LOAN AND SECURITY AGREEMENT AND WAIVER

Exhibit 10.1

SIXTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT AND WAIVER

This Sixth Amendment to Loan and Security Agreement and Waiver (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.      Borrowers failed to comply with Section 6.7(c) of the Agreement (Minimum to EBITDA) for the testing period ended February 29, 2016 (the “Covenant Violation”). Borrowers requested that Bank waive the Event of Default that has occurred as a result of the Covenant Violation. Bank hereby waives the Event of Default that has occurred as a result of the Covenant Violation. This waiver is specific as to content and time, shall be limited precisely as written, and shall not constitute a waiver of any other current or future default or Event of Default or breach of any covenant contained in the Agreement or the terms and conditions of any other Loan Documents. Bank expressly reserves all of its various rights, remedies, powers and privileges under the Agreement and the other Loan Documents due to any other default, Event of Default or breach not waived herein.

2.      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.

3.      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.

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(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”

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

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.

6.      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 Violation, no Event of Default has occurred and is continuing.

7.      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.

8.      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 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:

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:

Printed Name:  

Title:

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

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EXHIBIT E

COMPLIANCE CERTIFICATE

Please send all Required Reporting to:	Comerica Bank
	Technology & Life Sciences Division
	Loan Analysis Department
	000 Xxxxxx Xxxxxx
	0xx Xxxxx, XX 0000
	Xxxx Xxxx XX 00000
	Phone: (000) 000-0000
	Fax: (000) 000-0000

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