AMENDMENT NUMBER SEVENTEEN TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amendment Number Seventeen to Amended and Restated Loan and Security
Agreement ("Amendment") is entered into effective as of April 1, 2005 by and
between SHF IX, a Delaware Limited Liability Company ("Lender"), and PORTA
SYSTEMS CORP., a Delaware corporation ("Borrower"), in light of the following:
A. Lender is successor in interest of all obligations of Borrower owed to
XXXXX FARGO FOOTHILL, INC., a California corporation ("Foothill") pursuant to an
assignment dated as of October 7, 2004 between Foothill and Lender.
B. Borrower and Foothill have previously entered into that certain Amended
and Restated Loan and Security Agreement, dated as of November 28, 1994 (as
amended and modified, from time to time, the "Agreement").
C. Borrower has requested of Lender, as successor to Foothill to further
extend the Term of the Loans and to amend the Agreement as provided for and on
the conditions herein.
NOW, THEREFORE, Borrower and Lender hereby amend the Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in this Amendment
shall have the meanings given to them in the Agreement unless specifically
defined herein.
2. AMENDMENT.
(a) Section 3.4 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and Lender and shall continue in full force and
effect for a term ending on July 1, 2005, and the maturity date of the Old Term
Note and New Term Note and all interest thereon shall also be July 1, 2005. The
foregoing not withstanding, Lender shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default."
(b) Section 6.13 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"6.13 Financial Covenants.
(a) For each calendar quarter, commencing with the quarter
ending December 31, 2004, (i) Borrower shall generate positive net income
and (ii) the ratio of Borrower's EBITDA to debt service for the quarter
shall be not less than 1.1:1.
(b) Borrower shall deliver to Lender not later than 15
business days after the end of each calendar month, other than the third
month of the quarter, a balance sheet and statement of operations for the
month, compiled by Borrower from its books and records in a manner
consistent with the financial statements included in its Form 10-Q
Quarterly Reports and 10-K Annual Reports (collectively, the "SEC
Reports") as filed with the Securities and Exchange Commission (the
"Commission"), except that the monthly financial statements shall not be
reviewed by Borrower's independent auditors and shall not include
footnotes. Borrower shall deliver to Lender the balance sheet and
statement of income for the third month in each calendar quarter at the
same time as it delivers the quarterly net income and ratio of EBITDA to
debt service pursuant to Section 6.13(c).
(c) The quarterly net income and the ratio of EBITDA
to debt service for the quarter shall be based on the financial statements
contained in the SEC Reports and shall be provided to Lender within one
business day after the earlier of the date the SEC Reports are filed with
the Commission or the date on which the SEC Reports are required to be
filed with the Commission.
(d) As soon as practicable and in any event within 10
days after the filing of the applicable SEC Report for each quarter
commencing as of December 31, 2004 and for the quarters ending March 31,
2005, and June 30, 2005, a Compliance Certificate in the form attached
hereto as Exhibit A signed by the chief financial officer of the Borrower
demonstrating in reasonable detail compliance (or noncompliance, as the
case may be) with Section 6.13 as at the end of such quarter and stating
that as at the end of such quarter there did not exist any Default or
Event of Default or, if such Default or Event of Default existed,
specifying the nature and period of existence thereof and what action the
Borrower proposes to take with respect thereto.
3. REPRESENTATIONS AND WARRANTIES. Borrower and each Affiliate executing
this Agreement hereby affirms to Lender:
(a) that all of Borrower's representations and warranties act forth in
the Agreement are true, complete and accurate in all respects as of
the date hereof.
(b) that during the period of this extension Borrower will not pay any
antecedent debt or obligations to any Person not in the ordinary
course of its business or the business of any subsidiary.
4. CONDITION TO FORBEARANCE. The effectiveness of this Amendment is
expressly conditioned upon:
(a) the receipt by Lender of an executed copy of this Amendment;
(b) payment in good funds on or before April 1, 2005, May 1, 2005, June
1, 2005 and July 1, 2005 of $75,000, to be applied by Lender first
to interest at the rate of 12% per annum from January 1, 2005 on the
New Term Note and then to principal of New Term Note.
5. BLOCKED ACCOUNT AGREEMENT. Lender acknowledges that Borrower has
executed Blocked Account Control Agreement (the "Blocked Account Agreement")
with its principal depository bank, XX Xxxxxx Chase Bank, N.A. (the
"Depository") in favor of Lender. Lender agrees that (i) it will not execute or
deliver to the Depository, the Shifting Control Notice, as defined in the
Blocked Account Agreement, until and unless Borrower shall not be in compliance
with the provisions of this Amendment, and (ii) it will give written notice to
Borrower that it is delivering the Shifting Control Notice not later than the
date the Shifting Control Notice is given to the Depository.
6. FURTHER ASSURANCES. The parties recognize that it may be necessary for
Borrower and/or Lender to execute and/or file and/or record documents or
instruments in order that (i) Lender be reflected as the holder of the
obligations, (ii) that the perfection of Lender's security interest be
maintained and (iii) Lender's rights under the Agreement be accurately
evidenced. Accordingly, promptly upon request by Lender, Borrower also shall do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all deeds, conveyances, mortgages, deeds of trust, trust
deeds, assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as Lender may reasonable require from time to
time in order: (a) to carry out more effectively the purposes of the Agreement;
(b) to perfect and maintain the validity, effectiveness and priority of any
security interests intended to be created by the Agreement including, without
limitation, the delivery of a landlord waiver from any landlord required by
Lender; and (c) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm unto Lender the rights granted now or hereafter intended to
be granted to Lender under the Agreement or under any other instrument executed
in connection with the Agreement or that Borrower may be or become bound to
convey, mortgage or assign to Lender in order to carry out the intention or
facilitate the performance of the provisions of the Agreement. Borrower shall
furnish to Lender evidence satisfactory to Lender of every such recording,
filing or registration.
7. COSTS AND EXPENSES. Borrower shall pay to Lender all of Lender's
reasonable out-of-pocket costs and expenses (including, without limitation, the
reasonable fees and expenses of its counsel, which counsel may include any local
counsel deemed necessary, search fees, filing and recording fees, documentation
fees, appraisal fees, travel expenses, and other fees) arising in connection
with the preparation, execution, and delivery of this Amendment and all related
documents.
8. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement as amended and supplemented hereby, shall remain in full force and
effect.
9. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which when so executed end delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute one end the same Amendment.
This Amendment shall become effective upon the execution of a counterpart of
this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first set forth above.
SHF IX, a Delaware Limited Liability
Company
By: /s/ [ILLEGIBLE]
--------------------------------
Title: Chairman
-----------------------------
PORTA SYSTEMS CORP.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Title:
-----------------------------
CONSENT AND RATIFICATION
Each of the undersigned affiliates of Porta Systems Corp. ("Porta") is
aware of the terms of the above Amendment Number Seventeen to the Amended and
Restated Loan and Security Agreement, dated as of April 1, 2005 (the "Loan
Agreement"), and acknowledges that all of such affiliate's obligations under any
of the Collateral Documents (as defined in the Assignment Agreement) from
Chemical Bank to Xxxxx Fargo Foothill, Inc. are and shall continue in full force
and effect in favor of Lender as successor by assignment of all obligations of
Borrower to Xxxxx Fargo Foothill, Inc., including the obligations to guarantee
the obligations of Porta owing to Lender and to secure such obligations pursuant
to the terms of such Collateral Documents. "Assignment Agreement" shall have the
meaning given to it in the Loan Agreement.
ASTER CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
CPI HOLDING CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
CRITERION PLASTICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
DISPLEX, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
MIROR TELEPHONY SOFTWARE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA FOREIGN SALES CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS EXPORT CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS INTERNATIONAL
CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS LEASING CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS OVERSEAS CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
LERO INDUSTRIES LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS, LIMITED
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
XXXXXXXXXX BUSINESS SYSTEMS LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
XXXXXXXXXX COMMUNICATIONS LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
PORTA SYSTEMS S.A. de C.V.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name:
---------------------------
Title:
--------------------------
EXHIBIT A
COMPLIANCE CERTIFICATE
To: SHF IX, LLC
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected chief financial officer of Porta Systems, Inc.
(the "Borrower");
(2) I have reviewed the terms of the Seventeenth Amendment to Credit
Agreement dated as of April 1, 2005 between Borrower SHF IX LLC, (the
"Agreement") and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Borrower as of
December 31, 2004, March 31, 2005 and June 30, 2005 by the Attachment hereto;
(3) The examination described in paragraph (2) did not disclose, and I
have no knowledge, whether arising out of such examinations or otherwise, of the
existence of any condition or event which constitutes a Default or an Event of
Default (as such terms are defined in the Agreement) during or at the end of the
accounting period covered by the Attachment hereto or as of the date of this
Certificate, except as described below (or on a separate attachment to this
Certificate). The following exceptions set forth, in detail, the nature of the
condition or event, the period during which it has existed and the action which
the Borrower has taken, is taking or proposes to take with respect to each such
condition or event:
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
The foregoing certification, together with the computations in the
Attachment hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this _____ day of ________ , ________,
pursuant to Section 6.13 (d) of the Credit Agreement.
PORTA SYSTEMS, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
ATTACHMENT TO COMPLIANCE CERTIFICATE
AS OF________,___________, WHICH PERTAINS
TO THE PERIOD FROM___________________, 200_
TO___________________________, 200_
Borrower had positive net income for the period covered of
$_________________ as required by Section 6.13 (a) of the Agreement for the
period reported.
Borrower's EBITDA to debt service as required by Section 6.13 of the
Agreement for the period was ___________________.
Borrower has provided Lender with all reports balance sheets, SEC filings
and other documentation as required by Section 6.13 (b) and (c) of the Agreement
for the period reported.
