Exhibit 10.1 Collateral Agreement ManTech GSE


     

     

     Exhibit
      10.1

    


    COLLATERAL
      AGREEMENT

    


    This
      Collateral Agreement (hereinafter the "Agreement") is dated and effective as
      of
      July 9, 2003, and is by and between GSE Systems, Inc. ("GSE") and ManTech
      International Corporation ("ManTech"). GSE and ManTech may hereinafter be
      collectively referred to as the "Parties."

    


    WITNESSETH:

    


    WHEREAS,
      GSE recently received the award of a contract for the Laguna Verde Simulator
      (hereinafter the "Laguna Verde Contract"); and

    


    WHEREAS,
      the Laguna Verde Contract requires the issuance of payment and performance
      bonds
      (hereinafter the "Bonds") by a Mexican surety company; and

    


    WHEREAS,
      GSE has identified a Mexican surety company that is willing to issue such Bonds;
      and

    


    WHEREAS,
      such Mexican surety company, Fianzas Guardiana Inbursa, S.A. (hereinafter
      "FGI"), is willing to issue such Bonds only upon the receipt of 100% collateral
      in the form of letters of credit ("Letters of Credit"); and

    


    WHEREAS,
      ManTech is willing to issue such Letters of Credit to FGI on GSE's behalf based
      on the terms and conditions contained herein.

    


    NOW
      THEREFORE, in consideration of the mutual representations, warranties, covenants
      and agreements contained herein, and other valuable consideration, the receipt
      and sufficiency of which are hereby acknowledged, the Parties do hereby agree
      as
      follows:

    


    1.
      Letters
      of Credit.
      ManTech
      agrees to issue one or more Letters of Credit to FGI for (i) an Advance Payment
      Bond in the amount of $2,060,739.89 with an issuance date of June 20, 2003
      for a
      period of 30 months or when the Advance Payment Bond is released, whichever
      is
      later, and (ii) a Performance Bond in the amount of $1,317,602.80 with an
      issuance date of June 20, 2003 for a period of 42 months or when the Performance
      Bond is otherwise released, whichever is later.

    


    2.
      Consideration
      to ManTech.
      As
      consideration for ManTech's issuance of the Letters of Credit, GSE will (i)
      issue ManTech 100,000 warrants at the market price of GSE's common stock as
      of
      the close of business on July 8, 2003, based on an agreement reasonably
      acceptable to ManTech, and (ii) pay ManTech a fee equal to 7% per annum on
      the
      total amount of the then-existing value of the Letters of Credit payable on
      a
      quarterly basis. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    3.
      Prepayment Allowance.
      Subject
      to approval by GSE's lender, GSE may prepay the amounts under the Letters of
      Credit at any time, in whole or in part, without penalty or premium, which
      shall
      result in a cancellation thereof, in whole or in part. Any such prepayment
      shall
      first be applied to any accrued and unpaid interest, if any, and thereafter
      to
      the principal outstanding under the Letters of Credit.

    


    4.
      GSE
      Representations. GSE
      represents and warrants to ManTech that:

    


    
      	
              (A)
                

            	
              It
                is a corporation duly organized, validly existing and in good standing
                under the laws of the State of
                Delaware;

            


    

    


    
      	
              (8)
                

            	
              It
                is duly qualified, in good standing and authorized to do business
                in each
                jurisdiction where because of the nature of its activities or properties
                such qualification is required by applicable laws or the failure
                to be so
                qualified could have a material adverse effect on
                GSE;

            


    

    


    
      	
              (C)
                

            	
              It
                has the power to enter into this Agreement, to deliver this Agreement
                and
                to perform its obligations under this Agreement and has taken all
                necessary action to authorize such execution, delivery and
                performance;

            


    

    


    
      	
              (D)
                

            	
              The
                execution, delivery and performance of this Agreement by GSE does
                not and
                will not violate or conflict with any law applicable to it, any provision
                of its organizational documents, any order or judgment of any court
                or
                other agency of government applicable to it or any of its assets
                or any
                contractual restriction binding on or affecting it or any of its
                assets;

            


    

    


    
      	
              (E)
                

            	
              All
                governmental and other consents, authorizations, approvals, licenses
                and
                orders that are required to have been obtained by it with respect
                to this
                Agreement and the transactions contemplated herein have been obtained
                and
                are in full force and effect and all conditions of any such consents,
                authorizations, approvals, licenses and orders have been complied
                with;

            


    

    


    
      	
              (F)
                

            	
              Its
                obligations under this Agreement constitute its legal, valid and
                binding
                obligations, enforceable in accordance with their respective terms
                [subject to applicable bankruptcy, reorganization, insolvency, moratorium
                or similar laws affecting creditors' rights generally and subject,
                as to
                enforceability, to equitable principles of general application (regardless
                of whether enforcement is sought in a proceeding in equity or at
                law)];
                and

            


    

    


    
      	
              (G)
                

            	
              There
                is not pending or threatened against it any action, suit or proceeding
                at
                law or in equity or before any court, tribunal, governmental body,
                agency
                or official or any arbitrator that is likely to (1) affect the legality,
                validity or enforceability against it of this Agreement or its ability
                to
                perform

            


    

    



    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    its
      obligations hereunder, or (2) materially affect its operations, business,
      property or assets or financial or other condition.

    


    
      	
              (H)
                

            	
              GSE's
                lender has consented to the transactions contemplated herein and
                GSE shall
                further covenant that its current business loan and security agreement
                shall not be modified or amended to limit or prohibit the performance
                of
                any of GSE's obligations hereunder in the
                future.

            


    

    


    5.
      Reporting
      Requirements.

    


    
      	
              (A)
                

            	
              Upon
                request, but in no event more frequently than once in any three
                consecutive calendar month period, GSE shall provide ManTech with
                a
                detailed written status report on the Laguna Verde Contract. This
                report
                shall include, but is not limited to, major project activities for
                the
                applicable period, tracking and accomplishment of technical and payment
                milestones, and open issues with the customer and
                subcontractors.

            


    

    


    
      	
              (B)
                

            	
              On
                a monthly basis, GSE shall provide Mr. John A. Moore, Jr., ManTech
                Executive Vice President, with a detailed status and activities report
                on
                the Laguna Verde Contract. This report, which may be in writing or
                by oral
                briefing at Mr. Moore's option, shall be sufficient to allow Mr.
                Moore to
                understand the major project activities, accomplishment of technical
                and
                payment milestones, and open issues with the customer and
                subcontractors.

            


    

    


    6.
      Miscellaneous.

    


    
      	
              (A)
                

            	
              This
                Agreement shall not be transferable or assignable by GSE without
                ManTech's
                prior written consent.

            


    

    


    
      	
              (B)
                

            	
              ManTech
                may freely assign or transfer all or any portion of its interest
                in this
                Agreement without the consent of GSE and in the event ManTech collaterally
                assigns or transfers its right, title and interest in and to this
                Agreement to its lender(s) under a current business loan and security
                agreement, as such agreement may be further amended, modified or
                replaced
                from time to time, GSE agrees to execute and deliver such documents,
                instruments and agreements as such lender(s) may reasonably require
                in
                connection therewith.

            


    

    


    
      	
              (C)
                

            	
              If
                any provisions of this Agreement are held to be invalid, void or
                unenforceable, the remaining provisions hereof shall not be affected
                or
                impaired, and such remaining provisions shall remain in full force
                and
                effect.

            


    

    


    
      	
              (D)
                

            	
              This
                Agreement shall be governed and construed in accordance with the
                laws of
                the State of Maryland, excluding its conflict of laws
                principles.

            


    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    
      	
              (E)
                

            	
              This
                Agreement may be executed in one or more counterparts, each of which
                shall
                for all purposes be deemed an original and all of which shall constitute
                the same instrument.

            


    

    


    
      	
              (F)
                

            	
              GSE
                agrees to indemnify and hold harmless ManTech from any and all costs,
                damages, claims, actions, demands, losses and expenses (including
                the
                value of the Letters of Credit drawn upon, reasonable attorneys'
                fees,
                collection fees or enforcement fees) in the event the Letters of
                Credit
                are drawn upon for any reason. Any payments due hereunder shall be
                paid to
                ManTech no later than two (2) business days following GSE's receipt
                of
                written notice specifying the amounts
                due.

            


    

    


    
      	
              (G)
                

            	
              The
                Parties acknowledge that this Agreement and GSE's obligations hereunder
                are subject to a current business loan and security agreement between
                GSE
                and its lender, as such agreement may be further amended, modified
                or
                replaced from time to time.

            


    

    


    
      	
              (H)
                

            	
              This
                Agreement is the exclusive and complete understanding and agreement
                between the Parties regarding the subject matter hereof and supersedes
                all
                prior negotiations, agreements, understandings or representations
                between
                the Parties regarding the subject matter hereof, whether oral or
                written.
                This Agreement may be amended only by a written amendment signed
                by the
                Parties hereto.

            


    

    


    IN
      WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
      the
      date first above written.

    


    GSE
      Systems, Inc.

    


    


    By:
      _/s/ Chin-our Jerry Jen_________

    Name:
      Chin-our Jerry Jen

    Title:
      President & COO

    


    ManTech
      International Corporation

    


    


    By:
      _/s/ Ronald R. Spoehl_________

    Name:
      Ronald R. Spoehel

    Title:
      Executive Vice President & CFO

     

     

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