Exhibit 10.1

 

SIXTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT

 

This Sixth Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of August 4, 2016, by and among MODERN SYSTEMS CORPORATION, a
Delaware corporation, formerly known as BluePhoenix Solutions USA, Inc., a
Delaware corporation (“Modern”) and MS MODERNIZATION SERVICES, INC., a Texas
corporation, formerly known as Sophisticated Business Systems, Inc., successor
by merger to BP-AT Acquisition LLC, a Delaware limited liability company f/k/a
BP-AT Acquisition Corporation, a Delaware corporation (“MS”, and collectively
with Modern, “Borrowers”, and each individually, a “Borrower”), and COMERICA
BANK (“Bank”).

 

RECITALS

 

Borrowers and Bank are parties to that Loan and Security Agreement dated October
2, 2013, as it may be amended from time to time, including without limitation by
that certain First Amendment to Loan and Security Agreement, Joinder, and
Modification to Loan Documents dated September 25, 2014, that certain Omnibus
Modification to Loan Documents and Consent dated January 8, 2015, that certain
Third Amendment to Loan and Security Agreement, Modification to Loan Documents
and Consent dated May 1, 2015, that certain Fourth Amendment to Loan and
Security Agreement dated May 11, 2015 and that certain Fifth Amendment to Loan
and Security Agreement and Waiver dated as of March 9, 2016 (as amended, the
“Agreement”). The parties desire to amend the Agreement in accordance with the
terms of this Amendment and Borrowers have requested that Bank waive the
occurrence of certain Events of Default.

 

NOW, THEREFORE, the parties agree as follows:

 

1.           Exhibit A of the Agreement is amended by amending and restating the
following defined terms to read in their entireties as follows:

 

“Liquidity’ means the sum of Borrowers’ Cash at Bank (which Cash at Bank shall
be no less than Two Hundred Fifty Thousand Dollars ($250,000)) plus eighty
percent (80%) of Eligible Accounts.

 

“Non-Formula Revolving Line Maturity Date” means July 1, 2018.

 

2.           Sections 6.7(a) and 6.7(c) of the Agreement are amended and
restated to read in their entireties as follows:

 

(a)         Bank Debt Liquidity Coverage. Tested monthly as of the last day of
each month, commencing on the Revolving Line Increase Effective Date, a ratio of
Liquidity to all Indebtedness, other than Indebtedness that is guaranteed, to
Bank of at least 1.25 to 1.00.

 

(b)           EBITDA. Tested monthly, EBITDA of Parent, measured on a trailing
six (6) month basis ending on the date of determination, of not less than the
following amounts on the following dates:

 

Testing Dates Minimum EBITDA April 30, 2016 ($1,500,000) May 31, 2016
($1,500,000) June 30, 2016 ($1,000,000 July 31, 2016 ($1,000,000) August 31,
2016 ($750,000) September 30, 2016 ($750,000) October 31, 2016 ($250,000)
November 30, 2016 $250,000 December 31, 2016 $250,000 January 31, 2017 and the
last day of each month thereafter $500,000”

 

1

 

 

3.           Exhibit E to the Agreement is deleted and replaced with Exhibit E
attached hereto.

 

4.           Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remains in full force and effect in accordance with its
terms and hereby is ratified and confirmed in all respects. Except as expressly
set forth herein, the execution, delivery, and performance of this Amendment
shall not operate as a waiver of, or as an amendment of, any right, power, or
remedy of Bank under the Agreement, as in effect prior to the date hereof.

 

5.           Borrowers represent and warrant that the representations and
warranties contained in the Agreement are true and correct in all material
respects as of the date of this Amendment, and that, other than the Covenant
Violations, no Event of Default has occurred and is continuing.

 

6.           As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

 

(a)       this Amendment, executed by Borrowers; and

 

(b)       all reasonable Bank Expenses incurred through the date of this
Amendment, which may be debited from any of Borrowers’ accounts.

 

7.           This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.

 

[Remainder of Page Intentionally Left Blank]

 

2

 

 

IN WITNESS WHEREOF, Borrowers and Bank have executed and delivered this Sixth
Amendment to Loan and Security Agreement as of the date first set forth above.

 

  MODERN SYSTEMS CORPORATION, a Delaware corporation, formerly known as
BluePhoenix Solutions USA, Inc.           By: /s/ Richard T. Chance        
Printed Name: Richard T. Chance         Title: Chief Financial Officer        
MS MODERNIZATION SERVICES, INC., a Texas corporation, formerly known as
Sophisticated Business Systems, Inc., successor by merger to BP-AT Acquisition
LLC, formerly known as BP-AT Acquisition Corporation         By: /s/ Richard T.
Chance         Printed Name: Richard T. Chance         Title:

Chief Financial Officer

        COMERICA BANK         By: /s/ Walter Weston         Printed Name: Walter
Weston         Title: VP

 

[Signature Page to Sixth Amendment to Loan and Security Agreement (11851718)]

 

 

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

Please send all Required Reporting to: Comerica Bank  

Technology & Life Sciences Division

Loan Analysis Department

250 Lytton Avenue

3rd Floor, MC 4240

Palo Alto CA 94301

Phone: (650) 462-6060

Fax: (650) 462-6061

  

FROM: Modern Systems Corporation and MS Modernization Services, Inc.

 

The undersigned authorized Officer of Modern Systems Corporation and MS
Modernization Services, Inc. (individually and collectively, “Borrower”), hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is
in complete compliance for the period ending , 201___ with all required
covenants, including without limitation the ongoing registration of intellectual
property rights in accordance with Section 6.8, except as noted below and (ii)
all representations and warranties of Borrower stated in the Agreement are true
and correct in all material respects as of the date hereof; provided, however,
that those representations and warranties expressly referring to another date
shall be true, correct and complete in all material respects as of such date.
Attached herewith are the required documents supporting the above certification
(“Supporting Documents”). The Officer further certifies the Supporting Documents
are prepared in accordance with Generally Accepted Accounting Principles (GAAP)
and are consistently applied form one period to the next except as explained in
an accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” or
“Applicable” column,

 

REPORTING COVENANTS REQUIRED

COMPLIES

 

Company Prepared Monthly F/S Monthly, within 30 days YES NO Compliance
Certificate Monthly, within 30 days YES NO CPA Audited, Unqualified F/S for
Parent Annually, within 150 days of FYE YES NO Company Prepare Annual
Consolidating F/S for Parent Annually, within 150 days of FYE (commencing 2014
FY) YES NO Company Prepared Annual F/S Annually, within 150 days of FYE YES NO
Borrowing Base Cert, A/R & A/P Agings Monthly, within 30 days YES NO Annual
Business Plan Annually, on or before 1/31 YES NO Intellectual Property Report
Quarterly within 30 days YES NO Audit Semi-annual YES NO         If Public:    
  10-Q Quarterly, within 5 days of SEC filing (50 days) YES NO 10-K Annually,
within 5 days of SEC filing (95 days) YES NO         Total amount of Borrower’s
cash and investments Amount: $____________________________ YES NO Total amount
of Borrower’s cash and investments maintained with Bank Amount:
$____________________________ YES NO

 

 

 

  DESCRIPTION APPLICABLE       Legal Action > $250,000 (Sect. 6.2(iv)) Notify
promptly upon notice _____________________ YES NO Inventory Disputes> $250,000
(Sect. 6.3) Notify promptly upon notice _____________________ YES NO Mergers &
Acquisitions> $250,000 (Sect. 7.3) Notify promptly upon notice
_____________________ YES NO Cross default with other agreements >$250,000
(Sect. 8.6) Notify promptly upon notice _____________________ YES NO
Judgments/Settlements >  $250,000 (Sect. 8.8) Notify promptly upon notice
_____________________ YES NO

 

FINANCIAL COVENANTS REQUIRED ACTUAL COMPLIES         Bank Debt Liquidity Ratio
(tested monthly commencing on the Revolving Line Increase Effective Date)
1.25:1.00 _________:1.00 YES NO New Equity See Sec. 6.7(b)
$________________________ YES NO Minimum EBITDA See Sec. 6.7(c)
$________________________ YES NO         FINANCIAL COVENANTS REQUIRED ACTUAL
COMPLIES
        Permitted Indebtedness for equipment leases <$250,000
$________________________ YES NO Permitted Investments for stock repurchase
<$250,000 $________________________ YES NO Permitted Investments for
subsidiaries <$250,000 $________________________ YES NO Permitted Investments
for employee loans <$250,000 $________________________ YES NO Permitted
Investments for joint ventures <$250,000 $________________________ YES NO
Permitted Liens for equipment leases <$250,000 $________________________ YES NO
Permitted Transfers <$250,000 $________________________ YES NO Cash Transfer to
Parent <$450,000 $________________________ YES NO

 

Please Enter Below Comments Regarding Violations:

 

 

 

The undersigned further acknowledges that at any time Borrower is not in
compliance with all the terms set forth in the Agreement, including, without
limitation, the financial covenants, no Credit Extensions will be made.

 

Very truly yours,

 

MODERN SYSTEMS CORPORATION, for itself and on behalf of MS Modernization
Services, Inc.

 

    Authorized Signer           Name           Title