THIS SECURED NON-CONVERTIBLE REVOLVING NOTE (THIS "NOTE") HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GSE SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED NON CONVERTIBLE REVOLVING NOTE
FOR VALUE RECEIVED, each of GSE SYSTEMS, INC., a Delaware corporation (the
"Parent"), and the other companies listed on Exhibit A attached hereto (such
other companies together with the Parent, each a "Company" and collectively, the
"Companies"), jointly and severally, promises to pay to LAURUS MASTER FUND,
LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Xxxxxx House, South
Church Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"Holder") or its registered assigns or successors in interest, the sum of Five
Million Dollars ($5,000,000), or, if different, the aggregate principal amount
of all Loans (as defined in the Security Agreement referred to below), together
with any accrued and unpaid interest hereon, on March 7, 2008 (the "Maturity
Date") if not sooner indefeasibly paid in full.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Security Agreement among the Companies and the
Holder dated as of the date hereof (as amended, modified and/or supplemented
from time to time, the "Security Agreement").
The following terms shall apply to this Secured Non-Convertible Revolving
Note (this "Note"):
ARTICLE I
CONTRACT RATE AND MINIMUM BORROWING NOTE
1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on
the outstanding principal amount of this Note (the "Principal Amount") shall
accrue at a rate per annum equal to the "prime rate" published in The Wall
Street Journal from time to time (the "Prime Rate"), plus two percent (2%) (the
"Contract Rate"). The Contract Rate shall be increased or decreased as the case
may be for each increase or decrease in the Prime Rate in an amount equal to
such increase or decrease in the Prime Rate; each change to be effective as of
the day of the change in the Prime Rate. The Contract Rate shall not at any time
be less than eight percent (8.0%). Interest shall be (i) calculated on the basis
of a 360 day year, and (ii) payable monthly, in arrears, commencing on March 7,
2008 on the first business day of each consecutive calendar month thereafter
through and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.
1.2 Contract Rate Payments. The Contract Rate shall be calculated on the
last business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date (each a
"Determination Date")
ARTICLE II
PREPAYMENT RIGHT
2.1 The Company may prepay the Principal Amount in full or in part at any
time without premium or penalty. Any partial payment shall be applied first
against interest and fees and subsequently against the principal sum then
outstanding.
ARTICLE III
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
3.1 Events of Default. The occurrence of an Event of Default under the
Security Agreement shall constitute an event of default ("Event of Default")
hereunder.
3.2 Default Interest. Following the occurrence and during the continuance
of an Event of Default, the Companies shall, jointly and severally, pay
additional interest on the outstanding principal balance of this Note in an
amount equal to two percent (2%) per month, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.
3.3 Default Payment. Following the occurrence and during the continuance of
an Event of Default, the Holder, at its option, may elect, in addition to all
rights and remedies of the Holder under the Security Agreement and the other
Ancillary Agreements and all obligations and liabilities of each Company under
the Security Agreement and the other Ancillary Agreements, to require the
Companies, jointly and severally, to make a Default Payment ("Default Payment").
The Default Payment shall be 107% of the outstanding principal amount of the
Note, plus accrued but unpaid interest, all other fees then remaining unpaid,
and all other amounts payable hereunder. The Default Payment shall be applied
first to any fees due and payable to the Holder pursuant to the Notes, the
Security Agreement and/or the Ancillary Agreements, then to accrued and unpaid
interest due on the Notes and then to the outstanding principal balance of the
Notes. The Default Payment shall be due and payable immediately on the dat e
that the Holder has exercised its rights pursuant to this Section 3.3.
ARTICLE IV
MISCELLANEOUS
4.1 [Intentionally Omitted.]
4.2 Cumulative Remedies. The remedies under this Note shall be cumulative.
4.3 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.4 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effective given (a) upon personal delivery to the
party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
respective Company at the address provided for such Company in the Security
Agreement executed in connection herewith, and to the Holder at the address
provided in the Security Agreement for the Holder, with a copy to Xxxx X.
Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, xxxxxxxxx
number (000) 000-0000, or at such other address as the respective Company or the
Holder may designate by ten days advance written notice to the other parties
hereto. A Notice of Conversion shall be deemed given when made to the Parent
pursuant to the Purchase Agreement.
4.5 Amendment Provision. The term "Note" and all references thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
4.6 Assignability. This Note shall be binding upon each Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Security Agreement. No Company may assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.
4.7 Cost of Collection. In case of any Event of Default under this Note,
the Companies shall, jointly and severally, pay the Holder the Holder's
reasonable costs of collection, including reasonable attorneys' fees.
4.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY,
ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE
SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE
OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT EACH COMPANY ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE
COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID
(c) EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE
SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
4.9 Severability. In the event that any provision of this Note is invalid
or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
4.10 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Companies to the Holder and thus refunded
to the Companies.
4.11 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Companies as more fully described
in the Security Agreement and (ii) pursuant to the Stock Pledge Agreement dated
as of the date hereof. The obligations of the Companies under this Note are
guaranteed by certain Subsidiaries of the Companies pursuant to the Subsidiary
Guaranty dated as of the date hereof.
4.12 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
4.13 Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Company (or its agent) shall register the Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of thisNote
and either the reissuance by the Company of this Note to the new holder or the
issuance by the Company of a new instrument to the new holder, or (ii) transfer
through a book entry system maintained by the Company (or its agent), within the
meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
IN WITNESS WHEREOF, each Company has caused this Secured Non-Convertible
Revolving Note to be signed in its name effective as of this 7th day of March
2006.
GSE SYSTEMS, INC.
By:__________________________________
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
WITNESS:
__________________________________
GSE POWER SYSTEMS, INC.
By:__________________________________
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
WITNESS:
__________________________________
EXHIBIT A
OTHER COMPANIES
GSE SERVICES COMPANY LLC
By: __________________________________
Name: Xxxx X. Xxxxx
Title Cheif Executive Officer
Address: 0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
State of Formation: Delaware
MSHI, INC.
By: __________________________________
Name: Xxxx X. Xxxxx
Title Cheif Executive Officer
Address: 0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
State of Formation: Virginia
GSE ERUDITE SOFTWARE INC.
By: __________________________________
Name: Xxxx X. Xxxxx
Title Cheif Executive Officer
Address: 0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
State of Formation: Delaware
GSE GOVERNMENT & MILITARY
SIMULATION SYSTEMS, INC.
By: __________________________________
Name: Xxxx X. Xxxxx
Title Cheif Executive Officer
Address: 0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
State of Formation: Delaware
GSE PROCESS SOLUTIONS, INC.
By: __________________________________
Name: Xxxx X. Xxxxx
Title Cheif Executive Officer
Address: 0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
State of Formation: Delaware
