Exhibit 10.27
FIRST AMENDMENT TO FINANCING AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO FINANCING AND SECURITY AGREEMENT (this "Agreement")
is made as of the 30th day of March, 2004, by GENERAL PHYSICS CORPORATION, a
corporation organized under the laws of the State of Delaware ("General
Physics") and SKILLRIGHT, INC., a Delaware corporation ("Skillright"; General
Physics and Skillright are hereinafter referred to collectively as "the
"Borrower"), GSE SYSTEMS, INC., a corporation organized under the laws of the
State of Delaware ("GSE Systems"), GSE POWER SYSTEMS, INC., a Delaware
corporation ("GSE Power") and MSHI, INC., a Virginia corporation ("MSHI"; GSE
Systems, GSE Power and MSHI are hereinafter referred to collectively as "GSE"),
jointly and severally and WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association (the "Lender").
RECITALS
A. The Borrower, MXL Industries, Inc. ("MXL") and the Lender are parties to
a Financing and Security Agreement dated August 13, 2003 (the same, as amended,
modified, substituted, extended, and renewed from time to time, the "Financing
Agreement").
B. The Financing Agreement provides for some of the agreements between the
Borrower and the Lender with respect to a revolving credit facility in an amount
not to exceed $25,000,000.
C. Pursuant to Section 2.4.12 of the Financing Agreement, the Borrower has
notified the Lender that all obligations of MXL shall be terminated, and
therefore the Financing Agreement shall be deemed modified to eliminate all
references to MXL and any and all obligations of MXL under the Financing
Agreement and all of the other Financing Documents.
D. The Borrower has requested that the Lender make available to GSE a
revolving credit facility in the maximum principal amount of $1,500,000 as a
part of the revolving credit facility described in Recital B above.
E. The Lender is willing to agree to the Borrower's request on the
condition, among others, that this Agreement be executed by the Borrower and
GSE.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Borrower
and the Lender agree as follows:
1. The Borrower and the Lender agree that the Recitals above are a part of
this Agreement. Unless otherwise expressly defined in this Agreement, terms
defined in the Financing Agreement shall have the same meaning under this
Agreement.
2. The Borrower and the Lender agree that on the date hereof the aggregate
outstanding principal balance under the Revolving Credit Note (subject to change
for returned items and other adjustments made in the ordinary course of
business) is $9,244,984.
3. The Borrower represents and warrants to the Lender as follows:
(a) Borrower is a corporation duly organized, and validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to do business as a foreign corporation in good standing in every other state
wherein the conduct of its business or the ownership of its property requires
such qualification;
(b) Borrower has the power and authority to execute and deliver this
Agreement and perform its obligations hereunder and has taken all necessary and
appropriate action to authorize the execution, delivery and performance of this
Agreement;
(c) The Financing Agreement, as heretofore amended and as amended by
this Agreement, and each of the other Financing Documents remains in full force
and effect, and each constitutes the valid and legally binding obligation of
Borrower, enforceable in accordance with its terms;
(d) All of Borrower's representations and warranties contained in the
Financing Agreement and the other Financing Documents are true and correct on
and as of the date of Borrower's execution of this Agreement; and
(e) No Event of Default and no event which, with notice, lapse of time
or both would constitute an Event of Default, has occurred and is continuing
under the Financing Agreement or the other Financing Documents which has not
been waived in writing by the Lender.
4. The Financing Agreement is hereby amended as follows:
(a) Section 1.1 (Certain Defined Terms) is modified by deleting the
following defined terms in their entirety and inserting the following in place
thereof:
""Collateral" means the Borrower Collateral and the GSE Collateral.
"Credit Facility" means the Revolving Credit Facility, the Letter of
Credit Facility or the GSE Loan, as the case may be, and "Credit
Facilities" means collectively the Revolving Credit Facility, the Letter of
Credit Facility and the GSE Loan and any and all other credit facilities
now or hereafter extended under or secured by this Agreement.
"Guarantor" or "Guarantors" means GP Strategies Corporation, a
corporation organized and existing under the laws of the State of Delaware
("GPX") and its successors and assigns.
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"Guaranty" means that certain guaranty of payment for the benefit of
Lender dated the date hereof from GPX, as the same may from time to time be
extended, amended, restated or otherwise modified.
"Note" means the Revolving Credit Note or the GSE Note, and "Notes"
means collectively the Revolving Credit Note, the GSE Note and any other
promissory note which may from time to time evidence all or any portion of
the Obligations.
"Permitted Uses" means (a) as to Borrower, to refinance existing
indebtedness owed to Fleet National Bank, LaSalle Business Credit, Inc. and
Washington Mutual Bank, FA (the successor in interest to Dime Savings Bank
of New York, FSB) and for general working capital purposes arising in the
ordinary course of Borrower's business and to support the issuance of
Letters of Credit and (b) as to GSE for general working capital purposes
arising in the ordinary course of GSE's business.
"Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving
Loan Optional Prepayment, a GSE Mandatory Prepayment or a GSE Optional
Prepayment, as the case may be, and "Prepayments" mean collectively all
Revolving Loan Mandatory Prepayments, Revolving Loan Optional Prepayments,
GSE Mandatory Prepayments and GSE Optional Prepayments."
(b) Section 1.1 (Certain Defined Terms) is modified by adding the
following defined terms:
""Cash Flow means as to GSE and its Subsidiaries for any period of
determination thereof, the sum of (a) the net profit (or loss) determined
in accordance with GAAP consistently applied less any dividends or
distributions and less any capitalized research and development expense,
plus (b) depreciation and amortization, plus (c) interest expense.
"Debt Service" means as to GSE and its Subsidiaries for any period of
determination thereof an amount equal to the total of the aggregate amount
of all payments of principal and interest with respect to Indebtedness for
Borrowed Money of GSE and its Subsidiaries scheduled to be due and payable
during such period.
"Debt Service Coverage Ratio means as to GSE and its Subsidiaries for
the period of any determination the ratio of (a) Cash Flow to (b) Debt
Service
"GSE" means GSE Systems Inc., a Delaware corporation, its successors
and assigns."
"GSE Borrowing Base" has the meaning described in Section 2.5.3 (GSE
Borrowing Base).
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"GSE Borrowing Base Deficiency" has the meaning described in Section
2.5.3 (GSE Borrowing Base).
"GSE Borrowing Base Report" and "GSE Borrowing Base Reports" have the
meanings described in Section 2.5.3 (GSE Borrowing Base).
"GSE Collateral" means all property of GSE subject from time to time
to the Liens of this Agreement, any of the Security Documents and/or any of
the other Financing Documents, together with any and all Proceeds thereof.
"GSE Collateral Account" has the meaning described in Section 2.5.8
(GSE Collateral Account).
"GSE Eligible Receivables" means Eligible Receivables as defined
herein, as related to GSE only and not the Borrower.
"GSE Loan" has the meaning described in Section 2.5.1 (GSE Revolving
Credit Facility).
"GSE Loan Account: has the meaning described in Section 2.5.9 (GSE
Loan Account.
"GSE Lockbox" has the meaning described in Section 2.5.8 (GSE
Collateral Account).
"GSE Mandatory Prepayment" and "GSE Mandatory Prepayments" have the
meanings described in Section 2.5.6 (Mandatory Prepayments of GSE Loan).
"GSE Note" has the meaning described in Section 2.5.5 (GSE Revolving
Credit Note).
"GSE Optional Prepayment" and "GSE Optional Prepayments" have the
meanings described in Section 2.5.7 (Optional Prepayments of GSE Loan).
"GSE Revolving Credit Committed Amount" has the meaning described in
Section 2.5.1 (GSE Revolving Credit Facility)
"GSE Revolving Credit Commitment Period" means the period of time from
March 30, 2004 to the Business Day preceding the Revolving Credit
Termination Date.
"GSE Unbilled Receivables" means Receivables which otherwise qualify
as GSE Eligible Receivables but which shall be billed within fifteen (15)
days after the last day of the prior month and are included in GSE's
General Ledger Account number 1160-0001 titled "Sales earned not billed".
"GSE Unused Line Fees" and individually, a "GSE Unused Line Fee" have
the meanings described in Section 2.5.10 (GSE Unused Line Fee)."
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(c) Section 2.1.1 (Revolving Credit Facility) is hereby deleted in its
entirety and the following is hereby inserted in its place:
"2.1.1 Revolving Credit Facility.
Subject to and upon the provisions of this Agreement, Lender
establishes a revolving credit facility in favor of Borrower. The aggregate
of all advances under the Revolving Credit Facility (which includes
advances of the GSE Revolving Credit Committed Amount) is sometimes
referred to in this Agreement as the "Revolving Loan".
The principal amount of Twenty Five Million Dollars ($25,000,000)
is the "Revolving Credit Committed Amount".
During the Revolving Credit Commitment Period, Lender agrees to
make advances under the Revolving Credit Facility in accordance with the
provisions of this Agreement; provided that after giving effect to
Borrower's request, the outstanding principal balance of the Revolving Loan
and all Letter of Credit Obligations would not exceed the lesser of (a) the
Revolving Credit Committed Amount less the GSE Loan or (b) the then most
current Borrowing Base.
Unless sooner paid, the unpaid Revolving Loan, together with
interest accrued and unpaid thereon, and all other Obligations shall be due
and payable in full on the Revolving Credit Expiration Date."
(d) Section 2.3(a) is hereby deleted in its entirety and the following
is hereby inserted in its place:
"(a) Each advance of the Revolving Loan and the GSE Loan shall
bear interest until maturity (whether by acceleration, declaration,
extension or otherwise) at the Applicable Rate as determined in accordance
with the provisions of this Section."
(e) Section 2.4.1 is hereby deleted in its entirety and the following
is hereby inserted in its place:
"2.4.1 Borrowers' Representatives.
(a) Borrower: Lender is hereby irrevocably authorized by Borrower
and GSE to make advances under the Revolving Loan to Borrower pursuant to
the provisions of this Agreement upon the written, oral or telephone
request of any one or more of the Persons who is from time to time a
Responsible Officer of Borrower under the provisions of the most recent
certificate of corporate resolutions and/or incumbency of Borrower on file
with Lender. Lender assumes no responsibility or liability for any errors,
mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations
delivered by Borrower to Lender
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in connection with the Credit Facilities, any advance of the Revolving
Loan, any Letter of Credit or any other transaction in connection with the
provisions of this Agreement.
(b) GSE: Lender is hereby irrevocably authorized by Borrower and
GSE to make advances under the GSE Loan to GSE pursuant to the provisions
of this Agreement upon the written, oral or telephone request of any one or
more of the Persons who is from time to time a Responsible Officer of GSE
under the provisions of the most recent certificate of corporate
resolutions and/or incumbency of GSE on file with Lender. Lender assumes no
responsibility or liability for any errors, mistakes, and/or discrepancies
in the oral, telephonic, written or other transmissions of any
instructions, orders, requests and confirmations delivered by GSE to Lender
in connection with the GSE Loan or any other transaction in connection with
the provisions of this Agreement."
(f) The following section is added to Article II (The Credit
Facilities):
"Section 2.5 The GSE Revolving Credit Facility.
Section 2.5.1 GSE Loan.
Subject to and upon the provisions of this Agreement and as a
part of the Revolving Credit Commitment, Lender establishes a revolving
credit facility in favor of GSE. The aggregate of all advances under the
GSE Revolving Credit Facility is sometimes referred to in this Agreement as
the "GSE Loan".
The principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) is the "GSE Revolving Credit Committed Amount" and shall be
included in and a part of the Revolving Credit Committed Amount.
During the GSE Revolving Credit Commitment Period, Lender agrees
to make advances under the GSE Revolving Credit Facility in accordance with
the provisions of this Agreement; provided that after giving effect to
GSE's request, (a) the outstanding principal balance of the GSE Loan would
not exceed the lesser of (i) the GSE Revolving Credit Committed Amount of
(ii) the then most current GSE Borrowing Base and (b) the outstanding
principal balance of the Revolving Loan, the GSE Loan and all Letter of
Credit Obligations would not exceed the Revolving Credit Committed Amount.
Unless sooner paid, the unpaid GSE Loan, together with interest
accrued and unpaid thereon, and all other Obligations shall be due and
payable in full on the Revolving Credit Expiration Date.
Section 2.5.2 Procedure for Making Advances Under the Revolving
Loan; Lender Protection Loans.
Borrower may borrow under the GSE Revolving Credit Facility on
any Business Day. Advances under the GSE Loan shall be deposited to a
demand deposit account of GSE with Lender (or an Affiliate of Lender) or
shall be
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otherwise applied as directed by GSE, which direction Lender may require to
be in writing. No later than 12:00 p.m. (Eastern Time) on the date of the
requested borrowing, GSE shall give Lender oral or written notice (a "Loan
Notice") of the amount and (if requested by Lender) the purpose of the
requested borrowing. Any oral Loan Notice shall be confirmed in writing by
GSE within three (3) Business Days after the making of the requested
advance under the GSE Loan. Each Loan Notice shall be irrevocable.
In addition, GSE hereby irrevocably authorizes Lender at any time
and from time to time, without further request from or notice to GSE, to
make advances under the GSE Loan, and to establish, without duplication,
reserves against the GSE Borrowing Base, which Lender, in its sole and
absolute discretion, deems necessary or appropriate to protect the
interests of Lender, including, without limitation, advances and reserves
under the GSE Loan made to cover debit balances in the GSE Loan Account,
principal of, and/or interest on, the GSE Loan, the Obligations (including,
without limitation, any Letter of Credit Obligations), and/or Enforcement
Costs, prior to, on, or after the termination of other advances under this
Agreement, regardless of whether the outstanding principal amount of the
GSE Loan that Lender may advance or reserve hereunder exceeds the GSE
Revolving Credit Committed Amount or the GSE Borrowing Base. Lender shall
communicate to Borrower from time to time any action taken under this
paragraph either orally or in writing.
2.5.3 GSE Borrowing Base.
As used in this Agreement, the term "GSE Borrowing Base" means at
any time, an amount equal to the aggregate of (a) eighty percent (80%) of
the amount of GSE Eligible Receivables and (b) eighty percent (80%) of GSE
Unbilled Receivables.
The GSE Borrowing Base shall be computed based on the GSE
Borrowing Base Report most recently delivered to and accepted by Lender in
its sole and absolute discretion. In the event GSE fails to furnish a GSE
Borrowing Base Report required by Section 2.5.4 (GSE Borrowing Base
Report), or in the event Lender believes that a GSE Borrowing Base Report
is no longer accurate, Lender may, in its sole and absolute discretion
exercised from time to time and without limiting its other rights and
remedies under this Agreement, suspend the making of or limit advances
under the GSE Loan.
If at any time the total of the aggregate principal amount of the
GSE Loan exceeds the GSE Borrowing Base, a borrowing base deficiency ("GSE
Borrowing Base Deficiency") shall exist. Each time a GSE Borrowing Base
Deficiency exists, GSE, at the sole and absolute discretion of Lender
exercised from time to time, shall pay the GSE Borrowing Base Deficiency ON
DEMAND to Lender.
Without implying any limitation on Lender's discretion with
respect to the GSE Borrowing Base, the criteria for GSE Eligible
Receivables
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contained in the definition of GSE Eligible Receivables is in part based
upon the business operations of GSE existing on or about March 30, 2004 and
upon information and records furnished to Lender by GSE. If at any time or
from time to time hereafter, the business operations of GSE change or such
information and records furnished to Lender is incorrect or misleading,
Lender in its discretion, may at any time and from time to time during the
duration of this Agreement change such criteria or add new criteria. Lender
shall communicate such changed or additional criteria to GSE from time to
time either orally or in writing.
2.5.4 GSE Borrowing Base Report.
GSE will furnish to Lender no less frequently than monthly and at
such other times as may be requested by Lender a report of the GSE
Borrowing Base (each a "GSE Borrowing Base Report"; collectively, the "GSE
Borrowing Base Reports") in the form required from time to time by Lender,
appropriately completed and duly signed. The GSE Borrowing Base Report
shall contain the amount and payments on the GSE Receivables, both billed
and unbilled, and the calculations of the GSE Borrowing Base, all in such
detail, and accompanied by such supporting and other information, as Lender
may from time to time request. Upon Lender's request GSE will provide
Lender with (a) confirmatory assignment schedules; (b) copies of Account
Debtor invoices; (c) evidence of shipment or delivery; and (d) such further
schedules, documents and/or information regarding the Receivables, both
billed and unbilled, as Lender may reasonably require. The items to be
provided under this subsection shall be in form satisfactory to Lender, and
certified as true and correct by a Responsible Officer (or by any other
officers or employees of GSE whom a Responsible Officer from time to time
authorizes in writing to do so), and delivered to Lender from time to time
solely for Lender's convenience in maintaining records of the Collateral.
The failure of GSE to deliver any of such items to Lender shall not affect,
terminate, modify, or otherwise limit the Liens of Lender on the
Collateral.
2.5.5 GSE Revolving Credit Note.
The obligation of GSE to pay the GSE Loan, with interest, shall
be evidenced by a promissory note (as from time to time extended, amended,
restated, supplemented or otherwise modified, the "GSE Note") substantially
in the form of EXHIBIT B-2 attached hereto and made a part hereof, with
appropriate insertions. The GSE Note shall be dated as of March 30, 2004,
shall be payable to the order of Lender at the times provided in the GSE
Note, and shall be in the principal amount of the GSE Revolving Credit
Committed Amount. GSE acknowledges and agrees that, if the outstanding
principal balance of the GSE Loan outstanding from time to time exceeds the
face amount of the GSE Note, the excess shall bear interest at the
Post-Default Rate for the GSE Loan and shall be payable, with accrued
interest, ON DEMAND. The GSE Note shall not operate as a novation of any of
the Obligations or nullify, discharge, or release any such Obligations or
the continuing contractual relationship of the parties hereto in accordance
with the provisions of this Agreement.
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2.5.6 Mandatory Prepayments of GSE Loan.
GSE shall make the mandatory prepayments (each a "GSE Mandatory
Prepayment" and collectively, the "GSE Mandatory Prepayments") of the GSE
Loan at any time and from time to time in such amounts as is required
pursuant to Section 2.5.3 (GSE Borrowing Base) in order to cover any GSE
Borrowing Base Deficiency.
2.5.7 Optional Prepayments of GSE Loan.
GSE shall have the option, at any time and from time to time, to
prepay (each a "GSE Optional Prepayment" and collectively the "GSE Optional
Prepayments") the GSE Loan, in whole or in part without premium or penalty.
2.5.8 The GSE Collateral Account.
GSE will deposit, or cause to be deposited, all Items of Payment
to a bank account or bank accounts designated by Lender and from which
Lender alone has power of access and withdrawal (collectively, the "GSE
Collateral Account"). In the case of any deposit that is made by GSE
manually (i.e., the payment is received by the GSE rather than being
delivered to the GSE Lockbox or wired to the Collateral Account), such
deposit shall be made not later than the next Business Day after the date
of receipt of the Items of Payment. The Items of Payment shall be deposited
in precisely the form received, except for the endorsements of GSE where
necessary to permit the collection of any such Items of Payment, GSE hereby
agreeing to make such endorsement. In the event GSE shall fail to do so,
Lender is hereby authorized by GSE to make the endorsement in the name of
GSE. Prior to such a deposit, GSE will not commingle any Items of Payment
with any of the other funds or property of GSE, but will hold them separate
and apart in trust and for the account of Lender.
GSE shall direct its Account Debtors that all Items of Payment
are to be either (a) wired to the GSE Collateral Account or (b) mailed to
one or more post-office boxes designated by Lender, or to such other
additional or replacement post-office boxes pursuant to the request of
Lender from time to time (collectively, the "GSE Lockbox"). Lender shall
have unrestricted and exclusive access to the Lockbox.
GSE hereby authorizes Lender to inspect all Items of Payment,
endorse all Items of Payment in the name of GSE, and deposit such Items of
Payment in the GSE Collateral Account. Lender reserves the right, exercised
in its sole and absolute discretion from time to time, to provide to the
GSE Collateral Account credit prior to final collection of an Item of
Payment and to disallow credit for any Item of Payment which is
unsatisfactory to Lender. In the event Items of Payment are returned to
Lender for any reason whatsoever, Lender may, in the exercise of its
discretion from time to time, forward such Items of Payment a second time.
Any returned Items of Payment shall be charged back to the Collateral
Account, the GSE Loan Account, or other account, as appropriate.
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Lender will apply the whole or any part of the collected funds
credited to the GSE Collateral Account against the GSE Loan (or with
respect to Items of Payment that are not proceeds of Accounts or after the
occurrence and during the continuance of an Event of Default, against any
of the Obligations) or credit such collected funds to a depository account
of GSE with Lender (or an Affiliate of Lender), the order and method of
such application to be in the sole discretion of Lender.
2.5.9 GSE Loan Account.
Lender will establish and maintain a loan account on its books
(the "GSE Loan Account") to which Lender will (a) debit (i) the principal
amount of each advance of the GSE Loan made by Lender hereunder as of the
date made, (ii) the amount of any interest accrued on the GSE Loan as and
when due, and (iii) any other amounts due and payable by GSE to Lender from
time to time under the provisions of this Agreement in connection with the
GSE Loan, including, without limitation, Enforcement Costs, Fees, late
charges, and service, collection and audit fees, as and when due and
payable, and (b) credit all payments made by GSE to Lender on account of
the GSE Loan as of the date made including, without limitation, funds
credited to the GSE Loan Account from the GSE Collateral Account. Lender
may debit the GSE Loan Account for the amount of any Item of Payment that
is returned to Lender unpaid. All credit entries to the GSE Loan Account
are conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by Lender in cash or solvent credits.
Any and all periodic or other statements or reconciliations, and the
information contained in those statements or reconciliations, of the GSE
Loan Account shall be final, binding and conclusive upon GSE in all
respects, absent manifest error, unless Lender receives specific written
objection thereto from GSE within thirty (30) Business Days after such
statement or reconciliation shall have been sent by Lender.
2.5.10 GSE Unused Line Fee.
GSE shall pay to Lender a revolving credit facility fee
(collectively, the "GSE Unused Line Fees" and individually, a "GSE Unused
Line Fee") in an amount equal to three-eighths percent (3/8%) per annum of
the average daily unused and undisbursed portion of the GSE Revolving
Credit Committed Amount in effect from time to time accruing during each
quarter. The accrued and unpaid portion of the GSE Unused Line Fee shall be
paid in arrears by GSE to Lender on the first day of each September,
December, March and June, commencing on the first such date following the
date hereof, and on the Revolving Credit Termination Date.
2.5.11 GSE Origination Fee.
GSE shall pay to Lender on or before March 30, 2004 a loan
origination fee in the amount of Fifteen Thousand Dollars ($15,000), which
fee has been fully earned and is non-refundable."
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Exhibit A to this Agreement shall be deemed to be Exhibit B-2 to the
Financing Agreement.
(g) Section 3.2.2 (MXL Collateral) is hereby deleted in its entirety
and the following is inserted in place thereof:
"Section 3.2.2 GSE Collateral.
(a) GSE hereby assigns, pledges and grants to Lender, and agrees
that Lender shall have a perfected and continuing security interest in, and
Lien on, (i) all of GSE's Accounts, Inventory, Chattel Paper, Documents,
Instruments, Equipment, Investment Property, and General Intangibles (in
which GSE is permitted under the terms thereof to grant a security
interest) and all of GSE's deposit accounts with any financial institution
with which GSE maintains deposits, whether now owned or existing or
hereafter acquired or arising, (ii) all returned, rejected or repossessed
goods, the sale or lease of which shall have given or shall give rise to an
Account or Chattel Paper, (iii) all insurance policies relating to the
foregoing and the right to receive refunds of unearned insurance premiums
under those policies, (iv) all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to the foregoing
and all Equipment and General Intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records; and (v) all Proceeds and products of the foregoing. GSE further
agrees that Lender shall have in respect thereof all of the rights and
remedies of a secured party under the Uniform Commercial Code as well as
those provided in this Agreement, under each of the other Financing
Documents to which it is a party and under applicable Laws.
(b) GSE covenants and agrees that GSE shall provide Lender with
all necessary information and will execute and deliver such documents as
are required to comply with the Federal Assignment of Claims Act of 1940
(31 U.S.C. Section 3727 and 41 U.S.C. Section 15), to perfect Lender's
security interest in the Accounts arising under Government Contracts with a
contract value equal to or greater than Fifty Thousand Dollars ($50,000)
and such other Government Contracts as Lender may determine in its sole
discretion."
(h) The following section is hereby added to Section 7.1 (Affirmative
Covenants - Borrower):
"7.1.23 Financial Covenants - GSE.
(a) Total Liabilities to Tangible Net Worth. GSE shall maintain,
at all times a ratio of Total Liabilities to Tangible Net Worth not greater
than 3.0 to 1.0.
(b) Commencing March 31, 2004 GSE will maintain, on a
consolidated basis and tested as of the last day of each of GSE's fiscal
quarters for the four (4) quarter period ending on that date, a Debt
Service Coverage Ratio of not less 1.2 to 1.0; provided, however, this
covenant for the period ending March
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31, 2004 shall be calculated by multiplying the Cash Flow as of March 31,
2004 by a factor of 4; for the period ending June 30, 2004 shall be
calculated by multiplying the aggregate Cash Flow as of March 31, 2004 and
June 30, 2004 by a factor of 2; and for the period ending September 30,
2004 shall be calculated by multiplying the aggregate Cash Flow as of March
31, 2004, June 30, 2004 and September 30, 2004 by a factor of 1.33.
(i) All references to MXL shall be deemed to be deleted from the
Financing Agreement as of the date hereof. MXL is hereby released from any and
all obligations under the Financing Agreement.
(j) Section 9.1 (Notices) is modified by adding the following to the
list of parties:
"GSE: GSE Systems, Inc.
9189 Red Branch Road
Columbia, MD 21045
Attention: Jeffery G. Hough
with a copy to: GP Strategies Corporation
777 Westchester Avenue, 4th Floor
White Plains, NY 10604
Attention: Andrea Kantor, Esquire
5. The agreements of the Lender under this Agreement are subject to
fulfillment on or before the date of this Agreement of the following conditions
precedent in a manner satisfactory in form and substance to Lender and its
counsel:
(a) Organizational Documents - GSE: Lender shall have received:
(i) a certificate of good standing certified by the Secretary of
State, or other appropriate Governmental Authority, of the state of
formation of GSE;
(ii) a certified copy from the appropriate Governmental Authority
under which GSE is organized, of GSE's organizational documents and all
recorded amendments thereto;
(iii) a certificate of qualification to do business certified by
the Secretary of State or other Governmental Authority of each jurisdiction
in which the character of the properties owned by GSE or in which the
transaction of its business makes such qualification necessary; and
(iv) a certificate dated as of the date of this Agreement by the
Secretary or an Assistant Secretary of GSE covering:
(A) true and complete copies of GSE's organizational and
governing documents and all amendments thereto;
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(B) true and complete copies of the resolutions of its Board
of Directors authorizing (1) the execution, delivery and performance
of the Financing Documents to which it is a party, (2) the borrowings
hereunder, and (3) the granting of the Liens contemplated by this
Agreement and the Financing Documents to which GSE is a party;
(C) the incumbency, authority and signatures of the officers
of GSE authorized to sign this Agreement and the other Financing
Documents to which GSE is a party; and
(D) the identity of GSE's current directors.
(b) Opinion of GSE's Counsel. Lender shall have received the favorable
opinion of counsel for GSE addressed to Lender.
(c) Note. Lender shall have received the GSE Note, conforming to the
requirements hereof and executed by a Responsible Officer of GSE and
attested by a duly authorized representative of GSE.
(d) Financing Documents and GSE Collateral. GSE shall have executed
and delivered the Financing Documents to be executed by it, and shall have
delivered original Chattel Paper, Instruments, Investment Property, and
related GSE Collateral and all opinions and other documents contemplated by
ARTICLE III (The Collateral).
(e) Other Financing Documents. In addition to the Financing Documents
to be delivered by GSE, Lender shall have received all other Financing
Documents duly executed and delivered by Persons other than GSE.
(f) Other Documents, Etc. Lender shall have received such other
certificates, opinions, documents and instruments confirmatory of or
otherwise relating to the transactions contemplated hereby as may have been
reasonably requested by Lender.
(g) Payment of Fees. Lender shall have received payment of any Fees
due on or before the date hereof.
(h) Collateral Disclosure List. GSE shall have delivered to Lender a
Collateral Disclosure List required under the provisions of Section 3.3
(Collateral Disclosure List) duly executed by a Responsible Officer of GSE.
(i) Recordings and Filings. GSE shall have: (i) authorized, executed
and/or delivered all Financing Documents required to be filed, registered
or recorded in order to create, in favor of Lender, a perfected Lien in the
Collateral (subject only to the Permitted Liens) in form and in sufficient
number for filing, registration, and recording in each office in each
jurisdiction in which such filings, registrations and recordations are
required, and (ii) delivered such evidence as Lender deems satisfactory
that all necessary filing fees and all
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recording and other similar fees, and all Taxes and other expenses related
to such filings, registrations and recordings will be or have been paid in
full.
(j) Insurance Certificate. Lender shall have received insurance
certificates in accordance with the provisions of the Financing Agreement.
(k) Landlord's Waivers. Lender shall have received a waiver from the
landlord of the 9189 Red Branch Road, Columbia, Maryland location leased by
Borrower in form reasonably acceptable to Lender and its counsel in their
sole and absolute discretion.
(l) Borrowing Base Report. Lender shall have received a current GSE
Borrowing Base Report.
6. GSE hereby joins in the Financing Agreement as a borrower for the
purpose of rendering the representations, warranties and covenants contained in
the Financing Agreement, as amended hereby.
7. The Borrower hereby issues, ratifies and confirms the representations,
warranties and covenants contained in the Financing Agreement, as amended
hereby. The Borrower agrees that this Agreement is not intended to and shall not
cause a novation with respect to any or all of the Obligations.
8. GSE shall pay at the time this Agreement is executed and delivered all
fees, commissions, costs, charges, taxes and other expenses incurred by the
Lender and its counsel in connection with this Agreement, including, but not
limited to, reasonable fees and expenses of the Lender's counsel and all
recording fees, taxes and charges.
9. This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument. The Borrower agrees that the Lender may rely on a telecopy of any
signature of the Borrower. The Lender agrees that the Borrower may rely on a
telecopy of this Agreement executed by the Lender.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement under seal as of the date and year first written above.
WITNESS OR ATTEST: GENERAL PHYSICS CORPORATION
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
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WITNESS OR ATTEST: SKILLRIGHT, INC.
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS OR ATTEST: GSE SYSTEMS, INC.
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS OR ATTEST: GSE POWER SYSTEMS, INC.
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS OR ATTEST: MSHI, INC.
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS: WACHOVIA BANK, NATIONAL ASSOCIATION
By: (SEAL)
- ------------------------------------- ------------------------------
Lucy C. Campbell
Vice President
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AGREEMENT OF GUARANTOR
The undersigned is the "Guarantor" under a Guaranty of Payment Agreement,
dated August 13, 2003 (as amended, modified, substituted, extended and renewed
from time to time, the "Guaranty"), in favor of the Lender. In order to induce
the Lender to enter into the foregoing Agreement, the undersigned (a) consents
to the transactions contemplated by, and agreements made by the Borrower under,
the foregoing Agreement, and (b) ratifies, confirms and reissues the terms,
conditions, promises, covenants, grants, assignments, security agreements,
agreements, representations, warranties and provisions contained in the
Guaranty.
WITNESS signature and seal of the undersigned as of the date of the
Agreement.
WITNESS OR ATTEST: GP STRATEGIES CORPORATION
By: (SEAL)
- ------------------------------------- ------------------------------
Name:
----------------------------------
Title:
---------------------------------
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