Unassociated Document


    
      Exhibit
        4.2

      


      Subordinated
        Promissory Note

      


      PORTA
        SYSTEMS CORP.

      


      Subordinated
        Note due January 31, 2016

      


      
        	
                N
                  -
                  ___________

              	
                 

              	
                New
                  York, New York

              
	
                $___________________

              	 	
                August
                  1, 2008

              


      

      


      FOR
        VALUE
        RECEIVED,
        Porta
        Systems Corp., a Delaware corporation (the “Company”),
        hereby promises to pay to the order of ___________________ (“Registered
        Holder”)
        the
        principal amount of ___________________________________________ dollars
        ($___________). Principal shall be paid quarterly on the last day of the
        month
        ending three months after the issuance of these Subordinated Notes and
        thereafter on the last day of the month ending every three months thereafter
        in
        installments on the basis of a level payment twenty-five year amortization
        schedule , with all remaining and unpaid principal and accrued interest due
        and
        payable on January 31, 2016. Interest shall be payable at the rate of ten
        percent (10%) per annum. Payments of principal and interest shall be made
        quarterly in accordance with the payment schedule set forth as Schedule
        A
        to this
        Note. All payments shall be applied first to accrued interest and the balance,
        if any, to principal. If any payment is due is on a day on not a business
        day,
        such payment shall be made on the next day which is a business day. A business
        day shall mean a day other than Saturday, Sunday or other day on which banks
        in
        the City of New York are permitted or required to be closed for all or part
        of a
        normal business day. Payments shall be made in lawful money of the United
        States
        of America against presentment of this Note. In the event of a failure to
        make
        any payment due hereunder which remains unpaid for sixty (60) days, interest
        on
        the unpaid principal shall be payable, to the extent permitted by law, at
        the
        rate of sixteen percent (16%) per annum on the entire unpaid principal amount
        of
        this Note from and after the time that such unpaid principal amount shall
        have
        become due and payable (whether at maturity or by acceleration). This Note
        is
        one of a series of the Company’s 10% Subordinated Notes due January 31, 2016
        (collectively, the “New
        Notes”),
        in
        the aggregate principal amount of one million seven hundred fifty thousand
        dollars ($1,750,000) which were issued pursuant to agreements between the
        Company and each of the initial holders of the New Notes which became effective
        on August 1, 2008. 


      


      ARTICLE
        1.

      Events
        of
        Default and Acceleration

      


      (a) Events
        of Default Defined.
        The
        entire unpaid principal amount of this Note, together with interest thereon
        shall, on written notice from the Registered Holders of New Notes in the
        principal amount of not less than two-thirds of the aggregate principal amount
        of New Notes then outstanding, forthwith become and be due and payable if
        any
        one or more Events of Default shall have occurred (for any reason whatsoever
        and
        whether such happening shall be voluntary or involuntary or be affected or
        come
        about by operation of law pursuant to or in compliance with any judgment,
        decree
        or order of any court or any order, rule or regulation of any administrative
        or
        governmental body) and be continuing. An Event of Default shall
        occur:

      


      (i) if
        failure shall be made in the due and punctual payment of the principal of
        or
        interest on the New Notes when and as the same shall become due and payable
        whether at maturity or otherwise, and such failure shall have continued for
        sixty (60) days and payment thereof is not deferred pursuant to Article 2
        hereof; 


      
        
           

        

        
          Subordinated
            Note - 1

          
            

          

        

        
           

        

      


      


      (ii) if
        the
        maturity of any Senior Debt shall be accelerated as a result of a breach
        of or
        default under any instrument governing the terms of such Senior Debt
        .

      


      (iii) 
        if the
        Company shall consent to the appointment of a receiver, trustee or liquidator
        of
        itself or of a substantial part of its property, or shall admit in writing
        its
        inability to pay its debts generally as they become due, or shall make a
        general
        assignment for the benefit of creditors, or shall file a voluntary petition
        in
        bankruptcy, or an answer seeking reorganization in a proceeding under any
        bankruptcy law (as now or hereafter in effect) or an answer admitting the
        material allegations of a petition filed against the Company, in any such
        proceeding, or shall by voluntary petition, answer or consent, seek relief
        under
        the provisions of any other now existing or future bankruptcy or other similar
        law providing for the reorganization or winding up of corporations, or an
        arrangement, composition, extension or adjustment with its or their creditors,
        or shall, in a petition in bankruptcy filed against it or them be adjudicated
        a
        bankrupt, or the Company or its directors or the holders of a majority of
        its
        equity interest shall vote to dissolve or liquidate the Company;

      


      (iv) if
        a
        court of competent jurisdiction shall enter an order, judgment or decree
        appointing, without consent of the Company, a receiver, trustee or liquidator
        of
        the Company or of all or any substantial part of the property of the Company,
        or
        approving a petition filed against the Company seeking a reorganization or
        arrangement of the Company under the Federal bankruptcy laws or any other
        applicable law or statute of the United States of America or any State thereof,
        or any substantial part of the property of the Company shall be sequestered;
        and
        such order, judgment or decree shall not be vacated or set aside or stayed
        within ninety (90) days from the date of the entry thereof; or

      


      (v) if,
        under
        the provisions of any law for the relief or aid of debtors, any court of
        competent jurisdiction shall assume custody or control of the Company or
        of all
        or any substantial part of the property of the Company and such custody or
        control shall not be terminated or stayed within ninety (90) days from the
        date
        of assumption of such custody or control.

      


      (b) Rights
        of Note Holder.
        Nothing
        in this Note shall be construed to modify, amend or limit in any way the
        right
        of the Registered Holder to bring an action against the Company in the event
        the
        Company fail to pay principal of or interest on this Note when due.



      


      ARTICLE
        2.

      Subordination

      


      (a) Agreement
        of Subordination.
        The
        Company, for itself, its successors and assigns, covenants and agrees, and
        the
        Registered Holder by his or her acceptance of this Note likewise covenants
        and
        agrees, that the payment of the principal of and interest on this Note is
        hereby
        expressly subordinated, to the extent and in the manner hereinafter set forth,
        to the prior payment in full of all amounts due and owing on the Senior Debt,
        as
        hereinafter defined. No payment shall be made on this Note unless and except
        to
        the extent that, at the time of payment under and pursuant to this Note,
        all
        amounts then due and owing on the Senior Debt have been paid in full, there
        shall not have occurred an event of default or an event which, with the passage
        of time or the giving of notice by the holder of Senior Debt would result
        in an
        event of default under any instrument evidencing or relating to the Senior
        Debt,
        and the making of such payment would not cause the Company to breach any
        covenants to the holder of the Senior Debt set forth in the loan or other
        agreements between the Company and the holder of the Senior Debt, as the
        same
        may be amended from time to time, unless the holder of Senior Debt otherwise
        specifically consents in writing to such payment by the Company. If the Company
        is unable to make a payment of principal and interest on this Note at the
        time
        due by reason of the provisions of this Article
        2,
        the
        Company shall notify the Registered Holder of such fact, in writing, within
        a
        reasonable time after such date. The provisions of this Article
        2
        shall
        constitute a continuing offer to all persons who, in reliance upon such
        provision, become holders of, or continue to hold, Senior Debt, and such
        provisions are made for the benefit of the holders of Senior Debt, and such
        holders are hereby made obligees hereunder the same as if their names were
        written herein as such, and they and/or each of them may proceed to enforce
        such
        provisions.


      
        
           

        

        
          Subordinated
            Note - 2

          
            

          

        

        
           

        

      


      


      (b) Company
        Not to Make Payments with Respect to Note in Certain
        Circumstances.

      


      (i) Upon
        the
        maturity of any Senior Debt by lapse of time, acceleration or otherwise,
        all
        principal thereof and premium, if any, interest thereon, costs of enforcement
        or
        collection and any other sums due and owing by the Corporation to the holder
        of
        the Senior Debt shall first be paid in full, or such payment duly provided
        for
        in cash or in a manner satisfactory to the holder or holders of such Senior
        Debt
        , before any payment is made by the Company (A) on account of the principal
        of
        or interest on this Note or (B) to acquire this Note.

      


      (ii) 
        Upon the
        happening of an event of default with respect to any Senior Debt , as such
        event
        of default is defined therein or in the instrument under which it is
        outstanding, permitting the holders to accelerate the maturity thereof, and,
        if
        the default is other than default in payment of the principal of or premium,
        if
        any, or interest on such Senior Debt , upon written notice thereof given
        to the
        Company by the holder or holders of such Senior Debt or their representative
        or
        representatives, then, unless and until such event of default shall have
        been
        cured or waived or shall have ceased to exist, no payment shall be made by
        the
        Company (A) on account of the principal of or interest on this Note or (B)
        to
        acquire this Note.

      


      (iii) 
        In the
        event that, notwithstanding the provision of this Paragraph
        2(b),
        the
        Company shall make any payment to the Registered Holder on account of the
        principal of or interest on this Note after the happening of a default in
        payment of the principal of or premium, if any, or interest or any other
        sums
        on, Senior Debt or after receipt by the Company of written notice of an event
        of
        default with respect to any Senior Debt and after written notice of such
        default
        or event of default is given by the Company to the Registered Holder, then
        unless and until such default or event of default shall have been cured or
        waived or shall have ceased to exist, such payment shall be held by the
        Registered Holder in trust for the benefit of, and shall be paid forthwith
        over
        and delivered to, the holders of Senior Debt (pro rata as to each of such
        holders on the basis of the respective amounts of Senior Debt held by them)
        or
        their representative or the trustee under the indenture or other agreement
        (if
        any) pursuant to which any instruments evidencing any Senior Debt may have
        been
        issued, as their respective interests may appear, for application to the
        payment
        of all Senior Debt remaining unpaid to the extent necessary to pay all Senior
        Debt in full in accordance with the terms of such Senior Debt, after giving
        effect to any concurrent payment or distribution to or for the holders of
        Senior
        Debt .

      


      (c) Note
        Subordinated to Prior Payment of all Senior Debt on Dissolution, Liquidation
        or
        Reorganization of Company.
        Upon
        any distribution of assets of the Company upon any dissolution, winding up,
        liquidation or reorganization of the Company (whether in bankruptcy, insolvency
        or receivership proceedings or upon an assignment for the benefit of creditors
        or otherwise):

      


      (i) 
        The
        holders of all Senior Debt shall first be entitled to receive payment in
        full of
        the principal thereof, premium, if any, interest due thereon, costs of
        enforcement or collection and any other sums due and owing by the Corporation
        to
        the holder of the Senior Debt before the Registered Holder is entitled to
        receive any payment on account of the principal of or interest on this Note
        (other than payment of shares of stock of the Company as reorganized or
        readjusted, or securities of the Company or any other corporation provided
        for
        by a plan of reorganization or readjustment which stock and securities are
        subordinated to the payment of all Senior Debt and securities received in
        lieu
        thereof which may at the time be outstanding); and


      
        
           

        

        
          Subordinated
            Note - 3

          
            

          

        

        
           

        

      


      


      (ii) 
        Any
        payment or distribution of assets of the Company of any kind or character
        whether in cash, property or securities (other than shares of stock of the
        Company as reorganized or readjusted, or securities of the Company or any
        other
        corporation provided for by a plan of reorganization or readjustment which
        stock
        and securities are subordinated to the payment of all Senior Debt and securities
        received in lieu thereof which may at the time be outstanding), to which
        the
        Registered Holder would be entitled except for the provisions of this
Article
        2,
        shall
        be paid by the liquidating trustee or agent or other person making such payment
        of distribution, whether a trustee in bankruptcy, a receiver or liquidating
        trustee or other trustee or agent, directly to the holders of Senior Debt
        or
        their representative or representatives, or to the trustee or trustees under
        any
        indenture under which any instruments evidencing any of such Senior Debt
        may
        have been issued, to the extent necessary to make payment in full of all
        Senior
        Debt remaining unpaid, after giving effect to any concurrent payment or
        distribution or provision therefor to the holders of such Senior
        Debt.

      


      (iii) 
        In the
        event that notwithstanding the foregoing provision of this Article
        2,
        any
        payment or distribution of assets of the Company of any kind or character,
        whether in cash, property or securities (other than shares of stock of the
        Company as reorganized or readjusted, or securities of the Company or any
        other
        corporation provided for by a plan of reorganization or readjustment which
        stock
        and securities are subordinated to the payment of all Senior Debt and securities
        received in lieu thereof which may at the time be outstanding), shall be
        received by the Registered Holder on account of principal of or interest
        on this
        Note before all Senior Debt is paid in full, or effective provision made
        for its
        payment or distribution, such payment or distribution shall be received and held
        in trust for and shall be paid over to the holders of the Senior Debt remaining
        unpaid or unprovided for or their representative or representatives, or to
        the
        trustee or trustees under any indenture under which any instruments evidencing
        any of such Senior Debt may have been issued, for application to the payment
        of
        such Senior Debt until all such Senior Debt shall have been paid in full,
        after
        giving effect to any concurrent payment or distribution or provision therefor
        to
        the holders of such Senior Debt .

      


      (d) Registered
        Holder to be Subrogated to Right of Holders of Senior Debt .
        Subject
        to the payment in full of all Senior Debt, the Registered Holder shall be
        subrogated to the rights of the holders of Senior Debt to receive payments
        or
        distributions of assets of the Company applicable to the Senior Debt until
        all
        amounts owing on this Note shall be paid in full, and, for the purpose of
        such
        subrogation, no payments or distributions to the holders of the Senior Debt
        by
        or on behalf of the Company or by or on behalf of the Registered Holder by
        virtue of this Article
        2
        which
        otherwise would have been made to the Registered Holder of this Note shall,
        as
        between the Company and the Registered Holder, be deemed to be payment by
        the
        Company to or on account of the Senior Debt, it being understood that the
        provisions of this Article
        2
        are, and
        are intended solely, for the purpose of defining the relative rights of the
        Registered Holder of this Note, on the one hand, and the holders of the Senior
        Debt, on the other hand.

      


      (e) Obligation
        of the Company Unconditional.
        Nothing
        contained in this Article
        2
        or
        elsewhere in this Note is intended to or shall impair as between the Company
        and
        the Registered Holder, the obligation of the Company, which is absolute and
        unconditional, to pay to the Registered Holder the principal of and interest
        on
        this Note as and when the same shall become due and payable in accordance
        with
        their terms, or is intended to or shall affect the relative rights of the
        Registered Holder and creditors of the Company other than the holders of
        the
        Senior Debt, nor shall anything herein or therein prevent the Registered
        Holder
        of this Note from exercising all remedies otherwise permitted by applicable
        law
        upon default under this Note, subject to the rights, if any, under this
Article
        2
        of the
        holders of Senior Debt in respect of cash, property or securities of the
        Company
        received upon the exercise of any such remedy, it being understood that the
        Registered Holder shall not commence an action against the Company for failure
        to make payments if such payments may not be made to the Registered Holder
        pursuant to ths Article
        2.
        Upon
        any distribution of assets of the Company referred to in this Article
        2,
        the
        holders of this Note shall be entitled to rely upon any order or decree made
        by
        any court of competent jurisdiction in which any dissolution, winding up,
        liquidation or reorganization proceedings are pending, or a certificate of
        the
        liquidating trustee or agent or other person making any distribution to the
        Registered Holder for the purpose of ascertaining the persons entitled to
        participate in such distribution, the holders of the Senior Debt and other
        indebtedness of the Company, the amount thereof or payable thereon, the amount
        or amounts paid or distributed thereon and all other facts pertinent thereto
        or
        to this Article
        2.


      
        
           

        

        
          Subordinated
            Note - 4

          
            

          

        

        
           

        

      

       

      (f) Subordination
        Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior
        Debt .
        No
        right of any present or future holders of any Senior Debt to enforce
        subordination as herein provided shall at any time in any way be prejudiced
        or
        impaired by any act or failure to act on the part of the Company or by any
        act
        or failure to act, in good faith, by any such holder, or by any noncompliance
        by
        the Company with the terms, provisions and covenants of this Note, regardless
        of
        any knowledge thereof which any such holder may have or be otherwise charged
        with.

      


      (g) Definition
        of Senior Debt .
        The
        term “Senior
        Debt “
is
        defined to mean the principal of and premium, if any, interest, costs of
        enforcement or collection and any other sums due and owing by the Corporation
        on
        the following: (i) all indebtedness and obligations (other than the New Notes
        or
        notes to be issued to the holders of the Company's convertible debentures
        in
        connection with the Company's restructuring plan) that are created, assumed
        or
        guaranteed by the Company, whether before or after the issuance of the New
        Notes, that are (A) for money borrowed or (B) secured by purchase money
        mortgages or other similar security interests given by the Company or any
        subsidiary on real or personal property, (ii) all obligations of the Company,
        or
        of others which are guaranteed by the Company, whether existing on or after
        the
        issuance of the New Notes, as lessee under a lease of real or personal property,
        unless, with respect to any indebtedness or obligations described in clause
        (i)
        or (ii) of this Paragraph
        2(g),
        unless
        the instrument creating or evidencing such indebtedness expressly provides
        that
        such indebtedness is not superior in right of payment of the New Notes, (iii)
        all indebtedness or obligations of a kind not described in said clause (i)
        or
        (ii) which were incurred or guaranteed by the Company in connection with
        the
        acquisition of an existing business or assets, whether by means of a merger,
        consolidation, stock acquisition or acquisition of all or part of the assets
        of
        a corporation, partnership, limited liability company, business trust, sole
        proprietorship or other entity, or otherwise, and (iv) any deferrals, renewals,
        extensions or refundings of any of the foregoing, unless, in the case of
        any
        particular indebtedness or obligation or renewal, extension or refunding
        thereof, under the express provisions of the instrument creating or evidencing
        the same, or pursuant to which the same is outstanding, such indebtedness
        or
        other obligation or such renewal, extension or refunding thereof is not superior
        in right of payment to this Note. Senior Debt shall include the Company’s
        obligations to Cheyne Special Situations Fund L.P. and its affiliates,
        successors and assigns (collectively, “Cheyne”) issued under its senior secured
        note in the initial principal amount of $10,000,000 and any other obligations
        to
        Cheyne under any note, credit, loan or other agreement, and Senior Debt
        shall not
        include (a) indebtedness incurred for compensation to employees, or (b) other
        indebtedness incurred in the ordinary course of business for goods, materials,
        or services or any obligations of the Company under, or in respect of, leases
        other than as hereinbefore described. There are no restrictions on the right
        of
        the Company to incur Senior Debt.

      


      (h) Right
        of Registered Holder to Hold Senior Debt .
        The
        Registered Holder shall be entitled to all of the rights set forth in this
        Article
        2
        in
        respect of any Senior Debt at any time held by the Registered Holder to the
        same
        extent as any other holder of Senior Debt, and nothing in this Article
        2
        or
        elsewhere in this Note shall be construed to deprive the Registered Holder
        of
        any of its rights as such holder.


      
        
           

        

        
          Subordinated
            Note - 5

          
            

          

        

        
           

        

      


      


      ARTICLE
        3.

      Miscellaneous

      


      (a) Transferability.
        No
        transfer of this Note shall be effective unless such transfer is made (i)
        in
        compliance with all applicable Federal and state securities laws and the
        Registered Holder shall provide to the Company an opinion of counsel, which
        counsel and opinion shall be reasonably acceptable to the Company, as to
        the
        exemption from the registration requirements of the Securities Act of 1933,
        as
        amended, and applicable state securities laws, and (ii) is made pursuant
        to a
        written assignment or other instrument of transfer, a copy of which is delivered
        to the Company promptly following the transfer. The Company may, as a condition
        of such transfer, require the transferor to surrender this Note and issue
        a
        replacement Note to and in the name of the transferee. The Company shall
        be
        entitled to treat as the owner of this Note only the person shown as the
        Registered Holder on its books and records, regardless of whether the Company
        has any contrary knowledge.

      


      (b) WAIVER
        OF TRIAL BY JURY.
        IN ANY LEGAL PROCEEDING TO ENFORCE PAYMENT OF THIS NOTE, THE COMPANY AND,
        BY THE
        ACCEPTANCE OF THIS NOTE, THE REGISTERED HOLDER, THE REGISTERED HOLDER WAIVES
        TRIAL BY JURY.

      


      (c) Right
        of Prepayment.
        The
        Company may prepay the New Notes at whole at any time or in part from time
        to
        time, on not less than ten (10) days’ written notice without payment of any
        penalty or premium. Any prepayment shall by accompanied by payment of accrued
        interest to the date of payment. Prepayment shall be made, to the extent
        practical, proportional as to the Registered Holders of the outstanding New
        Notes based on the respective principal amounts of their New Notes; provided,
        that the Company may redeem in full the New Notes of any Registered Holder
        the
        principal amount of whose Note is not significant relative to the total
        outstanding principal amount of New Notes.

      


      (d) Notice
        to Company.
        Notice
        to the Company shall be given to the Company at their principal executive
        offices, presently located at 6851 Jericho Turnpike, Syosset, New York 11791,
        Attention: Chief Executive Officer, or to such other address as the Company
        may,
        from time to time, advise the Registered Holder of this Note.

      


      (e) Governing
        Law.
        This
        Note shall be governed by the laws of the State of New York applicable to
        agreements executed and to be performed wholly within such State. The Company,
        and by acceptance of this Note, the Registered Holder, consents to the exclusive
        jurisdiction of the United States District Court for the Southern District
        of
        New York and Supreme Court of the State of New York in the County of New
        York in
        any action relating to or arising out of this Note.

       

      IN
        WITNESS WHEREOF, the Company has executed this Note on the date and year
        first
        aforesaid.


      


      PORTA
        SYSTEMS CORP.


      


      By:
        ________________________________

      Edward
        B.
        Kornfeld

      Chief
        Executive Officer and Chief Financial Officer



      
        
           

        

        
          Subordinated
            Note - 6

          
            

          

        

        
           

        

      


      Schedule
        A

      


      Regular
        Payment Schedule