EXHIBIT 4.8
COMBINED AMENDMENT NUMBER FOUR TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Combined Amendment Number Four to Amended and Restated Loan and
Security Agreement ("Amendment") is entered into as of March 1, 2002 by and
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), and
PORTA SYSTEMS CORP., a Delaware corporation ("Borrower"), in light of the
following:
A. Borrower and Foothill have previously entered into that certain
Amended and Restated Loan and Security Agreement, dated as of November 28, 1994,
as amended by amendments number 1 through 15 (collectively, the "Agreement").
B. Borrower and Foothill desire to further amend the Agreement and
combine and restate amendments 4 through 15 to the Agreement, as provided for
and on the conditions herein.
NOW, THEREFORE, Borrower and Foothill 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. AMENDMENTS. The Agreement is amended as follows
(a) Section 1.1 of the Agreement is amended as follows:
(1) The following definitions are hereby deleted, and any
references to such definitions in the Agreement should no longer be
effective.
"Deferred Fee Notes", "Deferred Funding Fee", "Deferred
Funding Fee Note", Eligible Accounts", "Eligible Inventory",
"Facility Fee", "NWE Advance", "NWE Deferred Funding Fee", "NWE
Deferred Funding Fee Note", "NWE Line", "NWE Line Maximum Amount"
and "Renewal Date".
(2) The following definitions are hereby added:
"New Term Loan" means that certain term loan in the principal
amount of up to $1,500,000 which is evidenced by that certain Secured
Promissory Note, of even date herewith (the "New Term Note") a copy of
which is attached hereto as Exhibit A.
"Old Term Loan" means that certain term loan in the principal
amount of $22,609,930.30 (the Outstanding Obligations as of the close of
business on February 28, 2002 (other than L/Cs and L/C Guarantees)) which
is evidenced by that certain Second Amended and Restated Secured
Promissory Note of even date herewith (the "Old Term Note") which is
attached hereto as Exhibit B.
(b) Foothill and Borrower agree that as of the close of business on
February 28, 2002, the outstanding Obligations, including accrued interest, were
$22,609,930.30, in the aggregate, as follows:
(i) Revolving Advances - $12,464,600.08
(ii) Term Loan - $10,145,330.22
(iii) L/C and/or L/C Guarantees - $572,538"
(c) Sections 2.1, 2.2(a), (b) and (c), 2.4 and 2.8 of the Agreement
are hereby deleted.
(d) The first sentence of Section 2.2(b)(i) of the Agreement is
amended to read as follows:
"(i) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue commercial or standby letters of credit for the
account of Borrower (each, an "L/C") or to issue standby letters of credit
or guarantees of payment (each such letter of credit or guarantee, an "L/C
Guaranty") with respect to commercial or standby letters of credit issued
by another person for the account of Borrower in an aggregate face amount
not to exceed $572,538."
(e) Section 2.3 of the Agreement is amended to read as follows:
"2.3 Term Loans.
(a) Foothill has agreed to make the New Term Loan to
Borrower to be evidenced by and repayable in accordance with the terms and
conditions of the New Term Note, executed by Borrower in favor of Foothill. All
amounts evidenced by the New Term Note shall constitute Obligations. Borrower
may draw monies under the New Term Loan weekly, subject to receipt and approval
of Borrower's weekly disbursements budget. Such budgets shall be submitted to
Foothill on Friday before Noon for funding on the following Monday.
(b) Borrower has executed and delivered to Foothill the
Old Term Note evidencing the outstanding Obligations (other than the L/Cs and
L/C Guarantees) as of the close of business on February 28, 2002. All amounts
evidenced by the Old Term Note shall constitute Obligations."
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(f) Section 2.5 of the Agreement is amended by adding the following:
"(g) The Obligations under the New Term Note shall bear
interest at the rate of 12% per annum, which interest shall accrue monthly
and shall be added to principal until September 1, 2002 when interest for
the month of August 2002 shall be paid and interest shall continue to be
paid on the first day of each subsequent month.
(h) The Obligations under the Old Term Loan shall not bear
interest from March 1, 2002 until such time as Foothill, in its sole
discretion, notifies Borrower in writing that it shall thereafter accrue
interest which shall be payable in accordance with Section 2.5(a) through
(f)."
(g) Section 2.9 of the Agreement is amended to read as follows:
2.9 Sales of Assets or Divisions. Borrower agrees to
diligently pursue the sale of one or more of its three business units to
non-Affiliates of Borrower in arms length transactions. The initial
proceeds of any such sale, after expenses of such sale, shall be paid to
Foothill to pay accrued interest on the New Term Note and the outstanding
principal balance of the New Term Note.
(h) Section 3.4 of the Agreement is amended to read as follows:
"3.4 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue
in full force and effect for a term ending on December 31, 2002, and the
maturity date of the Old Term Note and New Term Note shall also be
December 31, 2002. The foregoing notwithstanding, Foothill 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.
(i) Section 9.3 of the Agreement is hereby deleted.
(j) During the period from March 1, 2002 through December 31, 2002,
Borrower shall not make any payments on Indebtedness to the holders of
Borrower's: (i) 6% Convertible Subordinated Debentures or (ii) 12% Subordinated
Notes, but Borrower shall not be prohibited from paying accounts payable in the
ordinary course of business
(k) This Amendment combines, amends and restates Amendments numbers
4 through 15 of the Agreement.
3. EXHIBITS. Exhibits "A", "B" and "C" hereto are added to the Agreement
as ▇▇▇▇▇▇▇▇ "▇", "▇" and "C" thereto.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Foothill
that (a) all of Borrower's representations and warranties set forth in the
Agreement (except for those set forth in Sections 5.10 and 5.11) are true,
complete and accurate in all respects as of the date hereof and (b) Exhibit "C"
hereto updates Section 5.9 of the Agreement.
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5. CONDITIONS PRECEDENT AND SUBSEQUENT.
(a) The effectiveness of this Amendment is expressly conditioned
upon the following:
(i) Receipt by Foothill of an executed copy of this Amendment,
the New Term Note and the Old Term Note.
(b) Prior to the close of business on March 5, 2002, Borrower shall
deliver to Foothill its updated projections for the year ending December 31,
2002 ("Fiscal 2002"). Upon Foothill's reasonable approval of the projections,
Foothill and Borrower shall, on or before March 11, 2002, amend Section 6.13 of
the Agreement to establish financial covenants for Fiscal 2002 based upon such
projections.
6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of Foothill's
out-of-pocket costs and expenses (including, without limitation, the 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.
7. 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.
8. 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 and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute one and the same Amendment.
This Amendment shall become effective upon the execution of a counterpart of
this Amendment by each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: ▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Title: Sr V.P.
--------------------------------------
PORTA SYSTEMS CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Title: CEO
--------------------------------------
5
SECURED PROMISSORY NOTE
$1,500,000 Los Angeles, Ca1ifornia
March 1, 2002
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
FOOTHILL CAPITAL CORPORATION ("Foothill"), or order, at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the
holder may specify in writing, the principal sum of One Million Five Hundred
Thousand Dollars ($l,500,000) or such lesser sum as is advanced by Holder to
Maker as the New Term Loan under that certain Amended and Restated Loan And
Security Agreement between the Maker and Foothill, dated as of November 28, 1994
(as amended, the "Agreement") plus interest in the manner and upon the terms and
conditions set forth below:
1. Rate of Interest
This Secured Promissory Note ("Note") shall bear interest at such
times and at such rates as set forth in the Agreement
2. Schedule of Payments.
Principal and interest under this Note shall be due and payable on
December 31, 2002, or sooner as provided in the Agreement.
3. Prepayment
This Note may be prepaid at any time in whole or in part, without
any premium or penalty whatsoever.
Maker is required to prepay this Note under certain circumstances
set forth in the Agreement.
4. Holder's Right of Acceleration.
Upon the occurrence of an Event of Default under the Agreement
including, but not limited to, the failure to pay any installment of principal
or interest hereunder when due, the Holder may, at its election and without
notice to the Maker, declare the entire balance hereof immediately due and
payable.
5. Additional Rights of Holder.
If any installment of principal or interest hereunder is not paid
when due, the Holder shall have the right to compound interest by adding the
unpaid interest to principal, with such amount thereafter bearing interest at
the rate provided in this Note in addition to the tights set forth herein, in
the Agreement, and under law.
Exhibit A
1
6. General Provisions.
(a) If this Note is not paid when due, the Maker further promises to
pay all costs of collection, foreclosure fees, and reasonable attorneys' fees
incurred by the Holder, whether or not suit is filed hereon.
(b) The Maker hereby consents to any and all renewals, replacements,
and/or extensions of time for payment of this Note before, at or after maturity.
(c) The Maker hereby consents to the acceptance, release, or
substitution of security for this Note.
(d) Presentment for payment, notice of dishonor, protest, and notice
of protest are hereby expressly waived
(e) Any waiver of any rights under this Note, the Agreement, or
under any other agreement, instrument, or paper signed by the Maker is neither
valid nor effective unless made in writing and signed by the Holder.
(f) No delay or omission on the part of the Holder in exercising any
right shall operate as a waiver thereof or of any other right.
(g) A waiver by the Holder upon any one occasion shall not be
construed as a bar or waiver of any right or remedy on any future occasion.
(h) Should any one or more of the provisions of this Note be
determined illegal or unenforceable all other provisions shall nevertheless
remain effective.
(i) This Note cannot be changed, modified, amended, or terminated
orally.
7. Security for the Note
This Note is secured by the Agreement, and by various other security
documents. This Note is subject to all of the terms and conditions thereof
including, but not limited to, the remedies specified therein.
8. Choice of Law and Venue.
THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE MAKER AND THE HOLDER, SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW. TO THE
MAXIMUM EXTENT PERMITTED BY LAW, THE MAKER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE SHALL BE TRIED AND DETERMINED
ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, OR AT THE SOLE OPTION OF
Exhibit A
2
THE HOLDER, IN THE STATE OF NEW YORK OR ANY OTHER COURT IN WHICH THE HOLDER
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION.
9. Waiver of Jury Trial
THE MAKER, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF THE HOLDER AND THE
MAKER WITH RESPECT TO THIS NOTE, OR THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. THE MAKER, TO THE EXTENT IT MAY
LEGALLY DO SO, HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF
ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT
THE HOLDER MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION 9 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF MAKER TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
PORTA SYSTEMS CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Exhibit A
3
SECOND AMENDED AND RESTATED
SECURED PROMISSORY NOTE
$22,609,930.30 Los Angeles, California
March 1,2002
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
FOOTHILL CAPITAL CORPORATION ("Foothill"), or order, at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the
holder may specify in writing, the principal sum of Twenty Two Million Six
Hundred Nine Thousand Nine Hundred Thirty Dollars and Thirty Cents
($22,609,930.30) plus interest in the manner and upon the terms and conditions
set forth below.
1. Rate of Interest
This Second Amended and Restated Secured Promissory Note ("Note")
shall bear interest at such times and at such rates as set forth in that certain
Amended and Restated Loan And Security Agreement between the Maker and Foothill,
dated as of November 28, 1994 (as amended, the "Agreement").
2. Schedule of Payments
Principal and interest under this Note shall be due and payable on
December 31, 2002, or sooner as provided in the Agreement.
3. Prepayment.
This Note may be prepaid at any time, in whole or in part, without
any premium or penalty whatsoever.
Maker is required to prepay this Note under certain circumstances
set forth in the Agreement.
4. Holder's Right of Acceleration.
Upon the occurrence of an Event of Default under the Agreement
including, but not limited to, the failure to pay any installment of principal
or interest hereunder when due, the Holder may, at its election and without
notice to the Maker, declare the entire balance hereof immediately due and
payable.
5. Additional Rights of Holder.
If any installment of principal or interest hereunder is not paid
when due, the Holder shall have the right to compound interest by adding the
unpaid interest to principal, with such amount thereafter bearing Interest at
the rate provided in this Note in addition to the rights set forth herein, in
the Agreement and under law.
Exhibit B
1
6. General Provisions.
(a) If this Note is not paid when due, the Maker further promises to
pay all costs of collection, foreclosure fees and reasonable attorneys' fees
incurred by the Holder, whether or not suit is filed hereon.
(b) The Maker hereby consents to any and all renewals, replacements,
and/or extensions of time for payment of this Note before, at, or after
maturity.
(c) The Maker hereby consents to the acceptance, release, or
substitution of security for this Note.
(d) Presentment for payment, notice of dishonor, protest and notice
of protest are hereby expressly waived.
(e) Any waiver of any rights under this Note, the Agreement, or
under any other agreement, instrument, or paper signed by the Maker is neither
valid nor effective unless made in writing and signed by the Holder.
(f) No delay or omission on the part of the Holder in exercising any
right shall operate as a waiver thereof or of any other right.
(g) A waiver by the Holder on any one occasion shall not be
construed as a bar or waiver of any right or remedy on any future occasion.
(h) Should any one or more of the provisions of this Note be
determined illegal or unenforceable all other provisions shall nevertheless
remain effective.
(i) This Note cannot be changed, modified, amended, or terminated
orally.
7. Security for the Note.
This Note is secured by the Agreement, and by various other security
documents. This Note is subject to all of the terms and conditions thereof
including, but not limited to, the remedies specified herein.
8. Amendment and Restatement.
This Note amends, restates and replaces that certain Amended and
Restated Secured Promissory Note in the original principal amount of Thirteen
Million Five Hundred Two Thousand One Hundred Eighty Seven Dollars and Fifty
Cents ($13,502,187.50) dated February 13, 1995, which note shall be returned,
marked "paid by renewal" to the Maker.
9. Choice of Law and Venue.
THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE MAKER AND
Exhibit B
2
THE HOLDER, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE MAKER HEREBY
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND COURTS LOCATED IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AT THE SOLE OPTION OF THE HOLDER, IN THE
STATE OF NEW YORK OR ANY OTHER COURT IN WHICH THE HOLDER SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, MAKER HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.
10. Waiver of Jury Trial.
THE MAKER, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
OR PROCEDURE ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF THE HOLDER AND THE MAKER WITH
RESPECT TO THIS NOTE, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. THE MAKER, TO THE EXTENT IT MAY LEGALLY DO SO,
HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION 9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF MAKER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered on the date
first set forth above.
PORTA SYSTEMS CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Exhibit B
3
The following represents the status of current litigations being
maintained against Porta Systems Corp.
1) In July 1996, an action entitled Greenwich Management Consultants
Group, et al. v. Porta Systems Corp., et al. was commenced against the company
in New York State Supreme Court. The action arises out of the Company's
acquisition of Aster Corporation in which the plaintiffs received certain
unregistered shares and and/or warrants to purchase shares in the Company under
a merger agreement. The complaint alleges breach of contract against the Company
and breach of fiduciary duty against the directors arising out of an alleged
failure to register certain restricted shares and warrants owned by the
plaintiffs. The complaint seeks damages of $413,000. Although several years ago
counsel for the plaintiff advised the Company that additional plaintiffs may be
added and, as a result, the amount of damages claimed may become substantially
greater, no further plaintiffs have been added and plaintiffs have taken no
steps to prosecute the case in the last two years. The Company believes that the
defendants have valid defenses to the claims. The case remains in the discovery
stage.
2) In March 2000, the Company suspended, with pay, two of its executives
from their positions pending completion of the Company's investigation of
certain matters that had come to the Company's attention. Prior to the
completion of this investigation, however, these two executives accepted
positions with another company and thereby voluntarily resigned from their
positions with the Company. In February 2001, the two executives, together with
a third who similarly resigned from his position with the Company, filed suit in
the Supreme Court for the State of New York, County of New York, entitled ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇ Systems Corp., Index No.
6006771. The Complaint in this action was served on the Company in late
February. The Company asserts various claims against the Company based on the
allegation that each of the former executives was improperly terminated from his
employment without cause. The time to answer the Complaint has not yet expired.
The Company intends vigorously to defend against this lawsuit, and has asserted
counterclaims against these three former executives based, among other things,
on their own breaches of their employment agreements with the Company.
3) In July 2001 an action entitled OBOD, et al. v. Porta Systems Corp.,
Index ▇▇. ▇▇, ▇▇▇. ▇▇▇▇ (▇▇▇), was commenced in U.S. District Court for the
Southern District of New York. The plaintiffs are trustees of a Trust which
holds a subordinate note from the Company in the amount of $500,000 which is
currently in default. By this action, plaintiffs seek to enforce payment under
the Note plus interest. Plaintiffs' motion for summary judgment was recently
denied by the Court on the grounds that the terms of the Note did not give them
permission to obtain a judgment while Porta remained in default to the Senior
Debtholder. The action continues to pend but is currently inactive.
Exhibit B
(to Combined Amendment Number 4)