Exhibit 10.3

 

FOURTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT

 

This Fourth Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of May 11, 2015, 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 March
24, 2014, 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, and that
certain Third Amendment to Loan and Security Agreement, Modification to Loan
Documents and Consent dated May 1, 2015 (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 amending and restating the
following defined terms to read in their entireties as follows:

 

"'Non-Formula Revolving Line Maturity Date' means June 30, 2016."

 

"'Revolving Line Maturity Date' means June 30, 2016."

 

2.           Subparagraph (d) of the definition of "Eligible Accounts" in
Exhibit A of the Agreement is amended and restated to read in its entirety as
follows:

 

"(d) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%)
of all Accounts ("Concentration Limit"), to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank; provided,
however, the Concentration Limit for (i) IBM Corporation, (ii) Jetro, (iii)
Xerox, (iv) New York Times, (v) King Country, (vi) Dell, (vii) Fujitsu, and
(viii) Idaho State Controller's Office shall be one hundred percent (100%);"

 

3.           New Section 6.7(b) is added to the Agreement to read in its
entirety as follows:

 

"(b) New Equity Event. On or before December 31, 2015, Borrower shall provide,
or cause to be provided, to Bank evidence that Borrower received cash proceeds
from the issuance of new equity, on terms and from investors satisfactory to
Bank, of not less than Two Million Five Hundred Thousand Dollars ($2,500,000)."

 

4.           Exhibit E of the Agreement is replaced with Exhibit E attached to
this Amendment.

 

5.           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.

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6.           Borrowers waive, discharge, and forever release Bank, Bank's
employees, officers, directors, attorneys, stockholders, and their successors
and assigns, from and of any and all claims, causes of action, allegations or
assertions that Borrowers have or may have had at any time up through and
including the date of this Amendment, against any or all of the foregoing,
regardless of whether any such claims, causes of action, allegations or
assertions are known to Borrowers or whether any such claims, causes of action,
allegations or assertions arose as result of Bank's actions or omissions in
connection with the Loan Documents, or any amendments, extensions or
modifications thereto, or Bank's administration of the Obligations or otherwise.

 

7.           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.

 

8.           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)         an Affirmation of Guaranties, executed by Columbia Pacific
Opportunity Fund, L.P. and Prescott Group Aggressive Small Cap Master Fund;

 

(c)         Corporation Resolutions and Incumbency Certifications: Authority to
Procure Loans, executed by Borrowers; and

 

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

 

9.           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]

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IN WITNESS WHEREOF, Borrowers and Bank have executed and delivered this Fourth
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/ Rick Rinaldo   Printed Name:  
Rick Rinaldo   Title: CFO         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/ Rick Rinaldo   Printed Name:   Rick
Rinaldo   Title: CFO         COMERICA BANK         By:   Printed Name:    
Title:

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IN WITNESS WHEREOF, Borrowers and Bank have executed and delivered this Fourth
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:   Printed Name:     Title:        
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:   Printed Name:     Title:         COMERICA
BANK         By: /s/ Michael Fishback   Printed Name:   Michael Fishback  
Title: Vice President

 

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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 EYE   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)   1.10:1.00                 :1.00   YES NO New Equity   See Sec.
6.7(b)   $                                 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

 

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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  

 

 

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