SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 08, 2003
GSE Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-26494 52-1868008
--------------------------- --------------- ---------------------------
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
9189 Red Branch Road, Columbia, MD 21045
------------------------------------------------- -----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (410) 772-3500
-----------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial statments and exhibits.
SIXTH MODIFICATION AGREEMENT
THIS SIXTH MODIFICATION AGREEMENT ("AGREEMENT") is made as of the 25th
day of September, 2003, by and among GSE SYSTEMS, INC., a Delaware corporation
("GSE SYSTEMS"), GSE PROCESS SOLUTIONS, INC., a Delaware corporation ("GSE
PROCESS"), and GSE POWER SYSTEMS, INC., a Delaware corporation ("GSE POWER," and
together with GSE SYSTEMS and GSE PROCESS, collectively, "BORROWERS"), 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"), GP STRATEGIES CORPORATION, a Delaware
corporation ("GP STRATEGIES"), MANTECH INTERNATIONAL CORPORATION, a Delaware
corporation ("MANTECH"), and PNC BANK, NATIONAL ASSOCIATION ("LENDER"). 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, a Second Modification Agreement dated as of July 20, 2000, a
Third Modification Agreement dated as of March 30, 2001, a Fourth Modification
Agreement dated as of January 14, 2002, and various letter agreements executed
from time to time (the aforesaid Loan and Security Agreement, as so amended
"NBOC LOAN AGREEMENT"), by and between the BORROWERS and the NATIONAL BANK OF
CANADA ("NBOC"), and the other "LOAN DOCUMENTS" (as such term is defined in the
NBOC LOAN AGREEMENT) executed in connection therewith, NBOC provided a credit
facility to the BORROWERS in the originally stated maximum principal amount of
Ten Million Dollars ($10,000,000.00), and a cash-secured letter of credit
facility in the original principal amount of Five Hundred Three Thousand Two
Hundred Forty Dollars and Twenty-Five Cents ($503,240.25) (collectively "CREDIT
FACILITY"). On or about January 15, 2002, NBOC transferred to the LENDER all of
its right, title, and interest in, to and under the NBOC LOAN AGREEMENT, such
other LOAN DOCUMENTS and the CREDIT FACILITY. On or about March 21, 2003, the
BORROWERS, the GUARANTORS and the LENDER entered into a Fifth Modification
Agreement amending the NBOC LOAN AGREEMENT in certain respects. The NBOC LOAN
AGREEMENT, as so amended, is hereinafter referred to as the "LOAN AGREEMENT."
All capitalized terms used herein and not otherwise defined shall have
the same meaning herein as in the LOAN AGREEMENT.
The LOAN from the LENDER to the BORROWERS is further evidenced by the
Revolving Loan Promissory Note dated March 23, 2000 in the original principal
amount of Ten Million Dollars ($10,000,000.00), by the BORROWERS, jointly and
severally, and payable to the order of NBOC ("NOTE"). On or about January 15,
2002, the NOTE was endorsed by NBOC to the LENDER.
The GUARANTORS have guaranteed all of the BORROWERS' obligations to the
LENDER pursuant to Guaranty Agreements dated as of March 23, 2000 ("GUARANTY
AGREEMENTS").
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 ("LIMITED GUARANTY AGREEMENT").
MANTECH presently provides certain subordinated loans to GSE SYSTEMS as
set forth in the Subordination and Intercreditor Agreement dated as of June 25,
2001 between MANTECH and the LENDER ("MANTECH SUBORDINATION AGREEMENT").
As hereinafter used in this AGREEMENT, the term "LOAN DOCUMENTS," shall
mean all of the "LOAN DOCUMENTS," as such term is defined in the LOAN AGREEMENT,
including but not limited to, the LOAN AGREEMENT, the NOTE, the GUARANTY
AGREEMENTS, the LIMITED GUARANTY AGREEMENT, the MANTECH SUBORDINATION AGREEMENT,
this AGREEMENT, and all documents executed or to be executed pursuant to this
AGREEMENT.
The CREDIT FACILITY is secured by, among other things, various security
interests and liens in the tangible and intangible assets of the BORROWERS and
the GUARANTORS, pursuant to the LOAN AGREEMENT and the other LOAN DOCUMENTS. All
assets which now or hereafter serve as security for the indebtedness that is
owed to the LENDER under the LOAN AGREEMENT and the other LOAN DOCUMENTS are
hereinafter referred to collectively as the "COLLATERAL."
The BORROWERS are in default under the LOAN AGREEMENT as a result of
violations of Sections 6.21 (Minimum EBIDTA) and 6.22 (Minimum Tangible Net
Worth Plus Subordinated Debt) of the LOAN AGREEMENT reported as of the end of
their fiscal QUARTER ending June 30, 2003 ("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 availability for
LETTERS OF CREDIT and has not, as of the date hereof, demanded repayment of any
sums under the CREDIT FACILITY.
The BORROWERS have also informed the LENDER of a proposed sale of the
assets of GSE PROCESS ("PROCESS SALE") from GSE PROCESS to NOVATECH ACQUISITION,
LLC, a Delaware limited liability company ("BUYER"), pursuant to an Asset
Purchase Agreement by and between GSE PROCESS and the BUYER, a copy of which was
provided to the LENDER on September 24, 2003 ("PROCESS SALE AGREEMENT").
The BORROWERS have also informed the LENDER of a proposed sale by
MANTECH to GP STRATEGIES of all of the equity interests owned by MANTECH in GSE
SYSTEMS ("MANTECH SALE").
The BORROWERS have requested that the LENDER, consent to the PROCESS
SALE, consent to the MANTECH SALE, waive the EXISTING DEFAULTS, and modify the
LOAN DOCUMENTS in certain respects. The LENDER has agreed to do so on the terms
and conditions set forth below.
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 AGREEMENT.
Section 2. Amendments To Loan Agreement. The LOAN AGREEMENT is hereby
amended and modified as follows:
a. Section 1.18 of the LOAN AGREEMENT captioned "Borrowing Base" is
hereby amended to delete clause "(d) the INVENTORY BORROWING BASE;".
b. Section 1.31 of the LOAN AGREEMENT captioned "Dollar Cap" is hereby
amended and restated in its entirety as follows:
Section 1.31. Dollar Cap. Section 1.31. Dollar Cap.
The term "DOLLAR CAP" means: (a) from March 23, 2003 through
the September 25, 2003, Six Million Five Hundred Thousand
Dollars ($6,500,000.00); (b) from September 25, 2003 through
March 31, 2004, One Million Five Hundred Thousand Dollars
($1,500,000.00); and (b) from April 1, 2004 through the
TERMINATION DATE, One Million Dollars ($1,000,000.00).
c. Section 1.101 of the LOAN AGREEMENT captioned "Termination Date" is
hereby amended and restated in its entirety as follows:
Section 1.101. Termination Date. The term "TERMINATION DATE" means May
31, 2004.
d. Section 1.108 of the LOAN AGREEMENT captioned "Unbilled Government
Accounts Maximum Credit Amount" is hereby amended and restated in its
entirety as follows:
Section 1.108. Unbilled Government Accounts Maximum
Credit Amount. The term "UNBILLED GOVERNMENT ACCOUNTS MAXIMUM
CREDIT AMOUNT" means Two Hundred Fifty Thousand Dollars
(250,000.00).
e. Section 2.1 of the LOAN AGREEMENT captioned to "Agreement to Extend
the Loan" is hereby amended by amending and restating the second
sentence thereof in its entirety as follows:
The LENDER shall advance proceeds of the LOAN to the BORROWERS
by depositing into the COMMERCIAL ACCOUNT or in accordance
with such other procedures as may be agreed to between the
LENDER and the BORROWERS, such sums as any of the BORROWERS
may request during the period from and including the date of
CLOSING to but not including the TERMINATION DATE; provided
that the aggregate outstanding principal balance of the LOAN,
plus the L/C EXPOSURE excluding the aggregate STATED AMOUNT of
LETTERS OF CREDIT permitted and outstanding under the CASH
SECURED L/C FACILITY and fully secured by cash collateral in
accordance with the L/C CASH COLLATERAL AGREEMENT and Section
9.4 of the LOAN AGREEMENT, shall never exceed at any time the
MAXIMUM CREDIT AMOUNT.
f. Section 2.1 of the LOAN AGREEMENT captioned "Agreement to Extend the
Loan" is hereby further amended by amending and restating the fifth
sentence thereof in its entirety as follows:
In the event that (a) the principal balance outstanding under
the LOAN, plus the L/C EXPOSURE excluding the aggregate STATED
AMOUNT of LETTERS OF CREDIT permitted and outstanding under
the CASH SECURED L/C FACILITY and fully secured by cash
collateral in accordance with the L/C CASH COLLATERAL
AGREEMENT and Section 9.4 of the LOAN AGREEMENT, ever exceeds
the MAXIMUM CREDIT AMOUNT (or any of the percentages or
sublimits set forth therein), the BORROWERS shall immediately
upon demand of the LENDER (and on September 25, 2003, and
April 1, 2004 without demand of the LENDER) pay to the LENDER
in cash the total amount of such excess and all accrued
interest thereon and, in addition to any other rights and
remedies of the LENDER hereunder, prior to such repayment such
over advances shall bear interest at the highest rate provided
under this AGREEMENT.
g. Subsection 2.2.1 of the LOAN AGREEMENT captioned "Availability" is
hereby amended and restated in its entirety as follows:
Section 2.1.1. Availability. 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 documents required by the LENDER in the
issuance of LETTERS OF CREDIT, on any BUSINESS DAY from the
date of CLOSING through but not including the TERMINATION
DATE, the BORROWERS (or any of them) may request that the
LENDER issue LETTERS OF CREDIT under the CREDIT FACILITY
(other than the CASH SECURED L/C FACILITY) for the account of
the BORROWERS, and the LENDER agrees to issue such LETTERS OF
CREDIT so requested, provided further: (a) the L/C EXPOSURE
(after giving effect to any requested issuance), excluding the
aggregate STATED AMOUNT of LETTERS OF CREDIT , if any,
permitted and outstanding under the CASH SECURED L/C FACILITY
and fully secured by cash collateral in accordance with in
accordance with the L/C CASH COLLATERAL AGREEMENT and Section
9.4 of the LOAN AGREEMENT shall not at any time exceed One
Hundred Thousand Dollars ($100,000.00); (b) the sum of the L/C
EXPOSURE (after giving effect to the requested issuance)
excluding the aggregate STATED AMOUNT of LETTERS OF CREDIT
permitted and outstanding under the CASH SECURED L/C FACILITY
and fully secured by cash collateral in accordance with the
L/C CASH COLLATERAL AGREEMENT and Section 9.4 of the LOAN
AGREEMENT, plus the aggregate unpaid principal balance of the
LOAN, shall not exceed the MAXIMUM CREDIT AMOUNT; (c) no
LETTER OF CREDIT (including any extension or renewal thereof,
whether or not automatic) shall expire on a date which is
later than one (1) year from the date of issuance thereof; (d)
no LETTER OF CREDIT (including any extension or renewal
thereof, whether or not automatic) shall expire on a date
which is on or after thirty (30) days prior to the TERMINATION
DATE, unless such LETTER OF CREDIT is secured by cash
collateral satisfactory to the LENDER in an amount equal to
one hundred percent (100%) of the STATED AMOUNT, to be applied
in accordance with Section 9.4 hereof; and (e) the issuance of
any requested LETTER OF CREDIT shall not conflict with or
cause the LENDER to exceed any limits imposed by any LAWS
applicable to the LENDER. If at any time the L/C EXPOSURE
exceeds any such permitted amounts, the BORROWERS shall
furnish to the LENDER cash collateral satisfactory to the
LENDER in an amount equal to such excess to be applied in
accordance with Section 9.4 hereof. No additional LETTERS OF
CREDIT shall be requested or issued under the CASH SECURED L/C
FACILITY.
h. Section 6.21 of the LOAN AGREEMENT captioned "Minimum EBITDA" is
hereby deleted and the following new Section 6.21 captioned "Minimum
Net Profit" inserted in lieu thereof as follows:
Section 6.21. Minimum Net Profit. The aggregate net profit of
the BORROWERS and their respective consolidated SUBSIDIARIES
for each such QUARTER determined in accordance with G.A.A.P.
and in a manner satisfactory to the LENDER, measured on a
consolidated basis, at the end of each of the QUARTERS ending
December 31, 2003 and March 31, 2004, shall be not less than
One Dollar ($1.00).
i. Section 6.22 of the LOAN AGREEMENT captioned "Minimum Tangible Net
Worth Plus Subordinated Debt" is hereby deleted and the following new
Section 6.21 captioned "Minimum Shareholder Equity" inserted in lieu
thereof as follows:
Section 6.21. Minimum Shareholder Equity. The BORROWERS and
their respective consolidated SUBSIDIARIES shall maintain at
all times shareholder equity, determined in accordance with
G.A.A.P. and in a manner satisfactory to the LENDER, of not
less than Six Million Dollars ($6,000,000.00) and reported at
the end of each of the QUARTERS ending September 30, 2003,
December 31, 2003, and March 30, 2004.
Section 3. Acknowledgments. The BORROWERS, the GUARANTORS, GP
STRATEGIES, and MANTECH acknowledge and agree that: (a) the LOAN DOCUMENTS are
the valid and binding obligations of the BORROWERS, the GUARANTORS, GP
STRATEGIES, and MANTECH, as the case may be, and are fully enforceable against
the BORROWERS, the GUARANTORS, GP STRATEGIES, and MANTECH, as the case may be,
in accordance with their respective terms; (b) the obligations of the BORROWERS,
the GUARANTORS, GP STRATEGIES, and MANTECH under the respective LOAN DOCUMENTS
are not subject to any set-off, defense or counterclaim against the LENDER; (c)
the BORROWERS and the GUARANTORS are presently in default under the LOAN
DOCUMENTS; and (d) the LENDER is entitled to immediately assert and enforce its
various rights and remedies against the BORROWERS, the GUARANTORS, GP STRATEGIES
and the COLLATERAL under the LOAN DOCUMENTS and applicable law.
Section 4. Amendment Fees. So long as there are any OBLIGATIONS which
remain outstanding as of such dates, the BORROWERS and the GUARANTORS hereby
acknowledge and confirm their agreement and obligation to pay to the LENDER the
following non-refundable and unconditional fees: (a) Fifty Thousand Dollars
($50,000.00) which shall be due and payable on October 1, 2003; and (b) Fifty
Thousand Dollars ($50,000.00) which shall be due and payable on January 1, 2004.
None of the foregoing fees shall be considered to be a payment of any of the
LENDER'S expenses incurred in connection with the CREDIT FACILITY or this
AGREEMENT, nor shall it be considered to modify or limit the ability of the
LENDER to terminate, in accordance with the provisions of the LOAN AGREEMENT and
the other LOAN DOCUMENTS, the ability of the BORROWERS to borrow under the LOAN,
or obtain LETTERS OF CREDIT. Such fees shall not be applied to any of the
indebtedness owed under the LOAN DOCUMENTS. The fees are, instead, intended as
part of the compensation earned by the LENDER for agreeing to provide the CREDIT
FACILITY in accordance with the terms of this AGREEMENT and the other LOAN
DOCUMENTS.
Section 5. Consent to Process Sale. Subject to the terms and conditions
set forth in this AGREEMENT, the LENDER hereby consents to the PROCESS SALE on
the terms set forth in the PROCESS SALE AGREEMENT including a release by LENDER
of any security interests which it holds in the assets of GSE PROCESS purchased
by, and transferred to, the BUYER (the "PURCHASED ASSETS"). Upon satisfaction of
all conditions precedent set forth in this AGREEMENT, including, but not limited
to those set forth in Section 12 hereof, the LENDER will deliver to GSE SYSTEMS
or its designee UCC-3 Partial Releases and other necessary releases in
connection with public filings which it holds of record to release the PURCHASED
ASSETS from the security interests granted by GSE PROCESS pursuant to the LOAN
AGREEMENT and other LOAN DOCUMENTS. Notwithstanding anything to the contrary set
forth in this AGREEMENT or any of the other LOAN DOCUMENTS, upon closing of the
PROCESS SALE, no further LOAN advances or LETTERS OF CREDIT will be requested by
or provided to GSE PROCESS under the CREDIT FACILITY.
Section 6. Consent to ManTech Sale. Subject to the terms and conditions
set forth in this AGREEMENT, the LENDER hereby consents to the MANTECH SALE;
provided the same shall occur contemporaneously with or subsequent to the
PROCESS SALE as set forth herein. For avoidance of doubt, the parties hereby
confirm that no dividends and distributions from GSE SYSTEMS to MANTECH are
permitted under the terms of the LOAN DOCUMENTS, and this AGREEMENT shall not be
construed to constitute a consent to any such payments.
Section 7. Waiver of Existing Defaults. Subject to the terms and
conditions set forth in this AGREEMENT, 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.
Section 8. Acknowledgment of Borrowers. Each of the BORROWERS hereby
acknowledges, ratifies and confirms its respective obligations to the LENDER
under the LOAN DOCUMENTS and further acknowledges, ratifies and confirms that
each of the BORROWERS are and shall remain, jointly and severally, absolutely
and unconditionally obligated to pay the LENDER all present and future
indebtedness that is owed under the LOAN DOCUMENTS, notwithstanding the LENDER'S
execution of this AGREEMENT and the various agreements of the LENDER set forth
herein.
Section 9. Acknowledgment of Guarantors, GP Strategies and Mantech.
Each of the GUARANTORS, GP STRATEGIES and MANTECH hereby acknowledges, ratifies
and confirms its respective obligations to the LENDER under the respective LOAN
DOCUMENTS, notwithstanding the LENDER'S execution of this AGREEMENT and the
various agreements of the LENDER set forth herein.
Section 10. Subordination of Loans and Indebtedness. The BORROWERS and
the GUARANTORS hereby agree that until all amounts that are owed under the LOAN
DOCUMENTS are paid in full, they will not loan or advance any funds to any
individual or entity, nor incur any additional indebtedness, without first
obtaining the prior written consent of the LENDER. The BORROWERS, the
GUARANTORS, GP STRATEGIES and MANTECH also agree that, without the prior written
consent of the LENDER, until all amounts that are owed under the LOAN DOCUMENTS
are paid in full, GSE SYSTEMS will not repay any portion of any loan(s) or
indebtedness due and payable to any of its stockholders, members, principals,
officers or directors, including but not limited to GP STRATEGIES or MANTECH,
and all such amounts due and owing from GSE SYSTEMS, including but not limited
to any such amounts payable to MANTECH or GP STRATEGIES (collectively, the
"SUBORDINATED DEBT") are hereby subordinated, in all respects, to all
indebtedness due and owing from the BORROWERS to the LENDER under the LOAN
DOCUMENTS. No payments shall be made by GSE SYSTEMS on any of the SUBORDINATED
DEBT without the prior written consent of the LENDER until such time as all
indebtedness that is owed to the LENDER under the LOAN DOCUMENTS has been fully
and indefeasibly paid in full and satisfied.
Section 11. Additional Representations and Warranties. As an inducement
to the LENDER to enter into this AGREEMENT, the BORROWERS, the GUARANTORS, GP
STRATEGIES and MANTECH hereby make the following additional representations and
warranties to the LENDER:
a. Each of them: (i) has the power to enter into this
AGREEMENT 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 AGREEMENT and all related documents and agrees to deliver to
the LENDER a certificate of corporate resolutions evidencing same; 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. With respect to the BORROWERS AND GUARANTORS, other than
the EXISTING DEFAULTS, 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, and with respect to GP STRATEGIES and MANTECH, none of them
is in default under any contract, agreement or instrument to which it is a party
or under which it or any of its property is bound that would have a material
adverse effect on this AGREEMENT.
e. The execution, delivery and performance of this AGREEMENT
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. With respect to the BORROWERS and GUARANTORS, 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 statements 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 AGREEMENT and all of the LOAN DOCUMENTS are the valid
and binding obligations of each of them and are fully enforceable in accordance
with all stated terms.
j. Immediately following payment to the LENDER of the proceeds
of the PROCESS SALE, there will be no reliance upon assets of GSE PROCESS as
support for advances or LETTERS OF CREDIT under the LOAN, the CREDIT FACILITY or
the LOAN DOCUMENTS.
k. As of the date hereof, the aggregate STATED AMOUNT of
LETTERS OF CREDIT outstanding under the CASH SECURED L/C FACILITY is Three
Hundred Ninety-One Thousand Four Hundred Sixty-Nine Dollars and Forty Cents
($391,469.40).
Section 12. Conditions Precedent. The LENDER'S consents, waivers, and
other agreements under this AGREEMENT shall not be effective until all of the
conditions precedent set forth below in this paragraph have been fully
satisfied:
a. This AGREEMENT shall have been executed and delivered to
the LENDER by the BORROWERS, the GUARANTORS, GP STRATEGIES, and MANTECH.
b. The following documents shall have been received by the
LENDER in connection with the PROCESS SALE AGREEMENT: (i) a copy of the complete
and fully executed PROCESS SALE AGREEMENT and such agreement shall be
substantially as disclosed to the LENDER on September 24, 2003; (ii) a copy of
the resolutions of GSE SYSTEMS and GSE PROCESS authorizing the transaction
contemplated thereby; (iii) a copy of the fully executed bill of sale for the
PURCHASED ASSETS and the fully executed assignment and assumption agreement in
connection with the PROCESS SALE AGREEMENT; and (iv) evidence that consideration
has been paid by the BUYER to GSE PROCESS.
c. All of the proceeds representing the net purchase price of
the PROCESS SALE, but an amount not less than Five Million Five Hundred Thousand
Dollars ($5,500,000.00) shall have been paid to the LENDER for application to
the balances outstanding under the LOAN, and the DOLLAR CAP applicable to the
CREDIT FACILITY, as amended pursuant to this AGREEMENT, shall have been reduced
to One Million Five Hundred Thousand Dollars ($1,500,000.00).
Section 13. Limited Modification. Except as modified by this AGREEMENT, the
parties hereto acknowledge and agree that all other terms and conditions of the
LOAN DOCUMENTS shall remain unchanged, in full force and effect and are hereby
ratified and confirmed by the BORROWERS, GUARANTORS, GP STRATEGIES, MANTECH and
the LENDER in all respects.
Section 14. No Intended Novation Or Refinancing. All parties hereto
expressly acknowledge that no novation of the CREDIT FACILITY, the LOAN or the
LOAN DOCUMENTS is intended by the parties, and that the modifications,
amendments, and restatements contemplated by this AGREEMENT are not intended to
evidence or to be construed as a refinancing of the LOAN or the CREDIT FACILITY.
Section 15. Confirmation of Liens; Covenant Not to Encumber. Each of
the BORROWERS and GUARANTORS ratifies and confirms that all existing liens,
security interests, and other pledges and grants of collateral which have been
previously granted or conveyed by the BORROWERS and the GUARANTORS with respect
to the CREDIT FACILITY are intended to remain in full force and effect, without
any loss or reduction in the priority or enforceability of any liens, security
interests, or pledges. The BORROWERS and the GUARANTORS hereby covenant and
agree that no further encumbrances of any type, whether voluntary or
involuntary, shall be placed against any COLLATERAL or any of their other
assets, without the prior written consent of the LENDER.
Section 16. Final Agreement. This AGREEMENT and the LOAN DOCUMENTS
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 17. Fees And Expenses. The BORROWERS, jointly and severally,
agree to promptly pay all costs and expenses incurred by the LENDER in
connection with this AGREEMENT, including, but not limited to, all attorneys'
fees.
Section 18. Binding Effect. This AGREEMENT shall inure to the benefit
of the parties hereto, and shall be binding upon, their respective personal
representatives, successors and assigns.
Section 19. Choice of Law. The laws of the State of Maryland
(excluding, however, conflicts of law principles) shall govern and be applied to
determine all issues relating to this AGREEMENT and the rights and obligations
of the parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this AGREEMENT or which occurred or were to occur as a direct or indirect
result of this AGREEMENT having been executed.
Section 20. 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
AGREEMENT. All captions are for the purpose of convenience only.
Section 21. Time. Time is of the essence with respect to this
AGREEMENT and all terms and conditions described herein.
Section 22. No Defenses; Release of Claims. As of the date of this
AGREEMENT, none of the BORROWERS has any offsets, defenses, counterclaims or
other claims or defenses which would lessen, delay or mitigate against its
duties and obligations to repay and perform the OBLIGATIONS in accordance with
all stated terms of the LOAN DOCUMENTS. As of the date of this AGREEMENT, none
of the GUARANTORS has any offsets, defenses, counterclaims or other claims or
defenses which would lessen, delay or mitigate against its duties and
obligations to repay and perform its "OBLIGATIONS," as such term is defined in
its respective GUARANTY AGREEMENT, in accordance with all stated terms of the
LOAN DOCUMENTS to which it is a party. As of the date of this AGREEMENT, GP
STRATEGIES has no offsets, defenses, counterclaims or other claims or defenses
which would lessen, delay or mitigate against its duties and obligations to
repay and perform its "OBLIGATIONS," as such term is defined in the LIMITED
GUARANTY AGREEMENT, in accordance with all stated terms of the LOAN DOCUMENTS to
which it is a party. As part of this AGREEMENT and in consideration of same,
each of the BORROWERS, GUARANTORS, GP STRATEGIES and MANTECH, jointly and
severally, hereby releases the LENDER, all of the affiliates, parent
corporations and subsidiaries of the LENDER, and all of the past, present and
future officers, directors, agents, attorneys and employees of the LENDER
(collectively, "RELEASED PARTIES") from any and all claims, causes of action,
suits and damages (including claims for attorneys' fees), known or unknown,
which any BORROWER, GUARANTOR, GP STRATEGIES or MANTECH, jointly, severally or
otherwise, ever had or now has against any or all of the RELEASED PARTIES.
Section 23. No Waiver. No failure or delay by the LENDER in the
exercise of any of its rights under any LOAN DOCUMENT shall be a waiver of such
right or remedy, nor shall a single or partial exercise or enforcement thereof
preclude any other or further exercise or enforcement thereof, or the exercise
or enforcement of any other right or remedy. The LENDER, at any time or from
time to time, may waive all or any rights under this AGREEMENT or the other LOAN
DOCUMENTS 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, any of the GUARANTORS, GP STRATEGIES, or MANTECH.
No notice to or demand upon any of the BORROWERS, the GUARANTORS, GP STRATEGIES
or MANTECH shall entitle any of them to any other or further notice or demand in
the same or similar circumstance.
Section 24. Waiver of Automatic Stay. In the event that any of the
BORROWERS or GUARANTORS hereafter file a bankruptcy case or have an involuntary
bankruptcy case filed against any of them, each of the BORROWERS and GUARANTORS
hereby specifically agree that the automatic stay provisions of Section 362 of
the United States Bankruptcy Code applicable to any such bankruptcy case shall
be immediately terminated as to the LENDER and any COLLATERAL which is owned by
the BORROWER(S) or GUARANTOR(S) who file(s) such a bankruptcy case (or has such
a bankruptcy case filed against it) so that the LENDER may immediately assert
and enforce all of its rights and remedies under this AGREEMENT, the other LOAN
DOCUMENTS and applicable law with respect to such COLLATERAL, and each of the
BORROWERS and GUARANTORS further agrees to immediately execute and deliver to
the LENDER and to file with the Bankruptcy Court such documents, pleadings and
papers as are necessary to effectuate the LENDER obtaining such an immediate
termination of the automatic stay. In the event that any of the BORROWERS, the
GUARANTORS or GP STRATEGIES makes a payment or payments to the LENDER or the
LENDER receives any payment or proceeds of the COLLATERAL or from any setoff or
any other source, which payments or proceeds or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside, avoided
and/or required to be repaid to a trustee, receiver or any other party under
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payments or proceeds repaid, the obligations, indebtedness
and liabilities of any of the BORROWERS, the GUARANTORS or GP STRATEGIES, or
part thereof, shall be revived and continued in full force and effect as if such
payments or proceeds had not been received by the LENDER.
Section 26. Waiver of Trial by Jury. Each party to this AGREEMENT
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 AGREEMENT 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 AGREEMENT
under seal as of the date first above written. This AGREEMENT may be executed in
counterparts and may be delivered via facsimile.
WITNESS/ATTEST: BORROWERS:
GSE SYSTEMS, INC.
________________________________ By: ____________________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
GSE PROCESS SOLUTIONS, INC.
________________________________ By: _________________________ (SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
GSE POWER SYSTEMS, INC.
________________________________ By:_____________________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
[SIGNATURES CONTINUED ON NEXT PAGE.]
Signature Page to Sixth Modification Agreement - Continued:
WITNESS/ATTEST: GUARANTORS:
MSHI, INC.
_______________________________ By:_____________________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
GSE ERUDITE SOFTWARE, INC.
_______________________________ By:_____________________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
GSE SERVICES COMPANY L.L.C.
_______________________________ By: _______________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
GP INTERNATIONAL ENGINEERING
& SIMULATION, INC.
________________________________ By:___________________________(SEAL)
Name: Jeffery G. Hough
Title: Senior Vice President & CFO
[SIGNATURES CONTINUED ON NEXT PAGE.]
Signature Page to Sixth Modification Agreement - Continued:
WITNESS/ATTEST: GP STRATEGIES:
GP STRATEGIES CORPORATION
_______________________________ By: ____________________________(SEAL)
Name: Andrea Kantor
Title: Vice President, General Counsel
MANTECH:
MANTECH INTERNATIONAL CORPORATION
_______________________________ By:____________________________(SEAL)
Name: George Pedersen
Title: Chairman, President & CEO
LENDER:
PNC BANK, NATIONAL ASSOCIATION
______________________________ By:____________________________(SEAL)
Name: Craig T. Sheetz
Title: Vice-President
Schedule A
Case Caption: Russian Research Center Kurchatov Institute v. Western Services
Corporation, et al; Western Services Corporation v. GSE Systems, Inc.
Case Number: AMD 02-3878 (United States District Court for the District of
Maryland).
Case Background: On November 27, 2002, the Kurchatov Institute (KI) filed suit
against Western Services Corporation (WSC) alleging, inter alia, unfair
competition, unjust enrichment, breach of contract, and copyright infringement
with respect to KI's SimPort technology. Based on a written software license
agreement executed on July 31, 2002, GSE is the exclusive licensee of KI's
SimPort technology. On February 10, 2003, WSC filed a Third-Party Claim against
GSE alleging unfair competition and tortious interference. WSC seeks unspecified
damages. The case is currently in discovery (which has a deadline of February 3,
2004), with a trial currently scheduled for June 14, 2004. GSE is represented by
Gorman & Williams, Two North Charles Street, Baltimore, MD 21201. The point of
contact is Charles L. Simmons, Jr., Esquire. (410) 528-0600.
GSE Assessment: GSE does not view this case as material. GSE's defense is
covered by applicable insurance. The likelihood of any financial exposure to GSE
is limited and remote. GSE will be filing dispositive pretrial motions to
dismiss WSC's claims against GSE. The deadline for such motions is March 13,
2004.