Exhibit 10.1

 

SEVENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT

 

This Seventh Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of February _15__, 2017, 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, that certain Fifth Amendment to Loan and
Security Agreement and Waiver dated as of March 9, 2016, and that certain Sixth
Amendment to Loan and Security Agreement and Waiver dated as of August 4, 2016
(as amended, the “Agreement”). The parties desire to amend the Agreement in
accordance with the terms of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

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

 

“Non-Formula Revolving Line” means a Credit Extension of up to Three Million
Dollars ($3,000,000).

 

“Non-Formula Revolving Line Maturity Date” means February _15__, 2019.

 

“Pricing Addendum” means that certain Prime Referenced Rate Addendum, dated as
of Seventh Amendment Date, by and between Borrowers and Bank (as the same may be
amended and/or restated from time to time).

 

“Revolving Line” means a Credit Extension of up to One Million Dollars
($1,000,000).

 

“Revolving Line Maturity Date” means February _15__, 2019.

 

“Seventh Amendment Date” means February _15__, 2017.

 

2.            Section 2.1(b)(ii) of the Agreement is amended and restated to
read in its entirety as follows:

 

“(ii) Form of Request. Whenever Borrower desires an Advance, Borrower will
notify Bank (which notice shall be irrevocable) by facsimile transmission or
telephone no later than 3:00 p.m. Pacific time, on the Business Day that the
Advance is to be made. Each such telephonic notification shall be promptly
confirmed by a Loan Advance/Paydown Request Form in accordance with the Pricing
Addendum. Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer, or without instructions if in
Bank’s discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. The notice shall be signed by a Responsible
Officer.”

 

 1 

 

 

3.            Section 2.1(c)(ii) of the Agreement is amended and restated to
read in its entirety as follows:

 

“(ii) Whenever Borrower desires a Non-Formula Revolving Line Advance, Borrower
will notify Bank (which notice shall be irrevocable) by facsimile transmission
or telephone no later than 3:00 p.m. Pacific time, on the Business Day that the
Non-Formula Revolving Line Advance is to be made. Each such telephonic
notification shall be promptly confirmed by a Loan Advance/Paydown Request Form
in accordance with the Pricing Addendum. Bank is authorized to make Non-Formula
Revolving Line Advances under this Agreement, based upon instructions received
from a Responsible Officer, or without instructions if in Bank’s discretion such
Non-Formula Revolving Line Advances are necessary to meet Obligations which have
become due and remain unpaid. The notice shall be signed by a Responsible
Officer.”

 

4.            The references to “Payment/Advance Form” in Section 3.2 of the
Agreement are deleted and replaced with “Loan Advance/Paydown Request”.

 

5.            Section 6.2(ix) of the Agreement is amended and restated to read
in its entirety as follows:

 

“(ix) within thirty (30) days of the last day of each June and December, a
report signed by Borrower, in form reasonably acceptable to Bank, listing any
applications or registrations that Borrower has made or filed in respect of any
Patents, Copyrights or Trademarks and the status of any outstanding applications
or registrations, as well as any material change in Borrower’s Intellectual
Property Collateral, including but not limited to any subsequent ownership right
of Borrower in or to any Trademark, Patent or Copyright not specified in
Exhibits A, B, and C of any Intellectual Property Security Agreement delivered
to Bank by Borrower in connection with this Agreement.”

 

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

 

“(b) New Equity Event. Borrowers shall provide, or cause to be provided, to Bank
evidence satisfactory to Bank that Borrowers received cash proceeds from the
issuance of a Borrower’s equity securities after the Seventh Amendment Date, on
terms and from investors satisfactory to Bank, of not less than (i) Five Hundred
Thousand Dollars ($500,000) on or before April 30, 2017 (the “First Tranche”)
and (ii) an additional Five Hundred Thousand Dollars ($500,000), excluding the
amount of the First Tranche, on or before July 31, 2017.

 

(c) 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  January 31, 2017  $(1,500,000) February 28, 2017 
$(1,500,000) March 31, 2017  $(1,500,000) April 30, 2017  $(1,500,000) May 31,
2017  $(1,500,000) June 30, 2017  $(1,500,000) July 31, 2017  $(1,000,000)
August 31, 2017  $(1,000,000) September 30, 2017  $(500,000) October 31, 2017 
$(500,000) November 30, 2017  $0  December 31, 2017  $0  January 31, 2018 
$500,000  February 28, 2018  $500,000  March 31, 2018  $500,000  April 30, 2018 
$500,000  May 31, 2018  $500,000  June 30, 2018  $500,000 

 

 2 

 

 

7.            Exhibits C and F to the Agreement are hereby deleted.

 

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

 

9.            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.

 

10.          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 no Event of Default has
occurred and is continuing.

 

11.          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;

 

(b)        a Prime Referenced Rate Addendum to Loan and Security Agreement,
executed by Borrowers;

 

(c)        an Amendment to and Affirmation of Guaranty, executed by Prescott
Group Aggressive Small Cap Master Fund;

 

(d)        Affirmations of Guaranty, executed by Columbia Pacific Opportunity
Fund, L.P., ModSys International Ltd., and MS Modernisation Services UK Ltd.;

 

(e)        a non-refundable facility fee in the amount of $5,000, which may be
debited from any of any Borrower’s accounts; and

 

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

 

12.          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]

 

 3 

 

 

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

 

  MODERN SYSTEMS CORPORATION       By: /s/ Richard Chance   Printed Name:
Richard T. Chance   Title: CFO       MS MODERNIZATION SERVICES, INC.       By:
/s/ Richard Chance   Printed Name: Richard T. Chance   Title: CFO       COMERICA
BANK       By: /s/ Walter Weston   Printed Name: Walter Weston   Title: Vice
President

  

[Signature Page to Seventh Amendment to Loan and Security Agreement (13339483)]

 

 

 

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  Within 30 days after each June 30 and December
31  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

 

 

 

 

AFFIRMATION OF GUARANTY

 

This AFFIRMATION OF GUARANTY (“Affirmation”) is made as of February ___, 2017,
by the undersigned (“Guarantor”) for the benefit of Comerica Bank (“Bank”).

 

RECITALS

 

A.           MODERN SYSTEMS CORPORATION, a Delaware corporation, formerly known
as BluePhoenix Solutions USA, Inc., a Delaware corporation 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
(individually and collectively, the “Borrower”) have obtained certain loans or
other credit accommodations from Bank pursuant to that certain Loan and Security
Agreement dated as of October 2, 2013, as 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, that certain
Fifth Amendment to Loan and Security Agreement and Waiver dated as of March 9,
2016, and that certain Sixth Amendment to Loan and Security Agreement and Waiver
dated as of August 4, 2016 (collectively, the “Loan Agreement”), which loans and
certain credit accommodations are guaranteed by Guarantor pursuant to the terms
of the Guaranty, dated September 25, 2014, by Guarantor in favor of Bank (as it
may be amended from time to time, the “Guaranty”). Borrower and Bank propose to
enter into a Seventh Amendment to Loan and Security Agreement dated as of the
date hereof (the “Amendment”). Unless otherwise defined, all capitalized terms
in this Affirmation shall be as defined in the Guaranty.

 

B.           Bank has agreed to enter into the Amendment provided, among other
things, that Guarantor acknowledges the entry by Bank into the Amendment and
agrees that the Guaranty will remain effective.

 

AGREEMENT

 

NOW, THEREFORE, Guarantor:

 

1.            Consents to the execution, delivery and performance by Borrower of
the Amendment and the documents and instruments executed in connection
therewith, as well as all other amendments and modifications to the Loan
Documents;

 

2.            Acknowledges and agrees that its Guaranty is and shall remain in
full force and effect in accordance with its terms with respect to all
Obligations (as defined in the Loan Agreement), subject to no setoff, defense or
counterclaim;

 

3.            Represents and warrants that the representations and warranties
contained in its Guaranty are true and correct in all material respects as of
the date of this Affirmation.

 

4.            Confirms that this Affirmation is not required by the terms of its
Guaranty and need not be obtained in connection with any prior or future waivers
or amendments or extensions of additional credit to Borrower.

 

IN WITNESS WHEREOF, the undersigned has executed this Affirmation of Guaranty as
of the first date above written.

 

  GUARANTOR:       COLUMBIA PACIFIC OPPORTUNITY FUND, L.P.       By:
                      Its:  

 

 

 

 

AFFIRMATION OF GUARANTIES

 

This AFFIRMATION OF GUARANTIES (“Affirmation”) is made as of February ___, 2017,
by the undersigned (collectively, “Guarantors” and each, a “Guarantor”) for the
benefit of Comerica Bank (“Bank”).

 

RECITALS

 

A.           MODERN SYSTEMS CORPORATION, a Delaware corporation, formerly known
as BluePhoenix Solutions USA, Inc., a Delaware corporation 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
(individually and collectively, the “Borrower”) have obtained certain loans or
other credit accommodations from Bank pursuant to that certain Loan and Security
Agreement dated as of October 2, 2013, as 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, that certain
Fifth Amendment to Loan and Security Agreement and Waiver dated as of March 9,
2016, and that certain Sixth Amendment to Loan and Security Agreement and Waiver
dated as of August 4, 2016 (collectively, the “Loan Agreement”), which loans and
certain credit accommodations are guaranteed by Guarantors pursuant to the terms
of Guaranties, each dated July 1, 2016, by Guarantors in favor of Bank (as it
may be amended from time to time, collectively, the “Guaranties” and each, a
“Guaranty”). Borrower and Bank propose to enter into a Seventh Amendment to Loan
and Security Agreement dated as of the date hereof (the “Amendment”). Unless
otherwise defined, all capitalized terms in this Affirmation shall be as defined
in the Guaranty.

 

B.           Bank has agreed to enter into the Amendment provided, among other
things, that, Guarantors acknowledge the entry by Bank into the Amendment and
agree that the Guaranties will remain effective.

 

AGREEMENT

 

NOW, THEREFORE, each Guarantor:

 

1.            Consents to the execution, delivery and performance by Borrower of
the Amendment and the documents and instruments executed in connection
therewith, as well as all other amendments and modifications to the Loan
Documents;

 

2.            Acknowledges and agrees that its respective Guaranty is and shall
remain in full force and effect in accordance with its terms with respect to all
Obligations (as defined in the Loan Agreement), subject to no setoff, defense or
counterclaim;

 

3.            Represents and warrants that the representations and warranties
contained in its respective Guaranty are true and correct in all material
respects as of the date of this Affirmation.

 

4.            Confirms that this Affirmation is not required by the terms of its
respective Guaranty and need not be obtained in connection with any prior or
future waivers or amendments or extensions of additional credit to Borrower.

 

IN WITNESS WHEREOF, the undersigned have executed this Affirmation of Guaranties
as of the first date above written.

 

  GUARANTOR:       MODSYS INTERNATIONAL LTD.       By:                Its:      
    MS MODERNISATION SERVICES UK LTD.         By:     Its:  

  

 

 

 

Prime Referenced Rate Addendum To
Loan and Security Agreement

 

This Prime Referenced Rate Addendum to Loan and Security Agreement (this
“Addendum”) is entered into as of February _15__, 2017, among Comerica Bank
(“Bank”), Modern Systems Corporation, and MS Modernization Services, Inc.
(individually and collectively, the “Borrower”). This Addendum supplements the
terms of the Loan and Security Agreement dated as of October 2, 2013 (as the
same may be amended, modified, supplemented, extended or restated from time to
time, the “Agreement”).

 

1.            Definitions. As used in this Addendum, the following terms shall
have the following meanings. Initially capitalized terms used and not defined in
this Addendum shall have the meanings ascribed thereto in the Agreement.

 

a.       “Advance” means a borrowing requested by the Borrower and made by Bank
under the Agreement.

 

b.       “Applicable Margin” means with respect to Advances of the Non-Formula
Revolving Line, three quarters of one percent (0.75%) per annum, and with
respect to Advances of the Revolving Line, and all other Obligations other than
Non-Formula Revolving Line Advances, two percent (2.00%) per annum.

 

c.        “Business Day” means any day, other than a Saturday, Sunday or any
other day designated as a holiday under Federal or applicable State statute or
regulation, on which Bank is open for all or substantially all of its domestic
and international business (including dealings in foreign exchange) in San Jose,
California, and, in respect of notices and determinations relating the Daily
Adjusting LIBOR Rate, also a day on which dealings in dollar deposits are also
carried on in the London interbank market and on which banks are open for
business in London, England.

 

d.       “Change in Law” means the occurrence, after the date hereof, of any of
the following: (i) the adoption or introduction of, or any change in any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not applicable to Bank on such date, or (ii)
any change in interpretation, administration or implementation thereof of any
such law, treaty, rule or regulation by any Governmental Authority, or (iii) the
issuance, making or implementation by any Governmental Authority of any
interpretation, administration, request, regulation, guideline, or directive
(whether or not having the force of law), including without limitation, any
risk-based capital guidelines or any interpretation, administration, request,
regulation, guideline, or directive relating to liquidity. For purposes of this
definition, (x) a change in law, treaty, rule, regulation, interpretation,
administration or implementation shall include, without limitation, any change
made or which becomes effective on the basis of a law, treaty, rule, regulation,
interpretation administration or implementation then in force, the effective
date of which change is delayed by the terms of such law, treaty, rule,
regulation, interpretation, administration or implementation, and (y) the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, H.R.
4173) and all requests, rules, regulations, guidelines, interpretations or
directives promulgated thereunder or issued in connection therewith shall be
deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued
or promulgated, whether before or after the date hereof, and (z) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall each be deemed to be a “Change in Law”, regardless
of the date enacted, adopted, issued or implemented.

 

e.       “Daily Adjusting LIBOR Rate” means, for any day, a per annum interest
rate which is equal to the quotient of the following:

 

(1)for any day, the per annum rate of interest determined on the basis of the
rate for deposits in United States Dollars for a period equal to one (1) month
appearing on Page BBAM of the Bloomberg Financial Markets Information Service at
or about 11:00 a.m. (London, England time) (or as soon thereafter as practical)
on such day, or if such day is not a Business Day, on the immediately preceding
Business Day. In the event that such rate does not appear on Page BBAM of the
Bloomberg Financial Markets Information Service (or otherwise on such Service)
on any day, the “Daily Adjusting LIBOR Rate” for such day shall be determined by
reference to such other publicly available service for displaying eurodollar
rates as may be reasonably selected by Bank, or in the absence of such other
service, the “Daily Adjusting LIBOR Rate” for such day shall, instead, be
determined based upon the average of the rates at which Bank is offered dollar
deposits at or about 8:00 a.m. (California time) (or as soon thereafter as
practical), on such day, or if such day is not a Business Day, on the
immediately preceding Business Day, in the interbank eurodollar market in an
amount comparable to the applicable principal amount of Obligations hereunder
which is to bear interest on the basis of the Daily Adjusting LIBOR Rate and for
a period equal to one (1) month;

 

divided by

 

 1 

 

 

(2)1.00 minus the maximum rate (expressed as a decimal) on such day at which
Bank is required to maintain reserves on “Euro-currency Liabilities” as defined
in and pursuant to Regulation D of the Board of Governors of the Federal Reserve
System or, if such regulation or definition is modified, and as long as Bank is
required to maintain reserves against a category of liabilities which includes
eurodollar deposits or includes a category of assets which includes eurodollar
loans, the rate at which such reserves are required to be maintained on such
category.

 

provided, however, and notwithstanding anything to the contrary set forth in the
Agreement, if at any time the Daily Adjusting LIBOR Rate determined as provided
above would be less than zero percent (0%) then the Daily Adjusting LIBOR Rate
shall be deemed to be zero percent (0%) per annum for all purposes of the
Agreement (the “Daily Adjusting LIBOR 0% Floor”), except for any portion of any
outstanding Advance(s) hereunder or any principal Obligations outstanding under
this Agreement which at any such time is/are subject to any Specified Hedging
Agreement, in which case the Daily Adjusting LIBOR Rate for such portion of such
Advance(s) and Obligations shall be determined without giving effect to the
Daily Adjusting LIBOR 0% Floor. Each calculation by Bank of the Daily Adjusting
LIBOR Rate shall be conclusive and binding for all purposes, absent manifest
error.

 

f.       “Governmental Authority” means the government of the United States of
America or any other nation, or of any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government (including, without limitation, any supranational bodies such as the
European Union or the European Central Bank).

 

g.       “Prime Rate” means the per annum interest rate established by Bank as
its prime rate for its borrowers, as such rate may vary from time to time, which
rate is not necessarily the lowest rate on loans made by Bank at any such time.

 

h.       “Prime Referenced Rate” means, for any day, a per annum interest rate
which is equal to the Prime Rate in effect on such day, but in no event and at
no time shall the Prime Referenced Rate be less than the sum of the Daily
Adjusting LIBOR Rate for such day plus two and one-half percent (2.50%) per
annum. If, at any time, Bank determines that it is unable to determine or
ascertain the Daily Adjusting LIBOR Rate for any day, the Prime Referenced Rate
for each such day shall be the Prime Rate in effect at such time, but not less
than two and one-half percent (2.50%) per annum.

 

i.       “Request for Advance” means a Loan Advance/Paydown Request Form issued
by the Borrower under the Agreement in the form annexed to this Addendum as
Exhibit A.

 

j.       “Specified Hedging Agreement” means any agreement or other
documentation between the Borrower (or any of them) and Bank providing for an
interest rate swap that does not provide for a minimum rate of zero percent (0%)
with respect to determinations of the Daily Adjusting LIBOR Rate, for the
purposes of such interest rate swap (e.g., determines the floating amount by
using the “negative interest method” rather than the “zero interest rate method”
in the case of any such interest rate swap made under any master agreement or
other documentation published by the International Swaps and Derivatives
Association, Inc.).

 

2.            Interest Rate Options. Subject to the terms and conditions of this
Addendum, the Obligations under the Agreement shall bear interest at the Prime
Referenced Rate plus the Applicable Margin.

 

3.            Payment of Interest. Accrued and unpaid interest on the unpaid
principal balance of the Obligations outstanding under the Agreement shall be
payable monthly, in arrears, on the first Business Day of each month, from the
date made until the same is paid in full (whether in accordance with the terms
hereof, by acceleration, or otherwise). In the event that any payment under this
Addendum becomes due and payable on any day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day, and, to the
extent applicable, interest shall continue to accrue and be payable thereon
during such extension at the rates set forth in this Addendum. Interest accruing
hereunder shall be computed on the basis of a year of 360 days, and shall be
assessed for the actual number of days elapsed, and in such computation, effect
shall be given to any change in the applicable interest rate as a result of any
change in the Prime Referenced Rate on the date of each such change.

 

4.            Bank’s Records. The amount and date of each advance under the
Agreement, its applicable interest rate, and the amount and date of any
repayment shall be noted on Bank’s records, which records shall be conclusive
evidence thereof, absent manifest error; provided, however, any failure by Bank
to make any such notation, or any error in any such notation, shall not relieve
Borrower of its obligations to repay Bank all amounts payable by Borrower to
Bank under or pursuant to this Addendum and the Agreement, when due in
accordance with the terms hereof.

 

 2 

 

 

5.            Selection/Conversion of Interest Rate Options.

 

a.       Borrower may request an Advance hereunder either (i) upon the delivery
to Bank of a written Request for Advance duly completed and executed by Borrower
(as herein provided) or, (ii) to the extent applicable, pursuant to a request
submitted through Bank’s Loan Management System (each a “Request”).

 

b.       In the event that Borrower is unable to request Advances hereunder
through the Bank’s Loan Management System, Advances hereunder may be requested
by delivery or submission to Bank by hand delivery, first class mail, overnight
courier, facsimile, email or other means of delivery acceptable to Bank, of a
written Request duly completed and executed by Borrower. Advances hereunder may
be requested in Borrower’s discretion by telephonic notice to Bank. Any Advance
requested by telephonic notice shall be confirmed by Borrower that same day by
submission to Bank of a written Request, as provided herein. Borrower
acknowledge(s) that if Bank makes an Advance based on a request made by
telephone, facsimile, email or other means of delivery (other than by hand
delivery, first class mail or overnight courier), it shall be for Borrower’s
convenience and all risks involved in the use of any such procedure shall be
borne by Borrower, and Borrower expressly agree(s) to indemnify and hold Bank
harmless therefor. Bank shall have no duty to confirm the authority of anyone
requesting an Advance by telephone, facsimile, email or any such other means of
delivery. In the event that Borrower elect(s) to request Advances by telephonic
notice, facsimile, email or other means of delivery acceptable to Bank, Borrower
acknowledge(s) and agree(s) that Bank may impose or require such verification,
authentication and other procedures as Bank may require from time to time.

 

6.            Default Interest Rate. From and after the occurrence of any Event
of Default, and so long as any such Event of Default remains unremedied or
uncured thereafter, the Obligations outstanding under the Agreement shall bear
interest at a per annum rate of five percent (5%) above the otherwise applicable
interest rate hereunder, which interest shall be payable upon demand. In
addition to the foregoing, a late payment charge equal to five percent (5%) of
each late payment hereunder may be charged on any payment not received by Bank
within ten (10) calendar days after the payment due date therefor, but
acceptance of payment of any such charge shall not constitute a waiver of any
Event of Default under the Agreement. In no event shall the interest payable
under this Addendum and the Agreement at any time exceed the maximum rate
permitted by law. THE MAXIMUM INTEREST RATE SHALL NOT EXCEED THE HIGHEST
APPLICABLE USURY CEILING.

 

7.             Prepayment. Borrower may prepay all or part of the outstanding
balance of any Obligations at any time without premium or penalty. Any
prepayment hereunder shall also be accompanied by the payment of all accrued and
unpaid interest on the amount so prepaid. Borrower hereby acknowledges and
agrees that the foregoing shall not, in any way whatsoever, limit, restrict, or
otherwise affect Bank’s right to make demand for payment of all or any part of
the Obligations under the Agreement due on a demand basis in Bank’s sole and
absolute discretion.

 

8.             Regulatory Developments or Other Circumstances Relating to the
Daily Adjusting LIBOR Rate.

 

a.       If any Change in Law shall: (a) subject Bank to any tax, duty or other
charge with respect to this Addendum or any Obligations under the Agreement, or
shall change the basis of taxation of payments to Bank of the principal of or
interest under this Addendum or any other amounts due under this Addendum in
respect thereof (except for changes in the rate of tax on the overall net income
of Bank imposed by the jurisdiction in which Bank’s principal executive office
is located); or (b) impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by Bank, or shall impose on Bank or
the foreign exchange and interbank markets any other condition affecting this
Addendum or the Obligations; and the result of any of the foregoing is to
increase the cost to Bank of maintaining any part of the Obligations or to
reduce the amount of any sum received or receivable by Bank under this Addendum
by an amount deemed by Bank to be material, then Borrower shall pay to Bank,
within fifteen (15) days of Borrower’s receipt of written notice from Bank
demanding such compensation, such additional amount or amounts as will
compensate Bank for such increased cost or reduction. A certificate of Bank,
prepared in good faith and in reasonable detail by Bank and submitted by Bank to
Borrower, setting forth the basis for determining such additional amount or
amounts necessary to compensate Bank shall be conclusive and binding for all
purposes, absent manifest error.

 

b.       In the event that any Change in Law affects or would affect the amount
of capital or liquidity required or expected to be maintained by Bank (or any
corporation controlling Bank), and Bank determines that the amount of such
capital or liquidity is increased by or based upon the existence of any
obligations of Bank hereunder or the maintaining of any Obligations, and such
increase has the effect of reducing the rate of return on Bank’s (or such
controlling corporation’s) capital as a consequence of such obligations or the
maintaining of such Obligations to a level below that which Bank (or such
controlling corporation) could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy and liquidity),
then Borrower shall pay to Bank, within fifteen (15) days of Borrower’s receipt
of written notice from Bank demanding such compensation, additional amounts as
are sufficient to compensate Bank (or such controlling corporation) for any
increase in the amount of capital and/or liquidity and reduced rate of return
which Bank reasonably determines to be allocable to the existence of any
obligations of Bank hereunder or to maintaining any Obligations. A certificate
of Bank as to the amount of such compensation, prepared in good faith and in
reasonable detail by Bank and submitted by Bank to Borrower, shall be conclusive
and binding for all purposes absent manifest error.

 

9.             Legal Effect. Except as specifically modified hereby, all of the
terms and conditions of the Agreement remain in full force and effect.

 

10.           Conflicts. As to the matters specifically the subject of this
Addendum, in the event of any conflict between this Addendum and the Agreement,
the terms of this Addendum shall control.

 

11.           Amendment and Restatement. This Addendum amends, restates and
replaces in its entirety that certain Prime Referenced Rate Addendum to Loan and
Security Agreement dated October 2, 2013 between Borrower and Bank.

 

[Remainder of Page Intentionally Left Blank]

 

 3 

 

 

IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date
first set forth above.

 

 

COMERICA BANK MODERN SYSTEMS CORPORATION

 

By:

/s/ Walter Weston

 

By:

/s/ Richard Chance

Name:

Walter Weston  

Name:

Richard T. Chance

Title:

Vice President

 

Title:

CFO

 

 

MS MODERNIZATION SERVICES, INC.

 

 

By:

/s/ Richard Chance

 

Name:

Richard T. Chance

 

Title: 

CFO

 

[Signature Page to Prime Referenced Rate Addendum to Loan and Security Agreement
(13339549)]

 

 4 

 

 

EXHIBIT A

 

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 3:00* P.M., P.S.T.

DEADLINE FOR EQUIPMENT ADVANCES IS 3:00 P.M., P.S.T.**

*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
P.S.T.

**Subject to 3 day advance notice.

 

To: Loan Analysis DATE: _____________________ TIME: ______________

FAX#: (650)462-6060

Email directly to:

● wrweston@comerica.com ● PaloAltoTLSCompliance@comerica.com

 

 

FROM: 

 

Modern Systems Corporation and MS

Modernization Services, Inc.

Borrower’s Name

TELEPHONE REQUEST (For Bank Use Only):

 

The following person is authorized to request the loan payment transfer/loan
advances on the designated account and is known to me.

     

FROM: 

______________________________________

                                   ___________________________________

  Authorized Signer’s Name                                    Authorized Request
& Phone #      

FROM:

______________________________________

                                   ___________________________________  
Authorized Signer’s Signature                                    Received by
(Bank) & Phone #      

PHONE #:______________________________________

 

FROM ACCOUNT #:______________________________

(please include Note number, if applicable)

 

TO ACCOUNT #: ________________________________

(please include Note number, if applicable)

                                   ___________________________________

                                   Authorized Signature (Bank)

 

REQUESTED TRANSACTION TYPE                           REQUESTED DOLLAR
AMOUNT

 

PRINCIPAL INCREASE* (ADVANCE)        $_________________________

PRINCIPAL PAYMENT (ONLY)                   $_________________________

 

OTHER INSTRUCTIONS:

 
 
 
 

For Bank Use Only

 

Date Rec’d:

Time:

Comp. Status:         YES         NO

Status Date:

Time:

Approval:

 

 

Borrower represent(s), warrant(s) and certify(ies) that no Default, Event of
Default, or any condition or event which, with the giving of notice or the
running of time, or both, would constitute a Default or Event of Default, has
occurred and is continuing under the Agreement, and none will exist upon the
making of the Advance requested hereunder. Borrower further certify(ies) that
upon advancing the sum requested hereunder, the outstanding Advances under the
Non-Formula Revolving Line or Revolving Line (as applicable) will not exceed the
Non-Formula Revolving Line or Revolving Line (as applicable). If the Advances
shall at any time exceed the Non-Formula Revolving Line or Revolving Line (as
applicable), Borrower will immediately pay such excess amount, without any
necessity of notice or demand (if applicable).

 

Capitalized terms used but not otherwise defined herein shall have the
respective meanings given to them in the Agreement.

 

 

EXHIBIT A

 

 

 

AMENDMENT TO AND AFFIRMATION OF GUARANTY

 

THIS AMENDMENT TO AND AFFIRMATION OF GUARANTY (“Amendment”) is dated as of
February _15__, 2017, between PRESCOTT GROUP AGGRESSIVE SMALL CAP MASTER FUND
(“Guarantor”) and COMERICA BANK (“Bank”).

 

RECITALS:

 

A.       MODERN SYSTEMS CORPORATION, a Delaware corporation, formerly known as
BluePhoenix Solutions USA, Inc., a Delaware corporation 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
(individually and collectively, the “Borrower”) have obtained certain loans or
other credit accommodations from Bank pursuant to that certain Loan and Security
Agreement dated as of October 2, 2013, as 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, that certain
Fifth Amendment to Loan and Security Agreement and Waiver dated as of March 9,
2016, and that certain Sixth Amendment to Loan and Security Agreement and Waiver
dated as of August 4, 2016 (collectively, the “Loan Agreement”), which loans and
certain credit accommodations are guaranteed by Guarantor pursuant to the terms
of the Guaranty, dated September 25, 2014, by Guarantor in favor of Bank (as it
may be amended from time to time, the “Guaranty”). Borrower and Bank propose to
enter into a Seventh Amendment to Loan and Security Agreement dated as of the
date hereof (the “Amendment”). Unless otherwise defined, all capitalized terms
in this Amendment shall be as defined in the Guaranty.

 

B.       Guarantor and Bank desire to amend the Guaranty as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Guarantor and Bank agree as follows:

 

1.       Section 13(c) of the Guaranty is amended and restated to read in its
entirety as follows:

 

“(c)Anything contained in the foregoing to the contrary notwithstanding, the
maximum liability of the undersigned to Bank pursuant to this Guaranty shall not
exceed $1,750,000, plus thirty seven and one half percent (37.5%) multiplied by
the accrued and unpaid interest, at the time Bank makes demand for payment under
this Guaranty, under the Non-Formula Revolving Line (as defined in the Loan
Agreement), plus the costs and expenses (including reasonable attorneys’ fees)
incurred by Bank in enforcing this Guaranty and in collecting such Indebtedness.
No payment by any person or entity other than the undersigned (including,
without limitation, Borrower or any other guarantor of such Indebtedness) with
respect to such Indebtedness shall reduce the obligations of the undersigned to
Bank hereunder unless and until the Indebtedness is fully and indefeasibly
satisfied in cash. No application of any collateral or proceeds thereof
(including, without limitation, any collateral given by the undersigned,
Borrower or any other person or entity) with respect to such Indebtedness shall
reduce the obligations of the undersigned to Bank hereunder unless and until the
Indebtedness is fully and indefeasibly satisfied in cash.”

 

2.       Guarantor affirms Guarantor’s obligations to Bank under the Guaranty
and acknowledges that, except as amended by this Amendment, all of the terms and
conditions of the Guaranty shall remain in full force and effect, subject to no
setoff, defense or counterclaim.

 

3.       Guarantor confirms that no affirmation (including without limit this
Amendment) is required by the terms of the Guaranty and need not be obtained in
connection with any prior or future waivers or amendments or extensions of
additional credit to Borrower.

 

4.       This Amendment shall be effective as of the date hereof.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

WITNESS WHEREOF, the parties have executed this Amendment as of the first date
written above.

 

COMERICA BANK   PRESCOTT GROUP AGGRESSIVE SMALL CAP MASTER FUND       By: /s/
Walter Weston   By: /s/ Phil Frohlich           Its: Vice President   Its:
Manager

 

 

[Signature Page to Amendment to and Affirmation of Guaranty]