<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Amendment No. 1
Under the Securities Exchange Act of 1934
Porta Systems Corporation
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock $0.01 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
735647307
------------------------------------------------------
(CUSIP Number)
Lloyd I. Miller, III, 4550 Gordon Drive, Naples, Florida 34102 941-262-8577
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
October 27, 1997
------------------------------------------------------
(Date of Event which Requires Filing of this
Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
1
<PAGE> 2
SCHEDULE 13D
- ------------------------------ -------------------------------
CUSIP No. 735647307 Page 2 of 7
- ------------------------------ -------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lloyd I. Miller, III ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00**
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 828,599***
SHARES ---------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 823,769***
REPORTING ---------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
828,599***
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
823,769***
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,652,368
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.3%****
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN-IA-OO**
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**See response to Item 3, herein.
***See response to Item 5(b), herein.
**** See response to Item 5(c), herein.
2
<PAGE> 3
AMENDMENT NO. 1 TO ORIGINAL REPORT ON SCHEDULE 13D
This Amendment No. 1 to the statement on Schedule 13D filed on behalf
of Lloyd I. Miller, III ("Miller") relates to the Common Stock, $0.01 par value
per share (the "Shares") of Porta Systems Corporation, a Delaware corporation
("the Company"). The purpose of this Amendment is to report that since Miller's
previous Schedule 13D filing, Miller has (i) purchased additional Shares, (ii)
converted the all of his Zero Coupon Senior Subordinated Convertible Notes of
the Company due January 2, 1998 (the "Notes"), pursuant to that certain tender
offer (the "Tender Offer") set forth in the Supplemental Indenture to the Notes,
dated October 10, 1997, and (iii) purchased additional Notes which Miller also
converted to Shares pursuant to the Tender Offer. As a result of the Tender
Offer, the outstanding shares of the Company have increased significantly,
resulting in a decrease of the percentage of the Shares beneficially owned by
Miller as reported in Miller's prior Schedule 13D filing.
Item 3 is hereby amended and restated in its entirety as follows:
Item 3. Source and Amount of Funds or Other Considerations.
---------------------------------------------------
Miller is the Investment Adviser to Trust A-4 and Trust C (the
"Trusts"). Trust A-4 was created pursuant to a Declaratory Judgment, signed by
the Honorable Wayne F. Wilke for the Court of Common Pleas, Probate Division,
Hamilton County, Ohio, on October 27, 1992, pursuant to which Trust A was split
into four separate trusts, of which Trust A-4 was one. Trust A and Trust C were
created pursuant to an Amended and Restated Trust Agreement, dated September 20,
1983 (the "Trust Agreement"). Miller was named as advisor to PNC Bank, Ohio,
N.A. (formerly The Central Trust Company, N.A., Cincinnati, Ohio), the Trustee
named in the Trust Agreement. Such appointment became effective on April 22,
1990, the date of death of Lloyd I. Miller, the Grantor of Trust A and Trust C.
All of the Shares and Notes purchased by Miller as Investment Adviser to the
Trusts were purchased by funds generated and held by the Trusts. The purchase
price for the Shares and Notes was $886,539.68 for Trust A-4 and the purchase
price for the Notes was $796,705.45 for Trust C.
Miller is the manager of Milfam LLC, an Ohio limited liability company
established pursuant to the Operating Agreement of Milfam LLC (the "Operating
Agreement"), dated December 10, 1996. Milfam LLC is the managing general partner
of (i) Milfam I, L.P., a Georgia limited partnership established pursuant to the
Partnership Agreement for Milfam I, L.P. (the "Partnership Agreement"), dated
December 11, 1996, and (ii) Milfam II, L.P. a Georgia limited Partnership
established, pursuant to the Partnership Agreement for Milfam II, L.P. (the
"Milfam II Partnership Agreement"), dated December 11, 1996. All of the Shares
and Notes purchased by Miller on behalf of Milfam I, L.P. were purchased with
money contributed to Milfam I, L.P. by its partners (as identified on the
signature page of Exhibit 99.3, attached hereto), or money generated and held by
Milfam I, L.P. All of the Shares purchased by Miller on behalf of Milfam II,
L.P. were purchased with money contributed to Milfam II, L.P. by its partners
(as identified on the signature page of Exhibit 99.4, attached hereto), or money
generated and held by Milfam I, L.P. The purchase price for the Shares and Notes
purchased by Miller on behalf of Milfam I, L.P. was $1,403,068.71. The purchase
price for the Shares purchased by Miller on behalf of Milfam II, L.P. was
$286,307.24.
All of the Shares purchased by Miller on his own behalf, were purchased
with personal funds generated and held by Miller. The purchase price for the
Shares purchased by Miller on his own behalf was $123,130.00.
Miller converted all of the Notes that had been purchased for (i) the
Trusts, (ii) Milfam I, and (iii) Miller on his own behalf, to Shares pursuant to
the Tender Offer, at the conversion price of $3.65.
3
<PAGE> 4
Item 4 is hereby amended and restated in its entirety as follows:
Item 4. Purpose of the Transaction.
---------------------------
Miller considers his beneficial ownership reported herein of the
1,609,768 Shares, as an investment in the ordinary course of business. From time
to time, Miller may acquire additional Shares or Notes or dispose of all of some
of the Shares which he beneficially owns. From May 1997, through October 1997,
Miller was involved in discussions with the Company to restructure the Notes
which culminated in Miller agreeing to the terms of the Tender Offer and the
Company executing a letter to Miller, dated October 9, 1997 agreeing to elect
Miller to the Company's Board of Directors (See Exhibit 99.5 attached hereto)
(to date, Miller has not yet been elected to the Company's Board of Directors).
Other than Miller's pending election to the Company's Board of Directors, Miller
does not have any plans or proposals that relate to the matters described in
Item 4 of Schedule 13D.
Item 5 is amended and restated in its entirety as follows:
Item 5. Interest in Securities of the Issuer.
-------------------------------------
(a) Miller beneficially owns 1,652,368 Shares (19.3% of the outstanding
Shares, based on 8,567,913 Shares outstanding). As of the date hereof, 460,264
Shares are owned of record by Trust A-4, 363,505 Shares are owned of record by
Trust C, 706,703 Shares are owned of record by Milfam I, L.P., 87,462 Shares are
owned of record by Milfam II, L.P., and 34,434 Shares are owned of record by
Miller on his own behalf.
(b) Miller has shared voting power and shared dispositive power for all
such Shares held of record by the Trusts and sole voting power and sole
dispositive power for all such Shares held of record by Milfam I, L.P., Milfam
II, L.P. and by Miller on his own behalf (see Item 6).
(c) Since Miller's most recent Schedule 13D filing, Miller converted
all of the Notes held by the Trusts, Milfam I, L.P., and Miller personally, to
Shares pursuant to the Tender Offer at the conversion price of $3.65. The
effective date of the conversion was November 4, 1997. Since the time of
Miller's prior Schedule 13D filing the number of outstanding Shares has
increased as a result of the Tender Offer resulting in a significant decrease in
the percent of outstanding Shares beneficially owned by Miller, without his
selling any Shares or Notes. The following tables detail the purchases of Shares
by Trust A-4, Trust C, Milfam I, L.P. , Milfam II, L.P. and Miller on his own
behalf, effected since Miller's last Schedule 13D filing. All of the
transactions were open market transactions.
4
<PAGE> 5
- --------------------------------------------------------------------------------
Trust A-4
- --------------------------------------------------------------------------------
Date of Transaction Number of Shares Price Per Share
- --------------------------------------------------------------------------------
11/7/97 2,500.00 3.274
- --------------------------------------------------------------------------------
11/10/97 200.00 3.3425
- --------------------------------------------------------------------------------
11/21/97 15,764.00 3,.51*
- --------------------------------------------------------------------------------
12/1/97 6,000.00 3.39
- --------------------------------------------------------------------------------
12/5/97 3,900.00 3.328
- --------------------------------------------------------------------------------
12/5/97 101.00 3.493
- --------------------------------------------------------------------------------
12/9/97 11,800.00 3.14
- --------------------------------------------------------------------------------
12/10/97 3,200.00 3.14
- --------------------------------------------------------------------------------
12/12/97 20,000.00 3.015
- --------------------------------------------------------------------------------
Total 63,465.00
- --------------------------------------------------------------------------------
*Purchase of $57,541.50 in principal amount of the Notes at a purchase price of
.9625 and converted to Shares pursuant to the Tender Offer.
- --------------------------------------------------------------------------------
Trust C
- --------------------------------------------------------------------------------
Date of Transaction Number of Shares Price Per Share
- --------------------------------------------------------------------------------
10/27/97 54,794.00 3.522*
- --------------------------------------------------------------------------------
11/26/97 27,397.00 3.540**
- --------------------------------------------------------------------------------
Total 82,191.00
- --------------------------------------------------------------------------------
*Purchase of $200,000 in principal amount of the Notes at a purchase price of
.965 and converted to Shares pursuant to the Tender Offer.
**Purchase of $100,000 in principal amount of the Notes at a purchase price of
.97 and converted to Shares pursuant to the Tender Offer.
- --------------------------------------------------------------------------------
Milfam I, L.P.
- --------------------------------------------------------------------------------
Date of Transaction Number of Shares Price Per Share
- --------------------------------------------------------------------------------
11/24/97 5,000.00 3.375
- --------------------------------------------------------------------------------
11/26/97 8,000.00 3.438
- --------------------------------------------------------------------------------
12/3/97 500.00 3.3275
- --------------------------------------------------------------------------------
12/11/97 25,000.00 3.078
- --------------------------------------------------------------------------------
12/16/97 17,400.00 2.99
- --------------------------------------------------------------------------------
12/17/97 42,600.00 2.930
- --------------------------------------------------------------------------------
Total 98,500.00
- --------------------------------------------------------------------------------
5
<PAGE> 6
- --------------------------------------------------------------------------------
Milfam II, L.P.
- --------------------------------------------------------------------------------
Date of Transaction Number of Shares Price Per Share
- --------------------------------------------------------------------------------
11/14/97 5,000.00 3.265
- --------------------------------------------------------------------------------
12/5/97 25,000.00 3.3425
- --------------------------------------------------------------------------------
12/8/97 2,000.00 3.78
- --------------------------------------------------------------------------------
12/8/97 30,262.00 3.218
- --------------------------------------------------------------------------------
12/8/97 13,200.00 3.253
- --------------------------------------------------------------------------------
12/8/97 4,000.00 3.275
- --------------------------------------------------------------------------------
12/10/97 8,000.00 3.155
- --------------------------------------------------------------------------------
Total 87,462.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lloyd I. Miller III
- --------------------------------------------------------------------------------
Date of Transaction Number of Shares Price Per Share
- --------------------------------------------------------------------------------
11/20/97 34,246.57 3.595*
- --------------------------------------------------------------------------------
*Purchase of $125,000 in principal amount of the Notes at a purchase price of
.985 and converted to Shares pursuant to the Tender Offer.
(d) Milfam I, L.P. has the right to receive dividends from and proceeds
of the sale of 706,703 Shares; Milfam II, L.P. has the right to receive
dividends from and proceeds of the sale of 87,462 Shares; Trust A-4 has the
right to receive dividends from and proceeds of the sale of 460,264 Shares;
Trust C has the right to receive dividends from and proceeds of the sale of
363,505 Shares; and Miller has the right to receive dividends from and proceeds
of the sale of 34,434 Shares.
Item 6 Is hereby amended by adding the following language after the last
paragraph.
The Milfam II Partnership Agreement contains identical language to the
language set forth above with respect to the Partnership Agreement.
The Company has agreed to elect Miller as a member of the Company's Board
of Directors. (See Item 4.)
In connection with the beneficial ownership of the Shares, Miller has
certain rights pursuant to that certain Registration Rights Agreement, dated
October 10, 1997 attached hereto as Exhibit 99.6
Item 7 is hereby amended by adding the following Exhibits:
Exhibit Document
------- --------
99.4 Milfam II, L.P. Partnership Agreement, dated December 11, 1996.
99.5 Letter to Miller from the Company, dated October 9, 1997.
99.6 Registration Rights Agreement, dated October 10, 1997.
6
<PAGE> 7
After reasonable inquiry and to the best knowledge and belief of the
undersigned, I certify that the information set forth in this statement is true,
complete and correct.
Dated: December 19, 1997
By: /s/ Lloyd I. Miller, III
------------------------
Lloyd I. Miller, III
6
<PAGE> 8
EXHIBIT INDEX
Exhibit Document
------- --------
EX-99.4 Milfam II, L.P. Partnership Agreement, dated December 11, 1996.
EX-99.5 Letter to Miller from the Company, dated October 9, 1997.
EX-99.6 Registration Rights Agreement, dated October 10, 1997.
8
<PAGE> 1
PARTNERSHIP AGREEMENT
OF
MILFAM II L.P.
THIS PARTNERSHIP AGREEMENT is made and entered into as of the 11th day
of December, 1996 between Milfam LLC, an Ohio limited liability company (herein
referred to as the "General Partner"), Trust B under Section 6 of the Amended
and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983, Trust D under
Section 8 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September
20, 1983, Lloyd I. Miller, III, and Martin G. Miller (herein collectively
referred to as the "Limited Partners").
DEFINED TERMS
Capitalized words and phrases used in this Agreement have the following
meanings:
(a) "Act" means the Georgia Revised Uniform Limited Partnership Act
law, as set forth in Sections 14-9-100 to -1204 of the Georgia Code Annotated,
as amended from time to time (or any corresponding provisions of succeeding
law).
(b) "Agreement" or "Partnership Agreement" means this partnership
agreement, as amended from time to time. Words such as "herein," "hereinafter,"
"hereof," "hereto" and "hereunder," refer to this Agreement as a whole, unless
the context otherwise requires.
(c) "Bankruptcy" of a Partner shall be deemed to have occurred 60 days
after the happening of any of the following: (1) the filing of an application by
a Partner for, or a consent to, the appointment of a trustee of the Partner's
assets, (2) the filing by a Partner of a voluntary petition in bankruptcy or the
filing of a pleading in any court of record admitting in writing the Partner's
inability to pay the Partner's debts as they come due, (3) the making by a
Partner of a general assignment for the benefit of creditors, (4) the filing by
a Partner of an answer admitting the material allegations of, or consenting to,
or defaulting in answering a bankruptcy petition filed against the Partner in
any bankruptcy proceeding, or (5) the entry of an order, judgment, or decree by
any court of competent jurisdiction adjudicating a Partner bankrupt or
appointing a trustee of the Partner's assets, and that order, judgment, or
decree continuing unstayed and in effect for a period of 60 days.
(d) "Basis Point" means one hundredth of one percent (.01 percent), 100
Basis Points are equal to one percent.
(e) "Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such
Partner's distributive share of Profits and any
<PAGE> 2
items in the nature of income or gain which are
specially allocated to such Partner.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value
of any Partnership Property distributed to such
Partner pursuant to any provision of this Agreement
net of liabilities assumed by the Partner or to which
such property is subject, and such Partner's
distributive share of Losses and any items in the
nature of expenses or losses which are specially
allocated to such Partner.
(iii) In the event any interest in the Partnership is
transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it
relates to the transferred interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. The General Partner shall make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations.
(f) "Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Partnership by such Partner.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
(h) "Family" and "Family Member" mean Catherine Ward and her
descendants and trusts created for their benefit.
(i) "General Partner" means any Person who (i) is listed as such in
Exhibit A, attached, or has become a General Partner pursuant to the terms of
this Agreement, and (ii) has not ceased to be a General Partner pursuant to the
terms of this Agreement.
(j) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be
the gross fair market value of such asset, as
determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Value of all Partnership assets shall
be adjusted to equal their respective gross fair
market values, as determined by the General
- 2 -
<PAGE> 3
Partner, as of the following times: (a) the
acquisition of an additional interest in the
Partnership by any new or existing Partner in
exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership
to a Partner of more than a de minimis amount of
Partnership Property as consideration for an interest
in the Partnership if the General Partner reasonably
determines that such adjustment is necessary or
appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (c)
the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g);
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair
market value of such asset on the date of
distribution; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to
Section 1.704-1(b)(2)(iv)(m) of the Regulations; -
provided, however, that Gross Asset Values shall not
be adjusted to the extent the General Partner
determines that an adjustment is not necessary or
appropriate in connection with a transaction that
would otherwise result in an adjustment.
If the Gross Asset Value of an asset has been determined or adjusted, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
(k) "Lehman Brothers Rate of Return" means the rate of return of the
Lehman Brothers Intermediate Bond Index for the period in question expressed in
Basis Points, as determined by a third party selected by the General Partner who
is qualified to make such a determination.
(l) "Limited Partner" means any Person whose name is set forth on
Exhibit A of this Agreement as Limited Partner or who has been admitted as an
additional or Substituted Limited Partner pursuant to the terms of this
Agreement. "Limited Partners" means all such Persons.
(m) "Net Cash Flow" means the gross cash proceeds from Partnership
operations and from the sale or other disposition of assets of the Partnership
less the portion thereof used to pay or establish reserves for all Partnership
expenses, debt payments, capital improvements, replacements and contingencies,
all as determined by the General Partner. "Net Cash Flow" shall not be reduced
by depreciation, amortization, cost recovery deductions or similar allowances.
- 3 -
<PAGE> 4
(n) "Partners" means all General Partners and all Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners.
(o) "Partnership" means the partnership formed pursuant to this
Agreement and the partnership continuing the business of this Partnership in the
event of dissolution as herein provided.
(p) "Partnership Property" means all real and personal property
acquired by the Partnership and any improvements thereto, and shall include both
tangible and intangible property.
(q) "Person" means any individual, partnership, corporation, trust or
other entity.
(r) "Profits" and "Losses" means, for each fiscal year or other period,
an amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(l) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into
account in computing Profits or Losses shall be added
to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted, the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing
Profits or Losses.
(iv) Gain or loss resulting from any disposition of
Partnership Property with respect to which gain or
loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs
from its Gross Asset Value;
(v) Notwithstanding any other provision herein, any items
which are specially allocated shall not be taken into
account in computing Profits or Losses.
- 4 -
<PAGE> 5
(s) "Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
(t) "Standard & Poor's Rate of Return" means the rate of return of the
Standard & Poor's Index for the period in question expressed in Basis Points, as
determined by a third party selected by the General Partner who is qualified to
make such a determination.
(u) "Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to Article 6 hereof.
(v) "Unit(s)" means any one (or part thereof) or more of the 1 million
units that are authorized to be issued to Partners representing an interest in
the Partnership as described in this Agreement.
ARTICLE 1
NAME AND PURPOSES
SECTION 1.1 FORMATION. The Partners do hereby form the Partnership as a
limited partnership pursuant to the Act, for the purposes hereinafter described.
SECTION 1.2 NAME AND OFFICE. The Partnership shall be conducted under
the name of Milfam II L.P. (the "Partnership"). The principal office and place
of business of the Partnership in Georgia shall be located at 1201 Peachtree
Street, N.E., Atlanta Georgia 30361, or such other place as the General Partner
may from time to time determine on prior notice to the Limited Partners.
SECTION 1.3 PURPOSES AND POWERS.
(a) The purposes of the Partnership and the business to be carried on
and the objectives to be effected by it are:
(i) To acquire, hold, and, in all respects, deal with
stocks, bonds, and other investment securities and,
in the sole discretion of the General Partner, to
acquire one or more memberships on recognized
national exchanges and to engage in any other
business permitted by the Act in order to make a
profit, increase Family wealth, and provide a means
for members of the Family to become knowledgeable of
and preserve Family assets;
(ii) To provide a means for resolving any disputes that
may arise among Family members with respect to the
management of Family assets so as to
- 5 -
<PAGE> 6
preserve harmony among Family members and avoid costs
associated with litigation;
(iii) To maintain control of Family assets;
(iv) To provide a means to consolidate certain Family
assets;
(v) To provide more centralized management for Family
assets;
(vi) To serve as liaison with outside advisors, such as
legal counsel, accountants, banks and portfolio
managers;
(vii) To benefit from economies of scale that can be
realized by consolidating Family assets;
(viii) To provide a means of facilitating gifts to Family
members without fractionalizing assets;
(ix) To provide protection to Family assets from claims of
creditors brought against Family members;
(x) To prevent the transfer of a Family member's interest
in Family assets in the event of a failed marriage;
(xi) To provide flexibility in taking advantage of
business and investment opportunities, to increase
Family wealth and profits that are not available
through trusts, corporations or other entities, and
to make investments in accordance with the modern
portfolio theory;
(xii) To facilitate the administration and reduce the cost
associated with the disability or probate of the
estate of Family members and to reduce or eliminate
probate and guardianship proceedings in foreign
jurisdictions;
(xiii) To promote knowledge of and communication about
Family assets while allowing restrictions to be
placed on disclosure of information thereby
permitting confidentiality to be preserved as needed;
(xiv) To enter into, continue, perform and carry out
contracts of any kind necessary to, in connection
with, or incidental to, the accomplishment of the
purposes of the Partnership;
(xv) To acquire any property, or any rights therein or
appurtenant thereto, necessary for the accomplishment
of such purposes;
- 6 -
<PAGE> 7
(xvi) To borrow money, and to issue evidence of
indebtedness and to secure the same by mortgage, deed
of trust, pledge or other lien, in furtherance of any
or all of the purposes of the Partnership, and to
continue in effect and assume any liabilities or
indebtedness that may have been incurred by any
predecessor partnership; and
(xvii) To carry on any other activities necessary to, in
connection with or incidental to the foregoing.
SECTION 1.4 TERM. The Partnership shall continue in full effect until
December 31, 2050, and thereafter from year to year with the agreement of all
Partners, unless sooner dissolved and terminated as herein provided.
SECTION 1.5 AGENT AND TAX MATTERS PARTNER. Lloyd I. Miller, III shall
be the Tax Matters Partner for the Partnership for purposes of Section
6231(a)(7) of the Code. CT Corporation System shall be the agent for the
Partnership for service of process in the State of Georgia.
ARTICLE 2
CAPITAL CONTRIBUTIONS
SECTION 2.1 CAPITAL CONTRIBUTIONS. Each Partner has made or will make a
Capital Contribution to the Partnership in the amount set forth on Exhibit A.
Contributions may be made in cash or property. In addition, a contribution may
be made by delivery of a promissory note or other obligation to contribute cash
or property. Each Partner's Capital Contribution is based upon the number of
Units the Partner acquires. The Partnership is authorized to issue up to 100,000
Units at an initial cost of $1,000 per Unit. Fractional Units may be issued.
SECTION 2.2 DIVERSIFICATION. The initial Capital Contribution made by
each Partner will be in the form of stocks, bonds and other securities. No such
Capital Contribution will be accepted by the Partnership if the acceptance
thereof would cause the Partnership to be an "investment company" within the
meaning of section 351 of the Code and the regulations thereunder. To provide
further assurance that the Partnership will not be an investment company as a
result of accepting a Capital Contribution made by any Partner, each Partner
will be required to contribute, as such Partner's initial Capital Contribution,
a "diversified portfolio of stocks and securities" within the meaning of Section
1.351-1(c)(6) of the Regulations.
SECTION 2.3 FUTURE CAPITAL CONTRIBUTIONS. If the Partnership requires
additional funding to provide working capital or for any other purpose, no
Partner shall have any obligation to advance such funds personally to the
Partnership except as otherwise provided herein.
- 7 -
<PAGE> 8
SECTION 2.4 LOANS TO THE PARTNERSHIP. Any Partner will be permitted to
make loans to the Partnership from time to time in such amounts and on such
terms as such Partner and the Partnership may agree. In no event, however, will
a Partner be permitted to loan funds to the Partnership on terms less favorable
to the Partnership than those that could be obtained from an unrelated creditor.
SECTION 2.5 GENERAL PROVISIONS. A Limited Partner shall not be liable
for any of the debts of the Partnership or be required to contribute any capital
or lend any funds to the Partnership other than as expressly provided in this
Agreement. The General Partner shall not have any personal liability for the
repayment of the Capital Contributions of any Limited Partner, except as
provided to the contrary in this Agreement. Unless otherwise provided herein, no
interest will be paid on or imputed to any capital contributed to the
Partnership.
SECTION 2.6 ADDITIONAL UNITS. The Partnership may increase the number
of authorized Units with the consent of Partners holding a majority of the
Units. The cost of additional Units will be determined by the General Partner by
dividing the total value of Units outstanding by the number of Units
outstanding. The determination will be made as nearly as practicable to the date
on which additional Units are to be issued.
ARTICLE 3
RIGHTS, POWERS AND DUTIES OF THE PARTNERS
SECTION 3.1 MANAGEMENT AND CONTROL OF THE PARTNERSHIP.
(a) The General Partner shall have the full and exclusive right to
manage and control the business and affairs of the Partnership and to make all
decisions regarding the affairs of the Partnership. In the course of such
management, the General Partner may acquire, encumber, hold title to, pledge,
sell, release or otherwise dispose of Partnership Property and interests therein
when and upon such terms as it determines to be in the best interests of the
Partnership. The General Partner shall have all of the rights, powers and
obligations of a partner of a partnership without limited partners, except as
otherwise provided under the Act.
(b) No Limited Partner who is not also a General Partner shall
participate in the management of or have any control over the Partnership's
business nor have the power to represent, act for, sign for or bind the General
Partner or the Partnership.
(c) In fulfilling its obligations set forth in paragraph (a) above, and
to the extent not inconsistent with that paragraph, the General Partner shall
have the authority to borrow money in the name of the Partnership, and in
connection with any such borrowing, to mortgage, pledge, encumber and
hypothecate the assets of the Partnership.
- 8 -
<PAGE> 9
SECTION 3.2 AUTHORITY OF THE GENERAL PARTNER. In addition to the rights
and powers the General Partner has under this Agreement and law, the General
Partner shall, except to the extent otherwise provided herein, have all rights
and powers required or appropriate to manage the Partnership business, including
without limitation, the right to hire other professional advisors and other
personnel to provide services to the Partnership. To accomplish the purposes of
the Partnership the authority of the General Partner includes, but is not
limited to the following:
(a) to purchase, sell, invest in and deal in stocks, bonds, notes,
evidence of indebtedness and any other securities of any person whether foreign
or domestic;
(b) to guarantee the financial transactions of others that are for the
benefit of the Partnership;
(c) to borrow money;
(d) to sell, pledge, or dispose of assets of the Partnership;
(e) to carry such insurance as the General Partner deems necessary; and
(f) to perform all acts deemed appropriate by the General Partner to
carry out the purposes of the Partnership.
SECTION 3.3 AUTHORITY OF PARTNERS TO DEAL WITH THE PARTNERSHIP. The
Partnership may acquire property or services from any Partner, or lease or sell
any property to the any Partner provided the terms of such transactions are
arm's-length and in furtherance of the purposes of the Partnership.
SECTION 3.4 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER.
(a) Without the unanimous consent of the Limited Partners, the General
Partner shall not have the authority to:
(i) Do any act in contravention of this Agreement;
(ii) Do any act which would make it impossible to carry on
the business of the Partnership;
(iii) Confess a judgment against the Partnership;
(iv) Admit a Person as a General Partner; or
(v) Elect to dissolve the Partnership.
- 9 -
<PAGE> 10
SECTION 3.5 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
(a) The General Partner shall use his best efforts to take all actions
that may be necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership and for the acquisition, holding and
operation of Partnership Property, in accordance with the provisions of this
Agreement and applicable laws and regulations.
(b) The General Partner shall at all times act with integrity and good
faith and exercise diligence in all activities relating to the conduct of the
Partnership business and in resolving conflicts of interest.
(c) The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) all Federal, state and
local tax returns required to be filed by the Partnership. The General Partner
shall, to the extent that Partnership funds are available, cause the Partnership
to pay any taxes payable by the Partnership.
(d) The General Partner shall use its best efforts to cause the
Partnership to be formed, reformed, qualified to do business or registered under
any applicable assumed or fictitious name statute or similar law if required by
such law in any state in which the Partnership then owns property or transacts
business.
(e) The General Partner shall have the sole and exclusive right to
manage and operate the business of the Partnership with full and exclusive
authority to act for and on behalf of and as agent of the Partnership and to
take any and all reasonable actions deemed by the General Partner to be
necessary or advisable in connection therewith. The General Partner shall
operate the business of the Partnership in a commercially reasonable manner and
shall do so at such time and in such manner as the General Partner, in its sole
discretion, shall reasonably deem fit and further, shall endeavor and take all
reasonable actions to operate the Partnership so as to provide income and
capital growth for the Partners.
SECTION 3.6 OTHER RIGHTS OF LIMITED PARTNERS. The Limited Partners
shall not participate in the management or control of the business of, or
transact any business for, the Partnership. The Limited Partners shall have no
power to sign for or bind the Partnership in their capacity as Limited Partners.
Limited Partners owning 90% or more of the outstanding Units held by Limited
Partners will have the right to remove the General Partner at any time.
SECTION 3.7 OTHER INTERESTS OF PARTNERS. The Partners may engage in or
possess an interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the investment
business in all its aspects. Neither the Partnership nor the other Partners
shall have any rights in and to such independent ventures or the income or
profits derived therefrom.
- 10 -
<PAGE> 11
SECTION 3.8 COMPENSATION TO GENERAL PARTNER.
In addition to any Profits that may be allocated to the General
Partner, as compensation for various administrative, reporting, advisory and
other services that are to be performed by the General Partner, the General
Partner will receive a guaranteed payment equal to .25 percent (25 Basis Points)
of the Gross Asset Value of all Partnership assets as of December 31 of each
year. The fee will be payable in four equal quarterly installments during the
succeeding and will be treated as earned during the succeeding year. The fee
will be adjusted if the Partnership has a short taxable year.
SECTION 3.9 CONFIDENTIALITY OF INFORMATION. The Partners acknowledge
that they may receive information regarding the Partnership in the nature of
trade secrets or that otherwise is confidential, the release of which may be
damaging to the Partnership or Persons with which it does business. Each Partner
shall hold in strict confidence any information it receives regarding the
Partnership that is identified as being confidential (and if that information is
provided in writing, that is so marked) and may not disclose it to any Person
other than another Partner, except for disclosures (1) compelled by law, (2) to
advisers or representatives of the Partner or Assignees of the Partner, but only
if they have agreed to be bound by the provisions of this Section 3.9, or (3) of
information that Partner also has received from a source independent of the
Partnership that the Partner reasonably believes obtained that information
without breach of any obligation of confidentiality. The Partners acknowledge
that breach of the provisions of this Section 3.9 may cause irreparable injury
to the Partnership for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Partners agree that the provisions of this
Section 3.9 may be enforced by specific performance and other appropriate
injunctive or equitable relief.
ARTICLE 4
ALLOCATIONS
SECTION 4.1 ALLOCATION OF PROFITS AND LOSSES.
(a) PROFITS. Profits for any fiscal period shall be allocated among the
Partners as follows:
(1) First, Profits shall be allocated to Partners who
have been allocated Losses pursuant to Section
4.1(b)(2) in proportion to the Losses so allocated to
them until the cumulative amount of Profits allocated
to Partners pursuant to this Section 4.1(a)(1) is
equal to the cumulative amount of Losses allocated to
Partners pursuant to Section 4.1(b)(2).
- 11 -
<PAGE> 12
(2) Second, Profits will be allocated to the General
Partner based upon the investment performance of the
Partnership during the calendar year (or other period
agreed upon by the Partners). The Profits allocated
to the General Partner will be determined as follows:
(i) If the rate of return for equity
investments earned by the Partnership for
the year (or such other period as may be
determined by the Partners) exceeds the
Standard & Poor's Rate of Return by 100
Basis Points or more, the General Partner
will be allocated Profits equal to .50
percent (50 Basis Points) of the average
Gross Asset Value of equity investments held
by the Partnership during such year (or
other period determined by the Partners). If
the rate of return for equity investments
earned by the Partnership for the year (or
such other period as may be determined by
the Partners) does not exceed the Standard &
Poor's Rate of Return by 100 Basis Points or
more, the General Partner will be allocated
Profits equal to .05 percent (5 Basis
Points) of the average Gross Asset Value of
equity investments held by the Partnership
during such year (or other period determined
by the Partners). If the period over which
the rate of return is measured is greater
than or less than one year, appropriate
adjustments will be made to the amount by
which the rate of the return earned by the
Partnership on equity investments must
exceed the Standard & Poor's Rate of Return
in order for the General Partner to earn .50
percent rather than .05 percent of the Gross
Asset Value of equity investments held by
the Partnership. The rate of return on
Partnership equity investments will be
determined in the same manner that the
Standard & Poor's Rate of Return is
determined.
(ii) If the rate of return for fixed income
investments earned by the Partnership for
the year (or such other period as may be
determined by the Partners) exceeds the
Lehman Brothers Rate of Return by 100 Basis
Points or more, the General Partner will be
allocated Profits equal to .50 percent (50
Basis Points) of the average Gross Asset
Value of fixed income investments held by
the Partnership during such year (or other
period determined by the Partners). If the
rate of return for fixed income investments
earned by the Partnership for the year (or
such other period as may be determined by
the Partners) does not exceed the Lehman
Brothers Rate of Return by 100 Basis Points
or more, the General Partner will be
allocated Profits equal to .05 percent (5
Basis Points) of the average Gross Asset
Value of fixed income investments held by
the Partnership during such year (or other
period determined by the
- 12 -
<PAGE> 13
Partners). If the period over which the rate
of return is measured is greater than or
less than one year, appropriate adjustments
will be made to the amount by which the rate
of the return earned by the Partnership on
equity investments must exceed the Lehman
Brothers Rate of Return in order for the
General Partner to earn .50 percent rather
than .05 percent of the Gross Asset Value of
fixed income investments held by the
Partnership. The rate of return on
Partnership fixed income investments will be
determined in the same manner that the
Lehman Brothers Rate of Return is
determined.
(3) Third, any remaining Profits shall be allocated among
Partners based upon the number of Units held by each
Partner in proportion to the number of Units
outstanding.
(b) LOSSES. Losses for any fiscal period shall be allocated among the
Partners as follows:
(1) First, Losses shall be allocated among Partners based
upon the number of Units held by each Partner in
proportion to the number of Units outstanding, except
that Losses shall not be allocated pursuant to this
Section 4.1(b)(1) to the extent such allocation would
cause any Limited Partner to have a deficit in such
Limited Partner's Capital Account at the end of such
fiscal year.
(2) Second, any Loss that cannot be allocated to a
Limited Partner because it would create a deficit in
such Limited Partner's Capital shall be allocated
first to other Limited Partners for whom the
allocation would not create a deficit in such Limited
Partners' respective Capital Accounts in proportion
to the positive balances in such Limited Partner's
Capital Account and then to the General Partner.
SECTION 4.2 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value.
Any elections or other decisions relating to such allocations shall be
made by the General Partner in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 4.2 are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Partner's Capital
- 13 -
<PAGE> 14
Account or share of Profits, Losses, other items or distributions pursuant to
any provision of this Agreement.
SECTION 4.3 OTHER ALLOCATIONS RULES.
(a) In the event additional Partners are admitted to the Partnership on
different dates during any fiscal year, or their interests in the Partnership
otherwise vary during the year, the Profits (or Losses) may be allocated to the
Partners in accordance with Section 706, of the Code, or rules comparable to
those allowed by Section 706 of the Code, using any convention permitted by law
and selected by the General Partner.
(b) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner using any permissible method under Section 706 of the Code and the
Regulations thereunder.
(c) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may be, for the year.
SECTION 4.4 NONRECOURSE LIABILITIES. The allocation provisions set
forth in this Agreement are based on the premise that the Partnership has not
incurred and will not incur any nonrecourse liabilities as that term is defined
in Section 1.752-1(a)(2) of the Treasury regulations. If the Partnership should
incur such liabilities, the Agreement will be amended to assure compliance with
Section 704(b) of the Code and the Treasury regulations thereunder.
ARTICLE 5
DISTRIBUTIONS
SECTION 5.1 DISTRIBUTIONS TO GENERAL PARTNER. Distributions of Net Cash
Flow for any period, if made, will be distributed first to the General Partner
until the cumulative Net Cash Flow distributed to the General Partner under this
Section 5.1 for the current and all past periods is equal to the cumulative
Profits allocated to the General Partner for the current and all prior periods
pursuant to Section 4.1(a)(2).
SECTION 5.2 REMAINING NET CASH FLOW. After the distributions described
in Section 5.1 have been made, if any additional distributions are made, the
balance of the Net Cash Flow will be distributed among the Partners based upon
the number of Units held by each Partner in proportion to the number of Units
outstanding. The timing and the amount of distributions of Net Cash Flow will be
in the sole discretion of the General Partner.
- 14 -
<PAGE> 15
ARTICLE 6
ASSIGNMENT OF LIMITED PARTNER'S INTEREST
SECTION 6.1 GENERAL PROVISION. The Partnership interest of a Limited
Partner, which includes the Units representing such interest, may be assigned in
whole or in part as permitted by the provisions of this Article 6.
SECTION 6.2 ASSIGNEES. The assignment, sale, transfer or pledge of a
Partnership interest, in whole or in part, by a Limited Partner is permitted in
accordance with the terms of this Agreement. Once an interest has been assigned,
transferred, pledged or otherwise encumbered, the assignee, transferee, pledgee
or otherwise (hereinafter, the "assignee") may not exercise any rights of a
Limited Partner with respect to such interest except those granted to the
assignee by the Act unless the assignee becomes a substitute Limited Partner in
accordance with Section 6.3. An assignment entitles the assignee to receive, to
the extent assigned, the assignor's Partnership interest, including, without
limitation, any distributions associated with such interest.
SECTION 6.3 PLEDGES. If any Partner or assignee at any time desires to
pledge or hypothecate any or all of the interest in the Partnership then owned
by him, he may do so provided (i) that such transaction is a bona fide pledge or
hypothecation to a financial institution and (ii) that such financial
institution at the time of such pledge agrees in writing to afford the other
Partners a right of first refusal to repurchase the interest in the Partnership
in the manner described in Section 6.5 in the event of the sale of such interest
upon foreclosure.
SECTION 6.4 TRANSFER TO FAMILY MEMBER. Any Partner may voluntarily
assign, with or without consideration, all or any part of such Partner's
interest in the Partnership to a Family Member provided such Family Member takes
the interest subject to the restrictions set forth in this Agreement.
SECTION 6.5 RIGHT OF FIRST REFUSAL. Except for transfers described in
Section 6.4, if any Person desires to transfer any or all of the interest in the
Partnership owned by him, or if any such interest becomes subject to an
involuntary transfer such Person (the "Transferor") will so notify the
Partnership and the other Partners in writing (the "Other Partners"). The notice
will set forth the name and address of the proposed transferee, who, in the case
of a sale, must be a bona fide prospective purchaser, the date of the proposed
transfer, the proposed transfer price (in terms of a dollar amount) and the
other terms and conditions of the proposed transfer. For a period of 60 days
after receipt of such notice, the Partnership may purchase some or all of the
offered interest by giving written notice to the Transferor. If the Partnership
does not elect to purchase the entire interest, it shall notify the Other
Partners of the portion of the interest it did not elect to purchase, and the
Other Partners shall have 45 days after expiration of such 60-day period to
purchase all, but not less than all, of the interest that the Partnership did
not elect to purchase. Such purchase by the Other Partners will be in proportion
to the ownership interest in
- 15 -
<PAGE> 16
the Partnership owned by such Other Partners (omitting, for purposes of such
calculation, the ownership interest owned by the Transferor) unless they agree
otherwise. If any of the Other Partners declines to purchase his proportion of
such interest, the remaining Other Partners may purchase such interest in
proportion to their interests in the Partnership (counting for this purpose only
the interests in the Partnership of the Other Partners who wish to purchase some
or all of the interest to be transferred). If all of the remaining interest
proposed to be transferred is not agreed to be purchased by the Other Partners,
the Transferor may transfer the remaining interest to the assignee. Any transfer
must completed in accordance with the terms of the notice given to the
Partnership. In addition, Persons to whom any interest is transferred must, as a
condition to such transfer, enter into an agreement with the parties hereto (or
all parties except the transferor) setting forth restrictions on transfer and
other provisions for repurchase identical to the limitations imposed by this
Agreement.
SECTION 6.6 SUBSTITUTE LIMITED PARTNER. The assignee of the whole or a
portion of a Partnership interest shall be admitted as a substitute Limited
Partner upon compliance with the following conditions:
(a) The assignee must deliver to the Partnership an executed
counterpart of the instrument of assignment, satisfactory in substance and form
to the General Partner that contains a statement of the assignor's desire that
the assignee be admitted as a substitute Limited Partner and the assignee's
agreement to be bound by this Agreement. This condition shall be deemed to be
met in the case of a Successor in Interest, defined hereinafter.
(b) The General Partner, in its sole discretion, must consent in
writing to the admission of the assignee as a substitute Limited Partner.
(c) The assignor and the assignee must execute and acknowledge such
instruments as the General Partner may deem necessary or desirable to effect
such admission, and the assignee agrees to pay all expenses in connection with
such admission.
SECTION 6.7 DEATH OF LIMITED PARTNER. The Partnership shall not be
dissolved, wound up and terminated upon the death, insanity, incompetency or
bankruptcy of a Limited Partner. If a Limited Partner shall die or be declared
insane, incompetent or bankrupt, he shall cease to be a Limited Partner and, if
designated by the Limited Partner, his Successor in Interest, as hereinafter
defined, shall succeed to the interest of the former Limited Partner in the
Profits, Losses, credits and distributions of the Partnership. A Limited
Partner's Successor in Interest shall be such person as the Limited Partner,
from time to time, has designated in writing. In the event that a Limited
Partner fails to designate a Successor in Interest, or if the person designated
is not then living, or for any reason renounces or disclaims the Partnership
interest or is unable to succeed to such Partnership interest, the Successor in
Interest shall be the spouse of the former Limited Partner. If the spouse is not
then living or for any other reason is unable to succeed to the Partnership
interest, or if the spouse renounces or disclaims such Partnership interest, or
if there is no spouse, the Successor in Interest shall be the executor or
administrator of the deceased
- 16 -
<PAGE> 17
Limited Partner's estate, the guardian of an insane or incompetent Limited
Partner's estate, or the trustee in bankruptcy of a bankrupt Limited Partner's
estate, who shall hold or distribute such Partnership interest in accordance
with applicable fiduciary law.
SECTION 6.8 RESTRICTIONS ON SUCCESSOR IN INTEREST. The Successor in
Interest shall be subject to all of the restrictions specified in this Article 6
applicable to the assignee of an interest and shall not become a substitute
Limited Partner except upon compliance with the conditions hereinabove
specified. The Successor in Interest shall be entitled to receive all sums
payable with respect to the interest of the Partner to which the Successor in
Interest succeeds. If agreed to by the General Partner, the Successor in
Interest of a deceased former Limited Partner shall be deemed to be the
recipient, for federal income tax purposes, of the portion of the deceased
former Limited Partner's distributive share of the Profit or Loss (or items
thereof) of the Partnership for the taxable year during which the deceased
former Limited Partner died in proportion to the part of the year that the
Successor in Interest is entitled to such Profit or Loss.
SECTION 6.9 WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may
withdraw from the Partnership prior to termination of the Partnership.
ARTICLE 7
SALE OF A GENERAL PARTNER'S INTEREST
SECTION 7.1 GENERAL RESTRICTION. A General Partner shall not transfer
all or any part of his interest in the Partnership without obtaining the consent
of Limited Partners owning a majority of the Units held by Limited Partners.
ARTICLE 8
EVENTS OF WITHDRAWAL
SECTION 8.1 PROCEDURE FOLLOWING EVENT OF WITHDRAWAL. Upon the
occurrence of an Event of Withdrawal, the General Partner concerned shall cease
to be a member of the Partnership and the Partnership shall have the option to
liquidate the Partnership interest of such General Partner. The Partnership and
all its Partners shall be notified of such event by the withdrawing General
Partner or his legal representative or by any remaining General Partner.
SECTION 8.2 EXERCISE OF OPTION. The Partnership shall exercise its
option by serving written notice upon the General Partner concerned or the legal
representative of such General Partner within ninety (90) days from the date it
receives notification of the Event of Withdrawal. The purchase price to be paid
by the Partnership for the interest shall equal the fair market value of such
interest, as determined by agreement of the parties or by appraisal if they
cannot agree
- 17 -
<PAGE> 18
as of the date of such notice, and shall be paid in full by cashier's check or
certified check at the closing or on such other terms as the parties agree.
SECTION 8.3 CONTINUATION OF PARTNERSHIP. If the Partnership exercises
its option, the Partnership shall not dissolve, wind up and terminate but its
business shall be continued if there is a remaining General Partner or, if there
is not a remaining General Partner, if the Limited Partners consent in writing
to the continuation of the business of the Partnership and to the appointment of
a new General Partner effective as of the date of withdrawal of the former
General Partner. The interests of the Partners shall be adjusted appropriately
to reflect the liquidation of the General Partner's interest and, if applicable,
the admission of a new General Partner.
SECTION 8.4 TERMINATION. Upon the occurrence of an Event of Withdrawal
at such time as the Partnership has a sole General Partner, the Partnership
shall be dissolved, wound up and terminated unless all of the Limited Partners
consent in writing to the continuance of the Partnership as contemplated in
Sections 8.3.
SECTION 8.5 EVENT OF WITHDRAWAL DEFINED. For purposes of this
Agreement, an Event of Withdrawal shall include the occurrence of any event set
forth in Section 14-9-602 of the Act upon compliance with any notification
requirements imposed by the Act. A voluntary withdrawal by a General Partner
will not be in violation of this Agreement provided the General Partner provides
written notice to Limited Partners holding 2/3 or more of the Partnership Units
held by Limited Partners at least 10 days in advance of such withdrawal.
ARTICLE 9
PROVISIONS APPLICABLE TO ALL
ASSIGNMENTS AND TRANSFERS
SECTION 9.1 GENERAL RESTRICTIONS. Notwithstanding anything to the
contrary in this Agreement, any assignment or purchase under Articles 6, 7 or 8
may be prohibited by the General Partner if such assignment or purchase would,
in the opinion of counsel for the Partnership, result in the termination of the
Partnership under Section 708(b)(l)(B) of the Code.
SECTION 9.2 SECTION 6050K. Upon the transfer or assignment of any
Partnership interest, the transferor or assignor must provide to the Partnership
the information set forth in Section 6050 K of the Code, and the Partnership
shall furnish the required information to the Internal Revenue Service, the
transferor and the transferee as required by such section.
- 18 -
<PAGE> 19
ARTICLE 10
TERMINATION OF THE PARTNERSHIP
SECTION 10.1 EVENTS CAUSING TERMINATION. The Partnership shall
dissolve, wind up and terminate upon the first to occur of the following:
(a) The expiration of the term of the Partnership;
(b) The occurrence of an Event of Withdrawal unless the business of the
Partnership is continued as provided in Article 8;
(c) Upon the written consent of all Partners.
SECTION 10.2 PROCEDURE ON TERMINATION. Upon the occurrence of an event
described in Section 10.1, the General Partner (or, if none, a Limited Partner
appointed by the Limited Partners) shall proceed to liquidate and wind up the
business of the Partnership. Upon fifteen (15) days' prior written notice to all
of the Partners identifying the assets to be sold, the liquidating Partner(s)
may, in lieu of selling the Partnership assets, convey undivided interests in
the assets to the Partners or distribute the assets in kind to the Partners. The
Partnership assets and the proceeds of any liquidation sale shall be applied and
distributed at the closing of any sale in the following order of priority:
(a) To the payment of all debts and liabilities of the Partnership and
all expenses of liquidation.
(b) To the setting up of such reserves as the liquidating Partners may
deem necessary for any contingent liabilities of the Partnership. Any reserves
shall be deposited with an escrowee to be applied to the discharge of any
contingent liabilities, and, at the expiration of whatever period the
liquidating Partner may deem advisable, the balance shall be distributed as
provided in clause (c) below.
(c) The balance, if any, shall be distributed to the Partners in
accordance with their Capital Accounts, adjusted to reflect the Gross Asset
Value of each asset, notwithstanding any statutory priorities the Limited
Partners may have under the provisions of the laws of the Act.
SECTION 10.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the
event the Partnership is "liquidated" within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, (i) distributions shall be made
pursuant to Article 10 to the Partners who have positive Capital Accounts in
compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations, and (ii) if
any Partner's Capital Account has a deficit balance (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation
- 19 -
<PAGE> 20
occurs), such Partner shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance to zero in compliance with
Section 1.704-1 (b)(2)(ii)(b)(3) of the Regulations. In the discretion of the
General Partner, a pro rata portion of the distributions that would otherwise be
made to the Partners pursuant to the preceding sentence may be:
(a) Distributed to a trust established for the benefit of the Partners
for the purposes of liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the Partners arising out of or in
connection with the Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the reasonable discretion of
the General Partner, in the same proportions as the amount distributed to such
trust by the Partnership would otherwise have been distributed to the Partners
pursuant to this Agreement; or
(b) Withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the Partners as soon as practicable.
SECTION 10.4 RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, each Partner shall look solely to the assets of the Partnership for
the return of his Capital Contribution and shall have no right or power to
demand or receive property other than cash from the Partnership. No Partner
shall have priority over any other Partner as to the return of his Capital
Contributions, distributions or allocations.
ARTICLE 11
FISCAL MATTERS
SECTION 11.1 BOOKS AND RECORDS. The General Partner shall maintain full
and accurate books of the Partnership at the Partnership's principal place of
business, showing all receipts and expenditures, assets and liabilities, Profits
and Losses, and all other records necessary for recording the Partnership's
business and affairs, including those sufficient to record the allocations and
distributions provided for in Article 4 and Article 5. The books of the
Partnership shall be kept on either a cash or an accrual basis as determined by
the General Partner. Each Partner and his duly authorized representatives shall
at all times during regular business hours have access to and may inspect and
copy any of such books and records.
SECTION 11.2 PARTNERSHIP YEAR. The annual accounting period of the
Partnership shall be the calendar year.
SECTION 11.3 PARTNERSHIP BANK ACCOUNTS. The General Partner shall
receive all moneys of the Partnership and shall deposit the same in one or more
banking accounts. All expenditures
- 20 -
<PAGE> 21
by the General Partner shall be made by checks drawn against the Partnership
accounts. Withdrawals from Partnership accounts shall be made upon such
signature or signatures as the General Partner shall authorize.
SECTION 11.4 ACCOUNTING DECISIONS. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the General Partner.
SECTION 11.5 FEDERAL INCOME TAX ELECTIONS. The decision to make or not
make any other election that is described in the Code including, without
limitation, a Section 754 election, shall be made in the discretion of the
General Partner.
ARTICLE 12
ALTERNATIVE DISPUTE RESOLUTION ("ADR"); BINDING ARBITRATION
12.1 AGREEMENT TO USE PROCEDURE. The Partners have entered into this
Agreement in good faith in the belief that it is mutually advantageous to them.
It is with that same spirit of cooperation that they pledge to attempt to
resolve any dispute amicably without the necessity of litigation. Accordingly,
they agree if any dispute arises between them relating to this Agreement (the
"Dispute"), they will first utilize the procedures specified in this Article 12
(the "Procedure") prior to any Additional Proceedings.
12.2 INITIATION OF PROCEDURE. The Partner seeking to initiate the
Procedure (the "Initiating Partner") shall give written notice to the other
Partners, describing in general terms the nature of the Dispute, the Initiating
Partner's claim for relief an identifying one or more individuals with authority
to negotiate the Dispute on such Partner's behalf. The Partner(s) receiving such
notice (the "Responding Partner," whether one or more) shall have five (5)
business days within which to designate by written notice to the Initiating
Partner, one or more individuals with authority to negotiate the Dispute on such
Partner's behalf. The individuals so designated shall be known as the
"Authorized Individuals." The Initiating Partner and the Responding Partner
shall collectively be referred to as the "Disputing Partners" or individually
"Disputing Partner."
12.3 DIRECT NEGOTIATIONS. The Authorized Individuals shall be entitled
to make such investigation of the Dispute as they deem appropriate, but agree to
promptly, and in no event later than thirty (30) days from the date of the
Initiating Partner's written notice, meet to discuss resolution of the Dispute.
The Authorized Individuals shall meet at such times and places and with such
frequency as they may agree. If the Dispute has not been resolved within thirty
(30) days from the date of their initial meeting, the Disputing Partners shall
cease direct negotiations and shall submit the Dispute to mediation in
accordance with the following procedure.
- 21 -
<PAGE> 22
12.4 SELECTION OF MEDIATOR. The Authorized Individuals shall have five
(5) business days from the date they cease direct negotiations to submit to each
other a written list of acceptable qualified attorney-mediators not affiliated
with any of the Partners. Within five (5) days from the date of receipt of such
list, the Authorized Individuals shall rank the mediators in numerical order of
preference and exchange such rankings. If one or more names are on both lists,
the highest ranking person shall be designated as the mediator. If no mediator
has been selected under this procedure, the Disputing Partners agree jointly to
request a State or Federal District Judge of their choosing (or if they cannot
agree, the Chief Judge of the United States District Court for the county in
which the principal office of the Partnership is located, and if that Judge
refuses to act, the Presiding Judge of the State Administrative Judicial Region
for said county) to supply within ten (10) business days a list of potential
qualified attorney-mediators. Within five (5) business days of receipt of the
list, the Authorized Individuals shall again rank the proposed mediators in
numerical order of preference and shall simultaneously exchange such list and
shall select as the mediator the individual receiving the highest combined
ranking. If such mediator is not available to serve, they shall proceed to
contact the mediator who was next highest in ranking until they are able to
select a mediator.
12.5 TIME AND PLACE OF MEDIATION. In consultation with the mediator
selected, the Authorized Individuals shall promptly designate a mutually
convenient time and place for the mediation, and unless circumstances require
otherwise, such time to be not later than forty-five (45) days after selection
of the mediator.
12.6 EXCHANGE OF INFORMATION. In the event any Disputing Partner to
this Agreement has substantial need for information in the possession of another
Disputing Partner to this Agreement in order to prepare for the mediation, all
Disputing Partners shall attempt in good faith to agree to procedures for the
expeditious exchange of such information, with the help of the mediator if
required.
12.7 SUMMARY OF VIEWS. At least seven (7) days prior to the first
scheduled session of the mediation, each Disputing Partner shall deliver to the
mediator and to the other Disputing Partners a concise written summary of its
views on the matter in Dispute, and such other matters required by the mediator.
The mediator may also request that a confidential issue paper be submitted by
each Disputing Partner to him.
12.8 PARTIES TO BE REPRESENTED. In the mediation, each Disputing
Partner shall be represented by an Authorized Individual and may be represented
by counsel. In addition, each Disputing Partner may, with permission of the
mediator, bring such additional Persons as needed to respond to questions,
contribute information, and participate in the negotiations.
12.9 CONDUCT OF MEDIATION. The mediator shall determine the format for
the meetings, designed to assure that both the mediator and the Authorized
Individuals have an opportunity to hear an oral presentation of each Disputing
Partner's views on the matter in dispute, and that the authorized parties
attempt to negotiate a resolution of the matter in dispute, with or without the
- 22 -
<PAGE> 23
assistance of counsel or others, but with the assistance of the mediator; to
this end, the mediator is authorized to conduct both joint meetings and separate
private caucuses with the Disputing Partners. The mediation session shall be
private. To the extent permitted under applicable law, the mediator will keep
confidential all information learned in private caucus with any Disputing
Partner unless specifically authorized by such Disputing Partner to make
disclosure of the information to the other Disputing Partner. The Disputing
Partners commit to participate in the proceedings in good faith with the
intention of resolving the Dispute if at all possible.
12.10 TERMINATION OF PROCEDURE. The Disputing Partners agree to
participate in the mediation procedure to its conclusion. The mediation shall be
terminated (1) by the execution of a settlement agreement by the Disputing
Partners, (2) by a declaration of the mediator that the mediation is terminated,
or (3) by a written declaration of a Disputing Partner to the effect that the
mediation process is terminated at the conclusion of one full day's mediation
session. Even if the mediation is terminated without a resolution of the
Dispute, the Disputing Partners agree not to terminate negotiations and not to
commence any litigation or other legal proceedings to resolve the Dispute
("Additional Proceedings") prior to the expiration of five (5) days following
the mediation. Notwithstanding the foregoing, any Disputing Partner may commence
Additional Proceedings within such five (5) day period if the Dispute could be
barred by an applicable statute of limitations.
12.11 FEES OF MEDIATION; DISQUALIFICATION. The fees and expenses of the
mediator shall be shared equally by the Disputing Partners. The mediator shall
be disqualified as a witness, consultant, expert or counsel for any Disputing
Partner with respect to the Dispute and any related matters.
12.12 CONFIDENTIALITY. To the extent permitted under applicable law,
the mediation process shall be confidential, and no stenographic, visual or
audio record shall be made. All conduct, statements, promises, offers, views and
opinions, whether oral or written, made in the course of the mediation by any
Disputing Partner, their agents, employees, representatives or other invitees
and by the mediator shall be confidential and shall, in addition and where
appropriate, be deemed privileged. To the extent permitted under applicable law,
such conduct, statements, promises, offers, views and opinions shall not be
discoverable or admissible for any purpose, including impeachment, in any
litigation or other proceeding involving the parties, and shall not be disclosed
to anyone not an agent, employee, expert, witness, or representative of any of
the Partners; provided, however, that evidence otherwise discoverable or
admissible is not excluded from discovery or admission as a result of its use in
the mediation.
12.13 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination, or invalidity thereof
which the Partners are unable to resolve using other procedures in this Article
12, shall be settled by arbitration in accordance with the rules of American
Arbitration Association by one or more arbitrators appointed under such rules,
in the place determined by the parties to the dispute, or if they cannot agree
on the location, in Cincinnati, Ohio. The decision of the arbitrator shall be
final and binding upon all parties
- 23 -
<PAGE> 24
hereto. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The expenses of arbitration shall be borne
equally by the Partners who are parties to the dispute.
ARTICLE 13
GENERAL PROVISIONS
SECTION 13.1 NOTICES. Except as otherwise provided in this Agreement,
any and all notices, consents, waivers, requests, votes or other instruments or
communications provided for under this Agreement shall be in writing, signed by
the party giving the same and shall be deemed properly given only if sent by
registered or certified United States mail, postage prepaid, addressed: (a) in
the case of the Partnership or the General Partner, to the Partnership or the
General Partner, as the case may be, at the principal place of business of the
Partnership, (b) in the case of any Partner to such Partner at his address set
forth in the records of the Partnership. Each Partner may, by notice to the
Partnership, specify any other address for the receipt of such instruments of
communications. Any such communication sent by telegram shall be properly given
when received by the person to whom it is sent.
SECTION 13.2 INDEMNIFICATION OF GENERAL PARTNER. A General Partner
shall not be liable to the Partnership or the Limited Partners for any act or
omission performed or omitted by the General Partner in good faith pursuant to
the authority granted to the General Partner by the Partnership Agreement, but
not for fraud, bad faith or gross negligence. The Partnership shall indemnify
the General Partner for any loss or damage incurred by the General Partner on
behalf of the Partnership in or in furtherance of the Partnership interests,
except for liability arising out of fraud, bad faith or gross negligence. If a
claim for indemnification against liabilities under the Securities Act of 1933
(other than for expenses incurred in successful defense) is asserted against the
Partnership by the General Partner under the Agreement or otherwise, the
Partnership will, unless in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction,
the question of whether such indemnification by it is against public policy, and
will be governed by the final adjudication of such issue. In the event the
General Partner pays any debt of the Partnership, the General Partner shall be
reimbursed therefor from Partnership assets.
SECTION 13.3 INTEGRATION. This Agreement embodies the entire agreement
and understanding among the Partners relating to the subject matter hereof, and
supersedes all prior agreements and understandings relating to such subject
matter.
SECTION 13.4 APPLICABLE LAW. This Agreement and the rights of the
Partners shall be governed by and construed and enforced in accordance with the
laws of the State of Georgia.
- 24 -
<PAGE> 25
SECTION 13.5 COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement binding on all
the parties hereto, notwithstanding that all the parties are not signatory to
the original counterpart.
SECTION 13.6 SEPARABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and any other application thereof
shall not in any way be affected or impaired thereby.
SECTION 13.7 BINDING EFFECT. Except as herein otherwise provided to the
contrary, this Agreement shall be binding upon, and inure to the benefit of, the
Partners and their respective heirs, executors, administrators, successors and
permitted assigns.
SECTION 13.8 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner is
not required to deliver or mail a copy of the Partnership's certificate of
limited partnership or any other certificate to any of the Limited Partners.
SECTION 13.9 AUTHORITY TO AMEND. Amendments to this Agreement shall
require the approval of the General Partner and the Limited Partners owning a
majority of the outstanding Units held by Limited Partners. Notwithstanding the
foregoing, no Partner's interest in Profits, Losses or cash distributions will
be reduced without the consent of that Partner. A copy of any amendment shall be
mailed in advance to all of the Limited Partners.
SECTION 13.10 GENDER. Wherever the context shall so require, all words
herein in a particular gender shall be deemed to include other genders where
applicable. In addition, singular words shall include the plural and plural
words shall include the singular.
SECTION 12.11 MEETINGS. Meetings of the Partners shall be held not less
than fifteen (15) days nor more than thirty (30) days after receipt of written
notice from the General Partner. The General Partner will give notice of a
meeting at any time upon their own choosing or within five (5) days after they
shall receive demand for a meeting from Limited Partners who own at least thirty
percent of the outstanding Units.
- 25 -
<PAGE> 26
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
day and year first above written.
[General Partner] MILFAM LLC,
an Ohio limited liability company
By: /s/ LLOYD I. MILLER, III
------------------------
LIMITED PARTNERS:
Trust B under Section 6 of
the Amended and Restated
Trust U/A Lloyd I. Miller,
dated September 20, 1983
By: /s/ BLAIR THOMPSON
------------------
Trust D under Section 8 of the Amended and
Restated Trust U/A Lloyd I. Miller, dated
September 20, 1983
By: /s/ STEVEN HENDRICKSON
-----------------------
/s/ LLOYD I. MILLER, III
------------------------
Lloyd I. Miller, III
/s/ MARTIN G. MILLER
--------------------
Martin G. Miller
- 26 -
<PAGE> 27
MILFAM II L.P.,
A GEORGIA LIMITED PARTNERSHIP
PARTNERSHIP AGREEMENT
THE INTEREST REPRESENTED HEREBY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
APPLICABLE STATE LAW. THE INTEREST HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
(i) AN EFFECTIVE REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (ii) AN OPINION OF COUNSEL
SATISFACTORY TO THE MILFAM II L.P. (THE
"PARTNERSHIP") TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT AND SUCH LAWS.
<PAGE> 1
Porta Systems Corp.
575 Underhill Blvd.
Syosset, New York 11731
October 9, 1997
BY TELECOPIER: (941) 282-8025
Mr. Lloyd Miller
4550 Gordon Drive
Naples, Florida 33940
Re: Porta Systems Corp.
Dear Mr. Miller:
You hereby represent to Porta Systems Corp. (the "Company") that you
own or otherwise control and have the right to convert not less than $4.6
million principal amount of the Company's Zero Coupon Senior Subordinated
Convertible Notes due January 2, 1996 (the "Notes") and you agree to convert the
Notes in accordance with a certain letter agreement (the "Letter Agreement")
dated the date of this Letter between you and the Company. All terms defined in
the Letter Agreement and used in this Letter shall have the same meanings in
this Letter as in the Letter Agreement.
In reliance upon the foregoing representation and based on (i) your
converting at least $4.6 million principal amount of Notes in accordance with
the Amended Terms and (ii) holders of the Required Percentage of Notes
converting their Notes in accordance with the Amended Terms, the Company agrees
to elect you as a director at the first meeting of the board of directors
following the Closing Date and to recommend that you be included as one of the
Company's nominees for election as a director at the Company's 1996 Annual
Meeting of Stockholders.
PORTA SYSTEMS CORP.
By: /s/ MICHAEL A. TANCREDI
-----------------------------------
Name: Michael A. Tancredi
Title: Senior Vice President
Secretary and Treasurer
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
between
PORTA SYSTEMS CORP.
and
THE HOLDERS DESCRIBED HEREIN
Dated as of October 10, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions..................................................................................... 1
2. Initial Registration Under the Securities Act................................................... 3
(a) Shelf Registration.................................................................... 3
(b) Rights Under Sections 3 and 4 Conditional............................................. 3
3. Securities Act Registration on Request.......................................................... 3
(a) Request............................................................................... 3
(b) Registration Statement Form........................................................... 4
(c) Effective Registration Statement...................................................... 5
(d) Priority in Requested Registration.................................................... 5
(e) Shelf Registrations................................................................... 6
(f) Continuing Obligation to Register..................................................... 6
4. Piggyback Registration.......................................................................... 6
5. Expenses........................................................................................ 7
6. Registration Procedures......................................................................... 8
7. Underwritten Offerings.......................................................................... 11
(a) Underwriting Agreement................................................................ 11
(b) Piggyback Underwritten Offerings; Priority............................................ 12
(c) Holders of Registrable Common Stock to be Parties to Underwriting Agreement........... 12
(d) Selection of Underwriters for Piggyback Underwritten Offering......................... 13
8. Preparation; Reasonable Investigation........................................................... 13
(a) Registration Statements............................................................... 13
(b) Confidentiality....................................................................... 13
9. Indemnification.................................................................................. 13
(a) Indemnification by the Company........................................................ 13
(b) Indemnification by the Offerors and Sellers........................................... 14
(c) Notices of Losses, etc................................................................ 15
(d) Contribution.......................................................................... 15
(e) Other Indemnification................................................................. 16
(f) Indemnification Payments.............................................................. 16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
10. Registration Rights to Others.................................................................. 16
11. Adjustments Affecting Registrable Common Stock................................................. 16
12. Rule 144 and Rule 144A......................................................................... 16
13. Amendments and Waivers......................................................................... 17
14. Nominees for Beneficial Owners................................................................. 17
15. Assignment..................................................................................... 17
16. Calculation of Percentage or Number of Shares of Registrable Common Stock...................... 17
17. Miscellaneous.................................................................................. 18
(a) Further Assurances.................................................................... 18
(b) Headings.............................................................................. 18
(c) No Inconsistent Agreements............................................................ 18
(d) Remedies.............................................................................. 18
(e) Entire Agreement...................................................................... 18
(f) Notices............................................................................... 18
(g) Governing Law......................................................................... 19
(h) Severability.......................................................................... 19
(i) Counterparts.......................................................................... 19
</TABLE>
-ii-
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 10, 1997
(this "Agreement"), by and among Porta Systems Corp., a Delaware corporation
(the "Company"), and those security holders of the Company who, in connection
with their conversion of Zero Coupon Senior Subordinated Notes due January 2,
1998 ("Notes"), become Affiliates of the Company as a result of their conversion
of the Notes (the "Holders").
To induce the holders of the Notes who, as a result of their
conversion of the Notes, become Affiliates of the Company, to convert the Notes
and receive shares of Common Stock issued by the Company, the Company has
undertaken to register Registrable Common Stock (as hereinafter defined) under
the Securities Act (as hereinafter defined) and to take certain other actions
with respect to the Registrable Common Stock. This Agreement sets forth the
terms and conditions of such undertaking.
In consideration of the premises and the mutual agreements set
forth herein, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized
terms used herein and in the recitals above shall have the following meanings:
"Affiliate" of a Person means any Person that controls, is
under common control with, or is controlled by, such other Person. For purposes
of this definition, "control" means the ability of one Person to direct the
management and policies of another Person.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to be closed.
"Commission" means the U.S. Securities and Exchange
Commission.
"Common Stock" means the shares of common stock, $0.01 par
value per share, of the Company.
"Exchange" means the principal stock exchange or market on
which the Common Stock is traded, which is presently the American Stock
Exchange, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, or any similar or successor
statute.
"Excusable Reason" means the occurrence of negotiations with
respect to material agreements prior to the announcement of the execution of the
agreement or the termination of the negotiations and other similar material
corporate events to which the Company is a party or expects to be a party if, in
the reasonable judgment of the Company, disclosure of the negotiations or other
event would be adverse to the best interests of the Company provided that the
Company is continuing to treat such negotiations as confidential and provided
further that the period during which the Company is precluded from filing the
registration statement (or
<PAGE> 5
suspended the use of an effective registration statement) as a result thereof
has not exceeded 60 days and provided further that the Company shall not be
permitted to avoid filing a registration statement (or to suspend the use of an
effective registration statement) for an Excusable Reason more than twice in any
one-year period.
"Expenses" means, except as set forth in Section 5 hereof, all
expenses incident to the Company's performance of or compliance with its
obligations under this Agreement, including, without limitation, all
registration, filing, listing, stock exchange and NASD fees, all fees and
expenses of complying with state securities or blue sky laws (including fees,
disbursements and other charges of counsel for the underwriters only in
connection with blue sky filings), all word processing, duplicating and printing
expenses, messenger and delivery expenses, all rating agency fees, the fees,
disbursements and other charges of counsel for the Company and of its
independent public accountants, including the expenses incurred in connection
with "cold comfort" letters required by or incident to such performance and
compliance, any fees and disbursements of underwriters customarily paid by
issuers of securities and, with respect to registration statements other than a
Shelf Registration, up to $15,000 of the reasonable fees, disbursements and
other charges of one firm of counsel (per registration statement prepared) to
the Holders of Registrable Common Stock (selected by the Holders holding a
majority of the shares of Registrable Common Stock covered by such
registration), but excluding from the definition of Expenses underwriting
discounts and commissions and applicable transfer taxes, if any, which
discounts, commissions and transfer taxes shall be borne by the seller or
sellers of Registrable Common Stock in all cases.
"Initiating Holders" has the meaning set forth in Section 3(a)
hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"NASDAQ" means the Nasdaq Stock Market and includes The Nasdaq
National Market and The Nasdaq SmallCap Market.
"Notes" means the Company's Zero Coupon Senior Subordinated
Convertible Notes due January 2, 1998.
"Person" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint stock
company, trust, unincorporated organization, governmental or regulatory body or
subdivision thereof or other entity.
"Public Offering" means a public offering and sale of Common
Stock pursuant to an effective registration statement under the Securities Act.
"Registrable Common Stock" means any shares of Common Stock
held by the Holders immediately following the conversion of the Notes as to
which and only for so long as registration pursuant to the Securities Act is
required for public sale without regard to volume limitations, as adjusted to
reflect any merger, consolidation, recapitalization, reclassification, split-up,
stock dividend, rights offering or reverse stock split made, declared or
effected with respect to the Common Stock.
-2-
<PAGE> 6
"Requesting Holders" has the meaning set forth in Section 4
hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar or successor statute.
"Selling Holders" means the Holders of Registrable Common
Stock requested to be registered pursuant to Section 3(a) hereof.
"Shelf Registration" means a shelf registration statement
pursuant to Rule 415 promulgated under the Securities Act.
"Transfer" means any transfer, sale, assignment, pledge,
hypothecation or other disposition of any interest. "Transferor" and
"Transferee" have correlative meanings.
2. Initial Registration Under the Securities Act.
(a) Shelf Registration. The Company shall (i) cause
to be filed not later than 45 days after the date hereof a Shelf Registration
statement providing for the sale by the Holders of all of the Registrable Common
Stock and (ii) use its best efforts to have such Shelf Registration thereafter
declared effective by the Commission not later than 60 days after the date of
filing, subject to any delay for an Excusable Reason. The Shelf Registration
shall register the Registrable Common Stock for resale by the Holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings). The Company agrees to use its best efforts to keep the
Shelf Registration continuously effective until the end of the eighteenth month
following the date such Shelf Registration is declared effective by the
Commission or such shorter period which will terminate when all of the
Registrable Common Stock covered by the Shelf Registration has been sold
pursuant to the Shelf Registration, excluding from the calculation of such
eighteen-month period any period of time during which the Shelf Registration was
unavailable for use by the Holders due to any stop order, injunction or other
order or requirement of the Commission or other governmental or regulatory
agency or court as contemplated by Section 2(b)(ii) or for any other reason
including an Excusable Reason.
(b) Rights Under Sections 3 and 4 Conditional. So
long as the Company has complied and continues to remain in compliance with
Section 2(a) of this Agreement, the Holders shall have no right to cause the
filing of a registration statement pursuant to Section 3 hereof or to
participate in an offering under a registration statement pursuant to Section 4
hereof.
3. Securities Act Registration on Request.
(a) Request. If at any time after March 31, 1998, the
Company does not make available to the Holders for any reason (other than an
Excusable Reason) the Shelf Registration statement contemplated by Section 2
hereof, one or more Holders (the "Initiating Holders") may make a written
request (the "Initiating Request") to the Company for the registration with the
Commission under the Securities Act of all or part of such Initiating
-3-
<PAGE> 7
Holders' Registrable Common Stock; provided, however, that such request shall be
made by one or more Holders of at least 10% of the outstanding shares of
Registrable Common Stock, which request shall specify the number of shares to be
disposed of and the proposed plan of distribution therefor. Upon the receipt of
any Initiating Request for registration pursuant to this paragraph, the Company
promptly shall notify in writing all other Holders of the receipt of such
request and will use its best efforts to effect, at the earliest possible date
(taking into account any delay that may result from any special audit required
by applicable law), such registration under the Securities Act, including a
Shelf Registration (if then eligible), of
(i) the Registrable Common Stock which the Company
has been so requested to register by such Initiating Holder, and
(ii) all other Registrable Common Stock which the
Company has been requested to register by any other Holders by written
request given to the Company within 30 days after the giving of written
notice by the Company to such other Holders of the Initiating Request,
all to the extent necessary to permit the disposition (in accordance with
Section 3(b) hereof) of the Registrable Common Stock so to be registered;
provided, that,
(A) if the intended method of distribution
is an underwritten public offering, the Company shall not be
required to effect such registration pursuant to this Section
3(a) unless such underwriting shall be conducted on a "firm
commitment" basis,
(B) subject to the last sentence of Section
5 hereof, any Holder whose Registrable Common Stock was to be
included in any such registration, by written notice to the
Company, may withdraw such request and, on receipt of such
notice of the withdrawal of such request from Holders holding
a percentage of Common Stock, such that the Holders that have
not elected to withdraw do not hold, in the aggregate, the
requisite percentage of the Common Stock to initiate a request
under this Section 3(a), the Company need not effect such
registration, and
(C) the Company shall not be required to
effect any registration to be effected pursuant to this
Section 3(a) unless at least 10% of the shares of Registrable
Common Stock outstanding at the time of such request is to be
included in such registration.
(b) Registration Statement Form. Registrations under
Section 3(a) hereof shall be on such appropriate registration form prescribed by
the Commission under the Securities Act as shall be selected by the Company and
as shall permit the disposition of the Registrable Common Stock pursuant to an
underwritten offering unless the Selling Holders holding at least a majority of
the shares of Registrable Common Stock requested to be included in such
registration statement determine otherwise, in which case pursuant to the method
of disposition determined by such Selling Holders. The Company agrees to include
in any such
-4-
<PAGE> 8
registration statement filed pursuant to Section 3(a) hereof all information
which any Selling Holder, upon advice of counsel, shall reasonably request.
(c) Effective Registration Statement. A registration
requested pursuant to Section 3(a) hereof shall not be deemed to have been
effected
(i) unless a registration statement with
respect thereto has been declared effective by the Commission and
remains effective in compliance with the provisions of the Securities
Act and the laws of any state or other jurisdiction applicable to the
disposition of all Registrable Common Stock covered by such
registration statement until such time as all of such Registrable
Common Stock have been disposed of in accordance with such registration
statement,
(ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental or
regulatory agency or court for any reason other than a violation of
applicable law solely by the Selling Holders and has not thereafter
become effective, or
(iii) if, in the case of an underwritten
offering, the conditions to closing specified in an underwriting
agreement to which the Company is a party are not satisfied other than
by reason of any breach or failure by the Selling Holders, or are not
otherwise waived.
The Holders of Registrable Common Stock to be included in a
registration statement may at any time terminate a request for registration made
pursuant to Section 3(a) in accordance with Section 3(a)(ii)(B). Expenses
incurred in connection with a request for registration terminated pursuant to
this paragraph shall be paid in accordance with the last sentence of Section 5
hereof.
(d) Priority in Requested Registration. If a
registration under Section 3(a) hereof involves an underwritten public offering,
and the managing underwriter of such underwritten offering shall advise the
Company in writing (with a copy to each Holder requesting that Registrable
Common Stock be included in such registration statement) that, in its opinion,
the number of shares of Registrable Common Stock requested to be included in
such registration exceeds the number of such securities that can be sold in such
offering within a price range stated to such managing underwriter by Selling
Holders owning at least a majority of the shares of Registrable Common Stock
requested to be included in such registration to be acceptable to such Selling
Holders, the Company shall include in such registration, to the extent of the
number and type of securities which the Company is advised can be sold in such
offering, all Registrable Common Stock requested to be registered pursuant to
Section 3(a) hereof, pro rata among the Selling Holders on the basis of the
number of shares of Registrable Common Stock requested to be registered by all
such holders, and no other shares of Common Stock, whether to be sold by the
Company or any other Person.
-5-
<PAGE> 9
(e) Shelf Registrations. If a demand made pursuant to
Section 3(a) hereof is for a Shelf Registration, the period for which such Shelf
Registration must remain effective need not extend beyond the period set forth
in Section 2(a) hereof or such shorter period which will terminate when all of
the Registrable Common Stock covered by the Shelf Registration has been sold
pursuant thereto.
(f) Continuing Obligation to Register. No
registration effected under this Section 3 shall relieve the Company of its
obligation to effect the Shelf Registration under Section 2 hereof or of its
obligation to permit the registration of Registrable Common Stock under Section
4 hereof.
4. Piggyback Registration. If at any time after March 31,
1998, the Company does not make available to the Holders for any reason (other
than an Excusable Reason) the Shelf Registration statement contemplated by
Section 2(a) hereof and at any time proposes to register any of its securities
under the Securities Act by registration on any forms other than Form S-4 or S-8
(or any successor or similar form(s)), whether or not pursuant to registration
rights granted to other holders of its securities and whether or not for sale
for its own account, it shall give prompt written notice to all of the Holders
of its intention to do so and of such Holders' rights (if any) under this
Section 4, which notice, in any event, shall be given at least 10 Business Days
prior to such proposed registration. Upon the written request of any Holder
receiving notice of such proposed registration that is a Holder of Registrable
Common Stock (a "Requesting Holder") made within 5 Business Days after the
receipt of any such notice (3 Business Days if the Company states in such
written notice or gives telephonic notice to the relevant securityholders, with
written confirmation to follow promptly thereafter, stating that (i) such
registration will be on Form S-3 and (ii) such shorter period of time is
required because of a planned filing date), which request shall specify the
Registrable Common Stock intended to be disposed of by such Requesting Holder
and the minimum offering price per share at which the Holder is willing to sell
its Registrable Common Stock, the Company shall, subject to Section 7(b) hereof,
effect the registration under the Securities Act of all Registrable Common Stock
which the Company has been so requested to register by the Requesting Holders
thereof; provided, that,
(A) prior to the effective date of the
registration statement filed in connection with such
registration, promptly following receipt of notification by
the Company from the managing underwriter of the price at
which such securities are to be sold, the Company shall so
advise the attorney-in-fact for the Requesting Holders of such
price, and if such price is below the minimum price which any
Requesting Holder shall have indicated to be acceptable to
such Requesting Holder, such Requesting Holder shall then have
the right irrevocably to withdraw its request to have its
Registrable Common Stock included in such registration
statement, by delivery of written notice of such withdrawal to
the Company promptly but in any event before the execution of
the underwriting agreement on behalf of such Holder, without
prejudice to the rights of any Holder or Holders of
Registrable Common Stock to include Registrable Common Stock
in any future registration (or registrations) pursuant to this
Section 4 or to cause
-6-
<PAGE> 10
such registration to be effected as a registration under
Section 2 or Section 3(a) hereof, as the case may be;
(B) if at any time after giving written
notice of its intention to register any securities and prior
to the effective date of the registration statement filed in
connection with such registration, the Company shall determine
for any reason not to register or to delay registration of
such securities, the Company may, at its election, give
written notice of such determination to each Requesting Holder
and (i) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable
Common Stock in connection with such registration (but not
from any obligation of the Company to pay the Expenses in
connection therewith), without prejudice, however, to the
rights of any Holder to include Registrable Common Stock in
any future registration (or registrations) pursuant to this
Section 4 or to cause such registration to be effected as a
registration under Section 2 or 3(a) hereof, as the case may
be, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Common Stock, for the same period as the delay in
registering such other securities; and
(C) if such registration involves an
underwritten offering, each Requesting Holder shall sell its
Registrable Securities on the same terms and conditions as
those that apply to the Company, if the Company is offering
Common Stock.
No registration effected under this Section 4 shall relieve
the Company of its obligation to effect any registration upon request under
Section 3(a) hereof or of its obligation to effect the Shelf Registration under
Section 2 hereof.
5. Expenses. The Company shall pay all Expenses in connection
with any registration initiated pursuant to Section 2(a), 3(a) or 4 hereof,
whether or not such registration shall become effective and whether or not all
or any portion of the Registrable Common Stock originally requested to be
included in such registration is ultimately included in such registration.
Notwithstanding the foregoing, if any request for registration made pursuant to
Section 3(a) hereof is withdrawn or terminated by the Selling Holders prior to
the registration becoming effective, the Expenses incurred in connection with
such request shall be borne by the Selling Holders pro rata on the basis of the
number of shares of Registrable Common Stock requested to be registered pursuant
to such demand by each Selling Holder; provided, however, that, in the case of
an underwritten Public Offering, if such request for registration is withdrawn
or terminated by the Selling Holders prior to the registration becoming
effective because the offering price of the Registrable Common Stock requested
to be registered would, in the opinion of the managing underwriter of such
offering, be less than 90% of the estimated offering price of the Common Stock
as indicated in writing by the managing underwriter prior to the initial filing
of such registration statement with the Commission, the Company shall pay 50% of
the Expenses in connection with such registration and the Selling Holders shall
pay the remaining 50% on a pro rata basis.
-7-
<PAGE> 11
6. Registration Procedures. If and whenever the Company is
required to effect any registration under the Securities Act as provided in
Sections 2(a), 3(a) and 4 hereof, the Company shall, as expeditiously as
possible:
(a) subject to Section 6(c) hereof, prepare and file
with the Commission (promptly and, in the case of any registration pursuant to
Section 3(a), in any event within 45 days) the requisite registration statement
to effect such registration and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that the Company
may discontinue any registration of its securities that are not shares of
Registrable Common Stock (and, under the circumstances specified in Section 4
hereof, its securities that are shares of Registrable Common Stock) at any time
prior to the effective date of the registration statement relating thereto;
(b) notify each seller of Registrable Common Stock
and other securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and subject to Section 6(c) hereof, prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Common Stock covered by such registration statement until such time
as all of such Registrable Common Stock has been disposed of in accordance with
the method of disposition set forth in such registration statement;
(c) before filing any registration statement or
prospectus or any amendments or supplements thereto, furnish to and afford the
Holders of the Registrable Common Stock, one firm of counsel for the Holders
designated by the Holders of a majority of the Registrable Common Stock included
in the registration statement (the "Holders Counsel") and the managing
underwriters, if any designated by the Holders, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(at least ten (10) Business Days prior to such filing). The Company shall not
file any registration statement or prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority of the
shares of Registrable Common Stock covered by such registration statement, the
Holders Counsel, or the managing underwriters, if any, shall reasonably object.
Any registration statement, when declared effective by the Commission or when
subsequently amended (by an amendment which is declared effective by the
Commission) or any prospectus in the form included in the registration statement
as declared effective by the Commission or when subsequently supplemented will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
-8-
<PAGE> 12
(d) use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness of a registration
statement, and in any event shall, within thirty (30) days of such cessation of
effectiveness, use its best efforts to amend the registration statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional registration statement pursuant to
Rule 415 covering all of the Registrable Common Stock and use its best efforts
to cause the subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to remain effective;
(e) if requested by the managing underwriters, if
any, or the Holders of a majority of the Registrable Common Stock being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or counsel reasonably request to
be included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to such registration statement;
(f) furnish to each seller of Registrable Common
Stock covered by such registration statement such number of copies of such
drafts and final conformed versions of such registration statement and of each
such amendment and supplement thereto (in each case including all exhibits and
any documents incorporated by reference), such number of copies of such drafts
and final versions of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such seller may
reasonably request in writing;
(g) use its best efforts (i) to register or qualify
all Registrable Common Stock under such other securities or blue sky laws of
such states or other jurisdictions of the United States of America as the
sellers of Registrable Common Stock covered by such registration statement shall
reasonably request in writing, (ii) to keep such registration or qualification
in effect for so long as such registration statement remains in effect, (iii) to
prevent the issuance of any order suspending the effectiveness of a registration
statement or of any order preventing or suspending the use of a prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Common Stock for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order at
the earliest possible moment, and (iv) to take any other action that may be
reasonably necessary or advisable to enable such sellers to consummate the
disposition in such jurisdictions of the securities to be sold by such sellers,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subsection (g) be obligated to be so
qualified, to subject itself to taxation in such jurisdiction or to consent to
general service of process in any such jurisdiction;
(h) use its best efforts to cause all Registrable
Common Stock and other securities covered by such registration statement to be
registered with or approved by such
-9-
<PAGE> 13
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to the Company and counsel to the seller or sellers of
Registrable Common Stock to enable the seller or sellers thereof to consummate
the disposition of such Registrable Common Stock in the manner set forth in the
registration statement;
(i) in connection with any underwritten offering, use
its best efforts to obtain and, if obtained, furnish to each seller of
Registrable Common Stock, and each such seller's underwriters, if any, a signed
(i) opinion of counsel for the Company,
dated the date of the closing under the underwriting agreement,
reasonably satisfactory in form and substance to the Holders Counsel,
and
(ii) "comfort" letter, dated the effective
date of such registration statement and signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration
statement, reasonably satisfactory in form and substance to the Holders
Counsel,
in each case, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' comfort letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to underwriters in
underwritten public offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as the sellers of the Registrable Common
Stock covered by such registration statement or the underwriters, if any, may
reasonably request;
(j) otherwise comply with all applicable rules and
regulations of the Commission and any other governmental agency or authority
having jurisdiction over the offering, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 promulgated thereunder, and furnish to
each seller of Registrable Common Stock at least ten days prior to the filing
thereof a copy of any amendment or supplement to such registration statement or
prospectus;
(k) use its best efforts to cause all such
Registrable Common Stock covered by such registration statement (i) to be listed
on the Exchange, if the listing of such Registrable Common Stock is then
permitted under the rules thereof or (ii) if the Company is not required
pursuant to clause (i) above to list such securities covered by such
registration statement on such Exchange, use its best efforts to secure
designation of all Registrable Common Stock covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-l of the Commission or, failing that, to secure NASDAQ authorization
for such Registrable Common Stock and, without limiting the generality of the
-10-
<PAGE> 14
foregoing, to arrange for at least two market makers to register with the NASD
as such with respect to such Registrable Common Stock;
(l) file all annual and quarterly reports required by
the Exchange Act, and, in the event that the Company is no longer subject to the
reporting requirements of the Exchange Act, file the reports required to be
filed by it under the Exchange Act and the rules and regulations adopted by the
Commission thereunder in the same manner as if it were subject to such reporting
requirements; and
(m) provide a transfer agent for such Registrable
Common Stock covered by such Registration Statement no later than the effective
date thereof (which transfer agent shall also maintain the share register for
the Common Stock).
The Company may require each seller of Registrable Common
Stock as to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of the securities covered
by such registration statement as the Company may from time to time reasonably
request in writing and as is required by applicable laws and regulations.
Each Holder agrees that as of the date that a final prospectus
is made available to it for distribution to prospective purchasers of
Registrable Common Stock it shall cease to distribute copies of any preliminary
prospectus prepared in connection with the offer and sale of such Registrable
Common Stock. Each Holder further agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in subsection
(b) of this Section 6, such Holder shall forthwith discontinue such Holder's
disposition of Registrable Common Stock pursuant to the registration statement
relating to such Registrable Common Stock until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subsection (b)
of this Section 6 and, if so directed by the Company, shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus relating to such Registrable
Common Stock current at the time of receipt of such notice.
7. Underwritten Offerings.
(a) Underwriting Agreement. In the event of an
underwritten offering of Registrable Common Stock, the Company shall enter into
an underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration or the disposition of such
Registrable Common Stock, and in such connection, (i) make such representations
and warranties to the underwriters, with respect to the business of the Company
and its subsidiaries and the registration statement, prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein, in each
case, as is reasonable, and (ii) include in such underwriting agreement
indemnification provisions and procedures no less favorable than those set forth
in Section 9 of this Agreement (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of Registrable
Common Stock covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties
-11-
<PAGE> 15
to be indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(b) Piggyback Underwritten Offerings; Priority. If
the Company proposes to register any of its securities under the Securities Act
as contemplated by Section 4 hereof and such securities are to be distributed by
or through one or more underwriters, the Company shall, if requested by any
Requesting Holders, use its best efforts to arrange for such underwriters to
include all of the Registrable Common Stock to be offered and sold by such
Requesting Holders among the securities of the Company to be distributed by such
underwriters; provided, that, if the managing underwriter of such underwritten
offering shall advise the Company in writing (with a copy to the Requesting
Holders) that if all the Registrable Common Stock requested to be included in
such registration (together with all other shares of Common Stock of other
stockholders of the Company requested to be so included pursuant to "piggyback"
rights granted to such stockholders) were so included, in its opinion, the
number and type of securities proposed to be included in such registration would
exceed the number and type of securities which could be sold in such offering
within a price range acceptable to the Company (such writing to state the basis
of such opinion and the approximate number and type of securities which may be
included in such offering without such effect), then the Company shall include
in such registration, to the extent of the number and type of securities which
the Company is so advised can be sold in such offering, (i) first, securities
that the Company proposes to issue and sell for its own account and (ii) second,
Registrable Common Stock requested to be registered by Requesting Holders
pursuant to Section 4 hereof and Common Stock of any other stockholders of the
Company requesting registration as aforesaid, pro rata, among such holders on
the basis of the number of shares of Common Stock requested to be registered by
all such holders.
Any Requesting Holder may withdraw its request to have all or
any portion of its Registrable Common Stock included in any such offering by
notice to the Company within 10 Business Days after receipt of a copy of a
notice from the managing underwriter pursuant to this section 7(b).
(c) Holders of Registrable Common Stock to be Parties
to Underwriting Agreement. The Holders of Registrable Common Stock to be
distributed by underwriters in an underwritten offering contemplated by
subsections (a) or (b) of this Section 7 shall be parties to the underwriting
agreement between the Company and such underwriters and any such Holder, at its
option, may require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Holders and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holders. No such Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters except that each such Holder shall be required to make
representations, warranties and agreements regarding such Holder, such Holder's
Registrable Common Stock and such Holder's intended method of distribution. The
Selling Holders shall appoint an attorney-in-fact who shall
-12-
<PAGE> 16
be authorized to negotiate with the underwriter on behalf of the Selling Holders
and to execute the underwriting agreement and related documentation on their
behalf.
(d) Selection of Underwriters for Underwritten
Offering. The underwriter or underwriters of each underwritten offering, if any,
of the Registrable Common Stock to be registered pursuant to Section 2(a) or
3(a) hereof (i) shall be a nationally recognized underwriter (or underwriters),
(ii) shall be selected by the Selling Holders owning at least a majority of the
shares of Registrable Common Stock to be registered and (iii) shall be
reasonably acceptable to the Company. The underwriter or underwriters of each
piggyback underwritten offering pursuant to Section 4 shall be a nationally
recognized underwriter (or underwriters) selected by the Company.
8. Preparation; Reasonable Investigation.
(a) Registration Statements. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company shall give each Holder of Registrable
Common Stock registered under such registration statement, the underwriter, if
any, and its respective counsel and accountants the reasonable opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and shall give each of them such reasonable access to its
books and records and such reasonable opportunities to discuss the business of
the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the reasonable
opinion of any such Holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
(b) Confidentiality. Each Holder of Registrable
Common Stock shall maintain the confidentiality of any confidential information
received from or otherwise made available by the Company to such Holder of
Registrable Common Stock and identified in writing by the Company as
confidential. Information that (i) is or becomes available to a Holder of
Registrable Common Stock from a public source, (ii) is disclosed to a Holder of
Registrable Common Stock by a third-party source who the Holder of Registrable
Common Stock reasonably believes has the right to disclose such information or
(iii) is or becomes required to be disclosed by a Holder of Registrable Common
Stock by law, including by court order, shall not be deemed to be confidential
information for purposes of this Agreement.
9. Indemnification.
(a) Indemnification by the Company. In connection
with any registration statement filed by the Company pursuant to Section 2(a),
3(a) or 4 hereof, the Company shall, and hereby agrees to, indemnify and hold
harmless, each Holder and seller of any Registrable Common Stock covered by such
registration statement and each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such Holder or seller or any such underwriter, and their respective
directors, officers, partners, agents and Affiliates (each, a "Company
Indemnitee" for purposes of this Section 9(a)), against any losses, claims,
damages, liabilities (or actions or proceedings,
-13-
<PAGE> 17
whether commenced or threatened, in respect thereof and whether or not such
Indemnified Party is a party thereto), joint or several, and expenses,
including, without limitation, the reasonable fees, disbursements and other
charges of one legal counsel for all of such Company Indemnitees (which counsel
shall be reasonably acceptable to all such Company Indemnitees) and reasonable
costs of investigation, to which such Company Indemnitee may become subject
under the Securities Act or otherwise (collectively, a "Loss" or "Losses"),
insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered or otherwise offered or
sold under the Securities Act or otherwise, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto (collectively, "Offering Documents"), or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances in
which they were made not misleading; provided, that, the Company shall not be
liable in any such case to the extent that any such Loss arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Offering Documents in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such Company Indemnitee specifically
stating that it is expressly for use therein; and provided, further, that the
Company shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Common Stock or any other Person, if any,
who controls such underwriter, in any such case to the extent that any such Loss
arises out of such Person's failure to send or give a copy of the final
prospectus (including any documents incorporated by reference therein), as the
same may be then supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Common Stock to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Company Indemnitee and shall
survive the transfer of such securities by such Company Indemnitee.
(b) Indemnification by the Offerors and Sellers. In
connection with any registration statement filed by the Company pursuant to
Section 2(a), 3(a) or 4 hereof in which a Holder has registered for sale
Registrable Common Stock, each such Holder or seller of Registrable Common Stock
shall, and hereby agrees to, indemnify and hold harmless the Company and each of
its directors, officers, employees and agents, each other Person, if any, who
controls the Company and each other seller and such seller's directors,
officers, stockholders, partners, employees, agents and affiliates (each, a
"Holder Indemnitee" for purposes of this Section 9(b)), against all Losses
insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any Offering Documents
(or any document incorporated by reference therein) or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in the light of circumstances in which
they were made not misleading, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Holder or seller of Registrable Common Stock
specifically stating that it is expressly for use therein; provided, however,
that the liability of such
-14-
<PAGE> 18
indemnifying party under this Section 9(b) shall be limited to the amount of the
net proceeds received by such indemnifying party in the offering giving rise to
such liability. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Holder Indemnitee and shall
survive the transfer of such securities by such Holder.
(c) Notices of Losses, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a Loss referred to in the preceding subsections of this Section 9,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 9, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such Loss, to
assume and control the defense thereof, in each case at its own expense, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
its assumption of the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall be liable for any
settlement of any such action or proceeding effected without its written
consent, which shall not be unreasonably withheld. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such Loss or which requires action on
the part of such indemnified party or otherwise subjects the indemnified party
to any obligation or restriction to which it would not otherwise be subject.
(d) Contribution. If the indemnification provided for
in this Section 9 shall for any reason be unavailable to an indemnified party
under subsection (a) or (b) of this Section 9 in respect of any Loss, then, in
lieu of the amount paid or payable under subsection (a) or (b) of this Section
9, the indemnified party and the indemnifying party under subsection (a) or (b)
of this Section 9 shall contribute to the aggregate Losses (including legal or
other expenses reasonably incurred in connection with investigating the same)
(i) in such proportion as is appropriate to reflect the relative fault of the
Company and the prospective sellers of Registrable Common Stock covered by the
registration statement which resulted in such Loss or action in respect thereof,
with respect to the statements, omissions or action which resulted in such Loss
or action in respect thereof, as well as any other relevant equitable
considerations, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, on the one hand, and such
prospective sellers, on the other hand, from their sale of Registrable Common
Stock; provided, that, for purposes of this clause (ii), the relative benefits
received by the prospective sellers shall be deemed not to exceed the amount
received by such sellers. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
-15-
<PAGE> 19
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligations, if any, of the Selling Holders of
Registrable Common Stock to contribute as provided in this subsection (d) are
several in proportion to the relative value of their respective Registrable
Common Stock covered by such registration statement and not joint. In addition,
no Person shall be obligated to contribute hereunder any amounts in payment for
any settlement of any action or Loss effected without such Person's consent.
(e) Other Indemnification. The Company and, in
connection with any registration statement filed by the Company pursuant to
Section 2(a) each Holder shall, and, in connection with any registration
statement filed by the Company pursuant to Section 3(a) or 4, each Holder who
has registered for sale Registrable Common Stock, shall, with respect to any
required registration or other qualification of securities under any Federal or
state law or regulation of any governmental authority other than the Securities
Act, indemnify Holder Indemnitees and Company Indemnitees, respectively, against
Losses, or, to the extent that indemnification shall be unavailable to a Holder
Indemnitee or Company Indemnitee, contribute to the aggregate Losses of such
Holder Indemnitee or Company Indemnitee in a manner similar to that specified in
the preceding subsections of this Section 9 (with appropriate modifications);
provided, that, the Holder shall be liable only if and to the extent that such
Loss arises out of or is based upon written information furnished to the Company
through an instrument duly executed by or on behalf of such Holder specifically
stating that it is expressly for use in connection with such registration or
qualification; and provided, further, that the aggregate liability of such
Holder under this Section 9 shall be limited to the amount of the net proceeds
received by such Holder in the offering giving rise to such liability.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 9 shall be made by periodic payments of
the amount thereof during the course of any investigation or defense, as and
when bills are received or any Loss is incurred.
10. Registration Rights to Others. If the Company shall at any
time hereafter provide to any holder of any securities of the Company rights
with respect to the registration of such securities under the Securities Act or
the Exchange Act, such rights shall not be in conflict with or adversely affect
any of the rights provided in this Agreement to the Holders of Registrable
Common Stock.
11. Adjustments Affecting Registrable Common Stock. The
Company shall not effect or permit to occur any combination, subdivision or
reclassification of Registrable Common Stock that would materially adversely
affect the ability of the Holders to include such Registrable Common Stock in
any registration of its securities under the Securities Act contemplated by this
Agreement or the marketability of such Registrable Common Stock under any such
registration or other offering.
12. Rule 144 and Rule 144A. The Company shall take all actions
required to be taken on the part of the Company in order to enable Holders to
sell Registrable Common Stock without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to
-16-
<PAGE> 20
time, (b) Rule 144A under the Securities Act, as such Rule may be amended from
time to time, or (c) any similar rules or regulations hereafter adopted by the
Commission, including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed under the Exchange Act. Upon
the request of any Holder, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements.
13. Amendments and Waivers. Any provision of this Agreement
may be amended, modified or waived if, but only if, the written consent to such
amendment, modification or waiver has been obtained from (i) except as provided
in clause (ii) below, the Holder or Holders of at least 66-2/3% of the shares of
Registrable Common Stock affected by such amendment, modification or waiver and
(ii) in the case of any amendment, modification or waiver of any provision of
Section 5 hereof or this Section 13, or as to the percentages of Holders
required for any amendment, modification or waiver, or any amendment,
modification or waiver which adversely affects any right and/or obligation under
this Agreement of any Holder, the written consent of each Holder so affected.
14. Nominees for Beneficial Owners. In the event that any
Registrable Common Stock is held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the Holder of such Registrable Common Stock for purposes
of any request or other action by any Holder or Holders pursuant to this
Agreement or any determination of the number or percentage of shares of
Registrable Common Stock held by any Holder or Holders contemplated by this
Agreement. If the beneficial owner of any Registrable Common Stock so elects,
the Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Common Stock.
15. Assignment. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns. Any Holder may assign to any Transferee
of its Registrable Common Stock its rights and obligations under this Agreement
(except with respect to shares of Registrable Common Stock sold pursuant to Rule
144 under the Securities Act, under any registration statement or otherwise in a
manner such that the shares are no longer subject to restrictions from further
public resale under the Securities Act without regard to volume limitations),
provided that the Company shall receive written notice of such transfer and that
such Transferee shall agree in writing with the parties hereto prior to the
assignment to be bound by this Agreement as if it were an original party hereto,
whereupon such assignee shall for all purposes be deemed to be a Holder under
this Agreement. Except as provided above or otherwise permitted by this
Agreement, neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by any Holder without
the prior written consent of the other parties hereto. The Company may not
assign this Agreement or any right, remedy, obligation or liability arising
hereunder or by reason hereof.
16. Calculation of Percentage or Number of Shares of
Registrable Common Stock. For purposes of this Agreement, all references to
percentage or number of shares of Registrable Common Stock or Common Stock shall
be calculated based upon the number of
-17-
<PAGE> 21
shares of Registrable Common Stock or Common Stock, as the case may be,
outstanding at the time such calculation is made and shall exclude any
Registrable Common Stock or Common Stock, as the case may be, owned by the
Company or any subsidiary of the Company.
17. Miscellaneous.
(a) Further Assurances. Each of the parties hereto
shall execute such documents and other papers and perform such further acts as
may be reasonably required or desirable to carry out the provisions of this
Agreement and the transactions contemplated hereby.
(b) Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
(c) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement which is inconsistent with the rights granted
to the Holders in this Agreement.
(d) Remedies. Each Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and the Company hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(e) Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to the subject matter hereof.
(f) Notices. Any notices or other communications to
be given hereunder by any party to another party shall be in writing, shall be
delivered personally, by telecopy, by certified or registered mall, postage
prepaid, return receipt requested, or by Federal Express or other comparable
delivery service, in the case of a Holder, to the address of such Holder as
shown on the Company's shareholder records, and in the case of the Company, as
follows:
-18-
<PAGE> 22
Porta Systems Corp.
575 Underhill Blvd.
Syosset, NY 11791
Attention: Mr. William V. Carney
Chairman of the Board and Chief Executive Officer
-and-
Mr. Edward B. Kornfeld
Chief Financial Officer
Tel: 516 364-9300
Fax: 516 682-4655
with a copy to:
Esanu Katsky Korins & Siger, LLP
605 Third Avenue
New York, NY 10158
Attention: Warren H. Esanu, Esq.
Tel: 212 953-6000
Fax: 212 953-6899
Notice shall be effective when delivered if given personally, when receipt is
acknowledged if telecopied, three Business Days after mailing if given by
registered or certified mail as described above, and one Business Day after
deposit if given by Federal Express or comparable delivery service.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made to be performed entirely in such State. Any action against
the Company may be brought solely in the Federal or State Courts located in New
York County, New York.
(h) Severability. Notwithstanding any provision of
this Agreement, neither the Company nor any other party hereto shall be required
to take any action which would be in violation of any applicable Federal or
state securities law. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or
the validity, legality or enforceability of this Agreement, including any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
(i) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
-19-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PORTA SYSTEMS CORP.
By: /s/ EDWARD B. KORNFELD
------------------------
Name: Edward B. Kornfeld
Title: Senior Vice President
and
Chief Financial Officer
-20-
