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: --------------------------------------------------
<PAGE>
PORTA SYSTEMS CORP.
575 Underhill Boulevard
Syosset, New York 11791
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 9, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of Porta Systems Corp., a Delaware corporation will be held at
our offices, 575 Underhill Boulevard, Syosset, New York 11791 on Friday, June 9,
2000, at 9:00 A.M. local time, for the purpose of considering and acting upon
the following matters:
(1) The election of seven (7) directors to serve until the 2001 annual
meeting of stockholders and until their successors shall be elected
and qualified;
(2) The approval of BDO Seidman, LLP as our independent auditors for the
year ending December 31, 2000; and
(3) The transaction of such other and further business as may properly
come before the meeting.
The board of directors has fixed the close of business on April 25, 2000
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 our annual
report to stockholders for 1999 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 at our 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 5, 2000
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO US. 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
2000 Annual Meeting of Stockholders
GENERAL INFORMATION
We are furnishing you the accompanying proxy and this proxy statement in
connection with the solicitation by our board of directors of proxies for use at
our 2000 Annual Meeting of Stockholders, to be held at our executive office at
575 Underhill Boulevard, Syosset, New York 11791 on Friday, June 9, 2000 at 9:00
A.M. or at any adjournment thereof. We expect to mail this proxy statement and
the related proxy and the 1999 annual report to stockholders on or about May 5,
2000.
At the annual meeting, stockholders will vote on (a) the election of seven
(7) directors to serve until the 2001 annual meeting of stockholders and until
their successors shall be elected and qualified, (b) the approval of BDO
Seidman, LLP, as our independent auditors for the year ending December 31, 2000,
and (c) the transaction of such other and further business as may properly come
before the meeting. We do not know of any other matters which will be voted upon
at the annual meeting.
We encourage you 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 25, 2000, are
entitled to notice and to vote at the annual meeting. As of the close of
business on the record date, there were 9,760,402 shares of our common stock
outstanding. You are entitled to one vote for each share you own of record on
the record date.
The presence in person or by proxy of holders of a majority of the shares
of common stock entitled to be voted will constitute a quorum for the
transaction of business at the annual meeting. If you file a proxy or attend the
annual meeting, your shares are counted as being present at the annual meeting
for purposes of determining whether there is a quorum, even if you abstain 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.
You are requested to complete, sign, date and return the enclosed proxy
without delay in order to ensure that your shares are voted at the annual
meeting. The return of a signed proxy will not affect your right to attend the
annual meeting and vote in person. If you give a proxy, you have 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 our corporate
secretary, 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 you sign and return a proxy, but make no specification 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.
<PAGE>
Cost of Solicitation
We will bear the costs of soliciting proxies. In addition to the
solicitation of proxies by mail, our directors, officers and employees, who will
receive no compensation in addition to their regular salary, may solicit proxies
by mail, telecopier, telephone or personal interview. We will request that
brokers and other custodians, nominees and fiduciaries forward proxy material to
the beneficial holders of 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 and discussion provides information as to the shares
of common stock beneficially owned on April 15, 2000 by:
o each director and each nominee for director;
o each officer named in the summary compensation table;
o each person owning of record or known by us, based on information
provided to us by the persons named below, to own beneficially at
least 5% of our common stock; and
o all officers and directors as a group.
Shares of Common Percentage of
Stock Beneficially Outstanding
Name Owned Common Stock
---- ------------------ -------------
William V. Carney 249,161 2.6%
Michael A. Tancredi 99,344 1.0%
Warren H. Esanu 101,500 1.0%
Herbert H. Feldman 61,000 *
Stanley Kreitman 61,000 *
Robert Schreiber 59,000 *
Edward B. Kornfeld 100,666 1.0%
John J. Gazzo 46,470 *
Seymour Joffe 148,167 1.5%
Lloyd I. Miller, III
4550 Gordon Drive
Naples, Florida 34102 2,015,480 20.7%
Ronald Wilkins 76,160 *
All directors and officers as a group
(18 individuals) 3,320,921 34.0%
- ----------
* Less than 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.
The shares owned by Mr. Joffe include 500 shares of common stock owned by
his wife and 13,500 shares of common stock owned by Joffe Marketing Inc.
The shares owned by Mr. Miller represent (a) 20,000 shares of common
stock purchased pursuant to our stock purchase program, (b) 7,000 shares of
common stock issuable upon the exercise of options held by Mr. Miller, (c)
34,247 shares of common stock owned by Mr. Miller, (d) 1,711,733 shares of
common stock held by the following: Milfam I, L.P. (694,503 shares), Milfam II,
L.P. (181,762 shares), the Lloyd I. Miller, Trust A-4 (470,763 shares), the
Lloyd A. Miller, Trust C (363,705 shares), and Mr. Miller's wife (1,000 shares),
and (e) 243,750 shares of common stock issuable upon exercise of warrants held
by the Lloyd I Miller III Keogh Plan
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<PAGE>
(81,250 shares), the Lloyd I. Miller, Trust A-2 (81,250 shares) and three family
trusts and two custodianships under the uniform gift to minors acts for his
minor children (81,250 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.
The number of shares owned by our directors who are nominated for election
and our officers named in the summary compensation table includes shares of
common stock which are issuable upon exercise of options and warrants that are
exercisable at April 15, 2000 or will become exercisable within 60 days after
that date. Set forth below is the number of shares issuable upon exercise of
those options and warrants for each of these directors and officers.
Name Shares
---- ------
William V. Carney 180,000
Michael A. Tancredi 75,000
Warren H. Esanu 51,500
Herbert H. Feldman 41,000
Stanley Kreitman 41,000
Robert Schreiber 39,000
Edward B. Kornfeld 88,000
John G. Gazzo 16,950
Seymour Joffe 127,500
Ronald Wilkins 50,000
All officers and directors as a group 838,700
The shares of common stock issuable upon exercise of Mr. Esanu's options
and warrants include warrants to purchase 12,500 shares of common stock issuable
upon warrants held by Elmira Realty Management Corp. pension and profit sharing
plan. Mr. Esanu has the sole voting and dispositive power with respect to shares
issuable upon exercise of these warrants. All other directors and officers named
in the table hold only options.
ELECTION OF DIRECTORS
Directors are elected annually by the stockholders to serve until the next
annual meeting of stockholders and until their respective successors are duly
elected. Our bylaws provide that the number of directors comprising the whole
board shall be determined from time to time by the Board. The size of the board
for the ensuing year is seven directors. Our board of directors is recommending
that the seven incumbent directors named below 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, and any shares represented by
proxy will be voted for the substitute nominee, unless the board reduces the
number of directors.
All of the directors were elected at the 1999 Annual Meeting of
Stockholders, for which proxies were solicited.
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<PAGE>
The following table sets forth certain information concerning the
nominees for director:
<TABLE>
<CAPTION>
Name of Nominee Principal Occupation or Employment Director Since Age
--------------- ---------------------------------- -------------- ---
<S> <C> <C> <C>
William V. Carney(1) Chairman of the board and chief executive 1970 63
officer
Seymour Joffe Consultant 1996 70
Michael A. Tancredi Senior vice president, secretary and treasurer 1970 70
Warren H. Esanu1(1,2) Of counsel to Esanu Katsky Korins & Siger,
LLP, attorneys at law 1997 57
Herbert H. Feldman1(1,2) President, Alpha Risk Management, Inc.,
independent risk management consultants 1989 66
Stanley Kreitman1(1,2) Vice chairman, Manhattan Associates,
investment advisors 1995 67
Robert Schreiber1(1,2) Chief executive officer of BLS
Communications, Ltd., a telecommunications
consulting firm 1997 67
</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.
Mr. Joffe has been a director since 1996 and also served as a director
from 1987 to 1992. He has been a consultant to our operations support systems
(OSS) business since 1999. From 1996 until 1999, he was president and chief
operating officer, and from 1995 until 1996, he was a consultant to our OSS
business.
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. Esanu has been a director since April 1997 and also served as a
director from 1989 to 1996. He was also our chairman of the board from March
1996 to October 1996. He has been of counsel to Esanu Katsky Korins & Siger,
LLP, 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
investment and 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, for more than five years. Prior thereto, he was president
of United States Banknote Corp., a publicly held corporation.
Mr. Schreiber has been chief executive officer of BLS Communications, a
telecommunications consulting firm, for more than the past five years.
The Board recommends a vote FOR the nominees listed above.
- 4 -
<PAGE>
Approval Required
Provided that a quorum is present at the annual meeting, the seven
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 and Directors Compensation
Our board of directors has three committees: the executive committee, the
audit committee, and the compensation committee. The executive committee may
exercise the power and authority of the board in the management of our business
and affairs, to the maximum extent permitted by the Delaware General Corporation
Law, when necessary between meetings of the board.
The audit committee is charged with the following responsibilities:
o Recommend to the board the selection of the independent accountants.
o Review the scope of the audit with the independent accountants.
o Review the annual and quarterly financial statements with the
independent accountants prior to the filing of the Form 10-K and
10-Q.
o Review any issues relating to the independence of the independent
accountants.
o Review with the independent accountants and the board of directors
any matters raised in any management letters issued by the
independent accountants.
o Review any material transactions between us and any of its officers
and directors, other than employment agreements and other matters
which are subject to approval of the compensation committee or any
stock option committee.
The compensation committee, which also serves as the stock option
committee pursuant to stock option plans, reviews and approves compensation for
officers. The compensation committee also reviews the elements our variable
compensation plans.
The executive committee is comprised of Messrs. Carney, Esanu, Feldman,
Kreitman, Miller and Schreiber. The audit and compensation committees are
comprised of Messrs. Esanu, Feldman, Kreitman, Miller and Schreiber. Mr.
Kreitman is chairman of the audit committee and Mr. Feldman is chairman of the
compensation committee. Mr. Lloyd I. Miller, III has advised us that he does not
wish to stand for re-election.
Excluding actions by unanimous written consent, during 1999 the board of
directors held six meetings, the audit committee held five meetings and the
compensation committee held two meetings. The executive committee did not hold
any meeting during 1999. 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.
The chairman and each director who is not an employee receives an annual
fee of $16,000 for serving as a director, and each chairman of a standing
committee of the board 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 our executive officers and information concerning
those officers who are not also directors.
Name Position
- ---- --------
William V. Carney Chairman of the board and chief executive
officer
Michael A. Tancredi Senior vice president, secretary and
treasurer
Edward B. Kornfeld Senior vice president-operations and
chief financial officer
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<PAGE>
Name Position
- ---- --------
Ronald Wilkins Senior vice president
John J. Gazzo Senior vice president
Michael Bahlo Senior vice president
Prem G. Chandran Senior vice president
David L. Rawlings Senior vice president
Mr. Kornfeld, 55, 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. Wilkins was elected a senior vice president and managing director, OSS
Division in 1998. Prior to joining us, Mr. Wilkins was involved in the wireless
telecommunications industry as president and chief executive officer of Sycom
Technologies from November 1997 to August 1998, and vice president of strategic
planning and alliances at Conxus Communications from December 1995 to October
1997. Prior to October 1997, Mr. Wilkins held various management positions with
Digital Equipment Corporation.
Mr. Gazzo, 55, has been senior vice president since March 1996. He was
vice president-marketing from April 1993 until March 1996 and was general
manager of its Porta Electronics Division from November 1989 to April 1993.
Additionally, he was vice president-research and development from March 1984 to
November 1989 and was vice president-engineering from February 1978 to February
1984.
Mr. Bahlo was elected senior vice president - OSS sales and marketing in
January 1999. Prior to joining us, Mr. Bahlo was the vice president, marketing
and sales for Daikin U.S. Comtec Laboratories form March 1997 to March 1999, and
held various management and marketing positions with Digital Equipment
Corporation form October 1986 to March 1997 most recently as marketing group
manager.
Mr. Chandran, 46, has been vice president since December 1995, and is the
head of our signal processing division. Mr. Chandran was assistant vice
president of engineering from 1991 until December 1995.
Mr. Rawlings, 55, has been vice president since March 1996. Mr. Rawlings
was assistant vice president of research and development-copper products from
1992 until March 1996.
EXECUTIVE COMPENSATION
----------------------
The following table shows the compensation we paid to our chief executive
officer and the 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, 1999.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term Compensation
Compensation (Awards)
------------ ----------------------
Restricted Stock Options,
Awards SARs All other
Name and Principal Position Year Salary Bonus (Dollars) (Number) Compensation
- --------------------------- ---- ------ ------- ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
William V. Carney, Chairman 1999 $240,000 -- -- -- $ 31,196
of the board and chief executive 1998 240,571 -- -- $90,000 40,737
officer 1997 200,000 $80,000 -- 86,250 37,815
Ronald Wilkins, Senior vice 1999 198,615 -- -- -- 3,122
president, OSS division 1998 62,154 -- -- 5,000 11,158
1997 -- -- -- -- --
Edward B. Kornfeld, Senior vice 1999 192,000 -- -- -- 5,553
president - operations and chief 1998 191,769 -- -- 40,000 4,992
financial officer 1997 172,000 35,000 -- 23,000 4,992
Michael A. Tancredi, Senior vice 1999 154,000 -- -- -- 48,646
president, secretary and treasurer 1998 150,633 -- -- 30,000 49,470
1997 132,775 30,000 -- 42,530 122,549
John J. Gazzo, senior vice president, 1999 152,000 -- -- 200 24,883
OSS division 1998 152,000 -- -- 8,000 31,072
1997 142,700 10,000 -- 5,000 29,186
</TABLE>
"All Other Compensation" includes a payment to the executive's account
pursuant to our 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 "All Other Compensation"
for 1997, 1998 and 1999 also includes, with respect to Mr. Tancredi, payments of
$110,250 made in 1997 pursuant to the supplemental retirement income program for
the years 1995, 1996 and 1997, and $36,750 for 1998 and 1999.
Set forth below is a chart which shows, for 1999, the components of "All
Other Compensation" listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Mr. Carney Mr. Wilkins Mr. Kornfeld Mr. Tancredi Mr. Gazzo
---------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
401(k) Match $ 2,400 $2,400 $ 2,400 $ 2,400 $ 2,148
Equity Split Dollar 21,038 -- -- -- 17,460
Supplemental Insurance 7,758 722 3,153 9,496 5,266
Supplemental Retirement
Payments -- -- -- 36,750 --
</TABLE>
We provide 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. Our 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
- 7 -
<PAGE>
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.
Certain of our officers named in the summary compensation table or their
affiliates are parties to employment or other agreements providing for
compensation during and after their employment.
Employment Agreements. We have entered into employment agreements with
Messrs. Carney, Wilkins, Bahlo, Kornfeld, Gazzo, and Lamb. The agreements
continue on a year-to-year basis, for January 1 of each year, unless terminated
on prior notice of not less than 120 days for Messrs. Carney, Wilkins, Bahlo and
Lamb, and 90 days for Messrs. Kornfeld and Gazzo. Salary is determined by the
board, 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.
Messrs. Kornfeld, Tancredi and Gazzo are entitled to receive their then current
salary for six months plus one month for each full year of service up to a
maximum aggregate 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", 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. We are party to salary continuation
agreements with Messrs. Carney, Kornfeld, Tancredi, Gazzo, and Lamb. The salary
continuation agreements provide that, in the event that a change of control
occurs and the executive's employment with us is subsequently terminated by us
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 of an amount
equal to his monthly salary at the rate in effect as of the date of his
termination (or, if higher, as in effect immediately prior to the change in
control) plus the pro rata monthly amount of his most recent annual bonus paid
immediately before the change of control multiplied by 36 in the case of Mr.
Carney and 24 in the case of Messrs. Kornfeld, Tancredi, Gazzo and Lamb. 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 acquisition of
beneficial ownership, directly or indirectly, by a person or group of persons of
our securities representing 25% or more of the combined voting power of our then
outstanding securities, or, during any period of two consecutive years, if
individuals who at the beginning of such period constituted the board 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 of control must occur during the term of the salary continuation
agreement, which in each case is currently through December 31, 2000 and is
renewed automatically unless we give timely notice prior to January 1 of any
year of our election not to renew the agreement. If such a change of control
occurs during the effectiveness of the salary continuation agreement, any
termination of such covered employee during the 18 months following the change
of control will result in the payment of the compensation described above.
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<PAGE>
Stock Option Plans
We have three stock option plans. In 1996, the board adopted and the
stockholders approved the 1996 stock option plan covering 100,000 shares of
common stock. In 1997, the board 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 adopted the 1998
non-qualified stock option plan covering 450,000 shares of Common Stock. In 1999
the board adopted and the stockholders approved the 1999 stock option plan
covering 400,000 shares of common stock. The 1996 plan provides for the grant of
incentive and nonqualified stock options, the 1998 plan provides for the grant
of nonqualified options and the 1999 plan provides for the grant of incentive
and 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 1999
plan provides for an annual grant to each non-management director of an option
to purchase 5,000 shares of common stock at fair market value to the extent
annual options are not granted under the 1996 plan.
As of April 30, 2000, 6,000 shares had been issued pursuant to the 1996
plan, and no shares had been issued pursuant to the 1998 or 1999 plan and
935,788 shares were subject to outstanding options under these plans. We also
granted options to purchase an aggregate of 125,000 shares of common stock to
officers which were not issued pursuant to any of the plans.
We have another stock option plan, the 1986 stock option 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, 2000, 3,000 shares of common
stock were subject to outstanding options pursuant to the 1986 plan.
The following table sets forth information as to grants of options during
the year ended December 31, 1999 to each of the 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, 1999
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term
--------------------------
Individual Grants
-----------------
Percent of
Number of Total
Shares Options
Underlying Granted to Exercise
Options Employees Price Per Expiration
Name Granted in Fiscal Year Share Date 5% 10%
---- ------- -------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald Wilkins 20,000 16.3% $1.75 5/6/05 $11,904 $27,004
John J. Gazzo 200 .2% 1.00 11/9/05 68 154
</TABLE>
- 9 -
<PAGE>
The following table sets forth information concerning the exercise of
options and warrants during the year ended December 31, 1999 and the year-end
value of options held by those 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
Unexercised Options In-the-Money
at Fiscal Options at Fiscal
Year End Year End
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
---- --------------- -------- ------------- -------------
<S> <C> <C>
William V. Carney 180,000/ $--/--
-- -- 0
Ronald Wilkins 50,000/ --/--
-- -- 40,000
Edward B. Kornfeld 88,000/ --/--
-- -- 0
Michael A. Tancredi 75,000/ --/--
-- -- 0
John J. Gazzo 16,750/ --/--
-- -- 200
</TABLE>
At December 31, 1999, the closing price of our common stock was $.75, and
none of the options held by the officers were in the money at that date.
Report of the Compensation Committee
The compensation committee for 1999 was comprised of Messrs. Warren H.
Esanu, Herbert H. Feldman, Mr. Lloyd I. Miller III, Stanley Kreitman and Robert
Schreiber. As part of its responsibilities, the committee meets to determine the
base salary of the senior executives 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. In discharging these responsibilities, the committee
reviews our performance relative to our 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, as reflected in our financial
performance, to determine base salary and bonus. The committee subsequently
reports on its evaluation and compensation determinations to the other
non-employee directors.
- 10 -
<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 on December 31, 1993 in (a) shares of our 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, 1994 to December 31, 1999
<TABLE>
<CAPTION>
Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Years Ending
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Porta Systems Corp. 100.00 13.74 6.50 13.50 8.25 3.00
S&P 500 Index 100.00 137.58 169.17 224.60 290.08 351.12
Peer Group -- Communications 100.00 149.65 175.27 228.35 402.24 883.32
Equipment Manufacturers
</TABLE>
- 11 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
During 1999, Warren H. Esanu, a director, served as a member of our audit
and compensation committees. During 1999, the law firm of Esanu Katsky Korins &
Siger, LLP, to which Mr. Esanu is of counsel, provided legal services to us, for
which it received fees of $514,579. Esanu Katsky Korins & Siger, LLP is
continuing to render legal services to us during 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Mr. Ronald Wilkins filed his Form 3, which was due in September 1998, and
his Form 4 for January 1999 in April 1999. Mr. Michael Bahlo filed his Form 3,
which was due in January 1999, in April 1999.
SELECTION OF INDEPENDENT AUDITORS
---------------------------------
We propose that the stockholders ratify our selection of BDO Seidman, LLP
as our independent auditors for the year ending December 31, 2000. The audit
committee and the board have approved the selection of BDO Seidman, LLP as
independent auditors. However, in the event our stockholders do not approve the
proposal, the board will reconsider the selection of the independent auditors.
BDO Seidman, LLP have been our independent auditors 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 us 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. The
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 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 recommends a vote FOR the proposal.
INCORPORATION BY REFERENCE
--------------------------
We have incorporated into this proxy statement the audited financial
statements for the years ended December 31, 1999 and 1998, together with the
related management's discussion and analysis of financial condition and results
of operations, which are included in the annual report. 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 without charge upon request. Requests for copies of the annual
report should be made as provided under "Other Matters."
OTHER MATTERS
-------------
Any proposal which a stockholder wishes to present at the 2001 Annual
Meeting of Stockholders must be received at our executive offices at 575
Underhill Boulevard, Syosset, New York 11791, not later than January 31, 2001.
- 12 -
<PAGE>
Copies of our annual report on Form 10-K for the year ended December 31,
1999, 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 our reasonable cost of furnishing such exhibits.
The Board 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 5, 2000
- 13 -
<PAGE>
PROXY
- -----
PORTA SYSTEMS CORP.
2000 Annual Meeting of Stockholders - June 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William V. Carney and Michael A. Tancredi
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 2000
Annual Meeting of Stockholders of Porta Systems Corp. (the "Company"), to be
held at 9:00 a.m., local time, on Friday, June 9, 2000, at the offices of the
Company, 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 seven (7) directors:
William V. Carney, Michael A. Tancredi, Seymour Joffe, 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 the selection of BDO Seidman, LLP as the Company's independent
auditors for the year ending December 31, 2000:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) In their discretion, upon the transaction of such other business as may
properly come before the meeting; all as set forth in the Proxy Statement,
dated May 5, 2000.
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: _____________________, 2000
_________________________
_________________________
(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.
