shares owned by his wife, as to which he disclaims
beneficial ownership.
(13) Helix Investment Partners, L.P. ("Helix") is a registered investment
advisor. Includes shares of Common Stock over which Helix shares
investment power and voting power with Helix Convertible Opportunities,
L.P. which amount to more than 5% of the outstanding Common Stock.
(14) Footnotes 1 through 12 are incorporated in this footnote. Also includes
30,765 shares of Common Stock issuable upon exercise of options held by
six other officers.
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 bylaws 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 for the ensuing year at nine directors and
3
<PAGE>
is recommending that the nine incumbent directors of the Company be re-elected.
If any nominee becomes unavailable for any 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 of Directors reduces the number of directors.
All of the Company's directors, other than Mr. Lloyd I. Miller III, were
elected at the 1997 Annual Meeting of Stockholders, for which proxies were
solicited. Mr. Miller was elected to the board in March 1998.
The following table sets forth certain information concerning the nominees
for director:
<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 61
and Chief Executive Officer
of the Company
Seymour Joffe ................. President and Chief 1996 68
Operating Officer of
the Company
Michael A. Tancredi ........... Senior Vice President, 1970 68
Secretary and Treasurer of
the Company
Howard D. Brous(1,2) .......... President and Chief 1989 52
Executive Officer of
H.D. Brous & Co., Inc.,
a New York Stock
Exchange member firm
Warren H. Esanu(1,2) .......... Of counsel to Esanu 1997 55
Katsky Korins & Siger, LLP,
attorneys at law
Herbert H. Feldman(1,2) ....... President, Alpha Risk 1989 64
Management, Inc.,
independent risk
management consultants
Stanley Kreitman(1,2) ......... Vice Chairman, Manhattan 1995 65
Associates, investment advisors
Lloyd I. Miller, III(1,2) ..... Registered investment advisor 1998 44
Robert Schreiber(1,2) ......... Chief Executive Officer of 1997 65
BLS Communications, Ltd.,
a telecommunications consulting
firm
</TABLE>
- ----------
(1) Member of the Executive Committee.
(2) Member of the Audit and Compensation Committees.
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 serves 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.
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. Miller has been a director since March 1998. For more than the past
five years, Mr. Miller has been self-employed as a registered investment
advisor. He is also a trustee of Carolco Liquidating Trust, a trust formed to
liquidate the assets of a motion picture company.
Mr. Schreiber has been Chief Executive Officer of BLS Communications, a
telecommunications consulting firm, 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 nine
directors receiving the most votes are elected as directors for a term of one
year and until their successors are elected and qualified.
Meetings, Committees of the Board of Directors and Directors Compensation
The Company has three committees: the executive committee, the audit
committee, and the compensation committee. The executive committee may exercise,
to the maximum extent permitted by the Delaware General Corporation Law, the
power and authority of the board in the management of the business and affairs
of the Company, and its acts when necessary between meetings of the board. The
audit committee has the authority to review the terms of the engagement of the
Company's independent auditors, approve the Company's audited financial
statements, meet with the Company's independent auditors, review the Company's
policies and procedures with respect to internal auditing, accounting and
financial controls, review with the auditors and with management any management
letter issued by the auditors and to generally exercise the power normally
accorded an audit committee of a public corporation. The compensation committee,
which also serves as the
5
<PAGE>
stock option committee pursuant to the Company's stock option plans, reviews and
approves compensation for the Company's officers. The compensation committee
also reviews the elements of the Company's variable compensation plans.
The executive committee is comprised of Messrs. Carney, Brous, Esanu,
Feldman, Kreitman, Miller and Schreiber. The audit and compensation committees
are comprised of Messrs. Brous, Esanu, Feldman, Kreitman, Miller and Schreiber.
Mr. Kreitman is chairman of the audit committee and Mr. Feldman is chairman of
the compensation committee.
Excluding actions by unanimous written consent, during 1997 the Board of
Directors held seven meetings, the executive committee held no meetings, the
audit committee held five meetings and the compensation committee held four
meetings. Each of the nominees for director attended at least 75% of the
aggregate number of meetings of the Board of Directors and the committee on
which he served that were held during the period he served.
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 also receives a fee of $1,200 for
each board meeting 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
Gerald C. Hammond ..................... Vice President - Strategic Development
Warren Marcus ......................... Vice President
Mr. Kornfeld, 54, has been Senior Vice President-Operations since 1996 and
Chief Financial Officer since October 1995. He was Vice President-Finance from
October 1995 until 1996. For more than five years prior thereto, Mr. Kornfeld
held positions with several companies for more than five years, including Excel
Technology Inc. (Quantronix Corp.) and Anorad Corporation.
Mr. Gazzo, 54, has been Senior Vice President since March 1996. He was
Vice President-Marketing of the Company from April 1993 until March 1996 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.
Mr. Chandran, 45, has been Vice President since December 1995, and is the
head of the Company's signal processing division. Mr. Chandran was Assistant
Vice President of Engineering from 1991 until December 1995.
6
<PAGE>
Mr. Chiodo, 43, has been Vice President since March 1996. Mr. Chiodo has
been with the Company since 1980. During that time he held various positions in
the Company, most recently as Assistant Vice President of OSS operations.
Mr. Rawlings, 54, has been Vice President since March 1996. Mr. Rawlings
was Assistant Vice President of Research and Development-Copper Products from
1992 until March 1996.
Mr. Novelli, 66, has been Vice President since December 1996. Mr. Novelli
was Assistant Vice President of Sales and Marketing-Copper Products from 1989
until December 1996.
Mr. Hammond, 43, has been Vice President - Strategic Development since
March 1997. He was an Assistant Vice President - Research and Development from
September 1992 until March 1997.
Mr. Marcus, 69, has been a Vice President since May 1996. He served as a
consultant to the Company from April 1993 to May 1996. For more than three years
prior thereto he was Vice President - Joint Ventures.
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 earned exceeded $100,000 for the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation (Awards)
------------------- --------------------
Restricted
Stock Options, All Other
Name and Awards SARs Compen-
Principal Position Year Salary Bonus (Dollars) Number sation(1)
----------------- ---- ------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
William V. Carney ..................... 1997 $200,000 $80,000 -- 86,250 $ 37,815
Chairman of the Board and 1996 170,038 -- -- 3,750 31,685
Chief Executive Officer 1995 162,000 -- -- -- 35,750
Seymour Joffe ......................... 1997 183,200 55,000 -- 32,500 9,330
President and Chief 1996 35,346 -- -- 35,000 47,645
Operating Officer 1995 -- -- -- -- 5,000
Edward B. Kornfeld .................... 1997 172,000 35,000 -- 23,000 4,992
Senior Vice President - 1996 147,489 -- -- 22,000 2,026
Operations and Chief 1995 30,153 -- -- 3,000 3,000
Financial Officer
Michael A. Tancredi ................... 1997 132,775 30,000 -- 42,530 122,549
Senior Vice President, 1996 122,618 -- -- 2,470 5,219
Secretary and Treasurer 1995 122,000 -- -- -- 10,319
John J. Gazzo ......................... 1997 142,706 10,000 -- 5,000 29,186
Senior Vice President, 1996 141,836 -- -- 3,750 25,447
OSS Division 1995 140,000 -- -- -- 31,445
</TABLE>
- ----------
(1) "All Other Compensation" includes 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. "All Other
Compensation" also includes, with respect to Mr. Tancredi, payments made
in 1997 pursuant to the supplemental retirement income program.
7
<PAGE>
Set forth below is a chart which shows, for 1997, the components of "All
Other Compensation" listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Mr. Carney Mr. Joffe Mr. Kornfeld Mr. Tancredi Mr. Gazzo
---------- --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Company 401(k) Match ................. $ 2,400 $2,400 $2,400 $ 1,980 $ 2,100
Equity Split Dollar .................. 21,038 -- -- -- 17,469
Supplemental Insurance ............... 9,341 6,930 2,592 6,930 6,288
Forgiveness of Interest on
employee notes ..................... 5,035 -- -- 3,389 3,389
Supplemental Retirement
Payments ........................... -- -- -- 110,250 --
</TABLE>
The Company provides certain management employees with a supplemental
management compensation program which is 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 insurance program. The
Company's premium payments with respect to Messrs. Carney and Gazzo are included
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 with annual retirement
income equal to 50% of the employee's base salary in 1984. Payments under the
program are to be made for a period of 15 years following the earlier of the
employee's attaining age 65 or his or her death. The supplemental retirement
income paid to Mr. Tancredi, which covered three years of payments all of which
were paid in 1997, is included in "All Other Compensation."
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.
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 Mr. 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 36
months and Mr. Tancredi is entitled to receive his then current salary for 24
months. Mr. Gazzo is entitled to receive his then current salary for a period of
24 months, and Mr. Joffe and Mr. Kornfeld are entitled to receive their then
current salary for a period of twelve months plus an additional period equal to
one month for each year of service 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 executive would be entitled to the greater of the severance
arrangements as described in this paragraph or the severance payments under the
executive severance agreements.
Salary Continuation Agreements. The Company is a party to Salary
Continuation Agreements with Messrs. Carey, Joffe, 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
8
<PAGE>
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
36, in the case of Mr. Carney, 24 in the case of Messrs. Joffe, Kornfeld and
Tancredi, and 18 in the case of Mr. Gazzo. 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 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, 1998 and is renewed automatically unless the
Company gives timely 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 payment of
the compensation described above.
Stock Option Plans
The Company has two stock option plans. In 1996, the Board of Directors
adopted and the stockholders approved the 1996 Stock Option Plan (the "1996
Plan") covering 100,000 shares of Common Stock. In 1997, the Board of Directors
adopted and the stockholders approved an amendment to the 1996 Plan increasing
the number of shares of Common Stock subject to the 1996 Plan to 450,000. In
1998, the Board of Directors adopted the 1998 Non-Qualified Stock Option Plan
(the "1998 Plan") covering 450,000 shares of Common Stock. The 1996 Plan
provides for the grant of incentive and nonqualified stock options and the 1998
Plan provides for the grant of nonqualified options. The 1996 Plan also provides
for an annual grant to each non-management director of an option to purchase
2,000 shares of Common Stock at the fair market value on the date of grant and
provided each director who was a non-management director on May 8, 1997 with an
option to purchase 15,000 shares of Common Stock at the fair market value on
such date. The 1998 Plan provides each director who was a non-employee director
on February 2, 1998 with an option to purchase 15,000 shares of Common Stock at
$3.25 per share, which was the fair market value per share of Common Stock on
such date. The options granted pursuant to the 1998 Plan include options to
purchase an aggregate of 228,000 shares of Common Stock at $3.25 per share which
were granted to the officers named in the Summary Compensation Table as follows:
Mr. Carney (90,000 shares), Mr. Joffe (60,000 shares), Mr. Kornfeld (40,000
shares), Mr. Tancredi (30,000 shares) and Mr. Gazzo (8,000 shares).
As of April 30, 1998, no shares had been issued pursuant to the 1996 Plan
or the 1998 Plan and 437,988 and 450,000 shares of Common Stock were subject to
outstanding options pursuant to the 1996 Plan and the 1998 Plan, respectively.
The Company has 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 April 30,
1998, 16,392 shares of Common Stock were subject to outstanding options pursuant
to the 1986 Plan.
9
<PAGE>
The following table sets forth information as to grants of options during
the year ended December 31, 1997 to each of the Company's officers named in the
Summary Compensation Table and the potential realizable value of the options at
an assumed annual rate of stock appreciation of 5% and 10%, respectively. Such
assumptions are made for purpose of making the computation for the following
table and does not constitute an estimate, prediction or projection of future
stock value. No stock appreciation rights ("SARs") were granted.
Option Grants in Year Ended December 31, 1997
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------------ -------------------------
Number of Percent of
Shares Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year Share Date 5% 10%
------ --------- ------------ -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William V. Carney .............. 86,250 24.0% $1.50 5/7/07 $35,744 $98,821
Seymour Joffe .................. 32,500 9.1% $1.50 5/7/07 13,469 37,614
Edward B. Kornfeld ............. 23,000 6.4% $1.50 5/7/07 9,532 26,629
Michael A. Tancredi ............ 42,530 11.9% $1.50 5/7/07 17,625 49,222
John J. Gazzo .................. 5,000 1.4% $1.50 5/7/07 2,072 5,787
</TABLE>
The following table sets forth information concerning the exercise of
options and warrants during the year ended December 31, 1997 and the year-end
value of options held by the Company's officers named in the Summary
Compensation Table.
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 Fiscal Options at Fiscal
Year End Year End
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
---- --------------- -------- -------------- --------------
<S> <C> <C> <C> <C>
William V. Carney .................. -- -- 93,150/ $166,875/
-- --
Seymour Joffe ...................... -- -- 67,500/ 95,937/
-- --
Edward B. Kornfeld ................. -- -- 48,000/ 66,250/
-- --
Michael A. Tancredi ................ -- -- 47,170/ 83,140/
-- --
John J. Gazzo ...................... -- -- 11,900/ 14,531/
-- --
</TABLE>
Report of the Compensation Committee
The Compensation committee for 1997 was comprised of Messrs. Howard D.
Brous, Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman and Robert
Schreiber. Mr. Lloyd I. Miller III, who was elected as a director in March 1998,
did not serve on the compensation committee in 1997. As part of its
responsibilities,
10
<PAGE>
the Committee meets 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 1997, the Committee granted
bonuses and options to certain employees, including the Chief Executive Officer
and other executive officers.
11
<PAGE>
Performance Graph
The following graph, based on data provided by the Standard & Poor's
Compustat, a division of McGraw-Hill, shows changes over the past five years in
the value of $100 invested in (a) shares of the Company's Common Stock; (b) the
Standard & Poor's 500 Index, and (c) an SIC peer group consisting of the
following 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 is 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, 1992 to December 31, 1997
[The following table was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Porta Systems Corp. ..................... 100.00 67.50 33.33 4.58 2.17 4.50
Peer Group -- Communications
Equipment Manufacturers ............... 100.00 96.20 109.74 164.23 192.35 250.60
S&P 500 Index ........................... 100.00 110.08 111.53 153.45 188.68 251.63
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, Herbert H. Feldman, Howard D. Brous, Warren H. Esanu, Stanley
Kreitman and Robert Schreiber served as members of the Company's Compensation
Committee. During 1997, 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 1997, the law firm of Esanu Katsky Korins &
Siger, LLP, to which Mr. Esanu is of counsel, provided legal services to the
Company, for which it received fees of $380,000. Esanu Katsky Korins & Siger,
LLP is continuing to render legal services to the Company during 1998.
In connection with the award of certain debentures to employees pursuant
to the Company's 1984 Employee Incentive Plan (the "1984 Plan"), which has
terminated, the Board of Directors, in 1985 and 1986 made loans to employees,
including officers, to facilitate the purchase of such debentures. The maturity
date of such loans has been extended to certain employees, including officers,
who elected to convert the debentures into Common Stock., and the loans, as
extended, mature on April 1, 1999. The loans bear interest at a floating
interest rate equal to 110% of certain United States government obligations. At
April 30, 1998, loans of $62,940, $42,940 and $42,360, borrowed by Messrs.
William V. Carney, Michael A. Tancredi and John J. Gazzo, respectively, were
outstanding.
SELECTION OF INDEPENDENT AUDITORS
It is proposed that the stockholders ratify the selection of BDO Seidman,
LLP as the independent auditors for the Company for the year ending December 31,
1998. The Audit Committee and the Board of Directors has approved the selection
of BDO Seidman, LLP as the Company's independent 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 has been the independent auditors for the Company since
the year ended December 31, 1995, and their report is included in the Annual
Report. 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.
Vote Required
The proposal to approve 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 proposal.
INCORPORATION BY REFERENCE
The Company incorporates into this Proxy Statement the audited financial
statements for the years ended December 31, 1997 and 1996 together with the
related Management's Discussion and Analysis of Financial Condition and Results
13
<PAGE>
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 Resultsof Operations, which are included in the
Company's Form 10-Q for the three months ended March 31, 1998. 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 and copies of the Form 10-Q will be provided by the Company
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 1999 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,
1999.
Copies of the Company's Form 10-K for the year ended December 31, 1997 and
Form 10-Q for the quarter ended March 31, 1998, 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 on furnishing such exhibits.
The Board of Directors does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, the persons named in the enclosed proxy intend to vote such proxy in
accordance with their best judgment on such matters.
By Order of the Board of Directors
Michael A. Tancredi
Secretary
May 22, 1998
14
<PAGE>
PROXY PORTA SYSTEMS CORP.
1998 ANNUAL MEETING OF STOCKHOLDERS--JUNE 23, 1998
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 1998
Annual Meeting of Stockholders of Porta Systems Corp. (the "Company"), to be
held at 8:30 a.m., local time, on Tuesday, June 23, 1998, at the offices of the
Corporation at 575 Underhill Blvd., 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 nine (9) directors:
William V. Carney, Seymour Joffe, Michael A. Tancredi, Howard D. Brous,
Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman, Lloyd I. Miller,
III 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 ratify the appointment of BDO Seidman, LLP as the Company's independent
auditors for the year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) 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 May 22, 1998.
<PAGE>
The shares represented by this proxy will be voted on Items 1 and 2 as
directed by the stockholder, but if no direction is indicated, will be voted FOR
Items 1 and 2.
If you plan to attend the meeting please indicate below:
I plan to attend the meeting [ ]
Dated:______________________, 1998
__________________________________
__________________________________
(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.
