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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
For the fiscal year ended December 31, 1997
Commission file number 1-8191
PORTA SYSTEMS CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-2203988
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
575 Underhill Boulevard, Syosset, New York 11791
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-9300
Purpose of Amendment: To include Items 7A, 10, 11, 12 and 13, and to include the
power of attorney as an exhibit.
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<PAGE>
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
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<PAGE>
Part III
Item 10: Directors and Executive Officers of the Company
Set forth below are the directors of the Company and certain information
concerning the Company's directors and executive officers as of April 15, 1998.
Name Age Position with the Company
- ---- --- -------------------------
William V. Carney (1) 61 Director, Chairman of the Board and
Chief Executive Officer
Seymour Joffe 68 Director, President and Chief
Operating Officer
Michael A. Tancredi 68 Director, Senior Vice President,
Secretary and Treasurer
Howard D. Brous (1) (2) (3) 52 Director
Warren H. Esanu (1) (2) (3) 55 Director
Herbert H. Feldman (1) (2) (3) 63 Director
Stanley Kreitman (1) (2) (3) 64 Director
Lloyd I. Miller III (1) (2) (3) 44 Director
Robert Schreiber (1) (2) (3) 64 Director
Edward B. Kornfeld 54 Senior Vice President-Operations
and Chief Financial Officer
John J. Gazzo 54 Senior Vice President
Prem G. Chandran 45 Vice President
Edmund A. Chiodo 43 Vice President
David L. Rawlings 54 Vice President
William J. Novelli 66 Vice President
Gerald C. Hammond 43 Vice President
(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.
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.
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<PAGE>
Item 10: Directors and Executive Officers of the Company (continued)
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.
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.
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. 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.
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<PAGE>
Item 10: Directors and Executive Officers of the Company (continued)
All directors are elected for a term of one year.
None of the Company's directors or officers are related.
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 he board 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 approve the Company's audited financial
statements, to meet with the Company's independent auditors, to 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 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 varialbe compensation plans.
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<PAGE>
Item 11: 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 most recent fiscal year.
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 (2) (Dollars) of Shares) (1)
----------------- ---- ------ -------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William V. Carney 1997 $ 200,000 $80,000 -- -- -- $ 37,815
Chairman of the Board 1996 170,038 -- -- -- -- 31,685
and Chief Executive Officer 1995 162,000 -- -- -- -- 35,750
Seymour Joffe 1997 183,200 55,000 -- -- -- 9,330
President and 1996 35,346 -- -- -- -- 47,645
Chief Operating Officer 1995 -- -- -- -- -- 5,000
Edward B. Kornfeld 1997 172,000 35,000 -- -- -- 4,992
Senior Vice President, 1996 147,489 -- -- -- -- 2,026
Operations 1995 30,153 -- -- -- -- 3,000
Chief Financial Officer
Michael A. Tancredi 1997 132,775 30,000 -- -- -- 119,160
Senior Vice President, 1996 122,618 -- -- -- -- 1,830
Secretary and Treasurer 1995 122,000 -- -- -- -- 6,930
John J. Gazzo 1997 142,706 10,000 -- -- -- 29,186
Senior Vice President 1996 141,836 -- -- -- -- 25,447
OSS Division 1995 140,000 -- -- -- -- 31,455
</TABLE>
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(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. Also includes,
with respect to Mr. Tancredi, payments made in 1997 pursuant to the
supplemental retirement income program.
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<PAGE>
Item 11: Executive Compensation (continued)
Set forth below is a chart which shows the component of "All Other
Compensation" listed in the Summary Compensation Table.
Mr. Mr. Mr. Mr. Mr.
Carney Joffe Kornfeld Tancredi Gazzo
------ ----- -------- -------- -----
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 6,228
Forgiveness of Interest on
Employee Debentures 5,035 -- -- -- 3,389
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
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. 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 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 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. 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
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
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<PAGE>
Item 11: Executive Compensation (continued)
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.
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.
The following table sets forth information concerning options granted
during the year ended December 31, 1997 pursuant to the 1996 Plan. No stock
appreciation rights ("SARs") were granted.
Option Grants in Year Ended December 31, 1997
Percent of
Number of Total Options
Shares Granted to
Underlying Employees in Exercise Price
Options Granted Fiscal Year Per Share Expiration Date
--------------- ----------- --------- ---------------
William V. Carney 86,250 24.0 1.50 5/7/07
Seymour Joffe 32,500 9.1 1.50 5/7/07
Edward B. Kornfeld 23,000 6.4 1.50 5/7/07
Michael A. Tancredi 42,530 11.9 1.50 5/7/07
John J. Gazzo 5,000 1.4 1.50 5/7/07
All current executive
officers 214,280 59.7 1.50 5/7/07
All non-officer
directors(1) 10,000 2.8 1.4188 4/30/07
All non-officer
directors 75,000 20.9 1.50 5/7/07
All other employees 59,500 16.6 1.50 5/7/07
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(1) Represents options automatically granted to non-employee directors
pursuant to the 1996 Plan.
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<PAGE>
Item 11: Executive Compensation (continued)
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
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
---- ------------- -------- ------------- -------------
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/
-- --
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, 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 1997, the Committee determined
that, bonuses would be paid to certain employees, including the Chief Executive
Officer and other executive officers.
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<PAGE>
Item 12: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 15, 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 executive officers named in the Summary
Compensation Table, 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%
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* 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 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, 19196
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 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 exercise of options held
by Mr. Brous.
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<PAGE>
Item 12: Security Ownership of Certain Beneficial Owners and Management
(continued)
(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 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 exercise of options
held by Mr. Gazzo.
(12) Represents 34,246 shares of Common Stock owned by Mr. Miller, 1,633,732
shares of Common Stock held by 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 75,000 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 (a) the
investment advisor for the Lloyd I. Miller, Trust A-2, the Lloyd I.
Miller, Trust A-4, and the Lloyd I. Miller, Trust C, (b) the manager of
the managing general partner of Milfam I, L.P. and Milfam II, L.P., and
(c) 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 of 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 2 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.
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<PAGE>
Item 13: 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.
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(c) Exhibits.
25.1 Power of Attorney (see signature page)
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PORTA SYSTEMS CORP.
Dated: April 30, 1998 By /s/ William V. Carney
------------------------------
William V. Carney
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/William V. Carney* Chairman of the Board, April 30, 1998
- ------------------------- Chief Executive Officer
William V. Carney and Director (Principal
Executive Officer)
/s/Edward B. Kornfeld* Senior Vice President and April 30, 1998
- ------------------------- Chief Financial Officer
Edward B. Kornfeld (Principal Financial and
Accounting Officer)
/s/Seymour Joffe* Director April 30, 1998
- -------------------------
Seymour Joffe
/s/Michael A. Tancredi* Director April 30, 1998
- -------------------------
Michael A. Tancredi
/s/Howard D. Brous* Director April 30, 1998
- -------------------------
Howard D. Brous
/s/Warren H. Esanu* Director April 30, 1998
- -------------------------
Warren H. Esanu
/s/Herbert H. Feldman* Director April 30, 1998
- -------------------------
Herbert H. Feldman
/s/Stanley Kreitman* Director April 30, 1998
- -------------------------
Stanley Kreitman
/s/Lloyd I. Miller, III* Director April 30, 1998
- -------------------------
Lloyd I. Miller, III
/s/Robert Shreiber* Director April 30, 1998
- -------------------------
Robert Shreiber
*By /s/ William V. Carney
- -------------------------
William V. Carney
Attorney-in-fact
April 30, 1998
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