MASTER LOAN AND SECURITY AGREEMENT

THIS MASTER LOAN AND SECURITY AGREEMENT (this “Agreement”) is made this 22nd day
of November, 2011, by and among GSE SYSTEMS, INC., a Delaware corporation, GSE
POWER SYSTEMS, INC., a Delaware corporation, and GSE ENVISION INC.,  a New
Jersey corporation (each a “Borrower” and collectively, the “Borrowers”) and
SUSQUEHANNA BANK (the “Bank”).

R E C I T A L S

WHEREAS, subject to and upon the terms, conditions and provisions of this
Agreement, Borrowers may obtain loans from the Bank upon and subject to the
provisions of this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1.  The Loans.

1.1.           Revolving Credit Facility.

(a)           Revolving Loans.  Subject to and upon the provisions of this
Agreement and relying upon the representations and warranties herein set forth,
the Bank agrees at any time and from time to time to make loans (each a
“Revolving Loan” or “Loan” and collectively the “Revolving Loans” or “Loans”) to
the Borrowers from the date hereof until the earlier of the Revolving Credit
Expiration Date (as hereinafter defined) or the date on which this revolving
credit facility (the “Revolving Credit Facility”) is terminated pursuant to
Section 7.1 hereof (whichever first occurs), in an aggregate principal amount at
any time outstanding not to exceed the Revolving Credit Amount (as hereinafter
defined).  As used herein, the term “Revolving Credit Expiration Date” means
November 1, 2013, as such date may be changed or extended from time to time
pursuant to Section 8.2 hereof, and the term “Revolving Credit Amount” means the
amount of $7,500,000 as such amount may be reduced at any time and from time to
time pursuant to this Agreement or as such amount may be increased or decreased
at any time and from time to time pursuant to this Agreement.  In no event shall
the Bank be obligated to make a Revolving Loan hereunder if an Event of Default
(as hereinafter defined) shall have occurred and be continuing.  Unless sooner
terminated pursuant to the provisions of this Agreement, this Revolving Credit
Facility and the obligation of the Bank to make Revolving Loans hereunder shall
automatically terminate on the Revolving Credit Expiration Date without further
action by, or notice of any kind from, the Bank.  Within the limitations set
forth herein and subject to the provisions of this Agreement, the Borrowers may
borrow, repay and reborrow under this Revolving Credit Facility.  The fact that
there may be no Revolving Loans outstanding at any particular time shall not
affect the continuing validity of this Agreement.  For the purposes of this
Agreement, each reference to a “Loan” or a “Revolving Loan” shall be deemed to
also refer to a “Letter of Credit”.

(b)           Minimum Amount and Use of Proceeds.  Each Revolving Loan shall be
in an amount not less than $10,000 and will be advanced by the Bank not later
than the Business Day (as hereinafter defined) following the day (which shall be
a Business Day) of the Borrowers’ request therefor.  The proceeds of each
Revolving Loan shall be used by the Borrowers solely for the purpose of (i)
obtaining stand-by letters of credit issued by the Bank to be delivered by the
Borrowers to third parties in connection with the Borrowers’ ordinary course of
business (each a “Letter of Credit” and collectively, the “Letters of Credit”)
or (ii) providing working capital for use by any of the Borrowers in connection
with the Borrowers’ ordinary course of business.  Each advance request by the
Borrowers shall be in a form acceptable to the Bank.

 
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(c)           Revolving Credit Note.  The joint and several obligation of the
Borrowers to pay the Revolving Loans with interest shall be evidenced by a
single Revolving Credit Note (which promissory note, as the same may from time
to time be extended, replaced, substituted for, amended, restated or otherwise
modified, is herein called the “Revolving Credit Note”) dated the date hereof in
the Revolving Credit Amount and executed and delivered by the Borrowers on the
date hereof.  The Bank will maintain on its books a loan account (the “Revolving
Loan Ledger”) with respect to advances, repayments and prepayments of Revolving
Loans, the accrual and payment of interest on Revolving Loans and all other
amounts and charges owing to the Bank in connection with Revolving
Loans.  Except for manifest error, the Revolving Loan Ledger shall be conclusive
as to all amounts owing by the Borrowers to the Bank in connection with and on
account of Revolving Loans.  The Revolving Credit Note shall be fully payable on
the earlier of (i) the Revolving Credit Expiration Date (as the same may be
extended from time to time) or (ii) on such date as the Bank may exercise its
rights to demand repayment in full of any or all amounts outstanding under the
Revolving Credit Facility, including those rights described in Section
1.1(e)(vii).  In accordance with the Revolving Credit Note, the scheduled
monthly payments due under the Revolving Loans will be automatically debited
from the Borrowers’ operating account maintained at the Bank (account
no.10010015864) on the applicable due date.

(d)           Voluntary Prepayments.  Within the limitations set forth herein
and subject to the provisions of this Agreement, the Borrowers may prepay any
Revolving Loan at any time in whole or in part from time to time without premium
or penalty, and any such prepayment need not be accompanied by payment of
interest on the amount prepaid except, that any prepayment of Revolving Loans
which constitutes a final payment of all Revolving Loans shall be accompanied by
payment of all interest thereon accrued through the date of prepayment.

(e)           Letters of Credit.

(i)           Terms of Letters of Credit.  Each Letter of Credit shall (A) be a
commercial letter of credit, (B) expire no later than the three hundred
sixty-five (365) days after the Revolving Credit Expiration Date (as may be
extended from time to time in accordance with this Agreement), (C) be used in
the Borrowers’ ordinary course of business and (D) otherwise be issued in
accordance with the Bank’s then current practices relating to the issuance of
letters of credit.  The face amount of any Letters of Credit issued and
outstanding (whether drawn upon or not) shall reduce the Revolving Credit Amount
available for Revolving Loans.

(ii)           Procedures for Letters of Credit.  The Borrowers shall give the
Bank written notice of its request for a Letter of Credit at least five (5)
Business Days (as hereinafter defined) prior to the date on which the Letter of
Credit is to be opened by delivering a request to the Bank with (A) the face
amount of the Letter of Credit, along with a sample of the letter of credit
requested, (B) the name and address of the beneficiary of the Letter of Credit,
(C) whether the Letter of Credit is irrevocable or revocable, (D) the type of
Letter of Credit requested, (E) the date the Letter of Credit is to be opened
and the date the Letter of Credit is to expire, (F) the purpose of the Letter of
Credit, (G) the terms and conditions for any draws under the Letter of Credit,
and (H) such other information as the Bank may deem to be necessary or
desirable.

 
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(iii)           Letter of Credit Fees.  Prior to or simultaneously with the
issuance of each Letter of Credit and on each anniversary thereof, if any, the
Borrowers shall pay to the Bank an annual letter of credit fee (each a “Letter
of Credit Fee” and collectively the “Letter of Credit Fees”) in an amount equal
to the greater of (A) one and three quarters of one percent (1.75%) of the face
amount of the Letter of Credit or (B) $2,500.  Notwithstanding the foregoing, in
the event that any Letter of Credit issued hereunder: (1) expires prior to the
first, or any subsequent, anniversary of the issuance of such Letter of Credit,
or (2) is retired prior to the first, or any subsequent, anniversary of the
issuance of such Letter of Credit, Borrower shall be entitled to a rebate from
Lender equal to the Bank's portion (but not for any such amounts paid by the
Bank to any correspondent bank, all as determined by the Bank) of the Letter of
Credit Fee for such Letter of Credit actually paid by Borrower with respect to
any annual period divided by 365 and multiplied by the actual number of days
during which such Letter of Credit remained outstanding.  To the extent that the
Borrower requests a Letter of Credit for a period shorter than one (1) year, the
Bank’s portion of the above-described Letter of Credit Fees shall be prorated by
the Bank to correspond to the actual period that the Letter of Credit is in
place, provided that the remaining portion of the applicable Letter of Credit
Fee shall not be pro-rated and shall be due and payable to the Bank to the
extent such proration is prohibited by its obligations and contracts with
respect to any correspondent bank.

(iv)           Agreement to Pay Letter of Credit Obligations.  The Borrowers
shall pay to the Bank the following amounts which are herein called the “Letter
of Credit Obligations” (A) the amount of each draft drawn under or purporting to
be drawn under a Letter of Credit on the Business Day following the day such
draft is paid by the Bank without any requirement of notice or demand by the
Bank, (B) on demand the amount of any and all charges, costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses) which
the Bank may charge or actually incur for drawings under a Letter of Credit,
transfers of a Letter of Credit, amendments to and extensions of a Letter of
Credit and for the prosecution or defense of any action arising out of or in
connection with any Letter of Credit, including, without limitation, any action
to enjoin full or partial payment of any draft drawn under or purporting to be
drawn under any Letter of Credit, and (C) on demand interest on all amounts
payable under (i) and (ii) above from the date due until paid in full at the
applicable interest rate set forth in the Revolving Credit Note.  Letter of
Credit Obligations shall also include, without limitation, Letter of Credit
Fees.  The Bank may maintain on its books a letter of credit account (the
“Letter of Credit Account”) with respect to the Letter of Credit Obligations
paid and payable from time to time hereunder.  Except for manifest error, the
Letter of Credit Account shall be conclusive as to Letter of Credit Obligations.

(v)           Agreement to Pay Absolute.  The obligation of the Borrowers to pay
Letter of Credit Obligations set forth in Section 1.1(e)(iv) above shall be
absolute and unconditional and irrespective of (A) any lack of validity or
enforceability of any Letter of Credit, (B) the existence of any claim, setoff,
defense or other right which any of the Borrowers may at any time have against
the beneficiary under any Letter of Credit or the Bank, (C) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue
provided that payment by the Bank under such Letter of Credit against
presentation of such draft shall not have constituted gross negligence or
willful misconduct, and (D) any other events or circumstances whatsoever,
whether or not similar to any of the foregoing provided that such other events
or circumstances shall not have constituted gross negligence or willful
misconduct of the Bank.

 
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(vi)           Increased Costs, Etc.  If any agency or instrumentality of the
United States of America or any state, county, municipality or other subdivision
thereof require insurance premiums on, or reserves against, any or all Letters
of Credit or otherwise promulgate and/or adopt any rules, regulations, orders,
statutes, interpretive rulings or laws or otherwise take any regulatory action
which may effectively increase the cost to the Bank of issuing, renewing,
amending and/or maintaining Letters of Credit or honoring or denying any drafts
and/or acceptances drawn or purported to be drawn thereunder, then upon demand
of the Bank the Borrowers shall pay to the Bank all amounts calculated by the
Bank in its reasonable discretion as being necessary to compensate the Bank for
such increased costs incurred by the Bank.  Subject to the foregoing limitation,
a certificate by the Bank to the Borrowers setting forth such amount or amounts
necessary to compensate the Bank for such increased costs shall be conclusive
absent manifest error.

(vii)           Repayment on Demand.  Notwithstanding any other provision in the
Financing Documents (as hereinafter defined) and as further described in the
Revolving Credit Note, if any Letter of Credit is drawn upon, then the amount of
the proceeds of the Loan used to purchase such Letter of Credit shall become
immediately due and payable upon demand from the Bank.

1.2.           Provisions Applicable to All Loans.

(a)           The Borrowers’ Representatives.  Each of the Borrowers hereby
represents and warrants to the Bank that each of them will derive benefits,
directly and indirectly, from the proceeds of each Loan, both in its separate
capacity and as a member of the integrated group to which each of the Borrowers
belong, since the successful operation of the integrated group is dependent upon
the continued successful performance of the functions of the integrated group as
a whole.  For administrative convenience, GSE Power Systems, Inc. is hereby
irrevocably appointed by each of the Borrowers as agent for each of the
Borrowers for the purpose of requesting Loans hereunder from the Bank, receiving
the proceeds of such Loans and disbursing the proceeds of such Loans among the
Borrowers.  In its capacity as such agent, GSE Power Systems, Inc. shall have
the power and authority through its authorized officer or officers to (i)
endorse any check for the proceeds of any Loan for and on behalf of each of the
Borrowers and in the name of each of the Borrowers, and (ii) instruct the Bank
to credit the proceeds of any Loan directly to a banking account of any of the
Borrowers which shall evidence the making of such Loan and shall constitute the
acknowledgement by each of the Borrowers of the receipt of the proceeds of such
Loan.  By reason of the foregoing, the Bank is hereby irrevocably authorized by
each of the Borrowers to make Loans to the Borrowers pursuant to this Agreement
upon the request of any one of the persons who is authorized to do so under the
provisions of the most recent corporate resolutions of GSE Power Systems, Inc.
on file with the Bank.  The Bank assumes no responsibility or liability for any
errors, mistakes and/or discrepancies in any oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations between
the Bank and any one or more of the Borrowers in connection with any Loan or
other transaction pursuant to the provisions of this Agreement.

 
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(b)           Interest Calculation.  All interest and fees payable under the
provisions of this Agreement or the Revolving Credit Note shall be computed on
the basis of actual number of days elapsed over a year of 360 days.  Where
applicable, the interest rate on all amounts on which interest is calculated
with respect to the Prime Rate (as defined in the Revolving Credit Note) shall
change immediately and contemporaneously with each change of the Prime Rate.

(c)           Late Charges.  If the Borrowers fail to make any payment of
principal, interest, prepayments, fees or any other amount becoming due pursuant
to the provisions of this Agreement or the Revolving Credit Note, within fifteen
(15) days of the date due and payable, the Borrowers shall jointly and severally
pay to the Bank a late charge equal to five percent (5%) of the amount of such
payment.  Such fifteen (15) day period shall not be construed in any way to
extend the due date of any such payment.  Late charges are imposed for the
purpose of defraying the Bank’s expenses incident to the handling of delinquent
payments, and are in addition to, and not in lieu of, the exercise by the Bank
of any rights and remedies hereunder or under applicable laws and any fees and
expenses of any agents or attorneys which the Bank may employ upon Default.

(d)           Loan Payments.  Whenever any payment to be made by the Borrowers
under the provisions of this Agreement or the Revolving Credit Note is due on a
day which is not a Business Day (as hereinafter defined), the due date thereof
shall be extended to the next succeeding Business Day and, in the case of any
payment which bears interest, such extension of time shall be included in
computing interest on such payment.  “Business Day” as used herein means any day
other than Saturday, Sunday or other day on which commercial banks in the State
of Maryland are authorized to close.  All payments of principal, interest, fees
or other amounts to be made by the Borrowers under the provisions of this
Agreement or the Revolving Credit Note shall be paid without setoff or
counterclaim to the Bank at the Bank’s office specified in Section 8.5 hereof in
lawful money of the United States of America in immediately available good
funds.

(e)           Interest On Overdue Amounts.  If the principal of or interest on,
the Revolving Credit Note or any other amount required to be paid to the Bank
hereunder or under the Revolving Credit Note is not paid when due, whether by
acceleration or otherwise, the Borrowers shall, on demand by the Bank from time
to time, jointly and severally pay to the Bank interest on such principal,
interest or other amount from the date due until the date of payment (after as
well as before any judgment) at a rate per annum equal to the Default Rate (as
hereinafter defined).

(f)           Definition of Obligations and Financing Documents.  As used in
this Agreement, the term “Obligations” means collectively and includes all
present and future indebtedness, liabilities and obligations of any kind and
nature whatsoever of the Borrowers to the Bank both now existing and hereafter
arising under, as a result of, on account of, or in connection with, this
Agreement and any and all amendments thereto, restatements thereof, supplements
thereto and modifications thereof made at any time and from time to time
hereafter, the Revolving Credit Note, any and all extensions, renewals or
replacements thereof, amendments thereto and restatements or modifications
thereof made at any time or from time to time hereafter, or the other Financing
Documents (as hereinafter defined), including, without limitation, future
advances, principal, interest, indemnities, fees, late charges, enforcement
costs (as hereinafter defined) and other costs and expenses, whether direct,
contingent, joint, several, joint and several, matured or unmatured.  The term
“Financing Documents” as used in this Agreement means collectively and includes
this Agreement, the Revolving Credit Note, each issued Letter of Credit, and any
other instrument, document or agreement both now and hereafter executed,
delivered or furnished by any one or more of the Borrowers or any other person
(as hereinafter defined) evidencing, guaranteeing, securing or in connection
with this Agreement or all or any part of the Obligations.

 
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(g)           Swap Agreement. At the Borrowers’ request, the Bank, the Borrowers
and a third party may enter into one or more (each as defined herein) Interest
Rate Hedges, Foreign Exchange Contracts, or similar agreements (collectively, a
“Swap Agreement”) designed to protect the Borrowers from fluctuating interest
and/or conversion rates.  The form of such agreement, and any decision by the
Bank to enter into such SWAP Agreements, shall be subject to the Bank’s sole
approval and discretion.  Any payment obligation of the Bank under any Swap
Agreement is referred to herein as the “Swap Exposure.”  Such obligation of the
Borrowers shall be secured by the Collateral (as hereinafter defined) and shall
be evidenced by the Revolving Credit Note.  The following terms, as used herein,
shall have the meanings set forth hereinbelow: (i) "Foreign Exchange Contract"
means a foreign exchange contract or agreement entered into in order to provide
protection from, or to minimize the impact from, the fluctuation of foreign
currencies; and (ii) "Interest Rate Hedge" shall mean an interest rate exchange,
collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar
agreements entered into in order to provide protection from, or to minimize the
impact from, increasing floating rates of interest applicable to indebtedness.

 
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1.3.           Collateral.  In order to secure the full and punctual payment of
the Obligations in accordance with the terms thereof, and to secure the
performance of this Agreement and the other Financing Documents, the Borrowers
hereby pledge and assign to the Bank and grants to the Bank a continuing lien
and security interest in and to all of the following property of the Borrowers,
both now owned and existing and hereafter created, acquired and arising and
regardless of where located (all such property being herein called the
“Collateral”), all to the extent owned by the Borrowers:  (i) all of the
Borrowers’ present and future accounts, general intangibles, chattel paper,
documents and instruments as such terms are defined by the Delaware Uniform
Commercial Code (except that with respect to GSE EnVision Inc.’s collateral,
such terms shall be as defined by the New Jersey Uniform Commercial Code),
including, without limitation, all present and future rights of the Borrowers to
payment for, or monetary obligations owed to the Borrowers on account of, goods
or other property sold or leased by the Borrowers or services rendered by the
Borrowers or loans or extensions of credit made or granted by the Borrowers,
whether or not such rights or monetary obligations are earned by performance and
whether due or to become due, the foregoing being herein called the
“Receivables”, (ii) all of the Borrowers’ inventory as such term is defined by
the Delaware Uniform Commercial Code (except that with respect to GSE EnVision
Inc.’s collateral, such term shall be as defined by the New Jersey Uniform
Commercial Code) (the “Inventory”), including, without limitation, raw
materials, work and goods in process, finished goods, goods or inventory
returned or repossessed or stopped in transit, supplies, packaging, shipping and
other materials, all other goods, merchandise and personal property used or
consumed in the business of the Borrower, and all documents and documents of
title relating to any of the foregoing, (iii) all of the Borrowers’ equipment as
such term is defined by the Delaware Uniform Commercial Code (except that with
respect to GSE EnVision Inc.’s collateral, such term shall be as defined by the
New Jersey Uniform Commercial Code), together with all additions, parts,
fittings, accessories, special tools, attachments, and accessions now and
hereafter affixed thereto and/or used in connection therewith, and all
replacements thereof and substitutions therefor, the foregoing being herein
called the “Equipment”, (iv) all the Borrowers’ letters patent, applications for
letters patent, trademarks, applications for trademarks, service marks, trade
names and copyrights, whether registered or unregistered, together with all
goodwill of the business of the Borrowers relating thereto, any and all
reissues, extensions, divisions or continuations thereof, all royalties, fees
and other payments made or to be made to the Borrowers with respect thereto, and
all rights, interests, claims and demands that the Borrowers have or may have in
existing and future profits and damages for past and future infringements
thereof, (v) all of the Borrowers’ licenses, permits, franchises, technologies,
methods, formulations, databases, trade secrets, know-how, inventions and other
intellectual property, whether or not proprietary to the Borrowers,  together
with all underlying concepts, ideas, formats, descriptions, interfaces and media
associated therewith, (vi) all of the Borrowers’ non-privileged correspondence,
agreements, documents, documentation, papers, books, files, records and other
transcribed information of any type, whether expressed in ordinary, machine or
computer language pertaining to the Borrowers’ business or to any of the
Collateral described in clauses (i), (ii), (iii), (iv) and (v) immediately
above, including, without limitation, customer lists, credit files, computer
programs, computer software, computer object and source codes, disks, tapes,
printouts, manuals and data, sales and advertising materials, distribution and
purchase correspondence and records, and all other files, documents, materials
and records used in or related to the Borrowers’ business, (vii) any and all
moneys and funds now and hereafter on deposit to the Collection Account (as
hereinafter defined in Section 4.14 hereof) and (viii) all cash and noncash
proceeds and products of the Collateral described in clauses (i), (ii), (iii),
(iv), (v), (vi) and (vii) immediately above, including, without limitation, all
cash and noncash proceeds deposited in any deposit account, and all accounts,
chattel paper, instruments, inventory, equipment, general intangibles and goods
(as such terms are defined by the Delaware Uniform Commercial Code, except that
with respect to GSE EnVision Inc.’s collateral, such terms shall be as defined
by the New Jersey Uniform Commercial Code) or other property purchased or
acquired with cash or noncash proceeds of such Collateral.

SECTION 2.                      Conditions Precedent.

2.1.           Initial Loan.  The Bank shall not make an initial advance of
proceeds under the Revolving Loan hereunder unless the following conditions
precedent have been satisfied in a manner acceptable to the Bank:

 
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(a)           Corporate Documents.  The Bank shall have received from each of
the Borrowers (i) a copy, certified as of a recent date by the applicable state
corporation commission of the Articles of Incorporation of each of the
Borrowers, (ii) a Certificate of Good Standing for each of the Borrowers issued
by the applicable state corporation commission, and (iii) a copy, certified to
the Bank as true and correct as of the date hereof by an officer of each of the
Borrowers, of the by-laws of each of the Borrowers and the resolutions of each
of the Borrowers’ board of directors authorizing the execution and delivery of
this Agreement and the other Financing Documents to which each of the Borrowers
is a party and designating by name and title the officer or officers of each of
the Borrowers who are authorized to sign this Agreement and such other Financing
Documents for and on behalf of each of the Borrowers and to make the borrowings
hereunder.

(b)           Financing Documents.  The execution and delivery of each of the
Financing Documents required by the Bank to be executed and delivered prior to
the making of the initial Loan.

(c)           Additional Documents.  The furnishing in form and content
acceptable to the Bank of any additional documents, agreements, certifications,
record searches or insurance policies which the Bank may reasonably deem
necessary or desirable.

2.2.           All Loans.  The Bank shall not make any Loan hereunder if:

(a)           Representations and Warranties.  Any representation or warranty
made in or in connection with this Agreement and the other Financing Documents
is not true, correct and complete in all material respects on and as of the date
of any Loan as if made on such date (except for representations and warranties
which specifically refer or relate to an earlier date);

(b)           Covenants and Conditions.  The Borrowers are not then in
compliance with all of the terms, covenants and conditions of this Agreement
which are binding upon them; or

(c)           Event of Default or Default.  Any Event of Default or Default
shall have occurred and be continuing.

SECTION 3.                      Representations and Warranties.  Each of the
Borrowers represents and warrants to the Bank that the following statements are
true, correct and complete as of the date hereof and as of each date a Loan is
or is to be made hereunder:

3.1.           Subsidiaries.  Except as set forth in Schedule 3.1 attached
hereto, none of the Borrowers has a Subsidiary (as hereinafter defined), other
than one of the other Borrowers.  As used herein, the term “Subsidiary” means,
with respect to each Borrower, any corporation, partnership, association or
other business entity of which securities or other ownership interests
representing more than 50% of the ordinary voting power are, at the time as of
which any determination is being made, owned or controlled, directly or
indirectly, by such Borrower or one or more of the subsidiaries of such Borrower
or by such Borrower and one or more subsidiaries of such Borrower.

 
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3.2.           Authority, Etc.  Each of the Borrowers is a corporation duly
organized and in good standing under the laws of its respective state of
formation and is qualified to do business in all states where it conducts
business.  Each of the Borrowers has the full power and authority to execute,
deliver and perform this Agreement and the other Financing Documents to which
such Borrower is a party.  Neither such execution, delivery and performance, nor
compliance by each of the Borrowers with the provisions of this Agreement and of
the other Financing Documents to which such Borrower is a party will conflict
with or result in a breach or violation of such Borrower’s articles of
incorporation or by-laws, or any judgment, order, regulation, ruling or law to
which such Borrower is subject or any contract or agreement to which such
Borrower is a party or to which any of such Borrower’s assets and properties is
subject, or constitute a default thereunder.  The execution, delivery and
performance of this Agreement and all other Financing Documents to which any
Borrowers is a party have been duly authorized and approved by all necessary
corporate action by each of the Borrowers and constitute the legal, valid and
binding obligations of each of the Borrowers enforceable in accordance with
their terms except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

3.3.           Registered Organization.  Each of the Borrowers is a registered
organization, as defined in the Uniform Commercial Code, and the location of
each of the Borrowers as a registered organization is the State of Delaware with
respect to GSE Systems, Inc. and GSE Power Systems, Inc., and the State of New
Jersey with respect to GSE EnVision Inc.  GSE Systems, Inc.’s, GSE Power
Systems, Inc.’s and GSE EnVision Inc.’s respective organizational identification
numbers, as referred to in the Uniform Commercial Code are 2390703, 2149859, and
0100471969, respectively.

3.4.           Litigation.  There is no litigation or proceeding pending or, to
the knowledge of any representative of any of the Borrowers signing this
Agreement on behalf of the Borrowers (each, as “Authorized Representative”),
threatened against or affecting any one or more of the Borrowers which might
reasonably be expected to cause a Material Adverse Effect (as hereinafter
defined).  As used herein, the phrase “Material Adverse Effect” shall mean a
material adverse effect with respect to (a) the business, results of operations,
assets or condition (financial or otherwise) of the Borrowers on a consolidated
basis taken as a whole, (b) the Borrowers’ ability (taken as a whole) to pay or
perform their obligations under the Financing Documents to which they are a
party or the Bank’s ability to enforce the Obligations, (c) the value of a
material portion of the Collateral, or (d) a material impairment of the priority
of the liens in favor of the Bank with respect to the Collateral.

3.5.           Financial Condition.  GSE Systems, Inc., as the parent of each of
the other Borrowers (the “Parent”) has heretofore furnished to the Bank (a) a
consolidated balance sheet as of December 31, 2010, and related statements of
income, shareholders’ equity and changes in cash flows for the fiscal year of
2010 then ended, all audited and certified by KPMG, LLP (“KPMG”), and (b) a
consolidated balance sheet dated as of June 30, 2011, and related statements of
income, shareholders’ equity and changes in cash flows for the two (2) fiscal
quarters of 2011 then ended, all prepared by the Parent and reviewed by
KPMG.  Such financial statements and all other financial statements and
information furnished or to be furnished to the Bank hereunder have been and
will be prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Borrowers on a consolidated basis
as of the dates thereof and the results of the operations of the Borrowers on a
consolidated basis for the periods covered thereby.  No material adverse change
in the business, financial condition, prospects or operations of any of the
Borrowers (taken as a whole) has occurred since the date of such financial
statements.  None of the Borrowers has any indebtedness (as hereinafter defined)
or liabilities other than (y) as reflected on such financial statements, as of
the date of such financial statements, or (z) as expressly permitted by the
provisions of this Agreement.

 
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3.6.           Taxes.  Each of the Borrowers has filed all federal, state and
local income, excise, property and other tax returns which are required to be
filed and has paid all taxes as shown on such returns or assessments received by
each Borrower (including, without limitation, all F.I.C.A. payments and
withholding taxes, if appropriate), except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been
provided.  No tax liens have been filed and no claims are being asserted with
respect to such taxes or assessments.

3.7.           Title to Properties and Collateral.  Each of the Borrowers has
good and marketable title to all of its assets and properties, including,
without limitation, the Collateral, and such assets and properties are subject
to no liens, security interests or other encumbrances except for those of the
Bank or those expressly permitted by the provisions of this Agreement or any of
the other Financing Documents.

3.8.           Borrowers’ Names, Business Locations, etc.  The correct legal
name of each of the Borrowers is that specified on the signature page of this
Agreement and each of the Borrowers has conducted business under such legal name
since March 30, 1994, in the case of GSE Systems, Inc., since October 16, 1996,
in the case of GSE Power Systems, Inc., and since  January 1, 2011, in the case
of  GSE EnVision Inc.  None of the Borrowers does business under any trade or
fictitious names.  The chief executive office of the Borrowers is 1332
Londontown Blvd., Sykesville, Maryland 21784 and the place where its records
concerning Receivables and other Collateral are kept is 1332 Londontown Blvd.,
Sykesville, Maryland 21784.  Each other location at which any one or more of the
Borrowers conducts business or keeps any of the Collateral is listed on Schedule
3.8 attached hereto.  All Equipment is personalty and is not and will not be
affixed to real estate in such a manner as to become a fixture and a part of
such real estate except for the Equipment described in Schedule 3.8 attached
hereto which is or will be attached to the real estate described in Schedule 3.8
attached hereto.  Such real estate is owned of record by the person or persons
specified in Schedule 3.8 attached hereto.

3.9.           Compliance with Laws, Etc.  (a) Each of the Borrowers has
complied in all material respects with any and all applicable federal, state or
local laws, statutes, rules, regulations or ordinances and none of the Borrowers
has received any notice of, or is the subject of, any investigation or complaint
alleging that such Borrower or the Collateral (or any part thereof) or any other
property owned, leased, operated or used by such Borrower is in violation of any
such law, statute, rule, regulation or ordinance, including, without limitation,
those which relate to Hazardous Materials (as hereinafter defined) and/or the
protection of the environment or human health (“Environmental Laws”).  GSE
Systems, Inc. is in good standing and is in compliance with, and shall at all
times maintain compliance with, all applicable rules and requirements necessary
to maintain its listing with the New York Stock Exchange – Euro Next Exchange.

(b)           To the knowledge of any Authorized Representative, hazardous
wastes, hazardous substances, toxic chemicals and substances, oil and petroleum
products and their by-products, radon, asbestos, pollutants or contaminants
(“Hazardous Materials”) have been used, located, installed, spilled, treated,
released or stored on, under or from any property in or on which any one or more
of the Borrowers conducts its operations.

 
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3.10.           Material Agreements.  None of the Borrowers is in default or
breach in the performance, observance or fulfillment or any of the terms,
conditions or provisions of any instrument, agreement or document to which such
Borrower is a party (including, without limitation, any instrument or agreement
evidencing or made in connection with any Indebtedness or liabilities) which
default or breach might reasonably be expected to cause a Material Adverse
Effect.

3.11.           Federal Reserve Board Regulations.  None of the Borrowers is
engaged in the business of extending credit for the purpose of purchasing or
carrying “margin stock” within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System of the United States (the “Board”) and
no part of the proceeds of the Loans will be used for any purpose which entails
a violation of Regulations U, G, T or X of the Board.

3.12.           ERISA.  Since September 2, 1974, no pension, employee benefit,
multiemployer, profit sharing, savings, stock bonus or other deferred
compensation plan (“Plan”) maintained by any one or more of the Borrowers or any
trade or business group with which any one of more of the Borrowers is
affiliated subject to the requirements of the Employee Retirement Security Act
of 1974 (“ERISA”) has been terminated, no lien exists against any one or more of
the Borrowers in favor of the Pension Benefit Guaranty Corporation (“PBGC”), and
no “reportable event” (as such term is defined in ERISA) has occurred with
respect to any such Plan.  None of the Borrowers has incurred any “accumulated
funding deficiency” within the meaning of ERISA or any liability to the PBGC in
connection with any Plan.  None of the Borrowers has any withdrawal or other
liability (absolute, contingent or otherwise) with respect to any multiemployer
plan as defined by Section 3(37) of ERISA.  Since September 2, 1974, each of the
Borrowers has complied with in all material respects all provisions of ERISA and
with all provisions of any Plan sponsored, maintained by, or contributed to, by
any one or more of the Borrowers.

3.13.           Licenses, etc.  Each of the Borrowers has obtained and now holds
all licenses, permits, franchises, patents, trademarks, copyrights and trade
names which are necessary to the conduct of its business as now conducted free
of any material conflict with the rights of any other person.

3.14.           Labor Matters.  None of the Borrowers is subject to any
collective bargaining agreements or any agreements, contracts, decrees or orders
requiring it to recognize, deal with or employ any persons organized as a
collective bargaining unit or other form of organized labor.  There are no
strikes or other material labor disputes pending or threatened against any one
or more of the Borrowers.  Each of the Borrowers has complied in all material
respects with the Fair Labor Standards Act.

3.15.           Accuracy of Information.  No information, exhibit, report,
statement or document furnished by any one or more of the Borrowers or any other
person to the Bank in connection with the Loans, this Agreement or the other
Financing Documents or the negotiation thereof contains any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained herein or therein not misleading.

 
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SECTION 4.                      Affirmative Covenants.  Each of the Borrowers
covenants and agrees with the Bank that so long as any of the Obligations (or
commitments therefor) shall be outstanding, each of the Borrowers shall:

4.1.           Payment of Obligations.  Punctually pay the principal of and
interest on the Loans and the other Obligations, at the times and places, in the
manner and in accordance with the terms of this Agreement, the Revolving Credit
Note and the other Financing Documents.
 
4.2.           Financial Statements and Other Reports.  Maintain at all times a
system of accounting established and administered in accordance with sound
business practices, and will deliver, or cause to be delivered, to the Bank (a)
as  soon as available, but in no event more than one hundred twenty (120) days
after the end of each fiscal year of each Borrower, the balance sheet of each
Borrower (or the Borrowers on a consolidated basis) as of the end of such year
and the related statements of income, retained earnings and cash flows for such
year audited by KPMG or other independent certified public accountants
satisfactory to the Bank, (b) concurrently with the delivery of the financial
statements described in clause (a) above, a certificate of the chief financial
officer of GSE Systems, Inc. setting forth the computations in reasonable detail
and satisfactory to the Bank demonstrating compliance with the financial
covenants contained in Section 5 hereof for the fiscal year to which such
financial statements relate, and certifying that to the best of his or her
knowledge, information and belief, after appropriate inquiry, no Default or
Event of Default then exists, or specifying the nature of any Default or Event
of Default which may then exist, (c) within sixty (60) days after the end of
each calendar quarter, the financial statements described in subsection (a)
relating to such quarter, prepared by GSE Systems, Inc. and certified by the
chief financial officer of GSE Systems, Inc. that such statements are true and
correct, (d) at such reasonable intervals as the Bank may require, such
assignments, schedules, statements, reports, certifications, records and other
documents with respect to the Collateral in such form and detail as is
reasonably satisfactory to the Bank, (e) promptly after filing, a copy of each
annual report filed in respect of any Plan subject to ERISA, and (f) promptly
upon request of the Bank such other information, reports or documents respecting
the business, properties, operation or financial condition of the Borrowers as
the Bank may at any time and from time to time reasonably request, and (g)
within sixty (60) days after the end of each calendar quarter, a contract status
report listing each contract under which any of the Borrowers provides goods or
services to third parties, and a description, in detail reasonably satisfactory
to the Bank, describing the status of each such contract.  In addition, the
Borrowers shall provide copies to the Bank of any and all financial documents
provided to the Securities and Exchange Commission within 3 days of the
Borrowers' filing of such documents.
 
4.3.           Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now being conducted by the
Borrowers, and do and cause to be done all things necessary to maintain and keep
in full force and effect their corporate existence in good standing in each
jurisdiction in which it conducts business.
 
4.4.           Compliance with Laws, Etc.  (a) Comply in all material respects
with all laws, statutes, ordinances, orders, rules or regulations applicable to
the Borrowers or to the Collateral (or any part thereof) or to any other
property owned, leased, operated or used by the Borrowers, including, without
limitation, Environmental Laws.

 
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(b)           Will not use, locate, install, spill, treat, release or store
Hazardous Materials on, under or from any property owned, leased, operated or
used by it unless such Hazardous Materials are handled in a manner not
prohibited by applicable Environmental Laws and are handled in a manner and in
such quantities that would not constitute a hazard to the environment or human
health and safety or subject such Borrower to any prosecution or material
liability in connection therewith.

(c)           Dispose of all Hazardous Materials only at facilities and/or with
carriers that maintain governmental permits under applicable Environmental Laws.

The Borrowers shall promptly, at their cost and expense, take all action
necessary or required by Environmental Laws to remedy or correct any violation
of Environmental Laws by any one or more of the Borrowers, the Collateral (or
any part thereof) or by any other property owned, leased, used or operated by
any one or more of the Borrowers.

The Borrowers hereby jointly and severally agree to indemnify and hold the Bank
and its employees and agents harmless from and against any and all liability,
loss, damage, costs and expenses suffered or incurred by the Bank during or
after the term of this Agreement arising out of or resulting from a violation of
any Environmental Laws by any one or more of the Borrowers, the Collateral (or
any part thereof) and any other property owned, leased, used or operated by any
one or more of the Borrowers.  The obligations and liabilities of the Borrowers
under the foregoing indemnity, together with interest thereon from the date due
until paid in full at the Default Rate (as hereinafter defined), shall be paid
by the Borrowers to the Bank upon demand and shall be a part of the Obligations
hereunder.  The foregoing indemnity shall survive the payment of all other
Obligations and the release of the Collateral.  Notwithstanding the foregoing,
Borrowers’ indemnification obligations under this Section 4.4 shall not extend
to any violation of Environmental Laws with respect to the Collateral to the
extent that such violation relates to the introduction of Hazardous Materials
first occurring after the date upon which the Bank (or any other third party)
takes possession of such Collateral.

4.5.           Payment of Liabilities and Taxes.  Pay, when due, all of its
indebtedness and liabilities (including, without limitation, the Obligations),
and pay and discharge promptly all taxes, assessments and governmental charges
and levies (including, without limitation, F.I.C.A. payments and withholding
taxes) upon it or upon its income, profits or property (including, without
limitation, the Collateral), except to the extent the amount or validity thereof
is contested in good faith by appropriate proceedings so long as adequate
reserves have been set aside therefor.

4.6.           Contractual Obligations.  Comply in all material respects with
any agreement or undertaking to which the Borrowers are a party and maintain in
full force and effect all contracts and leases to which they are or become a
party unless the failure to do so would not have a Material Adverse Effect.

4.7.           Maintenance of Properties.  Do all things necessary to maintain,
preserve, protect and keep its properties in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business may be properly conducted at all times, unless the failure
to do so would not have a Material Adverse Effect.  Each of the Borrowers shall
promptly notify the Bank of any event causing deterioration, loss or
depreciation in value of any substantial portion of the Collateral and the
amount of such loss or depreciation.  Each of the Borrowers shall perform,
observe, and comply in all material respects with all of the terms and
provisions to be performed, observed or complied with by it under each contract,
agreement or obligation relating to the Collateral.  The Bank shall have no duty
to, and each of the Borrowers hereby releases the Bank from all claims for loss
or damage caused by the failure of the Bank to, collect, protect, preserve or
enforce any of the Collateral or preserve rights against account debtors and
prior parties to the Collateral.

 
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4.8.           Insurance.  Maintain with financially sound, well rated and
reputable insurance companies insurance in such amounts and covering such risks
as is consistent with sound business practice, and in any event as is ordinarily
and customarily carried by companies similarly situated and in the same or
similar businesses as the Borrowers, but in no event less than $1,000,000 per
occurrence and $3,000,000 in the aggregate.  Each of the Borrowers will pay,
when due, all premiums on such insurance and will furnish to the Bank, upon
request, evidence of payment of such premiums and other information as to the
insurance carried by such Borrower.  Such insurance shall include, without
limitation, (a) comprehensive fire and extended coverage insurance on the
physical assets and properties of each of the Borrowers (including, without
limitation, the Collateral) against such risks, with such loss deductible
amounts and in such amounts not less than those which may be reasonably
satisfactory to the Bank but in all events conforming to prudent business
practices and in such minimum amounts that none of the Borrowers will be deemed
a co-insurer under applicable insurance laws, regulations, policies and
practices, (b) public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with the use
of any properties owned, occupied or controlled by any of the Borrowers, (c)
worker’s compensation insurance, (d) product liability insurance, and (e)
business interruption insurance.  Each policy of such insurance covering the
Collateral shall contain a provision or endorsement satisfactory to the Bank
naming the Bank as loss payee or mortgagee and providing that (a) such policy
may not be cancelled or altered and the Bank may not be removed as loss payee or
mortgagee without at least thirty days prior written notice to the Bank, and (b)
no act or default of any of the Borrowers or any other person shall affect the
right of the Bank to recover under such policy.  Each of the Borrowers hereby
irrevocably (x) assigns and grants to the Bank a security interest in any and
all proceeds of each such insurance policy covering the Collateral, (y) directs
each insurance company to pay all such proceeds directly to the Bank, and (z)
constitutes and appoints the Bank (and all officers, employees or agents
designated by the Bank) as such Borrower’s true and lawful attorney-in-fact
(coupled with an interest) with authority and power on behalf of such Borrower
to make, adjust, settle or compromise all claims under each such insurance
policy, to collect and receive all proceeds payable under each such insurance
policy and to endorse any check, draft or instrument for such proceeds.  Any
proceeds of such insurance received by the Bank (less the amount of any
reasonable costs and settlement of such losses) shall be held and applied, at
the option of the Bank, to the Obligations (whether matured or unmatured) in
such manner and at such times as the Bank may determine in its sole discretion
or to the restoration or replacement of the damaged or destroyed Collateral upon
terms and conditions reasonably satisfactory in all material respects to the
Bank.

 
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4.9.           Inspection.  Permit the Bank, by its representatives and agents,
to inspect any of its properties, books and financial records, examine and make
copies of its books of accounts and other financial records, and to discuss its
affairs, finances and accounts with, and to be advised as to the same by, it (or
its representatives) at such reasonable times and intervals as the Bank may
designate.  In connection with the foregoing, the Bank and its representatives
and agents, at the expense of the Borrowers, shall have the right to (a) enter
any business premises of any of the Borrowers or any other premises where the
Collateral and the records relating thereto may be located and to audit,
appraise, examine and inspect the Collateral and all records related thereto and
to make extracts therefrom and copies thereof, and (b) verify under reasonable
procedures the validity, amount, quality, quantity, value and condition of, and
any other matter relating to, the Collateral, including contacting any person
possessing any of the Collateral.  Notwithstanding the foregoing, unless: (y) an
Event of Default or Default shall then have occurred and be continuing, or (z)
such audit, appraisal, examination or inspection is performed or completed as a
requirement or at the request of any governmental body, Borrowers shall not
obligated to pay the costs with respect to any such audit, appraisal,
examination or inspection more than once per calendar year.

4.10.           Collection of Receivables.  Subject to the provisions of Section
4.14 hereof, collect its Receivables only in the ordinary course of business,
and shall not, without the Bank’s prior written consent, materially compromise,
adjust or otherwise alter the terms of any Receivable.

4.11.           Sale of Inventory, etc.  Sell its Inventory only in the ordinary
course of business, and will not, without the prior written consent of the Bank,
consign or otherwise dispose of its Inventory.

4.12.           Further Assurances.  Defend its title to the Collateral and the
security interest and lien thereon of the Bank against all persons and against
all security interests and liens on the Collateral adverse to those of the
Bank.  Each of the Borrowers will, from time to time, at the joint and several
expense of the Borrowers, execute, deliver, acknowledge and cause to be duly
filed, recorded or registered any statement, assignment, instrument, paper,
agreement or other document and take any other action that from time to time may
be necessary or desirable, or that the Bank may reasonably request, in order to
create, preserve, continue, perfect, confirm or validate the security interest
and lien of the Bank on the Collateral or to enable the Bank to obtain the full
benefits of this Agreement or to exercise and enforce any of its rights, powers
and remedies hereunder or under applicable laws.  The Borrowers shall jointly
and severally pay all costs of, and incidental to, the filing, recording or
registration of any such document as well as any recordation, transfer or other
tax required to be paid in connection with any such filing, recordation or
registration.  Each of the Borrowers hereby covenants to save harmless and
indemnify the Bank from and against any liability resulting from the failure to
pay any required documentary stamps, recordation and transfer taxes and
recording costs incurred by the Bank in connection with this Agreement or the
Collateral, which covenant shall survive the termination of this Agreement and
the payment of all other Obligations.  Each of the Borrowers agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement signed by any one or more of the Borrowers in connection
with this Agreement shall be sufficient as a financing statement.  If any
Receivable arises out of a contract with the United States of America or any
state, county, municipality or any department, agency or instrumentality
thereof, the Borrowers shall immediately notify the Bank thereof and, if
required by the Bank, execute and deliver any agreements, notices and/or
assignments and do such other things as may be satisfactory to the Bank in order
that all sums due or to become due to any one or more of the Borrowers under
such contract shall be duly assigned to the Bank in accordance with the Federal
Assignment of Claims Act and/or any other applicable federal, state and local
laws or regulations relating to the assignment of governmental obligations.  If,
in the reasonable opinion of the Bank, any Equipment is or may become a part of
any real estate owned or leased by any one or more of the Borrowers, each such
Borrower will, upon the request of the Bank, furnish to the Bank in form and
content reasonably satisfactory to the Bank, a landlord’s waiver by the record
owner of such real estate and a mortgagee’s waiver by any person who has a
security interest or lien on such real estate which is or may be superior to the
security interest and lien of the Bank on such Equipment.

 
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4.13.           Notice.  Promptly give written notice to the Bank of (a) the
occurrence of any Default or  Event of Default or any event, development or
circumstance which might reasonably be expected to cause a Material Adverse
Effect, (b) any litigation instituted or threatened against any one or more of
the Borrowers or any judgment against any one or more of the Borrowers where
claims against any one or more of the Borrowers exceed $50,000 and are not
covered in full by insurance, (c) any notice of a claim against, or
investigation of, any one or more of the Borrowers, the Collateral or any other
property owned, leased, operated or used by any one or more of the Borrowers
alleging a violation of Environmental Laws or the discovery, use, location,
installation, spill, treatment, release or storage of any Hazardous Materials by
any one or more of the Borrowers or on, under or from the Collateral (or any
part thereof) or any other property owned, leased, used or operated by any one
or more of the Borrowers which could result in a breach of the provisions of
Section 4.4 hereof, and (d) the occurrence of any “reportable event” within the
meaning of ERISA or any assertion of liability of any one or more of Borrowers
by the PBGC.

4.14.           Collections.  (a)  Until the authority to do so is terminated by
the Bank pursuant to subsection (b) below, enforce and collect at its cost and
expense in accordance with the collection practices customary in its business
payment of all amounts due and payable on or in respect of its Receivables
and/or the sale or lease of its Inventory on the Bank’s behalf and for the
Bank’s account as the Bank’s property in trust for the Bank, and use the
proceeds of all such payments for its general business purposes so long as such
use is not inconsistent with the provisions of this Agreement.

(b)           At any time upon or after the occurrence of an Event of Default
the Bank, in addition to any other of its rights and remedies, may terminate the
authority given to the Borrowers in subsection (a) above whereupon (i) the Bank
shall have the right to notify and direct, and/or require each of the Borrowers
to notify and direct, all account debtors to make all payments on or in respect
of Receivables and/or the sale or lease of Inventory directly to the Bank for
deposit into a special banking account maintained by the Bank over which the
Bank has exclusive dominion, control and power of access and withdrawal (the
“Collection Account”), (ii) unless otherwise agreed by the Bank, any cash,
checks, drafts, money orders, instruments or other remittances on or with
respect to Receivables and/or the sale or lease of Inventory received by any of
the Borrowers shall be delivered to the Bank within one day of receipt thereof
by such Borrower for deposit to the Collection Account in precisely the form in
which received, except for the addition thereto of the endorsement of such
Borrower where required for collection of any checks, drafts, money orders,
instruments or other remittances which endorsement each of the Borrowers agrees
to make and with respect thereto each of the Borrowers hereby waives notice of
presentment, protest and non-payment, (iii) pending such deposit, none of the
Borrowers will commingle any such cash, checks, drafts, money orders,
instruments or other remittances with other funds or property but will hold them
separate and apart and in trust for the Bank subject to the security interest
and lien of the Bank on the Collateral, and (iv) the Bank shall have the right
at any time and from time to time to apply funds held by it in the Collection
Account to the payment of all or any part of the Obligations, whether matured or
unmatured, in such order and manner as the Bank may determine in its sole
discretion.

 
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4.15.           Minimum Deposit in Operating Account at Bank.  Maintain their
primary operating and depository accounts at the Bank (the “Operating
Accounts”), with the aggregate amount of cash in the Operating Accounts to be in
an amount at least equal to the greater of (i) $3,000,000 or (ii) the aggregate
principal amounts of all Loans outstanding under the Revolving Credit Facility
(including any issued and outstanding letters of credit).  Notwithstanding the
foregoing, this minimum cash deposit requirement for the Operating Accounts
shall be reduced to $3,000,000 in the event that (A) either (i) the Borrowers’
aggregate after-tax net income (exclusive of gains or losses from derivatives
and non cash stock option expense), determined in accordance with generally
accepted accounting principles consistently applied (the “After-Tax Net
Income”), is positive for the fiscal year ending December 31, 2011 or (ii) the
Borrowers’ After-Tax Net Income is positive for two consecutive quarters
beginning with the quarter ending on March 31, 2012 (each a “Quarter”), and (B)
no Default (as defined herein) then exists.  Upon the occurrence of any of the
following:   (i) the Borrowers’ After-Tax Net Income becomes negative with
respect to any quarter, or (ii) a Default occurs, then the Borrowers’ cash
maintenance obligation for the Operating Accounts shall automatically revert to
the obligation described in the initial sentence of this Section 4.15; provided,
however, the minimum aggregate amount of cash required to be maintained pursuant
to this Section 4.15 shall again be reduced to $3,000,000 if Borrowers’
After-Tax Net Income is positive for any two consecutive subsequent Quarters and
provided that no Event of Default shall then exist.  If any Letter of Credit is
drawn upon and the Borrowers do not immediately repay to the Bank the amount of
the draw (the “Draw Amount”), then (i) the Bank shall remove the Draw Amount
from the Borrowers’ Operating Accounts and place the Draw Amount in a segregated
account controlled by the Bank where it will become cash collateral securing the
Borrowers’ obligation to repay the Draw Amount under the Revolving Credit Note
and (ii) the Borrowers shall immediately replenish the Operating Accounts so
that the Borrowers fulfill the cash maintenance obligation for the Operating
Accounts described in this Section 4.15.  Upon the Borrowers’ repayment to the
Bank of the Draw Amount, the Bank shall release to the Borrowers such Draw
Amount from the Bank-controlled cash collateral account. Notwithstanding the
foregoing, to the extent that any Letter of Credit issued pursuant to this
Agreement remains outstanding after the Revolving Credit Expiration Date,
Borrowers shall maintain in the Operating Accounts at all such times until such
Letter of Credit shall expire or otherwise be retired, an amount equal to the
aggregate principal amounts of all such Letters of Credit then outstanding. All
such quarterly testing requirements in this Section shall be based on the
Borrower's company prepared quarterly statements, except that with respect to
any quarter coinciding with the end of the calendar year, such testing
requirements shall be based on the Borrower's audited financial statements for
such year.

SECTION 5.                      Negative Covenants.  Each of the Borrowers
covenant and agrees with the Bank that so long as any of the Obligations (or
commitments therefor) shall be outstanding, that they shall not directly or
indirectly:

 
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5.1.           Cash Flow Coverage Ratio.  As of the end of each fiscal quarter,
permit the cumulative Cash Flow Coverage Ratio (as hereinafter defined) of the
Consolidated Group (as hereinafter defined) for such fiscal quarter and the
three immediately preceding fiscal quarters (treated as a single accounting
period) to be less than 1.20 to 1 for such period.  As used herein (a) the term
“Consolidated Group” means the Parent and each of the other Borrowers and
Subsidiaries, on a consolidated basis, (b) the term “Cash Flow Coverage Ratio”
means, with respect to any period, the ratio of the Cash Flow (as hereinafter
defined) of the Consolidated Group to the Debt Service (as hereinafter defined)
of the Consolidated Group, (c) the term “Cash Flow” means, for any period, the
total of the net income of the Consolidated Group for such period plus the
aggregate amounts of deferred taxes, depreciation, amortization, other noncash
charges and interest expense of the Consolidated Group for such period, minus
any dividends, officer withdrawals, distributions and other noncash income, all
as determined in accordance with generally accepted accounting principles
consistently applied, and (c) the term “Debt Service” means, for any period, the
total of the interest expense of the Consolidated Group for such period, plus
the aggregate principal amount of all indebtedness for borrowed money payable by
the Consolidated Group during such period or by its terms becoming due during
such period, plus the portion of the capital lease obligations of the
Consolidated Group not allocable to interest expense and payable by the
Consolidated Group (or a member thereof) during such period or by its terms
becoming due during such period, all as determined in accordance with generally
accepted accounting principles consistently applied.  The Cash Flow Coverage
Ratio shall be measured based upon the Consolidated Group’s consolidated and
consolidating financial statements.  The Cash Flow Coverage Ratio shall be
measured beginning with the quarter ending December 31, 2011. All such quarterly
testing requirements in this Section shall be based on the Borrower's company
prepared quarterly statements, except that with respect to any quarter
coinciding with the end of the calendar year, such testing requirements shall be
based on the Borrower's audited financial statements for such year.

5.2.           Minimum Tangible Capital Base.  As of the end of each fiscal
quarter, permit the Tangible Capital Base (as hereinafter defined) of the
Consolidated Group for such fiscal quarter to be less than Twenty-Six Million
Dollars ($26,000,000).  As used herein, the term “Tangible Capital Base” means,
with respect to any period, the Consolidated Group’s Net Worth (as defined
herein), minus the value of the Consolidated Group’s intangible assets as
determined in accordance with generally accepted accounting principles
consistently applied, minus amounts due to the one ore more members of the
Consolidated Group from any of their respective officers, plus the amounts of
any of the Consolidated Group’s debt that is subordinated to the Loan.  As used
herein, the term “Net Worth” means the excess of the Consolidated Group’s assets
over the Consolidated Group’s liabilities, as determined in accordance with
generally accepted accounting principles consistently applied.  The Tangible
Capital Base shall be measured based upon the Consolidated Group’s consolidated
and consolidating financial statements.  The Tangible Capital Base shall be
measured beginning with the quarter ending December 31, 2011. All such quarterly
testing requirements in this Section shall be based on the Borrower's company
prepared quarterly statements, except that with respect to any quarter
coinciding with the end of the calendar year, such testing requirements shall be
based on the Borrower's audited financial statements for such year.

 
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5.3.           Quick Ratio.  Permit the Quick Ratio (as hereinafter defined) of
the Consolidated Group at any time to be less than 2 to 1, measured
quarterly.  As used herein, the term “Quick Ratio” means, the ratio of the
current assets of the Consolidated Group on any date, less the value of their
Inventory, to the current liabilities of the Consolidated Group on such date,
all as determined in accordance with generally accepted accounting principles
consistently applied.  The Quick Ratio is measured based upon the Consolidated
Group’s consolidated and consolidating financial statements.  The Quick Ratio
shall be measured beginning with the quarter ending December 31, 2011.  All such
quarterly testing requirements in this Section shall be based on the Borrower's
company prepared quarterly statements, except that with respect to any quarter
coinciding with the end of the calendar year, such testing requirements shall be
based on the Borrower's audited financial statements for such year.

5.4.           Tangible Capital Base Ratio.  As of the end of each fiscal
quarter, permit the cumulative Tangible Capital Base Ratio (as hereinafter
defined) of the Consolidated Group (on a consolidated basis) for such fiscal
quarter to be more than 0.75 to 1 for such period.  As used herein, the term
“Tangible Capital Base Ratio” means, the ratio of the Consolidated Group’s’
total liabilities, as determined in accordance with generally accepted
accounting principles consistently applied, to the Tangible Capital Base.  The
Tangible Capital Base Ratio is measured based upon the Consolidated Group’s
consolidated and consolidating financial statements.  The Tangible Capital Base
Ratio shall be measured beginning with the quarter ending December 31,
2011.  All such quarterly testing requirements in this Section shall be based on
the Borrower's company prepared quarterly statements, except that with respect
to any quarter coinciding with the end of the calendar year, such testing
requirements shall be based on the Borrower's audited financial statements for
such year.

5.5.           Indebtedness.  Create, incur, assume or permit to exist any
indebtedness except (a) indebtedness to the Bank, (b) other indebtedness
existing on the date hereof or expressly permitted by the provisions hereof,
including, without limitation, indebtedness associated with Permitted
Acquisitions (as hereinafter defined), or Foreign Exchange Contracts, (c)
indebtedness incurred by the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business, (d) indebtedness owing to Bank
of America in connection with certain issued and outstanding Letters of Credit
issued or executed by Bank of America, a list of which are set forth on Schedule
5.5 attached hereto and made a part hereof (collectively, the "Bank of America
Indebtedness"), provided however that with respect to each such letters of
credit (other than letter of credit no. 68061841 issued by Bank of America in
the amount of $12,000 for National Nuclear Energy Generating Company), the
Borrowers will use commercially reasonable efforts to replace the letters of
credit issued by Bank of America with Letters of Credit issued by or through the
Bank not later than March 31, 2012, (e) indebtedness incurred in the ordinary
course of business which is unsecured and consists of open accounts extended by
suppliers on normal trade terms in connection with the purchase of goods and
services.  The term “indebtedness” as used in this Agreement means, with respect
to each of the Borrowers, all indebtedness, liabilities and obligations of such
Borrower of any nature whatsoever, direct or contingent, matured or unmatured,
joint or several, including, without limitation, (i) any obligation for borrowed
money, (ii) any obligation to pay rent under any lease which is required to be
classified as a liability in accordance with generally accepted accounting
principles, (iii) any obligation secured by a lien, security interest or other
encumbrance on property whether or not such Borrower has assumed or become
liable for the payment of such obligation, and (iv) any obligation for the
deferred purchase price of property or services.

 
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5.6.           Liens.  Create, incur, assume or permit to exist any lien,
security interest or encumbrance of any nature whatsoever on any of its
properties or assets, both now owned and hereafter acquired and including,
without limitation, the Collateral, except for (a) any lien or security interest
now or hereafter securing all or any part of the Obligations, (b) any lien,
security interest or encumbrance existing on the date hereof which was
immediately prior hereto disclosed to, and approved by, the Bank in writing, (c)
cash collateral securing the Bank of America Indebtedness in an amount equal to
the face amount of such letters of credit, and (d) any lien, security interest
or other encumbrance subsequently approved by the Bank in writing after the date
hereof.  Any lien, security interest or encumbrance permitted by this subsection
is called a “Permitted Lien.”

5.7.           Loans and Investments.  Except as set forth on Schedule 5.7
attached hereto, and only to the extent that such loans and/or investments would
not otherwise cause the Borrower to be in violation of any of the provisions of
this Agreement (including but not limited to the financial covenants set forth
in Sections 5.1 through 5.4 hereof), make or permit to remain outstanding any
loan or advance to, provide any guaranty for, or make or own any investment in,
any person, except loans made to one or more Subsidiary which, in the aggregate,
shall not exceed at any one time outstanding $500,000.

5.8.           Capital Expenditures.  Make any capital expenditures except for
capital expenditures in the ordinary course of business in the aggregate for all
of the Borrowers (taken as a whole) not in excess of $750,000 during any fiscal
year of the Borrowers.

5.9.           Mergers, Acquisitions, Etc.. Enter into any merger or
consolidation or acquire or purchase all or substantially all of the assets,
properties or stock of any other person; provided, however, that Borrowers shall
be permitted to acquire or purchase all or substantially all of the assets,
properties or stock of any person engaged in the Energy Services Industry (as
defined herein), so long as (a) no Default or Event of Default shall then have
occurred and be continuing, and (b) no Default or Event of Default is reasonably
expected to occur as a result of such acquisition and/or purchase (each such
acquisition or purchase, a “Permitted Acquisition”).  The term “Energy Services
Industry” shall mean the production, manufacture or transfer of energy, and
related services including, without limitation, simulation, marketing,
consulting and other similar and related services.

5.10.           Sale of Assets and Liquidation.  Sell, lease or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, assets or properties, including, without
limitation, the Collateral, outside of the ordinary course of business or take
any action to liquidate, dissolve or wind up itself or its business.

5.11.           Change of Business.  Enter into any business other than the
business as conducted by it on the date hereof.

 
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5.12.           Change of Name, Location, Etc.  (a) Change its legal name,
identity or structure, (b) change the location of its chief executive office or
its chief place of business, (c) change the location where it keeps its records
concerning the Collateral, (d) change the location of any Collateral, or (e)
open a new place of business, unless in each case it shall have given the Bank
prior written notice thereof and shall at its cost and expense have executed,
delivered, acknowledged, filed, recorded or registered all financing statements
and other documents as may be reasonably required by the Bank in order to
create, perfect, continue, preserve, confirm or validate the security interest
and lien of the Bank on the Collateral and their priority; provided, that no
Borrower shall in any event change the location of any Collateral if such change
would cause the security interest and lien of the Bank on the Collateral (or the
perfection thereof) to lapse, or if required to be perfected prior to such
change, to cease to be perfected.

5.13.           Fiscal year.  Change its fiscal year.

5.14.           Amendments.  Amend or terminate its corporate charter or bylaws
or waive any material provisions thereof.

5.15.           Prepayments.  Prepay any indebtedness owing by it prior to the
stated maturity date thereof other than the Obligations (if permitted hereunder)
and indebtedness to trade creditors where prepayment results in a discount on
the amount due.

5.16.           Affiliates.  Enter into or participate in any transaction with
an affiliate except on terms and at rates no more favorable than those which
would have prevailed in an arm’s length transaction between unrelated third
parties.

5.17.           Sale and Leaseback Transactions.  Sell or transfer any property
in order to concurrently or subsequently lease as lessee such or similar
property.

5.18.           ERISA.  Engage in any “prohibited transaction” (as such term is
defined by ERISA), incur any “accumulated funding deficiency” (as such term is
defined by ERISA) whether or not waived, or terminate any Plan in a manner which
could result in the imposition of a lien on any of its property pursuant to the
provisions of ERISA.

SECTION 6.                      Event of Default.  The term “Event of Default”
shall mean whenever it is used in this Agreement, any one or more of the
following events and the term “Default” whenever it is used herein means any one
or more of the following events, which with the giving of notice, lapse of time
or both would constitute an Event of Default:

6.1.           Payment of Obligations.  The failure of the Borrowers to pay any
of the Obligations as and when due and payable in accordance with the provisions
of this Agreement, the Revolving Credit Note and/or any of the other Financing
Documents, whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise, and such failure shall continue
uncured for a period of ten (10) days after such due date.

6.2.           Perform, etc. Certain Provisions of this Agreement.  The failure
of any of the Borrowers to perform, observe  or comply with any of the
provisions of subsections 4.8 and 4.9 of this Agreement (Affirmative Covenants)
or of Section 5 (Negative Covenants) of this Agreement;

6.3.           Perform, etc. Other Provisions of This Agreement.  The failure of
the Borrowers to perform, observe or comply with any of the provisions of this
Agreement other than those covered by Sections 6.1 and 6.2 above, and such
failure is not cured within a period of thirty (30) days after the date of
written notice thereof by the Bank to the Borrowers;

 
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6.4.           Representations and Warranties.  If any representation and
warranty contained herein or any statement or representation made in any
certificate or any other information at any time given by or on behalf of any
one or more of the Borrowers or furnished in connection with this Agreement or
any of the other Financing Documents shall prove to be false, incorrect or
misleading in any material respect on the date as of which made;

6.5.           Default under Other Financing Documents.  The occurrence of a
Default (as defined and described therein) under the provisions of the Revolving
Credit Note, or any of the other Financing Documents which is not cured within
applicable cure periods, if any;

6.6.           Liquidation, Termination, Dissolution, etc.  If any one or more
of the Borrowers shall liquidate, dissolve or terminate its existence;

6.7.           Default under Other Indebtedness.  If any one or more of the
Borrowers shall default in any payment of any indebtedness owing to the Bank
(other than the Obligations under the Financing Documents) or, with respect to
indebtedness for borrower money only, to any other person beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created, or default in the observance or performance of any
other agreement or condition relating to any such indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur the effect of which default or other event is to cause
or to permit the holder or holders of such indebtedness or beneficiary or
beneficiaries of such indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with the giving of
notice, if required, such indebtedness to become due prior to its stated
maturity;

6.8.           Attachment.  The issuance of any attachment or garnishment
against property or credits of any one or more of the Borrowers serving as
Collateral, or the issuance of any attachment or garnishment against any other
property or credits of any one or more of the Borrowers for an amount in excess,
singly or in the aggregate, of $50,000, which shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days after the issuance
thereof;

6.9.           Judgments.  One or more judgments or decrees shall be entered
against any one or more of the Borrowers involving in the aggregate a liability
in excess of $50,000, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days after the
entry thereof.

6.10.           Inability to Pay Debts, etc.  If any one or more of the
Borrowers shall admit in writing its inability to pay its debts as they mature
or shall make any assignment for the benefit of any of its creditors;

 
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6.11.           Bankruptcy.  If proceedings in bankruptcy, or for reorganization
of any one or more of the Borrowers, or for the readjustment of any of the debts
of any one or more of the Borrowers, under the United States Bankruptcy Code (as
amended) or any part thereof, or under any other applicable laws, whether state
or federal, for the relief of debtors, now or hereafter existing, shall be
commenced against or by any one or more of the Borrowers and, except with
respect to any such proceedings instituted by any one or more of the Borrowers,
shall not be discharged within thirty (30) days of their commencement (a
“Bankruptcy Event of Default”);

6.12.           Receiver, etc.  A receiver or trustee shall be appointed for any
one or more of the Borrowers or for any substantial part of the assets of any
one or more of the Borrowers, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of any one or more of the
Borrowers and, except with respect to any such appointments requested or
instituted by any one or more of the Borrowers, such receiver or trustee shall
not be discharged within thirty (30) days of his or her appointment, and, except
with respect to any such proceedings instituted by any one or more of the
Borrowers, such proceedings shall not be discharged within thirty (30) days of
their commencement (a “Receivership Event of Default”); or

6.13.           [RESERVED]

SECTION 7.                      Rights and Remedies.

7.1.           Rights and Remedies.  If any Default shall occur and be
continuing, the Bank may (i) declare the Revolving Credit Facility hereunder and
any obligation or commitment of the Bank hereunder to make Loans to the
Borrowers to be terminated, whereupon the same shall forthwith terminate, and
(ii) declare the unpaid principal amount of each of the Revolving Credit Note,
together with accrued and unpaid interest thereon, and all other Obligations
then outstanding to be immediately due and payable, whereupon the same shall
become and be forthwith due and jointly and severally payable by the Borrowers
to the Bank, without presentment, demand, protest or notice of any kind, all of
which are expressly waived by each of the Borrowers; provided, that, in the case
of any Default referred to in Sections 6.11 and 6.12 above, the Revolving Credit
Facility hereunder and any obligation or commitment of the Bank hereunder to
make Loans to the Borrowers shall immediately and automatically terminate and
the unpaid principal amount of each of the Revolving Credit Note, together with
accrued and unpaid interest thereon, and all other Obligations then outstanding
shall be automatically and immediately due and jointly and severally payable by
the Borrowers to the Bank without notice, presentment, demand, protest or other
action of any kind, all of which are expressly waived by each of the
Borrowers.  Upon the occurrence and during the continuation of any Default, then
in each and every case, the Bank shall be entitled to exercise in any
jurisdiction in which enforcement thereof is sought, the following rights and
remedies, in addition to the rights and remedies available to the Bank under the
other provisions of this Agreement and the other Financing Documents, the rights
and remedies of a secured party under the Maryland Uniform Commercial Code and
all other rights and remedies available to the Bank under applicable law, all
such rights and remedies being cumulative and enforceable alternatively,
successively or concurrently:

 
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(a)           The Bank shall have the right to take possession of the
Collateral, and for that purpose, so far as each of the Borrowers may give
authority therefor or to the extent permitted under applicable laws, to enter
upon any premises on which the Collateral or any part thereof may be situated,
exclude any of the Borrowers therefrom, and remove therefrom all or any of the
Collateral without any liability for suit, action or other proceeding, EACH OF
THE BORROWERS IS HEREBY WAIVING ANY AND ALL RIGHTS TO PRIOR NOTICE AND TO
JUDICIAL HEARING WITH RESPECT TO REPOSSESSION OF COLLATERAL, and require the
Borrowers, at the expense of the Borrowers, to assemble and deliver all or any
of the Collateral to such place or places as the Bank may designate.

(b)           The Bank shall have the right to operate, manage and control all
or any of the Collateral (including use of the Collateral and any other property
or assets of any of the Borrowers in order to continue or complete performance
of the obligations of any of the Borrowers under any contracts of any of the
Borrowers, or permit the Collateral or any portion thereof to remain idle or
store the same, and collect all rents and revenues therefrom and sell, lease or
otherwise dispose of any or all of the Collateral upon such terms and under such
conditions as the Bank, in its sole discretion, may determine, and purchase or
acquire any of the Collateral at any such sale or other disposition, all to the
extent permitted by applicable law.  Any purchaser or lessee of any of the
Collateral so sold or leased shall hold the property so sold or leased free from
any claim or right of any of the Borrowers and each of the Borrowers hereby
waives (to the extent permitted by law) all rights of redemption, stay or
appraisal with respect thereto.  The Bank and each of the Borrowers agree that
commercial reasonableness and good faith require the Bank to give to the
Borrowers no more than five (5) days prior written notice of any public sale or
other disposition of the Collateral or of the time after which any private sale
or other disposition of the Collateral is to be made.

(c)           The Bank shall have the right, and each of the Borrowers hereby
irrevocably designates and appoints the Bank and its designees as its
attorney-in-fact, with power of substitution and with power and authority in the
name of such Borrower, the Bank’s name or otherwise and for the use and benefit
of the Bank (i) to notify account debtors and other persons obligated to make
payments or other remittances on or with respect to the Collateral to make such
payments and other remittances directly to the Bank, (ii) to demand, collect,
sue for, take control of, compromise, settle, change the terms of, release,
exchange, substitute, extend, renew or otherwise deal with, the Collateral or
any account debtor or other person obligated on or under the Collateral in any
manner as the Bank may deem advisable, (iii) to remove from any place of
business of such Borrower all records in respect of the Collateral and, at the
cost and expense of the Borrowers, to make use of any place of business of such
Borrower as may be necessary or desirable to administer, control, collect, sell
or otherwise dispose of the Collateral, (iv) to receive and endorse the name of
such Borrower on any checks, drafts, money orders or other instruments of
payment relating to any of the Collateral, (v) to sign and send verifications of
Receivables or other Collateral and sign any proofs of claim or loss, (vi) to
commence, prosecute or defend any action, suit or proceeding relating to the
Collateral or the collection, enforcement or realization upon the Collateral,
(vii) to receive, open and dispose of all mail addressed to such Borrower and to
notify the postal authorities to change the address for delivery of mail
addressed to such Borrower to such other address as the Bank designates, (viii)
to adjust and compromise any claims under insurance policies, (ix) to register,
lease, assign, license, sublicense, sell or otherwise dispose of any patents,
trademarks or service marks and (x) to use, sell, assign, transfer, pledge, make
any agreement with respect to or otherwise deal with any or all of the
Collateral and to do all other acts and things necessary to carry out this
Agreement as though the Bank were absolute owner of the Collateral.  This power
of attorney, being coupled with an interest, is irrevocable and all acts by the
Bank and its designees pursuant thereto are hereby ratified and confirmed by
each of the Borrowers.  Neither the Bank nor any of its designees shall be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law other than acts of actual fraud or gross negligence.  The
provisions of this subsection shall not (x) be construed as requiring or
obligating the Bank or any designee to take any action authorized hereunder and
any action taken or any action not taken hereunder shall not give rise to any
liability on the part of the Bank or its designees or to any defense, claim,
counterclaim or offset in favor of any of the Borrowers, (y) be construed to
mean the Bank has assumed any of the obligations of any of the Borrowers under
any instrument or agreement as the Bank shall not be responsible in any way for
the performance of any of the Borrowers of any of the provisions thereof, and
(z) relieve any of the Borrowers of any of obligations of any of the Borrowers
hereunder or in any way limit the exercise by the Bank of any other or further
rights it may have hereunder, under the other Financing Documents, by law or
otherwise.

 
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(d)           EACH OF THE BORROWERS HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY
THE BANK OR CLERK OF ANY COURT OF RECORD TO APPEAR FOR IT IN ANY COURT OF RECORD
AFTER AN EVENT OF DEFAULT AND CONFESS JUDGMENT AGAINST IT WITHOUT PRIOR HEARING,
IN FAVOR OF THE BANK FOR AND IN THE AMOUNT OF THE OBLIGATIONS THEN OUTSTANDING
PLUS ALL OTHER AMOUNTS THEN DUE AND PAYABLE HEREUNDER AND UNDER THE REVOLVING
CREDIT NOTE AND THE OTHER FINANCING DOCUMENTS, COSTS OF SUIT AND ATTORNEY’S FEES
IN AN AMOUNT EQUAL TO 5% OF THE PRINCIPAL AMOUNT OF THE OBLIGATIONS THEN
OUTSTANDING. IN CONNECTION THEREWITH, EACH BORROWER HEREBY RELEASES, TO THE
EXTENT PERMITTED BY APPLICABLE LAWS, ALL ERRORS AND ALL RIGHTS OF EXEMPTION,
APPEAL, STAY OF EXECUTION, INQUISITION AND ALL OTHER RIGHTS TO WHICH EACH
BORROWER MAY OTHERWISE BE ENTITLED UNDER APPLICABLE LAWS NOW IN FORCE AND WHICH
MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER
JUDGMENT AGAINST EACH OF THE BORROWERS SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO.  SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS THE BANK SHALL DEEM NECESSARY OR DESIRABLE,
FOR ALL OF WHICH THIS AGREEMENT SHALL BE A SUFFICIENT WARRANT.

Notwithstanding the provisions of the immediately preceding paragraph, the Bank
agrees that in enforcing any judgment by confession obtained against the
Borrower in connection with this Agreement, the Bank shall not retain, solely
with respect to attorney’s fees incurred by the Bank in connection with this
Agreement, any amounts in excess of the actual amount of reasonable attorneys’
fees charged or billed to the Bank.

7.2.           Default Rate.  Notwithstanding the entry of any decree, order,
judgment or other judicial action, upon the occurrence of an Event of Default
hereunder, the unpaid principal amount of each of the Revolving Credit Note and
all other monetary Obligations outstanding or becoming outstanding while such
Default exists shall bear interest from the date of such an Event of Default
until such an Event of Default has been cured, at a floating and fluctuating per
annum rate of interest equal at all times to the Prime Rate in effect from time
to time, plus 2% per annum (the “Default Rate”), irrespective of whether or not
as a result thereof, the Revolving Credit Note or any of the Obligations has
been declared due and payable or the maturity thereof accelerated.  The
Borrowers shall on demand from time to time jointly and severally pay such
interest to the Bank and the same shall be a part of the Obligations hereunder.

 
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7.3.           Liens, Set-Off.  As security for the payment of the Obligations
and the performance of the Financing Documents, each of the Borrowers hereby
grants to the Bank a continuing security interest and lien on, in and upon all
indebtedness owing by it to, and all of its deposits (general or special),
credits, balances, monies, securities and other property and all proceeds
thereof, both now and hereafter held or received by, in transit to, or due by,
the Bank.  In addition to, and without limitation of, any rights of the Bank
under applicable laws, upon the occurrence of any Event of Default occurs, the
Bank may at any time and from time to time thereafter, without notice to the
Borrowers, set-off, hold, segregate, appropriate and apply at any time and from
time to time thereafter all such indebtedness, deposits, credits, balances
(whether provisional or final and whether or not collected or available),
monies, securities and other property toward the payment of all or any part of
the Obligations in such order and manner as the Bank in its sole discretion may
determine and whether or not the Obligations or any part thereof shall then be
due or demand for payment thereof made by the Bank.

7.4.           Enforcement Costs.  The Borrowers shall jointly and severally pay
to the Bank on demand (a) all enforcement costs paid, incurred or advanced by or
on behalf of the Bank and (b) interest on such enforcement costs from the date
paid, incurred or advanced until paid in full at a per annum rate of interest
equal at all times to the Default Rate.  As used herein, the term “enforcement
costs” shall mean and include collectively and include all expenses, charges,
recordation or other taxes, costs and fees (including attorneys’ fees and
expenses) of any nature whatsoever advanced, paid or incurred by or on behalf of
the Bank in connection with (a) the collection or enforcement of this Agreement
or any of the other Financing Documents, (b) the creation, perfection,
maintenance, preservation, defense, protection, realization upon, disposition,
collection, sale or enforcement of all or any part of the Collateral, and (c)
the exercise by the Bank of any rights or remedies available to it under the
provisions of this Agreement or any of the other Financing Documents.  All
enforcement costs, with interest as above provided, shall be a part of the
Obligations hereunder.

7.5.           Application of Proceeds.  Any proceeds of the collection of the
Obligations and/or the sale or other disposition of the Collateral will be held
and applied by the Bank to the payment of enforcement costs, and any balance of
such proceeds (if any) will be applied by the Bank to the payment of the
remaining Obligations (whether then due or not), at such time or times and in
such order and manner of application as the Bank may from time to time in its
sole discretion determine.  If the sale or other disposition of the Collateral
fails to satisfy all of the Obligations, the Borrowers shall remain jointly and
severally liable to the Bank for any deficiency.

7.6.           Remedies, etc. Cumulative.  Each right, power and remedy of the
Bank as provided for in this Agreement or in the other Financing Documents or
now or hereafter existing under applicable laws or otherwise shall be cumulative
and concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in the other Financing Documents or now or
hereafter existing under applicable laws or otherwise, and the exercise or
beginning of the exercise by the Bank of any one or more of such rights, powers
or remedies shall not preclude the simultaneous or later exercise by the Bank of
any or all such other rights, powers or remedies.

 
26

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7.7.           No Waiver, Etc.  No failure or delay by the Bank to insist upon
the strict performance of any term, condition, covenant or agreement of this
Agreement or of the other Financing Documents, or to exercise any right, power
or remedy consequent upon a breach thereof, shall constitute a waiver of any
such term, condition, covenant or agreement or of any such breach, or preclude
the Bank from exercising any such right, power or remedy at any later time or
times.  By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, the Bank shall not be
deemed to waive the right either to require prompt payment when due of all other
amounts payable under this Agreement or under any of the other Financing
Documents, or to declare an Event of Default for failure to effect such prompt
payment of any such other amount.  The payment by any one or more of the
Borrowers or any other person and the acceptance by the Bank of any amount due
and payable under the provisions of this Agreement or the other Financing
Documents at any time during which an Event of Default exists shall not in any
way or manner be construed as a waiver of such an Event of Default by the Bank
or preclude the Bank from exercising any right of power or remedy consequent
upon such an Event of Default.

SECTION 8.                      Miscellaneous.

8.1.           Financing Statements.

(a)           Each of the Borrowers hereby authorizes the Bank at any time from
time to time to file in any appropriate filing office any initial financing
statements and amendments thereto and continuations thereof covering any
collateral provided any Borrower for the Obligations.

(b)           No Borrower shall file any amendments, correction statements or
termination statements concerning any collateral for the Obligations without the
prior written consent of the Bank.

8.2.           Extension and Termination of Revolving Credit Facility.   Unless
sooner terminated pursuant to the provisions of Section 7.1 hereof, the
Revolving Credit Facility established pursuant hereto shall terminate on the
Revolving Credit Expiration Date in accordance with the provisions of Section
1.1(a) hereof; provided, that, at any time and from time to time hereafter, the
Bank may, at its sole and absolute discretion, reaffirm and extend the Revolving
Credit Expiration Date for one (1) or more one (1) year periods, which extension
and reaffirmation may be by letter agreement from the Bank and executed by the
Borrowers (the “Extension Letter”).  The Bank shall have no obligation to extend
the Revolving Credit Expiration Date, whether or not an Event of Default shall
then exist.  Furthermore, any Extension Letter shall be subject to any terms and
conditions as the Bank shall require, and may include an increase or decrease in
the Revolving Credit Amount. If required by the Bank, each of the Borrowers
shall execute and deliver to the Bank in form and content satisfactory in all
respects to the Bank either an amendment and modification of the Revolving
Credit Note or a restatement of the Revolving Credit Note so as to incorporate
into the Revolving Credit Note the terms of any such amendment to this
Agreement.  It is the intention of the Bank and the Borrowers that nothing
contained in any such amendment to this Agreement, any such amendment and
modification of the Revolving Credit Note or any such restatement of the
Revolving Credit Note shall be construed to cancel, extinguish, release,
discharge or constitute a novation of (a) any of the Obligations, (b) any
collateral and security for any of the Obligations, and (c) any of the Financing
Documents.  All such Obligations, collateral and security, and Financing
Documents shall remain and continue in full force and effect and shall be deemed
to be ratified and confirmed by each of the Borrowers by the execution and
delivery by the Borrowers of any such amendment to this Agreement, any such
amendment and modification to the Revolving Credit Note or any such restatement
of the Revolving Credit Note.

 
27

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8.3.           Course of Dealing; Amendment.  No course of dealing between the
Bank and any one or more of the Borrowers shall be effective to amend, modify or
change any provision of this Agreement or the other Financing Documents.  The
Bank shall have the right at all times to enforce the provisions of this
Agreement and the other Financing Documents in strict accordance with the
provisions hereof and thereof, notwithstanding any conduct or custom on the part
of the Bank in refraining from so doing at any time or times.  The failure of
the Bank at any time or times to enforce its rights under such provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
the other Financing Documents or as having in any way or manner modified or
waived the same.  This Agreement and the other Financing Documents to which the
Borrowers are a party may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Bank and the Borrowers.

8.4.           Waiver of Default.  The Bank may, at any time and from time to
time, execute and deliver to the Borrowers a written instrument waiving, on such
terms and conditions as the Bank may specify in such written instrument, any of
the requirements of this Agreement or of the other Financing Documents or any
Event of Default or Default and its consequences, provided, that any such waiver
shall be for such period and subject to such conditions as shall be specified in
any such instrument.  In the case of any such waiver, the Borrowers and the Bank
shall be restored to their former positions prior to such Event of Default or
Default and shall have the same rights as they had hereunder.  No such waiver
shall extend to any subsequent or other Event of Default or Default, or impair
any right consequent thereto and shall be effective only in the specific
instance and for the specific purpose for which given.

8.5.           Notices.  All notices, requests and demands to or upon the
parties to this Agreement shall be deemed to have been given or made when
delivered by hand, or when deposited in the mail, postage prepaid by registered
or certified mail, return receipt requested, or, in the case of notice by
telegraph, telex or facsimile transmission, when properly transmitted, addressed
as follows or to such other address as may be hereafter designated in writing by
one party to the other:

Borrowers:                             c/o GSE Systems, Inc.
1332 Londontown Blvd.
Sykesville, MD 21784
Attention: Chief Financial Officer

 
28

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With a copy to:                     Larry Gordon, Esquire
General Counsel
GSE Systems, Inc.
1332 Londontown Blvd.
Sykesville, MD 21784

Bank:                                  Susquehanna Bank
Commercial Banking
307 International Circle
Suite 600
Hunt Valley, MD 21030-1376
Attention:  Robert P. Whelen, Jr.

With a copy to:                     Kevin J. Davidson, Esquire
Gallagher Evelius & Jones LLP
Park Charles
218 North Charles Street, Suite 400
Baltimore, Maryland  21201

except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed.

8.6.           Right to Perform.  If the Borrowers shall fail to make any
payment or to otherwise perform, observe or comply with the provisions of this
Agreement or any of the other Financing Documents, then and in each such case,
the Bank may (but shall be under no obligation whatsoever to) without notice to
or demand upon the Borrowers remedy any such failure by advancing funds or
taking such action as it deems appropriate for the account and at the expense of
the Borrowers.  The advance of any such funds or the taking of any such action
by the Bank shall not be deemed or construed to cure an Event of Default or
waive performance by the Borrowers of any provisions of this Agreement.  The
Borrowers shall jointly and severally pay to the Bank on demand, together with
interest thereon from the date advanced or incurred until paid in full at a per
annum rate of interest equal at all times to the Default Rate, any such funds so
advanced by the Bank and any costs and expenses advanced or incurred by or on
behalf of the Bank in taking any such action, all of which shall be a part of
the Obligations hereunder.

8.7.           Costs and Expenses.  The Borrowers shall jointly and severally
pay to the Bank on demand all fees, recordation and other taxes, costs and
expenses of whatever kind and nature, including attorney’s fees and
disbursements, which the Bank may incur or which are payable in connection with
the closing and the administration of the Loans, including, without limitation,
the preparation of this Agreement and the other Financing Documents, the
recording or filing of any and all of the Financing Documents and obtaining lien
searches and title insurance policies.  All such fees, costs, recordation and
other taxes shall be a part of the Obligations hereunder.

8.8.           Joint and Several Liability, Etc.  The Borrowers shall be jointly
and severally liable for the payment and performance of the Obligations.  The
Bank may, without notice to or consent of any of the Borrowers and with or
without consideration, release, discharge, compromise or settle with, waive,
grant indulgences to, proceed against or otherwise deal with, any of the
Borrowers and any Collateral given by such Borrower without in any way
affecting, limiting, modifying, discharging or releasing any of the obligations
and liabilities under this Agreement or the other Financing Documents of the
other Borrowers.  Each of the Borrowers consents and agrees that (a) the Bank
shall be under no obligation to marshall any assets in favor of such Borrower or
against or in payment of any or all of the obligations and liabilities of such
Borrower under this Agreement or any of the other Financing Documents, (b) any
rights such Borrower may have against the other Borrowers for contribution,
exoneration from payment or otherwise, in respect of any amounts paid by such
Borrower pursuant to any of the Financing Documents or which continue to be
owing pursuant to any of the Financing Documents, shall be postponed until the
Obligations have been indefeasibly paid in full and no commitments therefor are
outstanding and (c) the Bank may enforce and collect the obligations and
liabilities of such Borrower hereunder or under the other Financing Documents
irrespective of any attempt, pursuit, enforcement or exhaustion of any rights
and remedies the Bank may at any time have to collect the obligations and
liabilities hereunder or under the other Financing Documents of the other
Borrowers.

 
29

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8.9.           Consent to Jurisdiction.  Each of the Borrowers irrevocably (a)
consents and submits to the jurisdiction and venue of any state or federal court
sitting in the State of Maryland over any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Financing Documents, (b)
waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum, and (c)
consents to the service of process in any such suit, action or proceeding in any
such court by the mailing of copies of such process to it by certified or
registered mail at its address set forth herein for the purpose of giving
notice.

8.10.           Waiver of Jury Trial.  Each of the Borrowers and the Bank hereby
voluntarily and intentionally waive any right they may have to a trial by jury
in any action, proceeding or litigation directly or indirectly arising out of,
under or in connection with the Loans, this Agreement or any of the other
Financing Documents.

8.11.           Assignment and Participations.  The Bank may, without notice to
or consent of the Borrowers, sell, assign or transfer to any person or persons,
all or any part of the Obligations or all or any part of the Financing Documents
and each such person or persons shall have the right to enforce the provisions
of the Financing Documents and any of the Obligations as fully as the Bank,
provided that the Bank shall continue to have the unimpaired right to enforce
the provisions of the Financing Documents and any of the Obligations as to so
much of the Financing Documents and/or the Obligations that it has not sold,
assigned or transferred.  Additionally, the Bank may sell or grant to any other
person or persons participations in all or any part of the Obligations or all or
any part of the Financing Documents.  In connection with and prior to and after
any such sale, transfer, assignment or participation, the Bank may disclose and
furnish to any prospective or actual purchaser, transferee, assignee or
participant, any and all reports, financial statements and other information
obtained by the Bank at any time and from time to time in connection with the
Obligations, any of the Financing Documents or otherwise.  Each of the Borrowers
will fully cooperate with the Bank in connection with any such assignment and
will execute and deliver such consents and acceptances to any such assignment,
amendments to this Agreement in order to effect any such assignment (including,
without limitation, the appointment of the Bank as agent for itself and all
assignees) and new or replacement promissory notes for any of the Revolving
Credit Note in conjunction with any such assignment; provided, that the joint
and several indebtedness, obligations and liabilities of the Borrowers under
this Agreement and the other Financing Documents will not be increased by reason
of any such assignment.

 
30

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8.12.           Certain Definitional Provisions.  The term “person” as used in
this Agreement means and includes any natural person, individual, company,
corporation, partnership, joint venture, unincorporated association, government
or political subdivision or agency thereof, or any other entity of whatever
nature.  All terms defined in this Agreement shall have such defined meanings
when used in any of the other Financing Documents.  Accounting terms used in
this Agreement shall have the respective meanings given to them under generally
accepted accounting principles in effect from time to time in the United States
of America.  The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.  As used herein, the singular
number shall include the plural, the plural, the singular and the use of the
masculine, feminine or neuter gender shall include all genders, as the context
may require.  Unless otherwise defined herein, all terms used herein which are
defined by the Maryland Uniform Commercial Code shall have the same meanings as
assigned to them by the Maryland Uniform Commercial Code unless and to the
extent varied by this Agreement.

8.13.           Severability.  The invalidity, illegality or unenforceability of
any provision of this Agreement shall not affect the validity, legality or
enforceability of any of the other provisions of this Agreement which shall
remain effective.

8.14.           Survival.  All representations, warranties and covenants
contained among the provisions of this Agreement shall survive the execution and
delivery of this Agreement and all other Financing Documents.

8.15.           Binding Effect.  This Agreement and all other Financing
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Bank and their respective personal representatives, successors and assigns,
except that neither of the Borrowers shall have the right to assign its rights
hereunder or any interest herein without the prior written consent of the Bank.

8.16.           Applicable Law and Time of Essence.  This Agreement and the
rights and obligations of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of Maryland, both in
interpretation and performance.  Time is of the essence in connection with all
obligations of either or both of the Borrowers hereunder and under any of the
other Financing Documents.

8.17.           Duplicate Originals and Counterparts.  This Agreement may be
executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.

8.18.           Headings.  Section and subsection headings in this Agreement are
included herein for convenience of reference only, shall not constitute a part
of this Agreement for any other purpose and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.

 
31

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IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this
Agreement under their respective seals as of the day and year first written
above.

WITNESS:
GSE SYSTEMS, INC.
 
 
   
By:
 
(SEAL)
   
Name: James Eberle
Title: Chief Executive Officer
   
 
 
GSE ENVISION INC.
 
 
   
By:
 
(SEAL)
   
Name: Jeffery G. Hough
Title: Senior Vice President
   
 
 
GSE POWER SYSTEMS, INC.
 
 
   
By:
 
(SEAL)
   
Name: James Eberle
Title: Chief Executive Officer
   
 
 
SUSQUEHANNA BANK
 
 
   
By:
 
(SEAL)
   
Name: Robert P. Whelen, Jr.
Title: Senior Vice President
 

 
32

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Schedule 3.1

Subsidiaries

GSE Services Company LLC Payroll
Formed:  12/27/96
GSE Power Systems AB (Sweden)
Incorporated:  7/1/90
GSE Systems Engineering (Beijing) Co. Ltd. (China)
Acquired:  10/1/02
Emirates Simulation Academy LLC
10% GSE Owned
Formed:  11/8/05
GSE Systems Ltd. (UK)
Formed: 6/28/07
GSE-UNIS Simulation Technology Co., Ltd. (China)
49% GSE Owned Joint Venture
Formed:  7/28/10
GSE EnVision, Inc.
Acquired: 1/4/10
GSE Power Systems, Inc.
Acquired: 4/13/94
TAS Engineering Consultants Ltd. (UK)
Acquired:  4/26/10
Teesside Automation Services Ltd.
Acquired:  4/26/10
EnVision Systems (India) Pvt. Ltd.
Acquired:  1/4/10

 
33

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Schedule 3.8

Borrower’s Names, Business Locations, Etc.

I.           Locations of Collateral

1.           1332 Londontown Blvd, Sykesville, MD 21784; and

2.           2 Shunpyke Road, Madison, NJ 07940

II.           Equipment as Fixtures

None.

III.           Record owner of Real Estate

1.           1332 Londontown Road, LLC

2.           SARG, LLC

 
34

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Schedule 5.5

Outstanding Obligations to Bank of America

Standby Letters of Credit  11/14/11
                   
All Standby Letters of Credit have been issued by Bank of America
                 
All are currently 100% cash collateralized
                                                     
Correspondent
       
 Expiration
 
 Amount
 
Type
 
Project
Bank
Customer
LOC #
Date
 
 US$
Euro
CNY
Total
                           
Advance Payment
SD01
Bank of America, Beijing
Shandong Nuclear Power Co., Ltd.
68058629
12/30/2011
 
 $    513,300.00
     
Bid
 
Tender
Bank of America, Beijing
Shanghai International Tendering Co., Ltd
68060662
1/15/2012
 
         88,888.00
     
Advance Payment
SD01
Bank of America, Beijing
Shandong Nuclear Power Co., Ltd.
68058631
3/15/2012
     
￥989,800.00
 
Bid
 
Tender
None
National Nuclear Energy Generating Company (Energoatom)
68061841
3/4/2012
 
         12,000.00
     
Warranty
 
KG04
Commerzbank AG
 KSG Kraftwerke Simulator
   
68062193
9/11/2012
 
          178,750.00
     
Performance
KG05
Commerzbank AG
 KSG Kraftwerke Simulator
3115395
9/13/2012
 
       136,500.00
     
Performance
SE01
None
Slovenské elektrárne a.s.
3099255
10/31/2012
(1)
 
€ 1,980,514.00
   
Performance
SD01
Bank of America, Beijing
Shandong Nuclear Power Co., Ltd.
   
68058627
9/25/2014
     
        989,800.00
 
Performance
SD01
Bank of America, Beijing
Shandong Nuclear Power Co., Ltd.
68058628
2/28/2017
 
       513,300.00
                                                     
 $   1,442,738.00
€ 1,980,514.00
￥1,979,600.00
                                               
US$
 $   1,442,738.00
 $       2,776,190
 $          312,748
 $       4,531,675.93
                           

 
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Schedule 5.7

Permitted Loans and Investments

1.           Capital contributions to GSE-Unis

2.           Earn-out payments to the previous shareholders of GSE EnVision Inc.

3.           Earn-out payments to the previous shareholders of TAS Holdings

4.           Open market purchases of common stock of GSE Systems, Inc.