Exhibit 10.3
THIRD MODIFICATION AGREEMENT
THIS THIRD MODIFICATION AGREEMENT ("MODIFICATION") is made as of the 30th
day of March, 2001, by and among GSE SYSTEMS, INC., a Delaware corporation, GSE
PROCESS SOLUTIONS, INC., a Delaware corporation, and GSE POWER SYSTEMS, INC., a
Delaware corporation (collectively, "BORROWERS"), GP STRATEGIES CORPORATION, a
Delaware corporation ("GP STRATEGIES"), MANTECH INTERNATIONAL CORPORATION, a New
Jersey corporation ("MANTECH"), GSE SYSTEMS INTERNATIONAL LTD., a Delaware
corporation ("INTERNATIONAL"), MSHI, INC., a Virginia corporation ("MSHI"), GSE
ERUDITE SOFTWARE, INC., a Delaware corporation ("ERUDITE"), GSE SERVICES COMPANY
L.L.C., a Delaware limited liability company ("SERVICES"), GP INTERNATIONAL
ENGINEERING & SIMULATION, INC., a Delaware corporation ("GP ENGINEERING"), and
NATIONAL BANK OF CANADA, a Canadian chartered bank ("LENDER"). GP STRATEGIES and
MANTECH are referred to collectively as the "LIMITED GUARANTORS." INTERNATIONAL,
MSHI, ERUDITE, SERVICES, and GP ENGINEERING are referred to collectively as the
"GUARANTORS."
RECITALS
Pursuant to the terms of a Loan And Security Agreement dated as of March 23,
2000, as amended pursuant to a First Modification Agreement dated as of May 30,
2000 ("FIRST MODIFICATION") and pursuant to a Second Modification Agreement
dated as of July 20, 2000 ("SECOND MODIFICATION"), and various letter agreements
executed from time to time (the aforesaid Loan and Security Agreement, as
amended from time to time, "LOAN AGREEMENT") by and between the BORROWERS and
the LENDER, the LENDER is providing to the BORROWERS a revolving credit facility
in the originally stated principal amount of Ten Million Dollars
($10,000,000.00). All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the LOAN AGREEMENT.
MANTECH has guaranteed all of the BORROWERS' obligations to the LENDER (subject
to certain limitations set forth therein) pursuant to a Limited Guaranty
Agreement dated as of March 23, 2000, as amended pursuant to the SECOND
MODIFICATION (as amended, "MANTECH GUARANTY"). GP STRATEGIES has guaranteed all
of the BORROWERS' obligations to the LENDER (subject to certain limitations set
forth therein) pursuant to a Limited Guaranty Agreement dated as of March 23,
2000. The GUARANTORS have guaranteed all of the BORROWERS' obligations to the
LENDER pursuant to Guaranty Agreements dated as of March 23, 2000.
The CREDIT FACILITY is secured by, among other things, the security interests
and liens granted by the BORROWERS and the GUARANTORS to the LENDER pursuant to
the LOAN AGREEMENT and the other LOAN DOCUMENTS. MANTECH has provided certain
credit enhancements in connection with the CREDIT FACILITY, including but not
limited to (a) irrevocable standby letter of credit no. 5867621 having an
originally stated face amount of Nine Hundred Thousand Dollars ($900,000.00),
issued on April 6, 2000 by Mellon Bank, N.A. for the benefit of the LENDER,
against MANTECH as account party, and having an expiry date of April 6, 2001
(together with any extensions or renewals thereof, "APRIL 2000 MANTECH L/C"),
and (b) irrevocable standby letter of credit no. S868784, having an original
undrawn face amount of Nine Hundred Thousand Dollars ($900,000.00), issued by
Mellon Bank, N.A. for the benefit of the LENDER, against MANTECH as account
party (together with any extensions or renewals thereof, "ADDITIONAL MANTECH
L/C").
The BORROWERS are in default under the LOAN AGREEMENT as a result of violations
of Sections 6.21, 6.22, 6.23, 7.3, and 7.4 of the LOAN AGREEMENT on or before
the date hereof ("EXISTING DEFAULTS"). As a result of the occurrence of the
EXISTING DEFAULTS, the LENDER may terminate the CREDIT FACILITY and accelerate
the time for payment of the OBLIGATIONS and exercise its rights and remedies
upon default. Notwithstanding the EXISTING DEFAULTS, the LENDER is continuing to
provide advances under the LOAN and has not as of the date hereof demanded
repayment of any sums under the CREDIT FACILITY.
The BORROWERS have requested that the LENDER modify certain terms of the LOAN
AGREEMENT. The BORROWERS have also requested that the LENDER waive the EXISTING
DEFAULTS.
NOW, THEREFORE, in consideration of the premises, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
Section 1. Recitals. The parties acknowledge the accuracy of the above
Recitals and hereby incorporate the Recitals into this MODIFICATION.
Section 2. ManTech Letters of Credit. The BORROWERS and MANTECH hereby
request that the LENDER draw upon the APRIL 2000 MANTECH L/C and the ADDITIONAL
MANTECH L/C and apply the net proceeds of same to the OBLIGATIONS; provided,
however, the LENDER shall not, in any event, incur any liability for any delay
or failure to do so. Once drawn upon, neither the APRIL 2000 MANTECH L/C nor the
ADDITIONAL MANTECH L/C shall constitute ELIGIBLE ADDITIONAL COLLATERAL VALUE.
The BORROWERS and MANTECH agree to maintain the APRIL 2000 MANTECH L/C and the
ADDITIONAL MANTECH L/C until drawn by the LENDER.
Section 3. Indebtedness to ManTech. GSE SYSTEMS shall be permitted to
borrow from MANTECH an aggregate principal amount not to exceed Three Million
Nine Hundred Thousand Dollars ($3,900,000); provided: (a) Two Million One
Hundred Thousand Dollars ($2,100,000) of such indebtedness shall be evidenced,
in part, by the Replacement Promissory Note of even date herewith in the
principal amount of Two Million One Hundred Thousand Dollars ($2,100,000) by GSE
SYSTEMS and payable to the order of MANTECH, a copy of which has been provided
to the LENDER; (b) Nine Hundred Thousand Dollars ($900,000) of such indebtedness
shall result from a drawing by the LENDER upon the APRIL 2000 MANTECH L/C in the
amount of Nine Hundred Thousand Dollars ($900,000), as set forth in Section 2
above, and such indebtedness shall be evidenced by instruments, agreements, and
documents which shall be provided to the LENDER in advance of execution thereof
and in form and substance satisfactory to the LENDER; (c) the balance of Nine
Hundred Thousand Dollars ($900,000) of such indebtedness shall result from a
drawing by the LENDER upon the ADDITIONAL MANTECH L/C in the amount of Nine
Hundred Thousand Dollars ($900,000) as set forth in Section 2 above, and such
indebtedness shall be evidenced by instruments, agreements, and documents which
shall be provided to the LENDER in advance of execution thereof and in form and
substance satisfactory to the LENDER; and (d) all of such indebtedness shall be
unsecured and subordinated to the OBLIGATIONS in writing pursuant to a written
subordination agreement in the same form as the Subordination and Intercreditor
Agreement of even date herewith by and between MANTECH and the LENDER.
Section 4. LIBOR Borrowing under the Loan Agreement. The BORROWERS
agree that, notwithstanding anything to the contrary set forth in the LOAN
AGREEMENT, during the period commencing on the date hereof and continuing for
twelve (12) consecutive months hereafter, the BORROWERS shall not elect to
accrue interest at the ADJUSTED LIBOR RATE and the LENDER shall have no
obligation to make any advances under the CREDIT FACILITY as LIBOR BORROWINGS.
In the event that no DEFAULT or EVENT OF DEFAULT shall occur or exist during, or
at the end of, such twelve-month period, the BORROWER may, at the end of such
twelve-month period, make elections for LIBOR BORROWINGS, subject to all of the
terms and conditions set forth in the LOAN AGREEMENT.
Section 5. Amendment To Loan Agreement. The LOAN AGREEMENT is hereby
amended and modified as follows:
a. Section 1.11 of the LOAN AGREEMENT captioned "Applicable Margin" is
hereby amended and restated in its entirety as follows:
Section 1.11. Applicable Margin. The term "APPLICABLE MARGIN"
means that percentage to be added to either the BASE RATE or the LIBOR
RATE in order to determine an applicable ADJUSTED BASE RATE or ADJUSTED
LIBOR RATE, which percentage shall be determined in accordance with the
following schedule:
BASE RATE LIBOR RATE
--------- -----------
0.75% 3.25%
b. Section 1.18 of the LOAN AGREEMENT captioned "Borrowing Base" is
hereby amended by adding immediately following the words and punctuation
"INTEREST RATE PROTECTION AGREEMENTS," the words and punctuation "FOREIGN
EXCHANGE EXPOSURE,".
c. Article 1 of the LOAN AGREEMENT is hereby amended by adding the
following definition of "Current Ratio" as new Section 1.29A immediately
following Section 1.29 captioned "Credit Facility":
Section 1.29A. Current Ratio. The term "CURRENT RATIO" means,
as at the end of any period, the ratio of (a) TOTAL CURRENT ASSETS as
at the end of such period to (b) TOTAL CURRENT LIABILITIES plus,
without duplication, the aggregate amount of all outstanding balances
under the CREDIT FACILITY as at the end of such period.
d. Section 1.34 of the LOAN AGREEMENT captioned "Eligible Additional
Collateral Value" is hereby amended and restated in its entirety as
follows:
Section 1.34 Eligible Additional Collateral Value. The term
"ELIGIBLE ADDITIONAL COLLATERAL VALUE" means, at any date of
determination thereof, an aggregate amount equal to the STATED AMOUNT
of a letter of credit having a face amount satisfactory to the LENDER,
naming the LENDER as beneficiary, issued by a bank satisfactory to the
LENDER, on terms and provisions acceptable to the LENDER, having an
expiration date satisfactory to the LENDER, and being in form and
substance satisfactory to the LENDER, in its sole discretion, provided
the same shall be duly issued and delivered to the LENDER and in full
force and effect, and provided further, the same shall cease to be
included in the determination of ELIGIBLE ADDITIONAL COLLATERAL VALUE
on the date which is thirty (30) days prior to such letter of credit's
expiry date.
e. Article 1 of the LOAN AGREEMENT is hereby amended by adding the
following definition of "Foreign Exchange Exposure" as new Section 1.48A
immediately following Section 1.48 captioned "Fiscal Year":
Section 1.48A. Foreign Exchange Exposure. The term "FOREIGN
EXCHANGE EXPOSURE" shall mean all existing and future obligations of
any of the BORROWERS to the LENDER, and all risks and exposure to the
LENDER as a result of transactions requested by or for the benefit of
any of the BORROWERS, including, but not limited to, the risk that
changes in foreign exchange rates will result in a financial loss, in
terms of US dollars, to the LENDER, whether existing or arising from
time to time, and whether in connection with foreign exchange credit
accommodations and transactions, currency transactions, foreign
exchange trades and settlement arrangements, foreign exchange risk
derivative instruments, foreign exchange settlement risks, relative
currency valuation, cross-currency risks, or otherwise.
f. Clause (e) of Section 1.81 of the LOAN AGREEMENT captioned
"Obligations" is hereby amended and restated in its entirety as follows:
(e) payments, duties or obligations owed to the LENDER arising
from or with respect to INTEREST RATE PROTECTION AGREEMENTS, FOREIGN
EXCHANGE EXPOSURE (including but not limited to, foreign exchange
facilities, foreign exchange risk derivative instruments, or
currency transactions), existing or arising from time to time;
g. Section 2.1 of the LOAN AGREEMENT captioned "Agreement to Extend
the Loan" is hereby amended by adding at the end thereof the following:
Subject to the terms and conditions of this AGREEMENT and the
LOAN DOCUMENTS, including but not limited to the terms of all
reimbursement agreements, applications and other agreements,
instruments, and documents required by the LENDER, the LENDER may, in
its sole discretion, provide foreign exchange credit accommodations to
the BORROWERS through but not including the TERMINATION DATE; provided
(a) the aggregate amount of the FOREIGN EXCHANGE EXPOSURE as determined
by the LENDER in its sole discretion shall not at any time exceed Five
Hundred Thousand Dollars ($500,000), and (b) one hundred percent (100%)
of the aggregate amount of the FOREIGN EXCHANGE EXPOSURE, as determined
by the LENDER in its sole discretion from time to time, shall be fully
reserved against the BORROWING BASE. If at any time, the LENDER
determines that the FOREIGN EXCHANGE EXPOSURE exceeds any such
permitted amounts, the BORROWERS shall pay to the LENDER the full
amount of such excess in immediately available funds.
h. The first two sentences of Section 2.2.3 of the LOAN
AGREEMENT captioned "Letter of Credit Fees And Other Charges" are hereby deleted
and the following inserted in lieu thereof:
The BORROWERS, jointly and severally, shall pay to the LENDER
a fee with respect to each outstanding LETTER OF CREDIT computed on the
face amount of such LETTER OF CREDIT at an annual percentage rate
(based on a 360-day year) equal to three and one-quarter percent
(3.25%). The aforesaid letter of credit fee shall be payable quarterly
in advance on the first BUSINESS DAY of each QUARTER.
i. Section 5.18 of the LOAN AGREEMENT captioned "Eligible Additional
Collateral Value" is hereby amended and restated in its entirety as
follows:
Section 5.18 Eligible Additional Collateral Value. Any letter
of credit which any of the BORROWERS contend should be included in the
calculation of ELIGIBLE ADDITIONAL COLLATERAL VALUE shall be considered
"eligible" only if, at the time of determination of eligibility, there
shall be no less than thirty (30) days remaining from such date of
determination to the expiry date of the letter of credit. In addition,
any letter of credit which any of the BORROWERS contend should be
included in the calculation of ELIGIBLE ADDITIONAL COLLATERAL VALUE
shall have an expiry date which is not less than one year from
issuance.
j. Section 6.12.5 of the LOAN AGREEMENT captioned "Quarterly Financial
Statements" is hereby amended and restated in its entirety as follows:
Section 6.12.5. Interim Financial Statements. (a) For the
QUARTER ending March 31, 2001, as soon as available and in any event
within forty-five (45) calendar days after the end of such QUARTER, the
BORROWERS shall submit to the LENDER a consolidated and consolidating
balance sheet of the BORROWERS and their SUBSIDIARIES as of the end of
such quarter, a consolidated and consolidating statement of income and
retained earnings of the BORROWERS and their SUBSIDIARIES for the
period commencing at the end of the previous FISCAL YEAR and ending
with the end of such quarter, and a consolidated statement of cash flow
of the BORROWERS and their SUBSIDIARIES for the portion of the FISCAL
YEAR ended with the last day of such quarter, all in reasonable detail
and stating in comparative form the respective consolidated and
consolidating figures for the projection and budget for such period and
the respective consolidated and consolidating figures for the
corresponding date and period in the prior FISCAL YEAR and all prepared
in accordance with G.A.A.P. and certified by the chief financial
officer of each of the BORROWERS (subject to year-end adjustments).
(b) In addition, as soon as available and in any event within
thirty (30) calendar days after the end of each calendar month
(provided in the case of the month of March 2001 only, within
forty-five (45) calendar days after the end of such calendar month),
the BORROWERS shall submit to the LENDER a consolidated and
consolidating balance sheet of the BORROWERS and their SUBSIDIARIES as
of the end of such month, a consolidated and consolidating statement of
income and retained earnings of the BORROWERS and their SUBSIDIARIES
for the period commencing at the end of the previous FISCAL YEAR and
ending with the end of such month, and a consolidated statement of cash
flow of the BORROWERS and their SUBSIDIARIES for the portion of the
FISCAL YEAR ended with the last day of such month, all in reasonable
detail and stating in comparative form the respective consolidated and
consolidating figures for the projection and budget for such period and
the respective consolidated and consolidating figures for the
corresponding date and period in the prior FISCAL YEAR and all prepared
in accordance with G.A.A.P. and certified by the chief financial
officer of each of the BORROWERS (subject to year-end adjustments).
k. Section 6.12.6 of the LOAN AGREEMENT captioned "Annual
Financial Statements" is hereby amended by adding, immediately after the words
"stating in comparative form," the words "the respective consolidated and
consolidating figures for the projection and budget for such period and".
l. Section 6.12.10 of the LOAN AGREEMENT captioned "Certificates of No
Default" is hereby amended and restated in its entirety as follows:
Section 6.12.10. Certificates of No Default. Within thirty
(30) calendar days after the end of each calendar month, each of the
BORROWERS shall submit to the LENDER certificates of the chief
financial officers of each of the BORROWERS certifying that: (i) there
exists no DEFAULT or EVENT OF DEFAULT, or if a DEFAULT or an EVENT OF
DEFAULT exists, specifying the nature thereof, the period of existence
thereof and what action such BORROWER proposes to take with respect
thereto; (ii) no material adverse change in the condition,
financial or otherwise, business, property or results of operations of
such BORROWER has occurred since the previous certificate was sent to
the LENDER by such BORROWER or, if any such change has occurred,
specifying the nature thereof and what action such BORROWER has taken
or proposes to take with respect thereto; (iii) all insurance premiums
then due have been paid; (iv) all taxes then due have been paid or, for
those taxes which have not been paid, a statement of the taxes not paid
and a description of such BORROWER'S rationale therefor; (v) no
litigation, investigation or proceedings, or injunction, writ or
restraining order is pending or threatened or, if any such litigation,
investigation, proceeding, injunction, writ or order is pending,
describing the nature thereof; and (vi) stating whether or not the
GUARANTORS and the BORROWERS are in compliance with the covenants in
this AGREEMENT, including a calculation of the financial covenants in
the schedule attached to such officers' certificates in form
satisfactory to the LENDER.
m. Sections 6.21 and 6.22 of the LOAN AGREEMENT captioned
"Minimum EBITDA" and "Minimum Tangible Net Worth Plus Subordinated Debt"
respectively, are hereby amended and restated in their entirety as follows:
Section 6.21. Minimum EBITDA. The EBITDA of the BORROWERS and
their respective consolidated SUBSIDIARIES measured on a consolidated
basis shall be: (a) for the QUARTER ending March 31, 2001, measured at
the end of such QUARTER, not less than $1,050,000.00; (b) for each of
the calendar months ending April 30, 2001, through and including
December 31, 2001, measured at the end of each such month, not less
than $383,000.00; (c) for each calendar month thereafter, measured at
the end of each such month, not less than $450,000.00.
Section 6.22. Minimum Tangible Net Worth Plus
Subordinated Debt. As of the end of each accounting period set forth
below of the BORROWERS and their respective consolidated SUBSIDIARIES,
the sum of TANGIBLE NET WORTH plus SUBORDINATED DEBT of the BORROWERS
and their respective consolidated SUBSIDIARIES on a consolidated basis
shall be not less than the respective amount set forth for such
accounting period:
(a) for the QUARTER ending March 31, 2001, and for each of the
calendar months ending April 30, 2001 and May 31, 2001:
$3,700,000.00;
(b) for each of the calendar months ending June 30, 2001, July
31, 2001, and August 31, 2001: $6,100,000.00;
(c) for each of the calendar months ending September 30, 2001,
October 31, 2001, and November 30, 2001: $6,750,000.00;
(d) for each of the calendar months ending December 31, 2001,
January 31, 2002, and February 28, 2002: $6,850,000.00;
(e) for each of the calendar months ending March 31, 2002, April
30, 2002, and May 31, 2002: $7,000,000.00;
(f) for each of the calendar months ending June 30, 2002, July
31, 2002, and August 31, 2002: $7,150,000.00;
(g) for each of the calendar months ending September 30, 2002,
October 31, 2002, and November 30, 2002: $7,300,000.00;
(h) for each of the calendar months ending December 31, 2002,
January 31, 2003, and February 28, 2003: $7,450,000.00.
n. Section 6.23 of the LOAN AGREEMENT captioned "Minimum
Working Capital" is hereby deleted and the following new Section 6.23 captioned
"Minimum Current Ratio" inserted in lieu thereof:
Section 6.23. Minimum Current Ratio. The CURRENT RATIO of
the BORROWERS and their respective consolidated SUBSIDIARIES on a
consolidated basis shall be not less than the respective amount
as of the end of each calendar month set forth below: (a) as of
the end of each calendar month ending March 31, 2001 through and
including August 31, 2001: 0.80; (b) as of the end of each
calendar month ending September 30, 2001 through and including
November 30, 2001: 0.85; (c) as of end of the calendar month
ending December 31, 2001: 0.90; and (d) as of the end of the
calendar month ending January 31, 2002 and each calendar month
thereafter: 1.00.
o. Section 6.24 of the LOAN AGREEMENT captioned "Ratio of Total
Liabilities to Tangible Net Worth Plus Subordinated Debt" is hereby amended and
restated in its entirety as follows:
Section 6.24. Ratio of Total Liabilities to Tangible Net
Worth Plus Subordinated Debt. The BORROWERS and their respective
consolidated SUBSIDIARIES on a consolidated basis shall maintain as of
the end of each calendar month set forth below the ratio of (a) TOTAL
LIABILITIES to (b) TANGIBLE NET WORTH plus SUBORDINATED DEBT not
greater than the respective ratio set forth below:
Month ending Ratio
------------ -----
3/31/01 6.25
4/30/01 6.25
5/31/01 6.25
6/30/01 and each calendar 4.00
month thereafter
Section 6. Amendment of ManTech Guaranty. The MANTECH GUARANTY is
hereby amended and modified by amending and restating Section 3 thereof
captioned "Letter of Credit" in its entirety as follows:
Section 3. Letter of Credit. (a) The GUARANTOR has delivered to the
LENDER an irrevocable standby letter of credit no. 5867621 having an
original undrawn face amount of Nine Hundred Thousand Dollars
($900,000.00) naming the LENDER as beneficiary, issued by Mellon Bank,
N.A. on April 6, 2000 and having an expiration date of April 6, 2001
("APRIL 2000 MANTECH L/C"). The GUARANTOR has also delivered to the
LENDER an additional irrevocable standby letter of credit no. S868784,
having an original undrawn face amount of Nine Hundred Thousand
Dollars ($900,000.00), naming the LENDER as beneficiary, issued by
Mellon Bank, N.A., on July 19, 2000 and having an expiration date of
July 18, 2001 ("ADDITIONAL MANTECH L/C;" the ADDITIONAL MANTECH L/C and
the APRIL 2000 MANTECH L/C are each sometimes referred to individually
as a MANTECH L/C and are referred to collectively as the "MANTECH
L/Cs"). The GUARANTOR acknowledges that the MANTECH L/Cs are to serve
as part of the BORROWING BASE for the LOAN to the BORROWERS.
(b) Effective, respectively, upon the due delivery to the LENDER of
each original fully executed, issued and effective MANTECH L/C
satisfying all of the conditions set forth above (as applicable to the
APRIL 2000 MANTECH L/C or the ADDITIONAL MANTECH L/C, as the case may
be), and continuing, respectively, for so long as each such MANTECH L/C
shall be effective, the provisions of Section 2 of this GUARANTY shall
be deemed amended to the effect that the GUARANTY MONETARY AMOUNT set
forth in Section 2 shall be reduced by an amount equal to the original
undrawn face amount of each such MANTECH L/C which continues so in
effect. Upon expiration or release of a MANTECH L/C, the amendments to
the GUARANTY MONETARY AMOUNT set forth in this clause (b) arising as a
result of the issuance and delivery of such MANTECH L/C shall
immediately and without further notice be void and of no further force
and effect. Upon expiration or release of both MANTECH L/Cs, all of the
provisions of Section 2 shall be as stated in Section 2. Upon a drawing
or drawings by the LENDER upon one or both of the MANTECH L/Cs and
application of such amount to payment of the obligations of the
BORROWERS to the LENDER, subject to Section 24 hereof captioned
"Reinstatement," the OBLIGATIONS of the GUARANTOR hereunder shall be
reduced to the extent of such drawing and application of proceeds. Upon
a drawing by the LENDER upon both of the MANTECH L/Cs equal to the full
$1,800,000.00 aggregate face amount of such MANTECH L/Cs, and
application of such amounts to payment of the obligations of the
BORROWERS to the LENDER, subject to reinstatement pursuant to Section
24 hereof, this GUARANTY shall be automatically terminated and MANTECH
shall have no further obligations hereunder.
Section 7. Waiver of Existing Defaults. Subject to the terms of this
MODIFICATION, the LENDER hereby waives the EXISTING DEFAULTS. The contrary
notwithstanding, the waiver granted herein shall not constitute a waiver of any
other violation, DEFAULT, or EVENT OF DEFAULT which may exist under the LOAN
AGREEMENT or any other LOAN DOCUMENT, whether or not known to the LENDER, nor
shall it constitute a waiver of any future violation, DEFAULT, or EVENT OF
DEFAULT occurring under the LOAN AGREEMENT or any other LOAN DOCUMENT, including
without limitation, any future or additional violation of Sections 6.21, 6.22,
6.23, 7.3, and 7.4 of the LOAN AGREEMENT.
Section 8. Amendment Fee. This provisions set forth in Sections 2 - 7,
inclusive of this MODIFICATION shall be conditioned upon and shall not be
effective until the BORROWER shall have paid to the LENDER a non-refundable and
unconditional fee equal to Twenty Thousand Dollars ($20,000.00). The fee shall
not be considered to be a payment of any of the LENDER's expenses incurred in
connection with the CREDIT FACILITY or this MODIFICATION.
Section 9. Acknowledgment of Guarantors and Limited Guarantors. Each of
the GUARANTORS and the LIMITED GUARANTORS hereby acknowledges the modifications
and other terms set forth herein and, except as specifically modified hereby,
ratifies and confirms all of its respective obligations under the LOAN DOCUMENTS
to which it is a party.
Section 10. Other Terms. Except as specifically modified herein, all
other terms and provisions of the LOAN DOCUMENTS remain in full force and effect
and are hereby ratified and confirmed. The modifications contained herein shall
not constitute a novation of, or a refinancing of, the CREDIT FACILITY or affect
the validity, priority, or enforceability of the liens and security interests
created by or granted in the LOAN DOCUMENTS.
Section 11. Additional Representations and Warranties. As an inducement
to the LENDER to enter into this AGREEMENT, the BORROWERS, the GUARANTORS, and
the LIMITED GUARANTORS hereby make the following additional representations and
warranties to the LENDER:
a. Each of them: (i) has the power to enter into this MODIFICATION and
any related documents, and to perform all of its obligations hereunder and
thereunder; (ii) has duly authorized the entry into and performance of this
MODIFICATION and all related documents; and (iii) is in good standing in the
state of its incorporation (or formation) and in all other states in which it
transacts business, except where the failure to be in good standing would not
materially affect performance under the LOAN DOCUMENTS.
b. None of them is in default of any of its respective duties or
obligations of the LOAN DOCUMENTS (other than the EXISTING DEFAULTS).
c. No event exists which constitutes, or which with the passage of
time, the giving of notice, or both, would constitute a default under the LOAN
AGREEMENT or any of the LOAN DOCUMENTS (other than the EXISTING DEFAULTS).
d. None of them is in default under any other contract, agreement or
instrument to which it is a party or under which it or any of its property is
bound.
e. The execution, delivery and performance of this MODIFICATION will
not immediately, or with the passage of time, the giving of notice, or both
violate any laws or result in a default under any contract, agreement, or
instrument to which any of them is a party or by which any of them or any of
their property is bound.
f. All warranties and representations previously made to the LENDER by
the each of them in connection with the LOAN DOCUMENTS remain true, accurate and
complete, except to the extent that the LENDER has previously been notified.
g. There are no outstanding judgments, tax liens, or pending litigation
against any of them, and there are no actions, suits, investigations or
proceedings pending or, to the knowledge of any of them, threatened against any
of them or against any of the COLLATERAL, except as disclosed on a schedule to
the LOAN DOCUMENTS or on Schedule A attached hereto.
h. No material adverse change has occurred in the financial condition
of any of the BORROWERS or any of the GUARANTORS, as indicated on their
financial statement most recently submitted to and reviewed by the LENDER, and
no event has occurred or circumstance exists which may cause such a material
adverse change.
i. This MODIFICATION and all of the LOAN DOCUMENTS, as modified and
amended in accordance herewith, are the valid and binding obligations of each of
them and are fully enforceable in accordance with all stated terms.
Section 12.Final Agreement. This MODIFICATION and the other LOAN DOCUMENTS,
as modified herein, constitute the entire agreement between the parties hereto
with respect to the CREDIT FACILITY, and may not be altered, modified or amended
except by a writing executed by the LENDER and any other party against whom any
such modification or amendment is to be enforced.
Section 13. Fees And Expenses. The BORROWERS, jointly and severally, agree
to promptly pay all costs and expenses incurred by the LENDER in connection with
this MODIFICATION, including, but not limited to, all attorneys' fees.
Section 14. Binding Effect. This MODIFICATION shall inure to the benefit of
the parties hereto, and shall be binding upon, their respective personal
representatives, successors and assigns.
Section 15. Choice Of Law. The laws of the State of New York (excluding,
however, conflicts of law principles) shall govern and be applied to determine
all issues relating to this MODIFICATION and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this MODIFICATION and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the execution of this MODIFICATION or which occurred or were to occur as a
direct or indirect result of this MODIFICATION having been executed.
Section 16. Tense, Gender, Defined Terms, Captions. As used herein, the
plural shall refer to and include the singular, and the singular shall refer to
and include the plural. The use of any gender shall include and refer to any
other gender. All defined terms are completely capitalized throughout this
MODIFICATION. All captions are for the purpose of convenience only.
Section 17. Time. Time is of the essence with respect to this MODIFICATION
and all terms and conditions described herein.
Section 18. Release Of Claims. Each of the BORROWERS, GUARANTORS and
LIMITED GUARANTORS hereby releases, waives, discharges and agrees to hold the
LENDER and its officers, directors, agents, attorneys, and employees harmless
from any and all claims, known or unknown, which such BORROWER, GUARANTOR or
LIMITED GUARANTOR might have against the LENDER or its officers, directors,
agents, attorneys, or employees which in any way relate, pertain, or arise,
directly or indirectly, from the CREDIT FACILITY, the LOAN DOCUMENTS, this
MODIFICATION, or which otherwise relate or pertain to the collateral securing
the obligations of the BORROWERS (or any of them) to the LENDER, the
transactions described in this MODIFICATION, or the conduct of the parties with
respect thereto.
Section 19. No Waiver. The LENDER, at any time or from time to time, may
waive all or any rights under this MODIFICATION or the other LOAN DOCUMENTS, as
amended, but any such waiver or indulgence by the LENDER at any time or from
time to time shall not constitute a future waiver of performance or exact
performance by the BORROWERS.
Section 20. Waiver of Trial by Jury. Each party to this MODIFICATION
agrees that any suit, action, or proceeding, whether claim or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party on or with respect to this MODIFICATION or any other LOAN DOCUMENT or
which in any way relates, directly or indirectly, to the OBLIGATIONS or any
event, transaction, or occurrence arising out of or in any way connected with
any of the OBLIGATIONS, or the dealings of the parties with respect thereto,
shall be tried only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
[SIGNATURES BEGIN ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this MODIFICATION under
seal as of the date first above written. This MODIFICATION may be executed in
counterparts and may be delivered via facsimile.
WITNESS/ATTEST: BORROWERS:
GSE SYSTEMS, INC.
________________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
GSE PROCESS SOLUTIONS, INC.
________________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
GSE POWER SYSTEMS, INC.
________________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
LIMITED GUARANTORS:
GP STRATEGIES CORPORATION
_______________________________ By: ______________________________(SEAL)
Name : ______________________,
Title: ______________________
MANTECH INTERNATIONAL CORPORATION
_______________________________ By: _____________________________(SEAL)
Name: ________________________,
Title: _________________________
GUARANTORS:
GSE SYSTEMS INTERNATIONAL LTD.
_______________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
MSHI, INC.
_______________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
GSE ERUDITE SOFTWARE, INC.
_______________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
GSE SERVICES COMPANY L.L.C.
_______________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Secretary
GP INTERNATIONAL ENGINEERING
& SIMULATION, INC.
________________________________ By: ______________________________(SEAL)
Jeffery G. Hough,
Senior Vice President
THE LENDER:
NATIONAL BANK OF CANADA
______________________________ By: _____________________________(SEAL)
Robert A. Incorvati,
Vice President
______________________________ By: _____________________________(SEAL)
James P. Sierakowski,
Vice President