NEGOTIABLE PROMISSORY NOTE

Exhibit 4.3

NEGOTIABLE PROMISSORY NOTE

$1,747,012	New York, New York
	As of January 1, 2009

FOR VALUE RECEIVED, PORTA SYSTEMS CORP., hereinafter referred to as “Borrower”, with an address at 6851 Jericho Turnpike, Syosset, New York, 11791, hereby promises to pay to the order of CHEYNE SPECIAL SITUATIONS FUND, L.P., hereinafter referred to as “Lender”, with an address at P.O. Box 908 GT, Walker House, Mary Street, Grand Caymans, Cayman Islands, or at such other place as the Lender or any holder hereof may from time to time have designated, the principal sum of ONE MILLION SEVEN HUNDRED FORTY SEVEN THOUSAND TWELVE AND NO/100 ($1,747,012) DOLLARS, which shall be due and payable on April 30, 2010, together with any accrued interest, unless prepaid in accordance with the terms of this note.  Interest shall accrue and be payable on the outstanding principal balance of this Note at an amount equal to the six-month rate of LIBOR as reported in the Money Rate Section of the Wall Street Journal on a “Payment Date” (as hereafter defined) or if such Payment Date is not a business publication date of the Wall Street Journal, the first such publication date immediately prior to the Payment Date, plus 10%, payable as set forth herein (this “Note”).  This Note supersedes and replaces in its entirely that certain Negotiable Promissory Note between the Borrower and the Lender dated November 11, 2008, as amended, in the principal amount of one million seven hundred forty seven thousand and twelve dollars ($1,747,012) (the “Prior Note”).  As of the date hereof, accrued interest on the Prior Note as of December 31, 2008 is $29,608, which is hereby added to the amounts due and owing under this Note. For avoidance of doubt, the Prior Note superseded and replaced in its entirety those certain Negotiable Promissory Notes between the Borrower and the Lender dated October 23, 2007 in the principal amount of $1,000,000 which was subsequently amended and restated on November 11, 2008 in the principal amount of $1,747,012.

1.           Payment of Principal and Interest.   Principal and interest payments of an aggregate amount of $125,000 monthly shall be paid commencing on the last day of January 2009, and the last day of each month thereafter with any unpaid principal and accrued interest due on April 30, 2010.  Borrower payments shall be allocated as follows: first, to accrued interest, then to principal, and then until the accrued interest and principal are paid in full. The Borrower may prepay the principal due under this Note, together with accrued interest thereon, in whole or in part, without penalty.  Interest shall be calculated on the basis of a year of 365 days, and charged for the actual number of days elapsed.

2.           Default.  The following shall be events of default (“Events of Default”) hereunder:

(a)           If any payment of principal, interest or other sum due hereunder shall not be made as and when the same shall become due and payable;

(b)           If Borrower defaults under that certain Amended and Restated Loan and Security Agreement (the “Loan Agreement”), as amended from time to time, dated as of November 28, 1994, between Borrower and Wells Fargo Foothill, Inc. (“Foothill”), whereby Lender is the successor in interest of the obligations of Borrower to Foothill, pursuant to an assignment dated February 7, 2007, between Lender and SHF IX, LLC, a Delaware limited liability company (“SHF IX”), Foothill’s successor in interest pursuant to an assignment between Foothill and SHF IX dated October 7, 2004;

(c)           A default by Borrower under this Note shall constitute an Event of Default under the Loan Agreement.

3.           Collateral.  All Collateral (as defined in the Loan Agreement) shall secure prompt payment in full of all of Borrower’s obligations in connection with this Note as well as all obligations in connection with the Loan Agreement.

4.           Due Upon Event of Default.   This Note (the entire remaining principal balance, interest and any other sums due hereunder) shall automatically become immediately due and payable, without further notice or demand, upon the occurrence of any Event of Default described in Section 2 above.

5.           Collection Costs. The Borrower shall be liable for any and all out-of-pocket costs (including reasonable attorneys’ fees and court costs) incurred by the Lender in connection with Lender’s enforcement of, or collection of amounts owed by the Lender under, this Note or any other documents contemplated hereby (any and all such sums, “Collection Costs”).

6.           Application of Payments.  Any payments made by Borrower hereunder shall be applied by Lender in the following priority:  first, to unpaid or unreimbursed Collection Costs, next to accrued but unpaid interest, and finally, to reduction of principal.

7.           Transfers; Prepayment.  This Note may be transferred, assigned, pledged, hypothecated or negotiated by the Lender at any time without notice or consent of Borrower.  This Note shall be binding upon the Borrower, its representatives, successors and permitted assigns.  The Borrower shall not assign this Note or any of its rights or obligations hereunder without the prior written consent of Lender.

8.           Waiver.  Except as otherwise expressly required herein, the Borrower hereby waives presentment, demand for payment, notice of dishonor, protest, notice of protest and non-payment, notice of intention to accelerate, notice of acceleration and any and all other notices or demands whatsoever in connection with the delivery, acceptance, performance, default or enforcement of this Note.  In any action, suit or proceeding arising out of or relating to this Note, the Borrower hereby waives the right to interpose any defense, set-off or counterclaim of any kind or nature whatsoever.  No release of any security for the Note or extension of time for payment of this Note or any payment installment hereof, and no alteration, amendment or waiver of any provision of this Note or other agreement relating to the Note or the obligations of Borrower hereunder between the Lender or any other person or company shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of the Borrower, and any other person or entity who may become liable for the payment of all or any part of this Note, except as otherwise specifically provided in writing by any such alterations, amendments or waivers of this Note or such other agreements.  No notice to or demand on the Borrower shall be deemed to be a waiver of the obligation of the Borrower or of the right of the Lender to take further action without further notice or demand as provided for in this Note.

9.           Delay No Waiver; No Oral Changes.  No delay on the part of the Lender in exercising any right or remedy under this Note or any other agreement relating to the obligations of Borrower under the Note or failure to exercise the same shall operate as a waiver in whole or in part of any such right or remedy.  No amendment or waiver of any provision of this Note shall be effective unless the same shall be in writing and signed by the Lender and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

10.           Governing Law; Consent to Jurisdiction.  This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to principles of conflicts or choice of law (or any other law that would make the laws of any state other than the State of New York applicable hereto).   Borrower hereby (a) waives any defense of forum non conveniens and irrevocably consents and agrees that any legal or equitable action or proceeding arising under or in connection with this Note or any document or instrument delivered with respect to this Note, may be brought in any federal or state court in the County of New York, State of New York, (b) agrees that any process in any action commenced in such court under this Note may be served upon such party either (i) by certified or registered mail, return receipt requested, or by an overnight courier service which obtains evidence of delivery, with the same full force and effect as if personally served upon him in such county or (ii) any other method of service permitted by law.  Notice shall be deemed given three days after mailing and one after delivery to any overnight courier.

 

[additional signatures on next page]

 

 

Each of the undersigned affiliates of Porta Systems Corp. (“Porta”) is aware of the terms of the above attached Negotiable Promissory Note, dated as of January 1, 2009 (the “Note”), and hereby consents to the Note and guarantees the obligations of Porta under the Note.

 

 

	ASTER CORPORATION     By:  /s/ Edward B. Kornfeld Name: Edward B. Kornfeld Title:
	CPI HOLDING CORP.     By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	CRITERION PLASTICS, INC.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	DISPLEX, INC.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	MIROR TELEPHONY SOFTWARE, INC.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:

 

 

 

	PORTA FOREIGN SALES CORP.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	PORTA SYSTEMS OVERSEAS CORP.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	LERO INDUSTRIES LTD.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	PORTA SYSTEMS, LIMITED   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	PORTA SYSTEMS EXPORT CORP.     By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	PORTA SYSTEMS INTERNATIONAL CORP.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:

 

 

	PORTA SYSTEMS LEASING CORP.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	VANDERHOFF BUSINESS SYSTEMS LTD.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	VANDERHOFF COMMUNICATIONS LTD.   By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title:
	PORTA SYSTEMS S.A. de C.V. By:  /s/ Edward B. Kornfeld Name:  Edward B. Kornfeld Title: