exh10-2.htm


    Exhibit
10.2

    FIRST
AMENDMENT TO LOAN AGREEMENT

     

    (Ex-Im
Bank-Guaranteed Transaction Specific Revolving Line of Credit)

     

               
This First Amendment to Loan Agreement (this “Amendment”)
dated as of May 5, 2009 is between Bank
of America, N.A. (the “Bank”)
and GSE
Systems, Inc.,
a Delaware corporation (“GSE”),
and GSE
Power Systems, Inc., a Delaware corporation (“Power”), as
co-borrowers
(GSE and Power are referred to collectively as, the “Borrower”).


     

    BACKGROUND

     

    A. The Borrower and the
Bank entered into that certain Loan Agreement (Ex-Im Bank-Guaranteed Transaction
Specific Revolving Line of Credit) dated as of March 28, 2008 ( the “Original
Loan Agreement”). 

     

    B. The Borrower has
requested that the Bank modify the revolving line of credit established by the
Original Loan Agreement, and the Bank has agreed to do so, upon the terms and
conditions set forth in this Amendment. 

     

    C. The purpose of the
modification is to amend certain definitions of the following financial
covenants effective as of March 31, 2009:  (i) Debt Service Coverage Ratio
and (ii) Funded Debt to EBITDA Ratio. 

     

    AGREEMENT

     

               
Now, therefore, in consideration of the premises and the mutual agreements
contained herein, the parties hereby amend the Original Loan Agreement on the
following terms and conditions:

     

    SECTION
1.    DEFINITIONS.  All capitalized terms used herein that are not
defined herein shall have the meanings ascribed to them in the Original Loan
Agreement, unless the context specifically requires
otherwise.

     

    SECTION
2.    AMENDMENTS TO ORIGINAL LOAN AGREEMENT.  The following
amendments are hereby made to the Original Loan Agreement:

     

               
(A)       Section 9.5 of the Original Loan
Agreement is hereby amended and restated in its entirety effective as of March
31, 2009 to read as follows:

     

    “9.5    
Debt Service Coverage
Ratio.

     

               
To maintain, with respect to GSE on a consolidated basis, a Debt Service
Coverage Ratio of at least 1.25:1.00.

     

    “Debt
Service Coverage Ratio” means the ratio of Cash Flow to Debt Service.
This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period.  

     

    “Cash
Flow” is defined as (a) net income, after income tax, (b) less income or
plus loss from discontinued operations and extraordinary items, (c) plus
depreciation, depletion, amortization, (d) plus interest expense on all
obligations, (e) plus non-cash charges related to foreign exchange, (f) minus
dividends, withdrawals, and other distributions, and (g) minus any unfinanced
capital expenditures.  

     

    
      
         

      

      
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    “Debt
Service” is defined as all regularly scheduled principal and interest
payments, during the twelve-month period ending with the last day of the
calculation period, on all indebtedness.”

     

               
(B)       Section 9.6 of the Original Loan
Agreement is hereby amended and restated in its entirety effective as of March
31, 2009 to read as follows:

     

    “9.6    
Funded Debt to EBITDA Ratio.

     

    To maintain, with respect
to GSE on a consolidated basis, a ratio of Funded Debt to EBITDA not exceeding
2.50:1.00.

    “Funded
Debt” means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long term debt, and
including the stated amount of any Letter of Credit (other than a Letter of
Credit that is cash-secured)
issued for the account of the Borrower or any reimbursement obligation
owing by the Borrower with respect to any Letter of Credit (other than a Letter
of Credit that is cash-secured).

    “EBITDA”
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, and amortization.  

    This ratio will be
calculated at the end of each reporting period for which the Bank requires
financial statements, using the results of the twelve-month period ending with
that reporting period.”

     

               
SECTION 3.    CONDITIONS
PRECEDENT. This Amendment shall become effective upon (a) the execution and
delivery of (i) this Amendment by the Borrower and the Bank and (ii) the
Ratification of Guaranty of even date herewith, by MSHI, Inc. and GSE Process
Solutions, Inc. in favor of the Bank; (b) the Bank’s receipt from the Borrower
of the reasonable fees and expenses of the Bank's counsel; and (c) all
proceedings required to be taken by the Borrower in connection with the
transactions contemplated by this Amendment having been taken in form and
substance satisfactory to the Bank and its counsel, and the Bank having received
all such counterpart originals of this Amendment executed by all parties listed
on the signature page(s) and originals, certified or other copies of such other
documents as the Bank may reasonably request.

     

    SECTION
4.    REAFFIRMATION.  Except as modified hereby, all of the terms,
covenants and conditions of the Original Loan Agreement, are ratified,
reaffirmed and confirmed and shall continue in full force and effect as therein
written.  In addition, all representations and warranties made in the
Original Loan Agreement are true and correct in all material respects as of the
date hereof and are hereby reaffirmed.  Nothing hereunder is intended, or
shall be construed, to be a novation or an accord and satisfaction of any other
obligation or liability of the Borrower to the Bank.  The Borrower and any
Guarantor do not now have, nor had at any prior time, any defenses (including,
without limitation, the defense of usury), claims, counterclaims, cross-actions
or equities or rights of rescission, setoff, abatement or diminution, with
respect to the Original Loan Agreement or any other document executed in
connection therewith, or the enforcement of Bank's rights thereunder, and the
Borrower and any Guarantor further waive and release any and all such defenses,
claims, counterclaims, cross-actions and equities, and rights of rescission,
set-off, abatement and diminution with respect thereto.

     

     

    
      
         

      

      
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    SECTION
5.    REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrower
represents and warrants to, and agrees with the Bank, that this Amendment (and
any other document executed by the Borrower in connection with this Amendment)
has been duly authorized by all necessary company action on the part of the
Borrower, has been duly executed by a duly authorized officer (or officers) of
the Borrower and constitutes the valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with the terms hereof (and
thereof).  The Borrower hereby certifies that the representations and
warranties contained in the Original Loan Agreement continue to be true and
correct and that no event of default and no event has occurred that with notice,
lapse of time or both would become an event of default.   The Borrower
further certifies that the financial statements supplied to the Bank truly and
completely disclose the Borrower's financial condition as of the date of the
statement, and there has been no material adverse change in the Borrower's
financial condition except as disclosed in such financial
statements.

     

    SECTION
6.    BINDING EFFECT.  This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns.

     

    SECTION
7.    COUNTERPARTS.  This Amendment may be executed in any number
of counterparts and by the different parties on separate counterparts. 
Each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement. 


     

    SECTION
8.    AMENDMENT AND WAIVER.  No amendment of this Amendment, and no
waiver of any one or more of the provisions hereof shall be effective unless set
forth in a writing and signed by the parties hereto.

     

    SECTION
9.    GOVERNING LAW.  This Amendment and the rights and obligations
of the Borrower and the Bank shall be governed by and construed according to the
laws of the State of Maryland without regard to conflicts of laws principles and
the laws of the United States as the same may be applicable.

     

    SECTION 10.  SEVERABILITY.  Any provision of this Amendment that is held
to be inoperative, unenforceable, voidable or invalid in any jurisdiction shall,
as to that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in that or any other jurisdiction, and to
this end the provisions of this Amendment are declared to be
severable.

     

    [Signatures
on next page]

     

     

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed and delivered by
their proper and duly authorized officers on the date first above written, intending
to create an instrument executed under seal.

     

     

    
      	
              The
      “Bank”:

               

               

               

              BANK
      OF AMERICA, N.A.

               

               

               

              By:                                                      
      

               

                       
      Kevin Mahon

               

              Senior Vice
      President

               

            	
              The
      “Borrower”:

               

               

               

              GSE
      SYSTEMS, INC.

               

               

               

              By:                                                      
      (Seal)

               

                         
      Jeffery Hough

               

               Chief
      Financial Officer

               

               

            
	
               

               

            	
              GSE
      POWER SYSTEMS, INC.

               

               

               

               

              By:                              
                             
      (Seal)

               

                         
      Jeffery Hough

               

               Chief
      Financial Officer

               

               

            


    

     

     

    Federal law requires all
financial institutions to obtain, verify and record information that identifies
each person who opens an account or obtains a loan.  The Bank will ask for
the Borrower’s legal name, address, tax ID number or social security number and
other identifying information.  The Bank may also ask for additional
information or documentation or take other actions reasonably necessary to
verify the identity of the Borrower, guarantors or other related
persons.

     

     

     

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