FIRST AMENDMENT TO LOAN AGREEMENT
Exhibit 10.1
FIRST AMENDMENT TO LOAN
AGREEMENT
(Domestic Revolving Line of
Credit)
This First Amendment to Loan Agreement (this “Amendment”) dated as of May 5,
2009 is between Bank of
America, N.A. (the “Bank”) and GSE Systems, Inc., a Delaware corporation
(“GSE”), and GSE Power Systems, Inc., a
Delaware corporation (“Power”), as co-borrowers (GSE and Power are referred
to collectively as, the “Borrower”).
BACKGROUND
- The Borrower and the Bank entered into that certain Loan Agreement (Domestic Revolving Line of Credit) dated as of March 28, 2008 ( the “Original Loan Agreement”).
- The Borrower has requested that the Bank modify the revolving line of credit established by the Original Loan Agreement, and the Bank has agreed to do so, upon the terms and conditions set forth in this Amendment.
- The purpose of the modification is, among other things, to (i) increase from $1,500,000 to $2,500,000 the revolving line of credit, (ii) amend the Domestic Borrowing Base definition and (iii) amend certain definitions of the following financial covenants effective as of March 31, 2009: Debt Service Coverage Ratio and Funded Debt to EBITDA Ratio.
AGREEMENT
Now, therefore, in
consideration of the premises and the mutual agreements contained herein, the
parties hereby amend the Original Loan Agreement on the following terms and
conditions:
SECTION
1. DEFINITIONS. All capitalized terms used herein that are not
defined herein shall have the meanings ascribed to them in the Original Loan
Agreement, unless the context specifically requires
otherwise.
SECTION
2. AMENDMENTS TO ORIGINAL LOAN AGREEMENT. The following
amendments are hereby made to the Original Loan
Agreement:
(A) The following definitions in Section 1.1
of the Original Loan Agreement are hereby amended and restated in their entirety
to read as follows:
“Domestic
Borrowing Base” means the sum of:
(a) 80% of the balance due on
Acceptable Receivable Value;
(b) 30% of the value of Acceptable
Inventory Value; and
(c)
100% of the principal balance of the certificate of deposit account number
9100130058928 with the Bank owned by the Borrower (the “Certificate
of Deposit”).
1
After calculating the Domestic Borrowing Base as provided above, the Bank may
deduct such reserves as the Bank may establish from time to time in its
reasonable credit judgment, including, without limitation, reserves for letters
of credit, rent at leased locations subject to statutory or contractual
landlord’s liens, inventory shrinkage, dilution, customs charges, warehousemen’s
or Bailees’ charges, and the amount of estimated maximum exposure, as
determined by the Bank from time to time, under any interest rate contracts
which the Borrower enters into with the Bank (including interest rate swaps,
caps, floors, options thereon, combinations thereof, or similar
contracts). The Domestic Borrowing Base is also subject to certain
specific reserves and limitations set forth in Section 2.1 of this
Agreement.
“Maximum Amount” means the
amount of Two Million
Five Hundred Thousand U.S. Dollars ($2,500,000.00).
(B) Section 2.6 of the Original Loan
Agreement is hereby amended and restated in its entirety to read as
follows:
For value received, the Borrower hereby unconditionally promises to pay to the
order of the Bank, in lawful money of the United States, the principal sum of
Two Million Five Hundred Thousand U.S. Dollars ($2,500,000.00), or so much
thereof, if any, as may be disbursed pursuant to this Agreement, with interest
thereon from the date hereof (or the date of disbursement if different from such
date) at the interest rate or rates stated herein, interest and principal to be
paid as set forth herein and all other sums payable pursuant to this Agreement,
including, but not limited to, any late charges. The Borrower hereby
waives presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate and all other
notices and formalities in connection with this Section 2.6 of this
Agreement.”
(C) Section 5.1 of the Original Loan
Agreement is hereby amended and restated in its entirety to read as
follows:
The personal
property listed below now owned or owned in the future by the parties listed
below will secure the Borrower’s obligations to the Bank under this
Agreement. The collateral is further defined in security agreement(s)
executed by the owners of the collateral.
(a) Equipment and fixtures owned by
the Borrower.
(b) Inventory owned by the
Borrower.
(c) Receivables owned by the
Borrower.
(d) Patents, trademarks and other
general intangibles owned by the
Borrower.
(e)
Deposit accounts with the Bank owned by the
Borrower, including the Certificate of Deposit.
(f)
Securities and other investment property owned by GSE and by Power as described
in a pledge agreement required by the Bank.”
(D) Section 9.5 of the Original Loan
Agreement is hereby amended and restated in its entirety effective as of March
31, 2009 to read as follows:
2
To maintain, with respect to GSE on a consolidated basis, a Debt Service
Coverage Ratio of at least 1.25:1.00.
“Debt
Service Coverage Ratio” means the ratio of Cash Flow to Debt Service.
This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period.
“Cash
Flow” is defined as (a) net income, after income tax, (b) less income or
plus loss from discontinued operations and extraordinary items, (c) plus
depreciation, depletion, amortization, (d) plus interest expense on all
obligations, (e) plus non-cash charges related to foreign exchange, (f) minus
dividends, withdrawals, and other distributions, and (g) minus any unfinanced
capital expenditures.
“Debt
Service” is defined as all regularly scheduled principal and interest
payments, during the twelve-month period ending with the last day of the
calculation period, on all indebtedness.”
(E) Section 9.6 of the Original Loan
Agreement is hereby amended and restated in its entirety effective as of March
31, 2009 to read as follows:
“9.6
Funded Debt to EBITDA Ratio.
To maintain, with respect
to GSE on a consolidated basis, a ratio of Funded Debt to EBITDA not exceeding
2.50:1.00.
“Funded
Debt” means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long term debt, and
including the stated amount of any Letter of Credit (other than a Letter of
Credit that is cash-secured) issued for the account of the Borrower or any
reimbursement obligation owing by the Borrower with respect to any Letter of
Credit (other than a Letter of Credit that is cash-secured).
“EBITDA”
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, and amortization.
This ratio will be
calculated at the end of each reporting period for which the Bank requires
financial statements, using the results of the twelve-month period ending with
that reporting period.”
(F)
Exhibit D (Domestic Borrowing Base Certificate) of the Original Loan Agreement
is hereby replaced in its entirety with Exhibit D attached to this
Amendment.
SECTION 3. CONDITIONS
PRECEDENT. This Amendment shall become effective upon (a) the execution and
delivery of (i) this Amendment by the Borrower and the Bank, (ii) the Amendment
to Security Agreement of even date herewith by the Borrower and the Bank and
(iii) the Ratification of Guaranty of even date herewith, by MSHI, Inc. and GSE
Process Solutions, Inc. in favor of the Bank; (b) the Bank’s receipt from the
Borrower of the reasonable fees and expenses of the Bank's counsel; and (c) all
proceedings required to be taken by the Borrower in connection with the
transactions contemplated by this Amendment having been taken in form and
substance satisfactory to the Bank and its counsel, and the Bank having received
all such counterpart originals of this Amendment executed by all parties listed
on the signature page(s) and originals, certified or other copies of such other
documents as the Bank may reasonably
request.
3
SECTION
4. REAFFIRMATION. Except as modified hereby, all of the terms,
covenants and conditions of the Original Loan Agreement, are ratified,
reaffirmed and confirmed and shall continue in full force and effect as therein
written. In addition, all representations and warranties made in the
Original Loan Agreement are true and correct in all material respects as of the
date hereof and are hereby reaffirmed. Nothing hereunder is intended, or
shall be construed, to be a novation or an accord and satisfaction of any other
obligation or liability of the Borrower to the Bank. The Borrower and any
Guarantor do not now have, nor had at any prior time, any defenses (including,
without limitation, the defense of usury), claims, counterclaims, cross-actions
or equities or rights of rescission, setoff, abatement or diminution, with
respect to the Original Loan Agreement or any other document executed in
connection therewith, or the enforcement of Bank's rights thereunder, and the
Borrower and any Guarantor further waive and release any and all such defenses,
claims, counterclaims, cross-actions and equities, and rights of rescission,
set-off, abatement and diminution with respect
thereto.
SECTION
5. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrower
represents and warrants to, and agrees with the Bank, that this Amendment (and
any other document executed by the Borrower in connection with this Amendment)
has been duly authorized by all necessary company action on the part of the
Borrower, has been duly executed by a duly authorized officer (or officers) of
the Borrower and constitutes the valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with the terms hereof (and
thereof). The Borrower hereby certifies that the representations and
warranties contained in the Original Loan Agreement continue to be true and
correct and that no event of default and no event has occurred that with notice,
lapse of time or both would become an event of default. The Borrower
further certifies that the financial statements supplied to the Bank truly and
completely disclose the Borrower's financial condition as of the date of the
statement, and there has been no material adverse change in the Borrower's
financial condition except as disclosed in such financial
statements.
SECTION
6. BINDING EFFECT. This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns.
SECTION
7. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by the different parties on separate counterparts.
Each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement.
SECTION
8. AMENDMENT AND WAIVER. No amendment of this Amendment, and no
waiver of any one or more of the provisions hereof shall be effective unless set
forth in a writing and signed by the parties
hereto.
SECTION
9. GOVERNING LAW. This Amendment and the rights and obligations
of the Borrower and the Bank shall be governed by and construed according to the
laws of the State of Maryland without regard to conflicts of laws principles and
the laws of the United States as the same may be
applicable.
SECTION 10. SEVERABILITY. Any provision of this Amendment that is held
to be inoperative, unenforceable, voidable or invalid in any jurisdiction shall,
as to that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in that or any other jurisdiction, and to
this end the provisions of this Amendment are declared to be
severable.
IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their proper and duly authorized officers on the date first above
written, intending to create an instrument executed under
seal.
4
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The
“Bank”:
BANK OF AMERICA,
N.A.
By:
Xxxxx Xxxxx
Senior Vice President
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The
“Borrower”:
GSE SYSTEMS,
INC.
By:
(Seal)
Xxxxxxx Xxxxx
Chief
Financial Officer
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GSE POWER SYSTEMS,
INC.
By:
(Seal)
Xxxxxxx Xxxxx
Chief
Financial Officer
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Federal law requires all
financial institutions to obtain, verify and record information that identifies
each person who opens an account or obtains a loan. The Bank will ask for
the Borrower’s legal name, address, tax ID number or social security number and
other identifying information. The Bank may also ask for additional
information or documentation or take other actions reasonably necessary to
verify the identity of the Borrower, guarantors or other related
persons.
#
6189060_v3
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EXHIBIT
D
Domestic Borrowing Base
Certificate
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GSE
Systems, Inc. & GSE Power Systems, Inc.
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MONTH-END
COLLATERAL REPORT AND BORROWING CERTIFICATE
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For
the month ending
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-
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DOMESTIC
REVOLVING FACILITY
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DOMESTIC
ACCOUNTS RECEIVABLE
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| 1. | ) |
Beginning
of Month G/L Balance
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$
|
-
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|||||
| 2. | ) |
ADD:
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Gross
Sales for the Month
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$
|
-
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||||
| 3. | ) |
ADD:
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Debit
Memos, Returned Checks, Other Debit Adjustments
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$
|
-
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||||
| 4. | ) |
LESS:
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Net
Cash Collections for the Month
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$
|
-
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||||
| 5. | ) |
LESS:
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Credit
Memos, Discounts, Other Credit Adjustments
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$
|
-
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||||
| 6. | ) |
End
of Month G/L Balance as of
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$
|
-
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| 7. | ) |
A/R
Aging Balance as of the same date
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$
|
-
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Variance,
if any (Line 6 minus Line 7)
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$
|
-
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| 8. | ) |
Ineligible
Accounts Receivable (Per
Attached Schedule A)
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$
|
-
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| 9. | ) |
Net
Eligible Accounts Receivable (Line
7 Aging Balance minus Line 8)
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$
|
-
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DOMESTIC
INVENTORY
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| 10. | ) |
Inventory
Balance Month Ending
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$
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0
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| 11. | ) |
Less:
Ineligible Inventory (Per
Attached Schedule A)
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$
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0
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| 12. | ) |
Add: Cost
in Excess of Xxxxxxxx
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$
|
-
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| 13. | ) |
Eligible
Inventory (Line
10 minus Line 11 plus line 12)
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$
|
-
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DOMESTIC
CERTIFICATE OF DEPOSIT
|
|
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| 14. | ) | 100% OF Outstanding Certificate of Deposit with Bank of America | $ |
-
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DOMESTIC
BORROWING BASE
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| 15. | ) |
a) Accounts
Receivable (80% of Line 9)
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$
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-
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b) Inventory
(30% of Line 13 or $1,500,000 max.)
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$
|
-
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c) 100%
of Outstanding Certificate of Deposit with Bank of America (100% of Line
14)
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$
|
-
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| 16. | ) |
Gross
Availability (Line
15a + Line 15b + 15c)
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$
|
-
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| 16. | ) |
Lessor
of Line 15 or $2,500,000 (Line
Limit)
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$
|
-
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LOAN
DETAIL
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Line
Of Credit Borrowings
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$ | |||||||
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L/Cs
at 100%
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$ | |||||||
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Other
(Specify)
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$ | |||||||
| 17. | ) |
Total
Loans Outstanding at Month-end
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$
|
-
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| 18. | ) |
Borrowing
Base Reserves (Per
Attached Schedule A)
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$
|
-
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| 19. | ) |
Net
Borrowing Base Availability (Line
16 minus Line 17 & 18)
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$
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-
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The
undersigned represents and warrants that:
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(A) The
information provided above and in the accompanying supporting
documentation is true, complete and correct,
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and
complies fully with the conditions, terms and covenants of the Business
Loan Agreement dated
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as
amended to the date (the "Agreement") between the undersigned and Bank of
America (the "Bank").
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(B) Since
the date of the last financial statement or certification furnished to the
Bank:
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(a)
There has been no material adverse change in the financial condition or
operations of the undersigned; and
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(b)
There is no event which is, or with notice or lapse of time or both would
be, a default under the Agreement
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GSE
Systems, Inc. & GSE Power Systems, Inc.
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By:
________________________________________ Date:
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(Signature
& Title)
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6
