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 ”).
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:
“9.5
Debt
Service Coverage Ratio.
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,
dur
