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 Co ...