Document:

exh10_5.htm

    Exhibit 10.5

      

          

      BORROWER:                               GSE
Systems, Inc.

                         GSE Power Systems,
Inc.

      

      GUARANTOR:          MSHI, Inc.

       

      

      

      CONTINUING AND UNCONDITIONAL
GUARANTY

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

      

      To:           Bank
of America, N.A.

      

      

      1.  The
Guaranty.  For valuable consideration, the undersigned
("Guarantor") hereby unconditionally guarantees and promises to pay promptly to
Bank of America, N.A., its subsidiaries and affiliates (collectively, "Bank"),
or order, in lawful money of the United States, any and all Indebtedness of GSE
Systems, Inc. and GSE Power Systems, Inc. (collectively, the "Borrower") to Bank
when due, whether at stated maturity, upon acceleration or otherwise, and at all
times thereafter.  The liability of Guarantor under this Guaranty is
not limited as to the principal amount of the Indebtedness guaranteed and
includes, without limitation, liability for all interest, fees, indemnities
(including, without limitation, hazardous waste indemnities), and other costs
and expenses relating to or arising out of the Indebtedness and for all Swap
Obligations now or hereafter owing from Borrower to Bank.  The
liability of Guarantor is continuing and relates to any Indebtedness, including
that arising under successive transactions which shall either continue the
Indebtedness or from time to time renew it after it has been
satisfied.  This Guaranty is cumulative and does not supersede any
other outstanding guaranties, and the liability of Guarantor under this Guaranty
is exclusive of Guarantor's liability under any other guaranties signed by
Guarantor.  If multiple individuals or entities sign this Guaranty,
their obligations under this Guaranty shall be joint and several.  If
Guarantor is a subsidiary or affiliate of Borrower, Guarantor's liability
hereunder shall not exceed at any one time the largest amount during the period
commencing with Guarantor's execution of this Guaranty and thereafter that would
not render Guarantor's obligations hereunder subject to avoidance under Section
548 of the Bankruptcy Code (Title 11, United States Code) or any comparable
provisions of any applicable state law.

       

      2.  Definitions.

       

      
        	
                 
      

              	
                (a)  "Bank
      Agreements" shall mean all agreements, documents, and instruments
      evidencing any of the Indebtedness, including but not limited to all loan
      agreements between Borrower and Bank and promissory notes from Borrower in
      favor of Bank, and all deeds of trust, mortgages, security agreements, and
      other agreements, documents, and instruments executed by Borrower in
      connection with the Indebtedness, all as now in effect and as hereafter
      amended, restated, renewed, or
superseded.

              

      

       

      
        	
                 
      

              	
                (b)  "Borrower"
      shall mean the individual or the entity named in Paragraph 1 of this
      Guaranty and, if more than one, then any one or more of
    them.

              

      

      

      
        	
                 
      

              	
                (c)  "Guarantor"
      shall mean the individual or the entity signing this Guaranty and, if more
      than one, then any one or more of
them.

              

      

      

      (d)  "Indebtedness"
shall mean, with respect to that certain Ex-Im Bank-Guaranteed Transaction
Specific Revolving Line of Credit and related agreements, documents and
instruments entered into between Bank and Borrower as of even date herewith, as
now in effect and as amended, renewed or restated in the future, any and all
debts, liabilities, and obligations of Borrower to Bank, now or hereafter
existing, whether voluntary or involuntary and however arising, whether direct
or indirect or acquired by Bank by assignment, succession, or otherwise, whether
due or not due, absolute or contingent, liquidated or unliquidated, determined
or undetermined, held or to be held by Bank for its own account or as agent for
another or others, whether Borrower may be liable individually or jointly with
others, whether recovery upon such debts, liabilities, and obligations may be or
hereafter become barred by any statute of limitations, and whether such debts,
liabilities, and obligations may be or hereafter become otherwise
unenforceable.  Indebtedness includes, without limitation, any and all
Swap Obligations and any and all obligations of Borrower to Bank for reasonable
attorneys' fees and all other costs and expenses incurred by Bank in the
collection or enforcement of any debts, liabilities, and obligations of Borrower
to Bank.

      

      
        
          
          

        

        
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                (e)  “Swap
      Obligations” shall mean all obligations of Borrower arising under any
      interest rate, credit, commodity or equity swap, cap, floor, collar,
      forward foreign exchange transaction, currency swap, cross currency rate
      swap, currency option, securities puts, calls, collars, options or
      forwards or any combination of, or option with respect to, these or
      similar transactions now or hereafter entered into between Borrower and
      Bank.

              

      

      

      3.  Obligations
Independent.  The obligations hereunder are independent of the
obligations of Borrower or any other guarantor, and a separate action or actions
may be brought and prosecuted against Guarantor whether action is brought
against Borrower or any other guarantor or whether Borrower or any other
guarantor be joined in any such action or actions.  Anyone executing
this Guaranty shall be bound by its terms without regard to execution by anyone
else.

      

      4.  Rights of
Bank.  Guarantor authorizes Bank, without notice or demand and
without affecting its liability hereunder, from time to time to:

      

      
        	
                 
      

              	
                (a)  renew,
      compromise, extend, accelerate, or otherwise change the time for payment,
      or otherwise change the terms, of the Indebtedness or any part thereof,
      including increase or decrease of the rate of interest thereon, or
      otherwise change the terms of any Bank
  Agreements;

              

      

      

      
        	
                 
      

              	
                (b)  receive
      and hold security for the payment of this Guaranty or any Indebtedness and
      exchange, enforce, waive, release, fail to perfect, sell, or otherwise
      dispose of any such security;

              

      

      

      
        	
                 
      

              	
                (c)  apply
      such security and direct the order or manner of sale thereof as Bank in
      its discretion may determine;

              

      

      

      
        	
                 
      

              	
                (d)  release
      or substitute any Guarantor or any one or more of any endorsers or other
      guarantors of any of the Indebtedness;
and

              

      

      

      
        	
                 
      

              	
                (e)  permit
      the Indebtedness to exceed Guarantor's liability under this Guaranty, and
      Guarantor agrees that any amounts received by Bank from any source other
      than Guarantor shall be deemed to be applied first to any portion of the
      Indebtedness not guaranteed by
Guarantor.

              

      

      

      5.  Guaranty to be
Absolute.  Guarantor agrees that until the Indebtedness has
been paid in full and any commitments of Bank or facilities provided by Bank
with respect to the Indebtedness have been terminated, Guarantor shall not be
released by or because of the taking, or failure to take, any action that might
in any manner or to any extent vary the risks of Guarantor under this Guaranty
or that, but for this paragraph, might discharge or otherwise reduce, limit, or
modify Guarantor's obligations under this Guaranty.  Guarantor waives
and surrenders any defense to any liability under this Guaranty based upon any
such action, including but not limited to any action of Bank described in the
immediately preceding paragraph of this Guaranty.  It is the express
intent of Guarantor that Guarantor’s obligations under this Guaranty are and
shall be absolute and unconditional.

      

      6.  Guarantor's Waivers of
Certain Rights and Certain Defenses.  Guarantor
waives:

      

      (a)  any
right to require Bank to proceed against Borrower, proceed against or exhaust
any security for the Indebtedness, or pursue any other remedy in Bank's power
whatsoever;

      

      
        	
                 
      

              	
                (b)  any
      defense arising by reason of any disability or other defense of Borrower,
      or the cessation from any cause whatsoever of the liability of
      Borrower;

              

      

      

      
        	
                 
      

              	
                (c)  any
      defense based on any claim that Guarantor's obligations exceed or are more
      burdensome than those of Borrower;
and

              

      

      

      
        
          
          

        

        
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                (d)  the
      benefit of any statute of limitations affecting Guarantor's liability
      hereunder.

              

      

      

      No
provision or waiver in this Guaranty shall be construed as limiting the
generality of any other waiver contained in this Guaranty.

      

      7.  Waiver of
Subrogation.  Until the Indebtedness has been paid in full and
any commitments of Bank or facilities provided by Bank with respect to the
Indebtedness have been terminated, even though the Indebtedness may be in excess
of Guarantor’s liability hereunder, Guarantor waives to the extent permitted by
applicable law any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory, or otherwise) including, without
limitation, any claim or right of subrogation under the Bankruptcy Code (Title
11, United States Code) or any successor statute, arising from the existence or
performance of this Guaranty, and Guarantor waives to the extent permitted by
applicable law any right to enforce any remedy that Bank now has or may
hereafter have against Borrower, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Bank.

      

      8.  Waiver of
Notices.  Guarantor waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, notices of intent to accelerate, notices of acceleration, notices of
any suit or any other action against Borrower or any other person, any other
notices to any party liable on any Bank Agreement (including Guarantor), notices
of acceptance of this Guaranty, notices of the existence, creation, or incurring
of new or additional Indebtedness to which this Guaranty applies or any other
Indebtedness of Borrower to Bank, and notices of any fact that might increase
Guarantor’s risk.

      

      9.  Security.  To
secure all of Guarantor's obligations hereunder, Guarantor assigns and grants to
Bank a security interest in all moneys, securities, and other property of
Guarantor now or hereafter in the possession of Bank, all deposit accounts of
Guarantor maintained with Bank, and all proceeds thereof.  Upon
default or breach of any of Guarantor's obligations to Bank, Bank may apply any
deposit account to reduce the Indebtedness, and may foreclose any collateral as
provided in the Uniform Commercial Code and in any security agreements between
Bank and Guarantor.

      

      10.  Subordination.  Any
obligations of Borrower to Guarantor, now or hereafter existing, including but
not limited to any obligations to Guarantor as subrogee of Bank or resulting
from Guarantor's performance under this Guaranty, are hereby subordinated to the
Indebtedness.  In addition to Guarantor's waiver of any right of
subrogation as set forth in this Guaranty with respect to any obligations of
Borrower to Guarantor as subrogee of Bank, Guarantor agrees that, if Bank so
requests, Guarantor shall not demand, take, or receive from Borrower, by setoff
or in any other manner, payment of any other obligations of Borrower to
Guarantor until the Indebtedness has been paid in full and any commitments of
Bank or facilities provided by Bank with respect to the Indebtedness have been
terminated.  If any payments are received by Guarantor in violation of
such waiver or agreement, such payments shall be received by Guarantor as
trustee for Bank and shall be paid over to Bank on account of the Indebtedness,
but without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty.  Any security interest, lien,
or other encumbrance that Guarantor may now or hereafter have on any property of
Borrower is hereby subordinated to any security interest, lien, or other
encumbrance that Bank may have on any such property.

      

      11.  Revocation of
Guaranty.

      

      
        	
                 
      

              	
                (a)  This
      Guaranty may be revoked at any time by Guarantor in respect to future
      transactions, unless there is a continuing consideration as to such
      transactions that Guarantor does not renounce.  Such revocation
      shall be effective upon actual receipt by Bank, at the address shown below
      or at such other address as may have been provided to Guarantor by Bank,
      of written notice of revocation.  Revocation shall not affect
      any of Guarantor's obligations or Bank's rights with respect to
      transactions committed or entered into prior to Bank's receipt of such
      notice, regardless of whether or not the Indebtedness related to such
      transactions, before or after revocation, has been incurred, renewed,
      compromised, extended, accelerated, or otherwise changed as to any of its
      terms, including time for payment or increase or decrease of the rate of
      interest thereon, and regardless of any other act or omission of Bank
      authorized hereunder.  Revocation by Guarantor shall not affect any
      obligations of any other guarantor.

              

      

      

      
        
          
          

        

        
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                (b)  In
      the event of the death of a Guarantor, the liability of the estate of the
      deceased Guarantor shall continue in full force and effect as to (i) the
      Indebtedness existing at the date of death, and any renewals or extensions
      thereof, and (ii) loans or advances made to or for the account of Borrower
      after the date of the death of the deceased Guarantor pursuant to a
      commitment made by Bank to Borrower prior to the date of such
      death.  As to all surviving Guarantors, this Guaranty shall
      continue in full force and effect after the death of a Guarantor, not only
      as to the Indebtedness existing at that time, but also as to the
      Indebtedness thereafter incurred by Borrower to
  Bank.

              

      

      

      
        	
                 
      

              	
                (c)  Guarantor
      acknowledges and agrees that this Guaranty may be revoked only in
      accordance with the foregoing provisions of this paragraph and shall not
      be revoked simply as a result of any change in name, location, or
      composition or structure of Borrower, the dissolution of Borrower, or the
      termination, increase, decrease, or other change of any personnel or
      owners of Borrower.

              

      

      

      12.  Reinstatement of
Guaranty.  If this Guaranty is revoked, returned, or canceled,
and subsequently any payment or transfer of any interest in property by Borrower
to Bank is rescinded or must be returned by Bank to Borrower, this Guaranty
shall be reinstated with respect to any such payment or transfer, regardless of
any such prior revocation, return, or cancellation.

      

      13.  Stay of
Acceleration.  In the event that acceleration of the time for
payment of any of the Indebtedness is stayed upon the insolvency, bankruptcy, or
reorganization of Borrower or otherwise, all such Indebtedness guaranteed by
Guarantor shall nonetheless be payable by Guarantor immediately if requested by
Bank.

      

      14.  No Setoff or Deductions;
Taxes.

      

      
        	
                 
      

              	
                (a)  Guarantor
      represents and warrants that it is organized and resident in the United
      States of America.  All payments by Guarantor hereunder shall be
      paid in full, without setoff or counterclaim or any deduction or
      withholding whatsoever, including, without limitation, for any and all
      present and future taxes.  If Guarantor must make a payment
      under this Guaranty, Guarantor represents and warrants that it will make
      the payment from one of its U.S. resident offices to Bank so that no
      withholding tax is imposed on the payment.  Notwithstanding the
      foregoing, if Guarantor makes a payment under this Guaranty to which
      withholding tax applies or if any taxes (other than taxes on net income
      (i) imposed by the country or any subdivision of the country in which
      Bank's principal office or actual lending office is located and (ii)
      measured by the United States taxable income Bank would have received if
      all payments under or in respect of this Guaranty were exempt from taxes
      levied by Guarantor's country) are at any time imposed on any payments
      under or in respect of this Guaranty including, but not limited to,
      payments made pursuant to this paragraph, Guarantor shall pay all such
      taxes to the relevant authority in accordance with applicable law such
      that Bank receives the sum it would have received had no such deduction or
      withholding been made (or, if Guarantor cannot legally comply with the
      foregoing, Guarantor shall pay to Bank such additional amounts as will
      result in Bank receiving the sum it would have received had no such
      deduction or withholding been made).  Further, Guarantor shall
      also pay to Bank, on demand, all additional amounts that Bank specifies as
      necessary to preserve the after-tax yield Bank would have received if such
      taxes had not been imposed.

              

      

      

      
        	
                 
      

              	
                (b)  Guarantor
      shall promptly provide Bank with an original receipt or certified copy
      issued by the relevant authority evidencing the payment of any such amount
      required to be deducted or
withheld.

              

      

      

      15.  Information Relating to
Borrower.  Guarantor acknowledges and agrees that it has made
such independent examination, review, and investigation of the Bank Agreements
as Guarantor deems necessary and appropriate, including, without limitation, any
covenants pertaining to Guarantor contained therein, and shall have sole
responsibility to obtain from Borrower any information required by Guarantor
about any modifications thereto. Guarantor further acknowledges and agrees
that it shall have the sole responsibility for, and has adequate means of,
obtaining from Borrower such information concerning Borrower's financial
condition or business operations as Guarantor may require, and that Bank has no
duty, and Guarantor is not relying on Bank, at any time to disclose to Guarantor
any information relating to the business operations or financial condition of
Borrower.

      

      
        
          
          

        

        
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      16.  Borrower's
Authorization.  Where Borrower is a corporation, partnership,
or limited liability company, it is not necessary for Bank to inquire into the
powers of Borrower or of the officers, directors, partners, members, managers,
or agents acting or purporting to act on its behalf, and any Indebtedness made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder, subject to any limitations on Guarantor's liability set
forth herein.

      

      17.  Guarantor Information;
Reporting to Credit Bureaus.  Guarantor authorizes Bank to
verify or check any information given by Guarantor to Bank, check Guarantor’s
credit references, verify employment, and obtain credit
reports.  Guarantor agrees that Bank shall have the right at all times
to disclose and report to credit reporting agencies and credit rating agencies
such information pertaining to the Indebtedness and/or Guarantor as is
consistent with Bank's policies and practices from time to time in
effect.  Guarantor acknowledges and agrees that the authorizations
provided in this paragraph apply to any individual general partner of Guarantor
and to Guarantor’s spouse and any such general partner’s spouse if Guarantor or
such general partner is married and lives in a community property
state.

      

      18.  Change of
Status.  Any Guarantor that is a business entity shall not
enter into any consolidation, merger, or other combination unless Guarantor is
the surviving business entity.  Further, Guarantor shall not change
its legal structure unless (a) Guarantor obtains the prior written consent of
Bank and (b) all Guarantor's obligations under this Guaranty are assumed by the
new business entity.

      

      19.  Remedies.  If
Guarantor fails to fulfill its duty to pay all Indebtedness guaranteed
hereunder, Bank shall have all of the remedies of a creditor and, to the extent
applicable, of a secured party, under all applicable law.  Without
limiting the foregoing
to the extent permitted by law, Bank may, at its option and without
notice or demand:

      

      (a)  declare
any Indebtedness due and payable at once;

      

      
        	
                 
      

              	
                (b)  take
      possession of any collateral pledged by Borrower or Guarantor, wherever
      located, and sell, resell, assign, transfer, and deliver all or any part
      of the collateral at any public or private sale or otherwise dispose of
      any or all of the collateral in its then condition, for cash or on credit
      or for future delivery, and in connection therewith Bank may impose
      reasonable conditions upon any such sale.  Further, Bank, unless
      prohibited by law the provisions of which cannot be waived, may purchase
      all or any part of the collateral to be sold, free from and discharged of
      all trusts, claims, rights of redemption and equities of Borrower or
      Guarantor whatsoever.  Guarantor acknowledges and agrees that
      the sale of any collateral through any nationally recognized
      broker-dealer, investment banker, or any other method common in the
      securities industry shall be deemed a commercially reasonable sale under
      the Uniform Commercial Code or any other equivalent statute or federal
      law, and expressly waives notice thereof except as provided herein;
      and

              

      

      

      
        	
                 
      

              	
                (c)  set
      off against any or all liabilities of Guarantor all money owed by Bank or
      any of its agents or affiliates in any capacity to Guarantor, whether or
      not due, and also set off against all other liabilities of Guarantor to
      Bank all money owed by Bank in any capacity to Guarantor.  If
      exercised by Bank, Bank shall be deemed to have exercised such right of
      setoff and to have made a charge against any such money immediately upon
      the occurrence of such default although made or entered on the books
      subsequent thereto.

              

      

      

      20.  Notices.  All
notices required under this Guaranty shall be personally delivered or sent by
first class mail, postage prepaid, or by overnight courier, to the addresses on
the signature page of this Guaranty, or sent by facsimile to the fax numbers
listed on the signature page, or to such other addresses as Bank and Guarantor
may specify from time to time in writing.  Notices sent by (a) first
class mail shall be deemed delivered on the earlier of actual receipt or on the
fourth business day after deposit in the U.S. mail, postage prepaid,
(b) overnight courier shall be deemed delivered on the next business day,
and (c) telecopy shall be deemed delivered when transmitted.

      

      
        
          
          

        

        
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      21.  Successors and
Assigns.  This Guaranty (a) binds Guarantor and Guarantor's
executors, administrators, successors, and assigns, provided that Guarantor may
not assign its rights or obligations under this Guaranty without the prior
written consent of Bank, and (b) inures to the benefit of Bank and Bank's
indorsees, successors, and assigns.  Bank may, without notice to
Guarantor and without affecting Guarantor's obligations hereunder, sell, assign,
grant participations in, or otherwise transfer to any other person, firm, or
corporation the Indebtedness and this Guaranty, in whole or in
part.  Guarantor agrees that Bank may disclose to any assignee or
purchaser, or any prospective assignee or purchaser, of all or part of the
Indebtedness any and all information in Bank's possession concerning Guarantor,
this Guaranty, and any security for this Guaranty.

      

      22.  Amendments, Waivers, and
Severability.  No provision of this Guaranty may be amended or
waived except in writing.  No failure by Bank to exercise, and no
delay in exercising, any of its rights, remedies, or powers shall operate as a
waiver thereof, and no single or partial exercise of any such right, remedy, or
power shall preclude any other or further exercise thereof or the exercise of
any other right, remedy, or power.  The unenforceability or invalidity
of any provision of this Guaranty shall not affect the enforceability or
validity of any other provision of this Guaranty.

      

      23.  Costs and
Expenses.  Guarantor agrees to pay all reasonable attorneys'
fees, including allocated costs of Bank's in-house counsel to the extent
permitted by applicable law, and all other costs and expenses that may be
incurred by Bank (a) in the enforcement of this Guaranty or (b) in the
preservation, protection, or enforcement of any rights of Bank in any case
commenced by or against Guarantor or Borrower under the Bankruptcy Code (Title
11, United States Code) or any similar or successor statute.

      

      24.  Governing Law and
Jurisdiction.  This Guaranty shall be governed by and construed
and enforced in accordance with the law of the State of Maryland.  To
the extent that Bank has greater rights or remedies under federal law, whether
as a national bank or otherwise, this paragraph shall not be deemed to deprive
Bank of such rights and remedies as may be available under federal
law.

      

      25.  Consent
to Jurisdiction.  TO INDUCE BANK TO ACCEPT THIS
GUARANTY, GUARANTOR IRREVOCABLY AGREES THAT, SUBJECT TO BANK’S SOLE AND ABSOLUTE
ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO
THIS GUARANTY WILL BE LITIGATED IN STATE OR FEDERAL COURTS HAVING SITUS IN
BALTIMORE, MARYLAND.  GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN BALTIMORE, MARYLAND
WAIVES PERSONAL SERVICE OF PROCESS UPON GUARANTOR, AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO GUARANTOR AT THE ADDRESS STATED ON THE
SIGNATURE PAGE HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT.

      

      26.  Waiver of Jury
Trial.  GUARANTOR AND BANK EACH WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS
GUARANTY OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
WITH THIS GUARANTY OR (B) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE.  GUARANTOR AGREES THAT IT
WILL NOT ASSERT ANY CLAIM AGAINST BANK OR ANY OTHER PERSON INDEMNIFIED UNDER
THIS GUARANTY ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES.

      

      
        
          
          

        

        
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      27.  CONFESSION OF
JUDGMENT.  GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO
PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES OR ANY CLERK OF ANY
COURT OF RECORD TO APPEAR ON BEHALF OF GUARANTOR IN ANY COURT IN ONE OR MORE
PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OR OTHER COURT OFFICIAL, AND TO CONFESS
JUDGMENT AGAINST GUARANTOR IN FAVOR OF THE HOLDER OF THIS GUARANTY IN THE FULL
AMOUNT DUE ON THIS GUARANTY (INCLUDING PRINCIPAL, ACCRUED INTEREST AND ANY AND
ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%)
OF THE TOTAL AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR
OPPORTUNITY OF GUARANTOR FOR PRIOR HEARING.  GUARANTOR AGREES AND
CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE CIRCUIT COURT OF ANY
COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.  GUARANTOR WAIVES
THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE
LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR PRIVILEGE OF EXEMPTION,
HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER
RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED
PROCEEDINGS ON A JUDGMENT.  THE AUTHORITY AND POWER TO APPEAR FOR AND
ENTER JUDGMENT AGAINST GUARANTOR 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 HOLDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.

      

      28.  FINAL
AGREEMENT.  BY SIGNING THIS DOCUMENT
EACH PARTY REPRESENTS AND AGREES THAT:  (A) THIS DOCUMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF,
(B) THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN
OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS
SUCH COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE OF TERMS AND
CONDITIONS EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY
EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
UNDERSTANDINGS OF THE PARTIES.

      

      

      The parties executed this agreement as
of March 28, 2008, intending to create an instrument executed under
seal.

      

      

      MSHI, Inc.

      

      

      By:           /s/ Jeffery
Hough                                                      
(Seal)

      Jeffery Hough

      Chief Financial Officer

      

      

      Address
for notices to
Bank:                                                                             Address
for notices to Guarantor:

      100 South
Charles Street, 2nd
Floor                                                                  7133
Rutherford Road, Suite 200

      Baltimore,
Maryland
21201                                                                                  Baltimore,
Maryland 21244

      Facsimile:_____________________                                                               Facsimile:_____________________

      

      

       
7exh10_6.htm

    Exhibit 10.6

      Bank
of America

       

      to

       

      GSE
Systems, Inc.

      and

      GSE
Power Systems, Inc.

       

      

       

      $1,500,000
Domestic Revolving Line of Credit

      

       

      March
28, 2008

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      TABLE
OF CONTENTS

       

      Section Page

       

       

      
        	
                 
      

              	
                 

              

      

      
        	
                DEFINITIONS

              	
                 

              	 
      
	
                1.1

              	
                Defined Terms.

              	
                1

              
	
                2.

              	
                DOMESTIC
      REVOLVING LINE OF CREDIT AMOUNT AND TERMS

              	
                5

              
	
                2.1

              	
                Line of Credit Amount.

              	
                5

              
	
                2.2

              	
                Availability Period.

              	
                5

              
	
                2.3

              	
                Repayment Terms.

              	
                6

              
	
                2.4

              	
                Interest Rate.

              	
                6

              
	
                2.5

              	
                Letters of Credit.

              	
                6

              
	
                2.6

              	
                Unconditional Promise to Pay.

              	
                7

              
	
                3.

              	
                [INTENTIONALLY
      OMITTED]

              	
                7

              
	
                4.

              	
                FEES
      AND EXPENSES

              	
                7

              
	
                4.1

              	
                Fees.

              	
                7

              
	
                4.2

              	
                Expenses.

              	
                8

              
	
                4.3

              	
                Reimbursement Costs.

              	
                8

              
	
                5.

              	
                COLLATERAL

              	
                8

              
	
                5.1

              	
                Personal Property.

              	
                8

              
	
                6.

              	
                DISBURSEMENTS,
      PAYMENTS AND COSTS

              	
                8

              
	
                6.1

              	
                Disbursements and Payments.

              	
                9

              
	
                6.2

              	
                Requests for Credit; Equal Access by all
      Borrowers.

              	
                9

              
	
                6.3

              	
                Telephone and Telefax
      Authorization.

              	
                9

              
	
                6.4

              	
                Direct Debit.

              	
                10

              
	
                6.5

              	
                Banking Days.

              	
                10

              
	
                6.6

              	
                Interest Calculation.

              	
                10

              
	
                6.7

              	
                Default Rate.

              	
                10

              
	
                6.8

              	
                Taxes.

              	
                10

              
	
                6.9

              	
                Payments in Kind.

              	
                11

              
	
                7.

              	
                CONDITIONS

              	
                11

              
	
                7.1

              	
                Authorizations.

              	
                11

              
	
                7.2

              	
                Governing Documents.

              	
                11

              
	
                7.3

              	
                Security Agreements.

              	
                11

              
	
                7.4

              	
                Guaranties.

              	
                11

              
	
                7.5

              	
                Perfection and Evidence of
      Priority.

              	
                11

              
	
                7.6

              	
                Payment of Fees.

              	
                11

              
	
                7.7

              	
                Repayment of Other Credit
      Agreement.

              	
                11

              
	
                7.8

              	
                Good Standing.

              	
                11

              
	
                7.9

              	
                [Intentionally Omitted].

              	
                12

              
	
                7.10

              	
                Landlord Agreement.

              	
                12

              
	
                7.11

              	
                Insurance.

              	
                12

              
	
                7.12

              	
                Conditions to Each Extension of Credit under the
      Domestic Line.

              	
                12

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      
        	
                7.13

              	
                Post-Closing Conditions.

              	
                12

              
	
                8.

              	
                REPRESENTATIONS
      AND WARRANTIES

              	
                12

              
	
                8.1

              	
                Formation, Etc.

              	
                12

              
	
                8.2

              	
                Authorization.

              	
                13

              
	
                8.3

              	
                Enforceable Agreement.

              	
                13

              
	
                8.4

              	
                Good Standing.

              	
                13

              
	
                8.5

              	
                No Conflicts.

              	
                13

              
	
                8.6

              	
                Financial Information.

              	
                13

              
	
                8.7

              	
                Lawsuits.

              	
                13

              
	
                8.8

              	
                Collateral.

              	
                13

              
	
                8.9

              	
                Permits, Franchises.

              	
                13

              
	
                8.10

              	
                Other Obligations.

              	
                13

              
	
                8.11

              	
                Tax Matters.

              	
                14

              
	
                8.12

              	
                No Event of Default.

              	
                14

              
	
                8.13

              	
                Insurance.

              	
                14

              
	
                8.14

              	
                ERISA Plans.

              	
                14

              
	
                8.15

              	
                Location of Borrower.

              	
                15

              
	
                8.16

              	
                Merchantable Inventory; Compliance with
      FLSA.

              	
                15

              
	
                8.17

              	
                Trading With the Enemy.

              	
                15

              
	
                8.18

              	
                Controlling Affiliate List.

              	
                15

              
	
                8.19

              	
                Location of Inventory.

              	
                15

              
	
                9.

              	
                COVENANTS

              	
                15

              
	
                9.1

              	
                Use of Proceeds.

              	
                15

              
	
                9.2

              	
                [INTENTIONALLY OMITTED.].

              	
                15

              
	
                9.3

              	
                Financial Information.

              	
                15

              
	
                9.4

              	
                Tangible Net Worth.

              	
                17

              
	
                9.5

              	
                Debt Service Coverage
Ratio.

              	
                17

              
	
                9.6

              	
                Funded Debt to EBITDA
Ratio.

              	
                17

              
	
                9.7

              	
                Bank as Principal
    Depository.

              	
                17

              
	
                9.8

              	
                Other Debts.

              	
                18

              
	
                9.9

              	
                Other Liens.

              	
                18

              
	
                9.10

              	
                Maintenance of Assets.

              	
                18

              
	
                9.11

              	
                Investments.

              	
                19

              
	
                9.12

              	
                Loans.

              	
                19

              
	
                9.13

              	
                Change of Management.

              	
                19

              
	
                9.14

              	
                Controlling Affiliate.

              	
                19

              
	
                9.15

              	
                Additional Negative
    Covenants.

              	
                19

              
	
                9.16

              	
                Notices to Bank.

              	
                20

              
	
                9.17

              	
                Insurance.

              	
                20

              
	
                9.18

              	
                Compliance with Laws.

              	
                21

              
	
                9.19

              	
                ERISA Plans.

              	
                21

              
	
                9.20

              	
                Books and Records.

              	
                21

              
	
                9.21

              	
                Audits.

              	
                21

              
	
                9.22

              	
                Perfection of Liens.

              	
                21

              
	
                9.23

              	
                Cooperation.

              	
                21

              
	
                9.24

              	
                Mandatory Prepayment; Early
      Termination.

              	
                21

              
	
                9.25

              	
                Field Exams.

              	
                21

              
	
                9.26

              	
                Continued Security
Interest.

              	
                22

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      
        	
                9.27

              	
                Terms of Sale of Items.

              	
                22

              
	
                10.

              	
                HAZARDOUS
      SUBSTANCES

              	
                22

              
	
                10.1

              	
                Indemnity Regarding Hazardous
      Substances.

              	
                22

              
	
                10.2

              	
                Compliance Regarding Hazardous
      Substances.

              	
                22

              
	
                10.3

              	
                Notices Regarding Hazardous
      Substances.

              	
                22

              
	
                10.4

              	
                Site Visits, Observations and
      Testing.

              	
                22

              
	
                10.5

              	
                Definition of Hazardous
      Substances.

              	
                23

              
	
                10.6

              	
                Continuing Obligation.

              	
                23

              
	
                11.

              	
                DEFAULT
      AND REMEDIES

              	
                23

              
	
                11.1

              	
                Failure to Pay.

              	
                23

              
	
                11.2

              	
                Other Bank Agreements.

              	
                23

              
	
                11.3

              	
                Cross-default.

              	
                23

              
	
                11.4

              	
                False Information.

              	
                23

              
	
                11.5

              	
                Bankruptcy.

              	
                23

              
	
                11.6

              	
                Receivers.

              	
                24

              
	
                11.7

              	
                Lien Priority.

              	
                24

              
	
                11.8

              	
                Lawsuits.

              	
                24

              
	
                11.9

              	
                Judgments.

              	
                24

              
	
                11.10

              	
                Material Adverse Change.

              	
                24

              
	
                11.11

              	
                Government Action.

              	
                24

              
	
                11.12

              	
                Default under Related
      Documents.

              	
                24

              
	
                11.13

              	
                ERISA Plans.

              	
                24

              
	
                11.14

              	
                Other Breach Under
    Agreement.

              	
                25

              
	
                12.

              	
                ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

              	
                25

              
	
                12.1

              	
                GAAP.

              	
                25

              
	
                12.2

              	
                Disposition of Schedules and
      Reports.

              	
                25

              
	
                12.3

              	
                Returned Merchandise.

              	
                25

              
	
                12.4

              	
                [INTENTIONALLY OMITTED.]

              	
                25

              
	
                12.5

              	
                Verification of
Receivables.

              	
                25

              
	
                12.6

              	
                Waiver of Confidentiality.

              	
                25

              
	
                12.7

              	
                Indemnification.

              	
                25

              
	
                12.8

              	
                Governing Law.

              	
                26

              
	
                12.9

              	
                Consent to Jurisdiction.

              	
                26

              
	
                12.10

              	
                Waiver of Jury Trial.

              	
                26

              
	
                12.11

              	
                CONFESSION OF JUDGMENT.

              	
                26

              
	
                12.12

              	
                Successors and Assigns.

              	
                27

              
	
                12.13

              	
                Severability; Waivers.

              	
                27

              
	
                12.14

              	
                Attorneys’ Fees.

              	
                27

              
	
                12.15

              	
                Joint and Several
Liability.

              	
                27

              
	
                12.16

              	
                One Agreement.

              	
                28

              
	
                12.17

              	
                Notices.

              	
                29

              
	
                12.18

              	
                Headings.

              	
                29

              
	
                12.19

              	
                Counterparts.

              	
                29

              
	
                12.20

              	
                Borrower Information; Reporting to Credit
      Bureaus.

              	
                29

              
	
                12.21

              	
                Document Receipt Cut-Off
    Date.

              	
                29

              
	
                12.22

              	
                USA Patriot Act Notice.

              	
                29

              

      

      

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      Table of Exhibits to Loan
Agreement

      A           -           Permitted
Liens

      B           -           Controlling
Affiliate List

      C           -           Inventory
Locations

      D           -           Domestic
Borrowing Base Certificate

      

      
        
          
             

             

          

           

        

        
          iv

          
            

          

        

        
           

        

      

      LOAN
AGREEMENT

      (Domestic
Revolving Line of Credit)

       

       

      This Loan
Agreement (this “Agreement”) dated as of March
28, 2008, is by and between Bank of America, N.A., a national banking
association (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 sometimes referred to collectively as the “Borrowers” and individually as
the “Borrower”).

       

      
        	
                1.  

              	
                DEFINITIONS

              

      

       

      1.1 Defined
Terms.

       

      In
addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this
Agreement:

       

      "Acceptable
Inventory" means inventory and Unbilled Costs which satisfy the following
requirements:

       

      (a)           The
inventory is owned by the Borrower free of any title defects or any liens or
interests of others except the security interest in favor of the
Bank.

       

      (b)           The
inventory is located at locations which the Borrower has disclosed to the Bank
and which are acceptable to the Bank.  If the inventory is covered by
a negotiable document of title (such as a warehouse receipt) that document must
be delivered to the Bank.  Inventory which is in transit is not
acceptable.

       

       (c)           The
inventory is held for sale in the ordinary course of the Borrower's business and
is of good and merchantable quality.  Display items, samples, and
packing and shipping materials are not acceptable.  Inventory which is
obsolete, unsalable, damaged, defective, used, discontinued or slow-moving, or
which has been returned by the buyer, is not acceptable.

       

      (d)           The
inventory is covered by insurance as required in the "Covenants" Article of this
Agreement.

       

      (e)           The
inventory has not been manufactured to the specifications of a particular
account debtor.

       

      (f)           The
inventory is not subject to any licensing agreements which would prohibit or
restrict in any way the ability of the Bank to sell the inventory to third
parties.

       

      (g)           The
inventory has been produced in compliance with the requirements of the U.S. Fair
Labor Standards Act (29 U.S.C. §§201 et seq.).

       

      (h)           The
inventory is not placed on consignment.

       

      (i)           The
inventory is located at or in the possession of a processor or Bailee, or
located on premises leased or subleased to the Borrower, or on premises subject
to a mortgage in favor of a person other than the Bank, unless such processor or
Bailee or mortgagee or the lessor or sublessor of such premises, as the case may
be, has executed and delivered all documentation which the Bank shall require,
if any, in its sole discretion to evidence the subordination or other limitation
or extinguishment of such person’s rights with respect to such inventory and the
Bank’s right to gain access thereto.

       

      (j)           The
inventory is subject to a third party's trademark or other proprietary right, if
and only if, the Bank determines in its discretion that the Bank could sell such
inventory on satisfactory terms in the case of an event of default
hereunder.

       

      (k)           The
Unbilled Costs, if billed pursuant to the terms and conditions of the applicable
documented purchase order or contract, would qualify as an Acceptable
Receivable.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

       

      (l)           The
inventory and Unbilled Costs are not included in the Export-Related Borrowing
Base under the Ex-Im Line.

       

      (l)           The
inventory and Unbilled Costs are otherwise acceptable to the Bank.

       

      “Acceptable Inventory
Value”  means, at the date of determination thereof, the lowest
of (i) the cost of Acceptable Inventory as determined in accordance with GAAP,
or (ii) the market value of Acceptable Inventory as determined in accordance
with GAAP or (iii) the lower of the appraised market value or orderly
liquidation value of the Acceptable Inventory, if the Bank has other loans and
financial accommodations to a Borrower for which it conducts (or contracts for
the performance of) such an appraised or orderly liquidation value.

       

      "Acceptable Receivable" means
an account receivable which satisfies the following requirements:

       

      (a)           The
account has resulted from the sale of goods or the performance of services by
the Borrower in the ordinary course of the Borrower's business and without any
further obligation on the part of the Borrower to service, repair, or maintain
any such goods sold other than pursuant to any applicable warranty.

       

      (b)           There
are no conditions which must be satisfied before the Borrower is entitled to
receive payment of the account.  Accounts arising from COD sales,
consignments or guaranteed sales are not acceptable.

       

      (c)           The
debtor upon the account does not claim any defense to payment of the account,
whether well founded or otherwise.

       

       (d)           The
account balance does not include the amount of any counterclaims or offsets
which have been or may be asserted against the Borrower by the account debtor
(including offsets for any "contra accounts" owed by the Borrower to the account
debtor for goods purchased by the Borrower or for services performed for the
Borrower).  To the extent any counterclaims, offsets, or contra
accounts exist in favor of the account debtor, such amounts shall be deducted
from the account balance.

       

       (e)           The
account represents a genuine obligation of the account debtor for goods sold to
and accepted by the account debtor or for services performed for and accepted by
the debtor.  To the extent any credit balances exist in favor of the
account debtor, such credit balances shall be deducted from the account
balance.

       

      (f)           The
account balance does not include the amount of any finance or service charges
payable by the account debtor.  To the extent any finance charges or
service charges are included, such amounts shall be deducted from the account
balance.

       

      (g)           The
Borrower has sent an invoice to the account debtor in the amount of the account
and the account is due and payable in U.S. Dollars, unless otherwise agreed to
in writing by the Bank.

       

      (h)           The
Borrower is not prohibited by the laws of the state where the account debtor is
located from bringing an action in the courts of that state to enforce the
account debtor's obligation to pay the account.  The Borrower has
taken all appropriate actions to ensure access to the courts of the state where
the account debtor is located, including, where necessary, the filing of a
Notice of Business Activities Report or other similar filing with the applicable
state agency or the qualification by the Borrower as a foreign corporation
authorized to transact business in such state.

       

      (i)           The
account is owned by the Borrower free of any title defects or any liens or
interests of others except the security interest in favor of the
Bank.

       

      (j)           The
debtor upon the account is not any of the following:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (i)           An
employee, affiliate, parent or subsidiary of the Borrower, or an entity which
has common officers or directors with the Borrower.

       

      (ii)           The
U.S. government or any agency or department of the U.S. government unless the
Bank agrees in writing to accept the obligation, the Borrower complies with the
procedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C. §15) with
respect to the obligation, and the underlying contract expressly provides that
neither the U.S. government nor any agency or department thereof shall have the
right of set-off against the Borrower.

       

      (iii)           Any
state, county, city, town or municipality.

       

      (iv)           Any
person or entity located in a foreign country.

       

       (k)           The
account is not in default.  An account will be considered in default
if any of the following occur:

       

      (i)           the
account is not paid within 90 days from its invoice date or 60 days from its due
date, whichever occurs first;

       

      (ii)           the
debtor obligated upon the account suspends business, makes a general assignment
for the benefit of creditors, or fails to pay its debts generally as they come
due; or

       

      (iii)           any
petition is filed by or against the account debtor obligated upon the account
under any bankruptcy law or any other law or laws for the relief of
debtors.

       

      (l)           The
account is not the obligation of an account debtor who is in default (as defined
above) on 50% or more of the accounts upon which such debtor is
obligated.

       

      (m)           The
account does not arise from the sale of goods which remain in the Borrower's
possession or under the Borrower's control, except an account where the
applicable documented purchase order or contract specifies a timing for
invoicing the account debtor prior to shipment of the goods or performance of
services and the Borrower has sent an invoice to the account debtor in the
amount of the account pursuant to the terms and conditions of the applicable
documented purchase order or contract.

       

      (n)           The
account is not evidenced by a promissory note or chattel paper, nor is the
account debtor obligated to the Borrower under any other obligation which is
evidenced by a promissory note.

       

      (o)           The
account is not included in the Export-Related Borrowing Base under the Ex-Im
Line.

      

      (p)           The
account is otherwise acceptable to the Bank.

      

      “Acceptable Receivable Value” means at the
date of determination thereof, the aggregate face amount of Acceptable
Receivables less taxes, discounts, credits, allowances and retainages, except to
the extent otherwise permitted in writing by the Bank.

       

      “Accounts Receivable Aging
Report”  means a report detailing all Acceptable Receivable,
and the applicable terms for the relevant time period.

       

      “Bailee” means a third party to
whom is delivered Acceptable Inventory of the Borrower for some particular use,
on mere deposit or upon a contract, express or implied, that after the purpose
has been fulfilled such inventory shall be redelivered to the person who
delivered it, or otherwise dealt with according to instructions or kept until
reclaimed by the person who delivered it, as the case may be, including, but not
limited to, a carrier, common carrier, warehouseman or processor.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      “Controlling Affiliate” means
each person, company or other entity owning or otherwise controlling more than
20% of the voting share capital (or equivalent right of ownership) of the
Borrower, or having the power to direct the Borrower's policies or management
whether by contract or otherwise.

       

      “Disbursement” means,
collectively, (a) an advance of a working capital loan from the Bank to the
Borrower under the Domestic Line, and (b) an advance to fund a drawing under a
letter of credit issued or caused to be issued by the Bank for the account of
the Borrower under the Domestic Line.

       

      “Domestic Borrowing Base” means
the sum of:

       

      (a)           80%
of the balance due on Acceptable Receivable Value; and

       

      (b)           30%
of the value of Acceptable Inventory Value.

       

      After
calculating the Domestic Borrowing Base as provided above, the Bank may deduct
such reserves as the Bank may establish from time to time in its reasonable
credit judgment, including, without limitation, reserves for letters of credit,
rent at leased locations subject to statutory or contractual landlord’s liens,
inventory shrinkage, dilution, customs charges, warehousemen’s or Bailees’
charges,  and the amount of estimated maximum exposure, as determined
by the Bank from time to time, under any interest rate contracts which the
Borrower enters into with the Bank (including interest rate swaps, caps, floors,
options thereon, combinations thereof, or similar contracts).  The
Domestic Borrowing Base is also subject to certain specific reserves and
limitations set forth in Section 2.1 of this
Agreement.

       

      “Ex-Im Bank” means the
Export-Import Bank of the United States.

       

      “Ex-Im Line” means that certain
Ex-Im Bank-Guaranteed Transaction Specific Revolving Line of Credit under that
certain Loan Agreement (Ex-Im Bank-Guaranteed Transaction Specific
Revolving Line of Credit) entered into as of even date herewith, between the
Borrower and the Bank, as now in effect or as hereafter renewed, amended or
restated.

       

       “Final Disbursement Date” means
March 28, 2010, or, if such date is not a Business Day, the next succeeding
banking day; provided, however, with respect to Letter of Credit Obligations
outstanding on the Final Disbursement Date, the Final Disbursement Date with
respect to an advance to fund a drawing under such letter of credit shall be the
date of the advance, which in no event shall be later than the expiry date of
such letter of credit.

       

      “GAAP” means the generally
accepted accounting principles issued in the United States.

       

      “Guarantor” means each
Controlling Affiliate and any other person, company or other entity that
executes a Guaranty.

       

      “Guaranty” means a guaranty in
favor of the Bank, in form and substance satisfactory to the Bank.

       

      “Letter of Credit Obligations”
means all undrawn amounts of outstanding obligations incurred by the Bank,
whether direct or indirect, contingent or otherwise, due or not due, in
connection with the issuance or guarantee by the Bank of letters of credit under
the Domestic Line.

       

      “Loan Documents” means this
Agreement, each promissory note (if any) executed in connection herewith, the
Security Agreement, each stock pledge agreement, each Guaranty and all other
documents or instruments executed and delivered by the parties hereto or
thereto, as the case may be.

       

      “Maximum Amount” means the
amount of One Million Five Hundred
Thousand U.S. Dollars ($1,500,000.00).

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      “Permitted Liens” means (a)
Liens for taxes, assessments or other governmental charges or levies not
delinquent, or, being contested in good faith by appropriate proceedings and
with respect to which proper reserves have been taken by Borrower; provided,
that, the Lien shall have no effect on the priority of the Liens in favor of the
Bank or the value of the assets in which the Bank has such a Lien and a stay of
enforcement of any such Lien shall be in effect; (b) deposits or pledges
securing obligations under worker’s compensation, unemployment insurance, social
security or public liability laws or similar legislation; (c) deposits or
pledges securing bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds and other
obligation of like nature arising in the ordinary course of the Borrower’s
business; (d) judgment Liens that have been stayed or bonded; (e) mechanics’,
workers’, materialmen’s or other like Liens arising in the ordinary course of
Borrower’s business with respect to obligations which are not due; (f) Liens
placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided, that, any such Lien shall not encumber any other
property of Borrower; (g) security interests being terminated concurrently with
the execution of the Loan Documents; and (h) such other Liens set forth on
Exhibit A attached hereto.

       

      "Unbilled Costs" means, at the
time of determination thereof, the amount of costs incurred by the Borrower in
connection with a documented purchase order or contract evidencing the buyer’s
agreement to purchase the underlying goods which costs are in excess of costs
billed by the Borrower to the buyer pursuant to such purchase order or
contract.  For purposes of calculating the amount of costs billed by
the Borrower to the Buyer pursuant to a documented purchase order or contract,
where the amount billed by the Borrower to the Buyer includes both a cost and a
profit component, the amount of costs billed shall not include the profit
component.

       

      

       

      
        	
                2.  

              	
                DOMESTIC
      REVOLVING LINE OF CREDIT AMOUNT AND
TERMS

              

      

       

      2.1 Line of Credit
Amount. 

       

      (a)           During
the availability period described below, the Bank will provide a revolving line
of credit to the Borrower (the “Domestic
Line”).  The Domestic Line is a revolving line of credit
providing for cash advances and letters of
credit.  During the availability period, the Borrower may repay
principal amounts and reborrow them.

       

      (b)           The
amount of the Domestic Line (the “Domestic Line Commitment”) is
equal to the lesser of (i) the Maximum Amount or (ii) the Domestic Borrowing
Base.  The Borrower agrees not to permit the principal balance
outstanding to exceed the Domestic Line Commitment.  If the Borrower
exceeds this limit, the Borrower will immediately pay the excess to the Bank
upon the Bank's demand.

       

      (c)           In
addition to the limitation set forth in Section 2.1(b), the following limitations will also apply to
the Domestic Line:

       

      (i)           The
aggregate amount of outstanding Disbursements under the Domestic Line plus the aggregate
amount of Letter of Credit Obligations may not exceed at any one time the
Maximum Amount.

       

      (ii)           The
aggregate amount of outstanding Disbursements under the Domestic Line plus 100% of the
aggregate amount of Letter of Credit Obligations may not exceed at any one time
the Domestic Borrowing Base.

       

      2.2 Availability
Period.

       

      The
Domestic Line is available between the date of this Agreement and the Final
Disbursement Date, or such earlier date as the availability may terminate as
provided in this Agreement (the “Domestic Line Expiration
Date”); provided, however, in the event
that the Final Disbursement Date is extended with respect to a letter of credit
outstanding as of the Final Disbursement Date (as provided in the definition of
“Final Disbursement
Date” above), the Domestic Line Expiration Date with respect to such
letter of credit may be extended by written notice from the Bank until on or
before the first banking day after such extended Final Disbursement
Date.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      2.3 Repayment
Terms.

       

      (a)           The
Borrower will pay interest on April 28, 2008, and then on the same day of each
month thereafter until payment in full of any principal outstanding under the
Domestic Line.

       

      (b)           The
Borrower will repay in full any principal, interest or other charges outstanding
under this facility no later than the Domestic Line Expiration
Date.

       

      (c)           The
Borrower may prepay the loan in full or in part at any time.  The
prepayment will be applied to the most remote payment of principal due under
this Agreement.

       

      (d)           If
at any time and for any reason the Domestic Borrowing Base is less than the
aggregate outstanding amount of Disbursements, the Borrower shall, upon the
Bank's election and demand, (i) furnish additional Collateral to the Bank of a
type and in an amount satisfactory to the Bank or (ii) pay to the Bank an amount
equal to the difference between the aggregate outstanding amount of
Disbursements and the Domestic Borrowing Base.

       

      (e)           Payments
under this Section 2.3 may be applied to the
obligations of the Borrower to the Bank in the order and manner as the Bank in
its discretion may determine.  Payments to be applied to outstanding
letters of credit and drafts accepted under letters of credit may, at the Bank's
option, be used to prepay, or held as cash collateral to secure, the Borrower's
obligations to the Bank with respect thereto.

       

      2.4 Interest
Rate.

       

      (a)           The
interest rate is a rate per year equal to the BBA LIBOR Daily Floating Rate plus
two and one-fourth (2.25) percentage point(s).

       

      (b)           The
BBA LIBOR Daily Floating Rate is a fluctuating rate of interest equal to the
rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by
Reuters (or other commercially available source providing quotations of BBA
LIBOR as selected by the Bank from time to time) as determined for each banking
day at approximately 11:00 a.m. London time two (2) London Banking Days prior to
the date in question, for U.S. Dollar deposits (for delivery on the first day of
such interest period) with a one month term, as adjusted from time to time in
the Bank’s sole discretion for reserve requirements, deposit insurance
assessment rates and other regulatory costs.  If such rate is not
available at such time for any reason, then the rate for that interest period
will be determined by such alternate method as reasonably selected by the
Bank.  A “London Banking Day” is a day on which banks in London are
open for business and dealing in offshore dollars.

       

      2.5 Letters of
Credit.

       

      (a)           During
the availability period, at the request of the Borrower, the Bank will
issue:

       

      (i)           Subject
to the Bank's written consent, Standby letters of credit with a maximum maturity
not to extend more than twenty-four (24) months beyond the date of issuance of
such letter of credit.

       

      (ii)           Subject
to the Bank's written consent, warranty letters of credit, which shall have a
maximum maturity not to extend more than three hundred sixty-five (365) days
beyond the date of issuance of such letter of credit.

       

      (b)           Notwithstanding
anything to the contrary in this Section 2.5, any
letter of credit issued within the final 60 days of the Domestic Line Expiration
Date shall expire no later than the Domestic Line Expiration Date unless
otherwise agreed by the Bank.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      (c)           In
calculating the principal amount outstanding under the Domestic Line Commitment,
the calculation shall include the amount of any letters of credit
outstanding, including amounts drawn on any letters of credit and not yet
reimbursed.  For the avoidance of doubt, the amount of Letter of Credit
Obligations shall not bear interest until such amounts are drawn
upon.

       

      (d)           The
Borrower agrees:

       

      (i)           Any
sum drawn under a letter of credit  may, at the option of the Bank, be
added to the principal amount outstanding under this Agreement.  The
amount will bear interest and be due as described elsewhere in this
Agreement.

       

      (ii)           If
there is a default under this Agreement, to immediately prepay and make the Bank
whole for any outstanding letters of credit.

       

      (iii)           The
issuance of any letter of credit and any amendment to a letter of credit is
subject to the Bank's written approval and must be in form and content
satisfactory to the Bank and in favor of a beneficiary acceptable to the
Bank.

       

      (iv)           To
sign the Bank's form Application and Agreement for letters of credit, as
applicable.

       

      (v)           To
pay any issuance and/or other fees that the Bank notifies the Borrower will be
charged for issuing and processing letters of credit for the
Borrower.

       

      (vi)           To
allow the Bank to automatically charge its checking account for applicable fees,
discounts, and other charges.

       

      (vii)           To
pay the Bank a non-refundable fee equal to the greater of Three Hundred U.S.
Dollars ($300) or one and one-half percent (1.5%) per annum of the outstanding
undrawn amount of each letter of credit, payable quarterly in arrears,
calculated on the basis of the face amount outstanding on the day the fee is
calculated.

       

      2.6 Unconditional Promise to
Pay.

       

      For value
received, the Borrower hereby unconditionally promises to pay to the order of
the Bank, in lawful money of the United States, the principal sum of One Million
Five Hundred Thousand U.S. Dollars ($1,500,000.00), or so much thereof, if any,
as may be disbursed pursuant to this Agreement, with interest thereon from the
date hereof (or the date of disbursement if different from such date) at the
interest rate or rates stated herein, interest and principal to be paid as set
forth herein and all other sums payable pursuant to this Agreement, including,
but not limited to, any late charges.  The Borrower hereby waives
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate and all other
notices and formalities in connection with this Section 2.6 of this
Agreement.

       

      
        	
                3.  

              	
                [INTENTIONALLY
      OMITTED]

              

      

       

       

      
        	
                4.  

              	
                FEES
      AND EXPENSES

              

      

       

      4.1 Fees.

       

      (a)           Unused Commitment
Fee.  The Borrower agrees to pay a fee on any difference
between the Domestic Line Commitment and the amount of credit it actually uses,
determined by the average of the daily amount of credit outstanding during the
specified period.  The fee will be calculated at 0.25% per
year.  The calculation of credit outstanding shall include the undrawn
amount of letters of credit.  This fee is due on June 28, 2008, and on
the same day of each following quarter until the Domestic Line Expiration
Date.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       (b)           Waiver
Fee.  If the Bank, at its discretion, agrees to waive or amend
any terms of this Agreement, the Borrower will, at the Bank's option, pay the
Bank a fee for each waiver or amendment in an amount advised by the Bank at the
time the Borrower requests the waiver or amendment.  Nothing in this
paragraph shall imply that the Bank is obligated to agree to any waiver or
amendment requested by the Borrower.  The Bank may impose additional
requirements as a condition to any waiver or amendment.

       

      (c)           Late
Fee.  To the extent permitted by law, the Borrower agrees to
pay a late fee in an amount not to exceed four percent (4%) of any payment that
is more than fifteen (15) days late.  The imposition and payment of a
late fee shall not constitute a waiver of the Bank’s rights with respect to the
default.

       

      4.2 Expenses.

       

      The
Borrower agrees to immediately repay the Bank for all reasonable expenses that
include, but are not limited to, filing, recording and search fees, appraisal
fees, title report fees, and documentation fees.

       

      4.3 Reimbursement
Costs.

       

      (a)           The
Borrower agrees to reimburse the Bank for any reasonable expenses it incurs in
the preparation of this Agreement and any agreement or instrument required by
this Agreement.  Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's in-house counsel to
the extent permitted by applicable law.

       

      (b)           The
Borrower agrees to reimburse the Bank for the cost of periodic field
examinations of the Borrower’s books, records and collateral, and appraisals of
the collateral, at such intervals as the Bank may reasonably
require.  The actions described in this paragraph may be performed by
employees of the Bank or by independent appraisers.

       

      
        	
                5.  

              	
                COLLATERAL

              

      

       

      5.1 Personal
Property.

       

      The
personal property listed below now owned or owned in the future by the parties
listed below will secure the Borrower’s obligations to the Bank under this
Agreement.  The collateral is further defined in security agreement(s)
executed by the owners of the collateral.

       

      (a)           Equipment
and fixtures owned by the Borrower.

       

      (b)           Inventory
owned by the Borrower.

       

      (c)           Receivables
owned by the Borrower.

       

      (d)           Patents,
trademarks and other general intangibles owned by the Borrower.

       

      (e)           Securities
and other investment property owned by GSE and by Power as described in a pledge
agreement required by the Bank.

       

      
        	
                6.  

              	
                DISBURSEMENTS,
      PAYMENTS AND COSTS

              

      

       

      
        
          
             

             

          

           

        

        
          8

          
            

          

        

        
           

        

      

      6.1 Disbursements and
Payments.

       

      (a)           Each
payment by the Borrower will be made in U.S. Dollars and immediately available
funds by direct debit to a deposit account as described in this Agreement or
otherwise authorized by the Borrower.  For payments not made by direct
debit, payments will be made by mail to the address shown on the Borrower’s
statement or at one of the Bank’s banking centers in the United States, or by
such other method as may be permitted by the Bank.

       

      (b)           The
Bank may honor instructions for advances or repayments given by any one of the
individuals authorized to sign loan agreements on behalf of the Borrower, or any
other individual designated by any one of such authorized signers (each an
“Authorized
Individual”).

       

      (c)           For
any payment under this Agreement made by debit to a deposit account, the
Borrower will maintain sufficient immediately available funds in the deposit
account to cover each debit.  If there are insufficient immediately
available funds in the deposit account on the date the Bank enters any such
debit authorized by this Agreement, the Bank may reverse the debit.

       

      (d)           Each
disbursement by the Bank and each payment by the Borrower will be evidenced by
records kept by the Bank.  In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory
notes.

       

      (e)           Prior
to the date each payment of principal and interest and any fees from the
Borrower becomes due (the “Due
Date”), the Bank will mail to the Borrower a statement of the amounts
that will be due on that Due Date (the “Billed
Amount”).  The calculations in the bill will be made on the
assumption that no new extensions of credit or payments will be made between the
date of the billing statement and the Due Date, and that there will be no
changes in the applicable interest rate.  If the Billed Amount differs
from the actual amount due on the Due Date (the “Accrued Amount”), the
discrepancy will be treated as follows:

       

      (i)           If
the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the
discrepancy.  The Borrower will not be in default by reason of any
such discrepancy.

       

      (ii)           If
the Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the
discrepancy.

       

      Regardless
of any such discrepancy, interest will continue to accrue based on the actual
amount of principal outstanding without compounding.  The Bank will
not pay the Borrower interest on any overpayment.

       

      6.2 Requests for Credit; Equal
Access by all Borrowers.

       

      Any
Borrower (or a person or persons authorized by any one of the Borrowers), acting
alone, can borrow up to the full amount of credit provided under this
Agreement.  Each Borrower will be liable for all extensions of credit
made under this Agreement to any other Borrower.

       

      6.3 Telephone and Telefax
Authorization.

       

      (a)           The
Bank may honor telephone or telefax instructions for advances or repayments and
telefax requests for the issuance of letters of credit given, or purported to be
given, by any one of the Authorized Individuals.

       

      (b)           Advances
will be deposited in and repayments will be withdrawn from account number
003927991969 owned by the Borrower, or such other of the Borrower’s accounts
with the Bank as designated in writing by the Borrower.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (c)           The
Borrower will indemnify and hold the Bank harmless from all liability, loss, and
costs in connection with any act resulting from telephone or telefax
instructions the Bank reasonably believes are made by any Authorized
Individual.  This paragraph will survive this Agreement's termination,
and will benefit the Bank and its officers, employees, and agents.

       

      6.4 Direct
Debit.

       

      The
Borrower agrees that on the Due Date the Bank will debit the Billed Amount from
deposit account number 003927991969 owned by the Borrower, or such other of the
Borrower’s accounts with the Bank as designated in writing by the Borrower (the
“Designated
Account”).

       

      6.5 Banking
Days.

       

      Unless
otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close,
or are in fact closed, in the state where the Bank's lending office is located,
and, if such day relates to amounts bearing interest at an offshore rate (if
any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market.  All payments and
disbursements which would be due on a day which is not a banking day will be due
on the next banking day.  All payments received on a day which is not
a banking day will be applied to the credit on the next banking
day.

       

      6.6 Interest
Calculation.

       

      Except as
otherwise stated in this Agreement, all interest and fees, if any, will be
computed on the basis of a 360-day year and the actual number of days
elapsed.  This results in more interest or a higher fee than if a
365-day year is used.  Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until
paid.  As used in this paragraph, “principal” shall not include
undrawn amounts under a Letter of Credit.

       

      6.7 Default
Rate.

       

      Upon the
occurrence of any default or after maturity or after judgment has been rendered
on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs which are not paid when due,
will at the option of the Bank bear interest at a rate which is 4.0 percentage
point(s) higher than the rate of interest otherwise provided under this
Agreement.  This may result in compounding of
interest.  This will not constitute a waiver of any
default.

       

      6.8 Taxes.

       

      (a)           If
any payments to the Bank under this Agreement are made from outside the United
States, the Borrower will not deduct any foreign taxes from any payments it
makes to the Bank unless required to do so by applicable law.  If any
such taxes are imposed on any payments made by the Borrower (including payments
under this paragraph), the Borrower will pay the taxes and will also pay to the
Bank, at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed.  The Borrower will
confirm that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within thirty (30) days after the due date.

       

      (b)           Payments
made by the Borrower to the Bank will be made without deduction of United States
withholding or similar taxes.  If the Borrower is required to pay U.S.
withholding taxes, the Borrower will pay such taxes in addition to the amounts
due to the Bank under this Agreement.  If the Borrower fails to make
such tax payments when due, the Borrower indemnifies the Bank against any
liability for such taxes, as well as for any related interest, expenses,
additions to tax, or penalties asserted against or suffered by the Bank with
respect to such taxes.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      6.9 Payments in
Kind.

       

      If the
Bank requires delivery in kind of the proceeds of collection of the Borrower's
accounts receivable, such proceeds shall be credited to interest, principal, and
other sums owed to the Bank under this Agreement in the order and proportion
determined by the Bank in its sole discretion.  All such credits will
be conditioned upon collection and any returned items may, at the Bank's option,
be charged to the Borrower.

       

      
        	
                7.  

              	
                CONDITIONS

              

      

       

      Before
the Bank is required to extend any credit to the Borrower under this Agreement,
it must receive any documents and other items it may reasonably require, in form
and content acceptable to the Bank, including any items specifically listed
below.

       

      7.1 Authorizations.

       

      Evidence
that the execution, delivery and performance by the Borrower of this Agreement
and any instrument or agreement required under this Agreement have been duly
authorized.

       

      7.2 Governing
Documents.

       

      A copy of
the Borrower's organizational documents.

       

      7.3 Security
Agreements.

       

      Signed
original security agreements covering the personal property collateral which the
Bank requires.

       

      7.4 Guaranties.

       

      Guaranties
signed by each Guarantor.

       

      7.5 Perfection and Evidence of
Priority.

       

      Evidence
that the security interests and liens in favor of the Bank are valid,
enforceable, properly perfected in a manner acceptable to the Bank and prior to
all others' rights and interests, except those the Bank consents to in
writing.

       

      7.6 Payment of
Fees.

       

      Payment
of all fees and other amounts due and owing to the Bank, including without
limitation the Ex-Im Bank Guarantee fee, the Ex-Im Bank Application fee as
required by the paragraph entitled “Fees” and payment of all
accrued and unpaid expenses incurred by the Bank as required by the paragraph
entitled “Reimbursement
Costs.”

       

      7.7 Repayment of Other Credit
Agreement.

       

      Evidence
that the existing Five Million U.S. Dollar ($5,000,000) revolving line of credit
with Laurus Master Fund Ltd. has been or will be repaid and cancelled on or
before the first extension of credit under this Agreement.

       

      7.8 Good
Standing.

       

      Certificates
of good standing for the Borrower from its state of formation and from any other
state in which the Borrower is required to qualify to conduct its
business.

       

      
        
          
             

             

          

           

        

        
          11

          
            

          

        

        
           

        

      

      7.9 [Intentionally
Omitted].

       

      7.10 Landlord
Agreement.

       

      For any
personal property collateral located on real property which is subject to a
mortgage or deed of trust or which is not owned by the Borrower (or the grantor
of the security interest), an agreement from the owner of the real property and
the holder of any such mortgage or deed of trust.

       

      7.11 Insurance.

       

      Evidence
of insurance coverage, as required in the “Covenants” Article of this
Agreement.

       

      7.12 Conditions to Each Extension
of Credit under the Domestic Line.

       

      Before
each extension of credit under the Domestic Line, including the
first:

       

      (a)           If
requested by the Bank, a Domestic Borrowing Base Certificate which shall be
current within five (5) banking days of the date of the request.

       

      (b)           Such
other documents, instruments and things as may be necessary or desirable in the
discretion of the Bank to perfect its security interest in the Collateral and to
protect its rights with respect to the Collateral.

       

      7.13 Post-Closing
Conditions.

       

      The Borrower agrees to, promptly upon
closing on the Domestic Line, (i) take all action necessary (or cause Laurus
Master Fund Ltd.) to file not later than twenty (20) calendar days after closing
all necessary UCC Termination Statements terminating the liens of Laurus Master
Fund Ltd. on any of the Borrower’s assets, including, but not limited to, making
demand upon Laurus Master Fund Ltd. pursuant to UCC Section 9-513 and (ii) for
any personal property collateral located on real property currently leased by
the Borrower, deliver to the Bank, not later than thirty (30) calendar days
after closing, landlord subordination agreements in favor of the Bank signed by
the lessors of such real property.   Any breach of the
obligations or the failure to occur of the items described above in this Section
7.14 will constitute at the Bank’s option an event of default under this
Agreement.  The Borrower understands that it is executing this
Agreement at this time and is closing the Domestic Line, without the prior
termination of the liens of Laurus Master Fund Ltd. on any of the Borrower’s
assets and without the landlord subordination agreements referenced above, and
neither the execution of the this Agreement or any related document, the closing
of the Domestic Line, nor any advance of funds thereunder will constitute any
admission by the Bank that all of the closing requirements have been
met.  The Borrower acknowledges and agrees that while the Bank may
advance certain funds to or for the account of the Borrower at the time of
closing, the Bank will not be obligated to advance any additional funds to the
Borrower (although the Bank may do so in its sole discretion) at any time if the
Borrower has not timely and fully provided each of the post-closing items set
forth above to the Bank, all in form and substance satisfactory to the Bank in
its sole discretion.

       

      
        	
                8.  

              	
                REPRESENTATIONS
      AND WARRANTIES

              

      

       

      When the
Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties.  Each
request for an extension of credit constitutes a renewal of these
representations and warranties as of the date of the request:

       

      8.1 Formation,
Etc.

       

      The
Borrower is duly formed and existing under the laws of the state or other
jurisdiction where organized.

       

      
        
          
             

             

          

           

        

        
          12

          
            

          

        

        
           

        

      

      8.2 Authorization.

       

      This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower's powers, have been duly authorized, and do not conflict with any of
its organizational papers.

       

      8.3 Enforceable
Agreement.

       

      This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.

       

      8.4 Good
Standing.

       

      In each
state in which the Borrower does business, it is properly licensed, in good
standing, and, where required, in compliance with fictitious name
statutes.

       

      8.5 No
Conflicts.

       

      This
Agreement does not conflict with any law, agreement, or obligation by which the
Borrower is bound.

       

      8.6 Financial
Information.

       

      All
financial and other information that has been or will be supplied to the Bank is
sufficiently complete to give the Bank accurate knowledge of the Borrower's (and
any guarantor's) financial condition, including all material contingent
liabilities.  Since the date of the most recent financial statement
provided to the Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower (or any guarantor).  If the Borrower is comprised of the
trustees of a trust, the foregoing representations shall also pertain to the
trustor(s) of the trust.  Any account receivable and inventory
balances set forth on any borrowing base certificate delivered to the Bank has
been or shall have been, as applicable, reconciled by the Borrower with its
general ledger, account receivables aging report and inventory
report.

       

      8.7 Lawsuits.

       

      There is
no lawsuit, tax claim or other dispute pending or threatened against the
Borrower which, if lost, would impair the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the
Bank.

       

      8.8 Collateral.

       

      All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
for Permitted Liens.

       

      8.9 Permits,
Franchises.

       

      The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights, copyrights,
and fictitious name rights necessary to enable it to conduct the business in
which it is now engaged.

       

      8.10 Other
Obligations.

       

      The
Borrower is not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation, except as have been disclosed in writing to the
Bank.

       

      
        
          
             

             

          

           

        

        
          13

          
            

          

        

        
           

        

      

      8.11 Tax
Matters.

       

      The
Borrower is not subject to limitations on its entitlement to deduct interest for
federal income tax purposes under Section 163(j) of the Internal Revenue Code of
1986 (known as the “earnings stripping” provisions) and has no knowledge of any
pending assessments or adjustments of its income tax for any year and all taxes
due have been paid, except as have been disclosed in writing to the
Bank.

       

      8.12 No Event of
Default.

       

      There is
no event which is, or with notice or lapse of time or both would be, a default
under this Agreement.

       

      8.13 Insurance.

       

      The
Borrower has obtained, and maintained in effect, the insurance coverage required
in the “Covenants”
Article of this Agreement.

       

      8.14 ERISA
Plans.

       

      (a)           Each
Plan (other than a multiemployer plan) is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law.  Each Plan has received a favorable determination letter from the
IRS and to the best knowledge of the Borrower, nothing has occurred which would
cause the loss of such qualification.  The Borrower has fulfilled its
obligations, if any, under the minimum funding standards of ERISA and the Code
with respect to each Plan, and has not incurred any liability with respect to
any Plan under Title IV of ERISA.

       

      (b)           There
are no claims, lawsuits or actions (including by any governmental authority),
and there has been no prohibited transaction or violation of the fiduciary
responsibility rules, with respect to any Plan which has resulted or could
reasonably be expected to result in a material adverse effect.

       

      (c)           With
respect to any Plan subject to Title IV of ERISA:

       

      (i)           No
reportable event has occurred under Section 4043(c) of ERISA for which the PBGC
requires 30-day notice.

       

      (ii)           No
action by the Borrower or any ERISA Affiliate to terminate or withdraw from any
Plan has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.

       

      (iii)           No
termination proceeding has been commenced with respect to a Plan under Section
4042 of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.

       

      (d)           The
following terms have the meanings indicated for purposes of this
Agreement:

       

      (i)           “Code” means the Internal
Revenue Code of 1986, as amended from time to time.

       

      (ii)           “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to
time.

       

      (iii)           “ERISA Affiliate” means any
trade or business (whether or not incorporated) under common control with the
Borrower within the meaning of Section 414(b) or (c) of the
Code.

       

      (iv)           “PBGC” means the Pension
Benefit Guaranty Corporation.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      (v)           “Plan” means a pension,
profit-sharing, or stock bonus plan intended to qualify under Section 401(a) of
the Code, maintained or contributed to by the Borrower or any ERISA Affiliate,
including any multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA.

       

      8.15 Location of
Borrower.

       

      The place
of business of the Borrower (or, if the Borrower has more than one place of
business, its chief executive office) is located at the address listed on the
signature page of this Agreement.

       

      8.16 Merchantable Inventory;
Compliance with FLSA.

       

      All
inventory which is included in the Domestic Borrowing Base is of good and
merchantable quality and free from defects, and has been produced in compliance
with the requirements of the U.S. Fair Labor Standards Act (29 U.S.C. §§201 et
seq.).

       

      8.17 Trading With the
Enemy.

       

      Neither
the execution of this Agreement nor the use of proceeds thereof violates the
Trading With the Enemy Act of 1917, as amended, nor any of the foreign assets
control regulations promulgated thereunder or under the International Emergency
Economic Powers Act or the U.N. Participation Act of 1945.

       

      8.18 Controlling Affiliate
List.

       

      Exhibit B attached
hereto is a true, correct and complete list as of the date hereof of each
Controlling Affiliate of the Borrower and their respective ownership
interests.

       

      8.19 Location of
Inventory.

       

      All
Acceptable Inventory shall be located at one or more of the addresses set forth
on Exhibit C
attached hereto, and such other addresses as the Borrower may disclose from time
to time by prior written notice to the Bank.

       

      
        	
                9.  

              	
                COVENANTS

              

      

       

      The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:

       

      9.1 Use of
Proceeds.

       

      To use
the proceeds of the Domestic Line only for general corporate purposes, including
working captial and not in violation of the Acts referred to in Section 8.17 hereof.

       

      9.2 [INTENTIONALLY
OMITTED.].

       

      9.3 Financial
Information.

       

      To
provide the following financial information and statements in form and content
acceptable to the Bank, and such additional information as requested by the Bank
from time to time:  The Bank reserves the right, upon written notice
to the Borrower, to require the Borrower to deliver financial information and
statements to the Bank more frequently than otherwise provided below, and to use
such additional information and statements to measure any applicable financial
covenants in this Agreement.

       

      (a) Within
one hundred twenty (120) days of the fiscal year end, the annual financial
statements of GSE, certified and dated by an authorized financial
officer.  These financial statements must be audited (with an opinion
satisfactory to the Bank) by an independent registered public accounting firm
acceptable to the Bank.  The statements shall be prepared on a
consolidated basis.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      (b) Within
forty-five (45) days of the period's end, quarterly financial statements of GSE,
certified and dated by an authorized financial officer.  These
financial statements must be reviewed by an independent
registered public accounting firm acceptable to the Bank.  The
statements shall be prepared on a consolidated basis.

       

      (c) Promptly,
upon sending or receipt, copies of any management letters and correspondence
relating to management letters, sent or received by the Borrower to or from the
Borrower's auditor.  If no management letter is prepared, the Bank
may, in its discretion, request a letter from such auditor stating that no
deficiencies were noted that would otherwise be addressed in a management
letter.

       

      (d) Copies of
the federal income tax return of the Borrower, within twenty (20) days of
filing, and, if requested by the Bank, copies of any extensions of the filing
date.

       

      (e) Copies of
the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K Current
Report for GSE concurrent with the date of filing with the Securities and
Exchange Commission.

       

      (f) Within
one hundred twenty (120) days of the end of each fiscal year and within
forty-five (45) days of the end of each quarter, a compliance certificate
of the Borrower, signed by an authorized financial officer and setting forth (i)
the information and computations (in sufficient detail) to establish that the
Borrower is in compliance with all financial covenants at the end of the period
covered by the financial statements then being furnished and (ii) whether there
existed as of the date of such financial statements and whether there exists as
of the date of the certificate, any default under this Agreement and, if any
such default exists, specifying the nature thereof and the action the Borrower
is taking and proposes to take with respect thereto.

       

      (g) A
Domestic Borrowing Base Certificate, in the form of Exhibit D attached
hereto, setting forth the Domestic Borrowing Base as of the last day of each
quarter, within twenty (20) days after the end of each quarter (or more
frequently if required by the Bank), with accompanying summaries of purchase
orders, or, if requested by the Bank, copies of the invoices or the record of
invoices from the Borrower's sales journal for the Acceptable Receivables and
Acceptable Inventory sought to be included in the Domestic Borrowing Base,
copies of the delivery receipts, purchase orders, contracts, shipping
instructions, bills of lading and other documentation pertaining to such
Acceptable Receivables and Acceptable Inventory, and copies of the cash receipts
journal pertaining to the borrowing base certificate.  Any account
receivable and inventory balances that support the Domestic Borrowing Base
Certificate shall be reconciled with the Borrower’s general ledger, Accounts
Receivable Aging Report, Unbilled Costs schedule and inventory
schedule.

       

      (h) An
Accounts Receivable Aging Report aged from the invoice due date detailing the
terms of the amounts due from each Buyer as of the last day of each quarter,
within twenty (20) days after the end of each quarter.

       

      (i) A summary
aging by vendor of accounts payable within twenty (20) days after the end of
each quarter.

       

      (j) If the
Bank requires the Borrower to deliver the proceeds of accounts receivable to the
Bank upon collection by the Borrower, a schedule of the amounts so collected and
delivered to the Bank.

       

      (k) An
inventory listing within twenty (20) days after the end of
each quarter.  The listing must include a description of the
inventory, its location and cost, and such other information as the Bank may
require.

       

      (l) A
schedule of Unbilled Costs within twenty (20) days after the end of
each quarter.

       

      (m) Copies of
all letters of credit issued in support of the Borrower’s accounts
receivable.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      (n) Promptly
upon the Bank's request, such other books, records, statements, lists of
property and accounts, budgets, forecasts or reports as to the Borrower and as
to each guarantor of the Borrower's obligations to the Bank, or other data
concerning the Collateral, as the Bank may request.

       

      9.4 Tangible Net
Worth.

       

      To
maintain, with respect to GSE on a consolidated basis, Tangible Net Worth equal
to at least Fifteen
Million U.S. Dollars ($15,000,000.00).

       

      “Tangible Net Worth” means the
value of total assets (including leaseholds and leasehold improvements and
reserves against assets but excluding goodwill, patents, trademarks, trade
names, organization expense, unamortized debt discount and expense, capitalized
or deferred research and development costs, deferred marketing expenses, and
other like intangibles, and monies due from affiliates, officers, directors,
employees, shareholders, members or managers) less total liabilities, including
but not limited to accrued and deferred income taxes, but excluding the
non-current portion of Subordinated Liabilities.

       

      “Subordinated Liabilities”
means liabilities subordinated to the Borrower’s obligations to the Bank in a
manner acceptable to the Bank in its sole discretion.

       

      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.

       

      “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, and
amortization, (d) plus interest expense on all obligations, (e) minus dividends,
withdrawals, and other distributions, and (f) minus any unfinanced capital
expenditures.  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.

       

      “Debt Service” is defined as
all regularly scheduled principal and interest payments on all
indebtedness.

       

      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 issued for the account of the Borrower or any
reimbursement obligation owing by the Borrower with respect to any letter of
credit.

       

      “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.

       

      9.7 Bank as Principal
Depository.

       

      To
maintain the Bank as its principal depository bank, including for the
maintenance of business, cash management, operating and administrative deposit
accounts.

       

      
        
          
             

             

          

           

        

        
          17

          
            

          

        

        
           

        

      

      9.8 Other
Debts.

       

      Not to
have outstanding or incur any direct or contingent liabilities or lease
obligations (other than those to the Bank), or become liable for the liabilities
of others, without the Bank's written consent.  This does not
prohibit:

       

      (a)           Acquiring
goods, supplies, or merchandise on normal trade credit.

       

      (b)           Endorsing
negotiable instruments received in the usual course of business.

       

      (c)           Obtaining
surety bonds in the usual course of business.

       

      (d)           Liabilities,
lines of credit and leases in existence on the date of this Agreement disclosed
in writing to the Bank in the Borrower's most recent financial
statements.

       

      (e)           Additional
debts and lease obligations for the acquisition of fixed assets, to the extent
permitted elsewhere in this Agreement.

       

      (f)           The
Company’s partial guarantee for the credit facility of its affiliate Emirates
Simulation Academy.

       

      (g)           The
Company’s obligation under a certain Office Lease Agreement between Red Branch
Road LLC and GSE Systems, Inc.

       

      9.9 Other
Liens.

       

      Not to
create, assume, or allow any security interest or lien (including judicial
liens) on property the Borrower now or later owns, except:

       

      (a)           Liens
and security interests in favor of the Bank.

       

      (b)           Permitted
Liens.

       

      (c)           Additional
purchase money security interests in assets acquired after the date of this
Agreement, if the total principal amount of debts secured by such liens does not
exceed One Hundred Thousand U.S. Dollars ($100,000) at any one
time.

       

      (d)           Liens
with respect to certain equipment purchased by the Borrower for British Energy
Generation Ltd. under
contract 40135378.

       

      9.10 Maintenance of
Assets.

       

      (a)           Not
to sell, assign, lease, transfer or otherwise dispose of any part of the
Borrower's business or the Borrower's assets except in the ordinary course of
the Borrower's business.

       

      (b)           Not
to sell, assign, lease, transfer or otherwise dispose of any assets for less
than fair market value, or enter into any agreement to do so.

       

      (c)           Not
to enter into any sale and leaseback agreement covering any of its fixed
assets.

       

      (d)           To
maintain and preserve all rights, privileges, and franchises the Borrower now
has.

       

      (e)           To
make any repairs, renewals, or replacements to keep the Borrower's properties in
good working condition.

       

      
        
          
             

             

          

           

        

        
          18

          
            

          

        

        
           

        

      

      9.11 Investments.

       

      Not to
have any existing, or make any new, investments in any individual or entity, or
make any capital contributions or other transfers of assets to any individual or
entity without the Bank's written consent, except for:

       

      (a)           Existing
investments disclosed to the Bank in writing.

       

      (b)           Investments
in the Borrower’s current subsidiaries.

       

      (c)           Investments
in any of the following:

       

      (i)           certificates
of deposit;

       

      (ii)           U.S.
treasury bills and other obligations of the federal government;

       

      (iii)           readily
marketable securities (including commercial paper, but excluding restricted
stock and stock subject to the provisions of Rule 144 of the Securities and
Exchange Commission).

       

      (d)           Requirements
for Investments in Emirates Simulation Academy, LLC as required from time to
time.

       

      (e)           Minority
interests held in Advantium Holding, B.V. and Red Storm Scientific,
Inc.

       

      9.12 Loans.

       

      Not to
make any loans, advances or other extensions of credit to any individual or
entity, except for:

       

      (a)           Existing
extensions of credit disclosed to the Bank in writing.

       

      (b)           Extensions
of credit to the Borrower’s current subsidiaries.

       

      (c)           Extensions
of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business to
non-affiliated entities.

       

      9.13 Change of
Management.

       

      Not to
make any substantial change in the present executive or management personnel of
the Borrower.

       

      9.14 Controlling
Affiliate.

       

      The
Borrower agrees every Controlling Affiliate as of the date hereof shall be a
Guarantor, and if a person, company or other entity becomes a Controlling
Affiliate after the date hereof, the Borrower shall cause such Controlling
Affiliate to become a Guarantor unless otherwise agreed to in writing by the
Bank and Ex-Im Bank.

       

      9.15 Additional Negative
Covenants.

       

      Not to,
without the Bank's written consent (which consent shall not be unreasonably
withheld):

       

      (a)             Enter
into any consolidation, merger, or other combination, or become a partner in a
partnership, a member of a joint venture, or a member of a limited liability
company.

       

      (b)             Acquire
or purchase a business or its assets for consideration in excess of Five Hundred
Thousand U.S. Dollars ($500,000).

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      (c)             Engage
in any business activities substantially different from the Borrower's present
business.

       

      (d)             Liquidate
or dissolve the Borrower's business.

       

      (e)             Voluntarily
suspend its business for more than fourteen (14) days in any three hundred
sixty-five (365) day period.

       

      9.16 Notices to
Bank.

       

      To
promptly notify the Bank in writing of:

       

      (a)           Any
lawsuit over Two Hundred Fifty Thousand U.S. Dollars ($250,000) against the
Borrower or any Obligor.

       

      (b)           Any
substantial dispute between any governmental authority and the Borrower or any
Obligor.

       

      (c)           Any
event of default under this Agreement, or any event which, with notice or lapse
of time or both, would constitute an event of default.

       

      (d)           Any
material adverse change in the Borrower's or any Obligor’s business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit.

       

      (e)           Any
change in the Borrower's or any Obligor’s name, legal structure, place of
business, or chief executive office if the Borrower or any Obligor has more than
one place of business.

       

      (f)           Any
actual contingent liabilities of the Borrower or any Obligor, and any such
contingent liabilities which are reasonably foreseeable.

       

      For
purposes of this Agreement, “Obligor” shall mean any
guarantor, any party pledging collateral to the Bank, or, if the Borrower is
comprised of the trustees of a trust, any trustor.

       

      9.17 Insurance.

       

      (a)           General Business
Insurance.  To maintain insurance satisfactory to the Bank as
to amount, nature and carrier covering property damage (including loss of use
and occupancy) to any of the Borrower's properties, business interruption
insurance, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. The insurance must include a
lender’s additional insured endorsement naming the Bank as its interest appears
in a form acceptable to the Bank.  Each policy shall provide for at
least thirty (30) days prior notice to the Bank of any cancellation
thereof.

       

      (b)           Insurance Covering
Collateral.  To maintain all risk property damage insurance
policies (including without limitation windstorm coverage, and hurricane
coverage as applicable) covering the tangible property comprising the
collateral.  Each insurance policy must be in an amount acceptable to
the Bank.  The insurance must be issued by an insurance company
acceptable to the Bank and must include a lender's loss payable endorsement in
favor of the Bank in a form acceptable to the Bank. Each policy shall provide
for at least thirty (30) days prior notice to the Bank of any cancellation
thereof.

       

      (c)             Evidence of
Insurance.  Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.

       

      
        
          
             

             

          

           

        

        
          20

          
            

          

        

        
           

        

      

      9.18 Compliance with
Laws.

       

      To comply
with the laws (including any fictitious or trade name statute), regulations, and
orders of any government body with authority over the Borrower's
business.  The Bank shall have no obligation to make any advance to
the Borrower except in compliance with all applicable laws and regulations and
the Borrower shall fully cooperate with the Bank in complying with all such
applicable laws and regulations.

       

      9.19 ERISA
Plans.

       

      Promptly
during each year, to pay and cause any subsidiaries to pay contributions
adequate to meet at least the minimum funding standards under ERISA with respect
to each and every Plan; file each annual report required to be filed pursuant to
ERISA in connection with each Plan for each year; and notify the Bank within ten
(10) days of the occurrence of any Reportable Event that might constitute
grounds for termination of any capital Plan by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer any Plan.  “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to
time.  Capitalized terms in this paragraph shall have the meanings
defined within ERISA.

       

      9.20 Books and
Records.

       

      To
maintain adequate books and records.

       

      9.21 Audits.

       

      To allow
the Bank and its agents to inspect the Borrower's properties and examine, audit,
and make copies of books and records at any reasonable time.  If any
of the Borrower's properties, books or records are in the possession of a third
party, the Borrower authorizes that third party to permit the Bank or its agents
to have access to perform inspections or audits and to respond to the Bank's
requests for information concerning such properties, books and
records.

       

      9.22 Perfection of
Liens.

       

      To help
the Bank perfect and protect its security interests and liens, and reimburse it
for related costs it incurs to protect its security interests and
liens.

       

      9.23 Cooperation.

       

      To take
any action reasonably requested by the Bank to carry out the intent of this
Agreement.

       

      9.24 Mandatory Prepayment; Early
Termination.

       

      If
requested by the Bank, to immediately repay the entire principal balance of the
Domestic Line, together with interest within a reasonable time, any fees
(including any prepayment fees) and any other amounts due thereunder, and not
obtain any further credit thereunder, upon the occurrence of the following
event:  the Ex-Im Line terminates for any reason, including, without
limitation, termination of the Ex-Im Line at the request of the Borrower,
termination resulting from failure by the Bank to renew the Ex-Im Line, or
termination as otherwise provided under the Ex-Im Line.

       

      9.25 Field
Exams.

       

      To allow
the Bank and its agents, at the Bank's discretion, to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time.  If any of the Borrower's properties, books or
records are in the possession of a third party, the Borrower authorizes that
third party to permit the Bank or its agents to have access to perform
inspections or audits and to respond to the Bank's requests for information
concerning such properties, books and records.  The Borrower shall pay
for the cost of semi-annual field exams and for any audits or exams after an
event of default has occurred hereunder.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      9.26 Continued Security
Interest.

       

      The
Borrower shall not change (a) its name or identity in any manner, (b) the
location of its principal place of business or its jurisdiction of organization
or formation, (c) the location of any Collateral or (d) the location of any of
the books or records related to the Collateral, in each instance without giving
thirty (30) days prior written notice thereof to the Bank and taking all actions
deemed necessary or appropriate by the Bank to continuously protect and perfect
the Bank's liens upon the Collateral.

       

      9.27 Terms of Sale of
Items.

       

      The
Borrower agrees that the terms of sale for Items shall be typical for the
industry but in no event shall allow for payment more than ninety (90) days
following the original invoice date.

       

      
        	
                10.  

              	
                HAZARDOUS
      SUBSTANCES

              

      

       

      10.1 Indemnity Regarding
Hazardous Substances.

       

      The
Borrower will indemnify and hold harmless the Bank from any loss or liability
the Bank incurs in connection with or as a result of this Agreement, which
directly or indirectly arises out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance.  This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower.  The indemnity includes
but is not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff).  The indemnity extends
to the Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns.

       

      10.2 Compliance Regarding
Hazardous Substances.

       

      The
Borrower represents and warrants that the Borrower has complied with all current
and future laws, regulations and ordinances or other requirements of any
governmental authority relating to or imposing liability or standards of conduct
concerning protection of health or the environment or hazardous
substances.

       

      10.3 Notices Regarding Hazardous
Substances.

       

      Until
full repayment of the loan, the Borrower will promptly notify the Bank in
writing of any threatened or pending investigation of the Borrower or its
operations by any governmental agency under any current or future law,
regulation or ordinance pertaining to any hazardous substance.

       

      10.4 Site Visits, Observations
and Testing.

       

      The Bank
and its agents and representatives will have the right at any reasonable time,
after giving reasonable notice to the Borrower, to enter and visit any locations
where the collateral securing this Agreement (the “Collateral”) is located for
the purposes of observing the Collateral, taking and removing environmental
samples, and conducting tests.  The Borrower shall reimburse the Bank
on demand for the costs of any such environmental investigation and
testing.  The Bank will make reasonable efforts during any site visit,
observation or testing conducted pursuant this paragraph to avoid interfering
with the Borrower’s use of the Collateral.  The Bank is under no duty
to observe the Collateral or to conduct tests, and any such acts by the Bank
will be solely for the purposes of protecting the Bank's security and preserving
the Bank's rights under this Agreement.  No site visit, observation or
testing or any report or findings made as a result thereof (“Environmental Report”) (i)
will result in a waiver of any default of the Borrower; (ii) impose any
liability on the Bank; or (iii) be a representation or warranty of any kind
regarding the Collateral (including its condition or value or compliance with
any laws) or the Environmental Report (including its accuracy or
completeness).  In the event the Bank has a duty or obligation under
applicable laws, regulations or other requirements to disclose an Environmental
Report to the Borrower or any other party, the Borrower authorizes the Bank to
make such a disclosure.  The Bank may also disclose an Environmental
Report to any regulatory authority, and to any other parties as necessary or
appropriate in the Bank’s judgment.  The Borrower further understands
and agrees that any Environmental Report or other information regarding a site
visit, observation or testing that is disclosed to the Borrower by the Bank or
its agents and representatives is to be evaluated (including any reporting or
other disclosure obligations of the Borrower) by the Borrower without advice or
assistance from the Bank.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      10.5 Definition of Hazardous
Substances.

       

      “Hazardous substances” means
any substance, material or waste that is or becomes designated or regulated as
“toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar designation or
regulation under any current or future federal, state or local law (whether
under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas.

       

      10.6 Continuing
Obligation.

       

      The
Borrower's obligations to the Bank under this Article, except the obligation to
give notices to the Bank, shall survive termination of this Agreement and
repayment of the Borrower's obligations to the Bank under this
Agreement.

       

      
        	
                11.  

              	
                DEFAULT
      AND REMEDIES

              

      

       

      If any of
the following events of default occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice.  If an event which, with notice
or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement.  In addition, if any event of default
occurs, the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in
equity.  If an event of default occurs under the paragraph entitled
“Bankruptcy,” below,
with respect to the Borrower, then the entire debt outstanding under this
Agreement will automatically be due immediately.

       

      11.1 Failure to
Pay.

       

      The
Borrower fails to make a payment under this Agreement when due.

       

      11.2 Other Bank
Agreements.

       

      Any
default occurs under any other agreement the Borrower (or any Obligor) or any of
the Borrower's related entities or affiliates has with the Bank or any affiliate
of the Bank.

       

      11.3 Cross-default.

       

      Any
default occurs under any agreement in connection with any credit the Borrower
(or any Obligor) or any of the Borrower's related entities or affiliates has
obtained from anyone else or which the Borrower (or any Obligor) or any of the
Borrower's related entities or affiliates has guaranteed.

       

      11.4 False
Information.

       

      The
Borrower or any Obligor has given the Bank materially false or misleading
information or representations.

       

      11.5 Bankruptcy.

       

      The
Borrower, any Obligor, or any general partner of the Borrower or of any Obligor
files a bankruptcy petition, a bankruptcy petition is filed against any of the
foregoing parties, or the Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor makes a general assignment for the benefit of
creditors.  The default will be deemed cured if any bankruptcy
petition filed against the Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor is dismissed within a period of thirty (30) days
after the filing; provided, however, that such cure opportunity will be
terminated upon the entry of an order for relief in any bankruptcy case arising
from such a petition.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      11.6 Receivers.

       

      A
receiver or similar official is appointed for a substantial portion of the
Borrower's or any Obligor's business, or the business is terminated, or, if any
Obligor is anything other than a natural person, such Obligor is liquidated or
dissolved.

       

      11.7 Lien
Priority.

       

      The Bank
fails to have an enforceable first lien (except for Permitted Liens or any other
prior liens to which the Bank has consented in writing) on or security interest
in any property given as security for this Agreement (or any
guaranty).

       

      11.8 Lawsuits.

       

      Any
lawsuit or lawsuits are filed on behalf of one or more trade creditors against
the Borrower or any Obligor in an aggregate amount of Two Hundred Fifty Thousand
U.S. Dollars ($250,000.00) or more in excess of any insurance
coverage.

       

      11.9 Judgments.

       

      Any
judgments or arbitration awards are entered against the Borrower or any Obligor,
or the Borrower or any Obligor enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two Hundred
Fifty Thousand U.S. Dollars ($250,000.00) or more in excess of any insurance
coverage.

       

      11.10 Material Adverse
Change.

       

      A
material adverse change occurs, or is reasonably likely to occur, in the
Borrower's (or any Obligor's) business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the credit; or the Bank
determines that it is insecure for any other reason.

       

      11.11 Government
Action.

       

      Any
government authority takes action that the Bank believes materially adversely
affects the Borrower's or any Obligor's financial condition or ability to
repay.

       

      11.12 Default under Related
Documents.

       

      Any
default occurs under any guaranty, subordination agreement, security agreement,
deed of trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document is no longer in effect, or
any guarantor purports to revoke or disavow the guaranty.

       

      11.13 ERISA
Plans.

       

      Any one
or more of the following events occurs with respect to a Plan of the Borrower
subject to Title IV of ERISA, provided such event or events could reasonably be
expected, in the judgment of the Bank, to subject the Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
the Borrower:

       

      (a)           A
reportable event shall occur under Section 4043(c) of ERISA with respect to a
Plan.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      (b)           Any
Plan termination (or commencement of proceedings to terminate a Plan) or the
full or partial withdrawal from a Plan by the Borrower or any ERISA
Affiliate.

       

      11.14 Other Breach Under
Agreement.

       

      A default
occurs under any other term or condition of this Agreement not specifically
referred to in this Article.  This includes without limitation (i) any
borrowing base requirements, (ii) line of credit amount limitations, and (iii)
any failure or anticipated failure by the Borrower (or any other party named in
the Covenants Article of this Agreement) to comply with any financial covenants
set forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to the Borrower or the
Bank.

       

      
        	
                12.  

              	
                ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

              

      

       

      12.1 GAAP.

       

      Except as
otherwise stated in this Agreement, all financial information provided to the
Bank and all financial covenants will be made under GAAP, consistently
applied.

       

      12.2 Disposition of Schedules and
Reports.

       

      The Bank
will not be obligated to return any schedules, invoices, statements, budgets,
forecasts, reports or other papers delivered by the Borrower.  The
Bank will destroy or otherwise dispose of such materials at such time as the
Bank, in its discretion, deems appropriate.

       

      12.3 Returned
Merchandise.

       

      Until the
Bank exercises its rights to collect the accounts receivable as provided under
any security agreement required under this Agreement, the Borrower may continue
its present policies for returned merchandise and adjustments.  Credit
adjustments with respect to returned merchandise shall be made immediately upon
receipt of the merchandise by the Borrower or upon such other disposition of the
merchandise by the debtor in accordance with the Borrower's
instructions.  If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall no longer be included
in the amount of such Acceptable Receivable in computing the Domestic Borrowing
Base.

       

      12.4 [INTENTIONALLY
OMITTED.]

       

      12.5 Verification of
Receivables.

       

      The Bank
may at any time, either orally or in writing, request confirmation from any
debtor of the current amount and status of the accounts receivable upon which
such debtor is obligated.

       

      12.6 Waiver of
Confidentiality.

       

      The
Borrower authorizes the Bank to discuss the Borrower's financial affairs and
business operations with any accountants, auditors, business consultants, or
other professional advisors employed by the Borrower, and authorizes such
parties to disclose to the Bank such financial and business information or
reports (including management letters) concerning the Borrower as the Bank may
request.

       

      12.7 Indemnification.

       

      The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement or any document required hereunder, (b) any
credit extended or committed by the Bank to the Borrower hereunder, (c) any
claim, whether well-founded or otherwise, that there has been a failure to
comply with any law regulating the Borrower's sales or leases to or performance
of services for debtors obligated upon the Borrower's accounts receivable and
disclosures in connection therewith, and (d) any litigation or proceeding
related to or arising out of this Agreement, any such document, any such credit,
or any such claim.  This indemnity includes but is not limited to
attorneys' fees (including the allocated cost of in-house
counsel).  This indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns.  This indemnity will survive
repayment of the Borrower's obligations to the Bank.  All sums due to
the Bank hereunder shall be obligations of the Borrower, due and payable
immediately without demand.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      12.8 Governing
Law.

       

      This
Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland.  The Domestic Line is a "commercial loan" within
the meaning of such term as it is defined in Section 12-101(c) and 12-103(e) of
the Commercial Law Article, Annotated Code of Maryland.  To the extent
that the Bank has greater rights or remedies under federal law, whether as a
national bank or otherwise, this paragraph shall not be deemed to deprive the
Bank of such rights and remedies as may be available under federal
law.

       

      12.9 Consent to
Jurisdiction.

       

      TO
INDUCE THE BANK TO ACCEPT THIS AGREEMENT, THE BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO THE BANK’S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN
ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT WILL BE LITIGATED IN STATE
OR FEDERAL COURTS HAVING SITUS IN BALTIMORE, MARYLAND.  THE BORROWER
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN BALTIMORE, MARYLAND, WAIVES PERSONAL SERVICE OF PROCESS UPON THE
BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL DIRECTED TO THE BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF
AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT.  IN ADDITION, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY DEFENSE ASSERTING AN INCONVENIENT FORUM IN
CONNECTION THEREWITH.

       

      12.10 Waiver of Jury
Trial.

       

      THE
BORROWER AND THE BANK EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS AGREEMENT OR ANY
RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR (B) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.  THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE.  THE BORROWER AGREES THAT IT WILL NOT
ASSERT ANY CLAIM AGAINST THE BANK OR ANY OTHER PERSON INDEMNIFIED UNDER THIS
AGREEMENT ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES.

       

      12.11 CONFESSION
OF JUDGMENT.

       

      THE
BORROWER AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD
IN THE UNITED STATES TO APPEAR ON BEHALF OF THE BORROWER IN ANY COURT IN ONE OR
MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OR PROTHONOTARY OR OTHER COURT
OFFICIAL, AND TO CONFESS JUDGMENT AGAINST THE BORROWER IN FAVOR OF THE HOLDER OF
THIS AGREEMENT IN THE FULL AMOUNT DUE UNDER THIS AGREEMENT (INCLUDING PRINCIPAL,
ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS' FEES
EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT
PRIOR NOTICE OR OPPORTUNITY OF THE BORROWER FOR PRIOR HEARING.  THE
BORROWER AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MARYLAND.  THE BORROWER WAIVES THE BENEFIT OF ANY AND EVERY STATUTE,
ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON THE
BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF
EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR
IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A
JUDGMENT.  THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT
AGAINST THE BORROWER 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 HOLDER SHALL DEEM NECESSARY, CONVENIENT, OR PROPER.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      12.12 Successors and
Assigns.

       

      This
Agreement is binding on the Borrower's and the Bank's successors and
assignees.  The Borrower agrees that it may not assign this Agreement
without the Bank's prior consent.  The Bank may sell participations in
or assign this loan and any credit facilities hereunder, and may exchange
information about the Borrower (including, without limitation, any information
regarding any hazardous substances) with actual or potential participants or
assignees.  If a participation is sold or the loan is assigned, the
purchaser will have the right of set-off against the Borrower.

       

      12.13 Severability;
Waivers.

       

      If any
part of this Agreement is not enforceable, the rest of the Agreement may be
enforced.  The Bank retains all rights, even if it makes a loan after
default.  If the Bank waives a default, it may enforce a later
default.  Any consent or waiver under this Agreement must be in
writing.

       

      12.14 Attorneys’
Fees.

       

      The
Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees
incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver,
“workout” or restructuring under this Agreement.  In the event of a
lawsuit or arbitration proceeding, the prevailing party is entitled to recover
costs and reasonable attorneys' fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.  In
the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys' fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case.  As used in this paragraph,
“attorneys' fees” includes the allocated costs of the Bank's in-house
counsel.

       

      12.15 Joint and Several
Liability.

       

      (a)           Each
Borrower agrees that it is jointly and severally liable to the Bank for the
payment of all obligations arising under this Agreement, and that such liability
is independent of the obligations of the other Borrower(s).  Each
obligation, promise, covenant, representation and warranty in this Agreement
shall be deemed to have been made by, and be binding upon, each Borrower, unless
this Agreement expressly provides otherwise.  The Bank may bring an
action against any Borrower, whether an action is brought against the other
Borrower(s).

       

      (b)           Each
Borrower agrees that any release which may be given by the Bank to the other
Borrower(s) or any guarantor will not release such Borrower from its obligations
under this Agreement.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      (c)           Each
Borrower waives any right to assert against the Bank any defense, setoff,
counterclaim, or claims which such Borrower may have against the other
Borrower(s) or any other party liable to the Bank for the obligations of the
Borrowers under this Agreement.

       

      (d)           Each
Borrower waives any defense by reason of any other Borrower’s or any other
person's defense, disability, or release from liability.  The Bank can
exercise its rights against each Borrower even if any other Borrower or any
other person no longer is liable because of a statute of limitations or for
other reasons.

       

      (e)           Each
Borrower agrees that it is solely responsible for keeping itself informed as to
the financial condition of the other Borrower(s) and of all circumstances which
bear upon the risk of nonpayment.  Each Borrower waives any right it
may have to require the Bank to disclose to such Borrower any information which
the Bank may now or hereafter acquire concerning the financial condition of the
other Borrower(s).

       

      (f)           Each
Borrower waives all rights to notices of default or nonperformance by any other
Borrower under this Agreement.  Each Borrower further waives all
rights to notices of the existence or the creation of new indebtedness by any
other Borrower and all rights to any other notices to any party liable on any of
the credit extended under this Agreement.

       

      (g)           The
Borrowers represent and warrant to the Bank that each will derive benefit,
directly and indirectly, from the collective administration and availability of
credit under this Agreement.  The Borrowers agree that the Bank will
not be required to inquire as to the disposition by any Borrower of funds
disbursed in accordance with the terms of this Agreement.

       

      (h)           Until
all obligations of the Borrowers to the Bank under this Agreement have been paid
in full and any commitments of the Bank or facilities provided by the Bank under
this Agreement have been terminated, each Borrower (a) waives any right of
subrogation, reimbursement, indemnification and contribution (contractual,
statutory or otherwise), including without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11, United States Code) or any
successor statute, which such Borrower may now or hereafter have against any
other Borrower with respect to the indebtedness incurred under this Agreement;
and (b) waives any right to enforce any remedy which the Bank now has or may
hereafter have against any other Borrower, and waives any benefit of, and any
right to participate in, any security now or hereafter held by the
Bank.

       

      (i)           Each
Borrower waives any right to require the Bank to proceed against any other
Borrower or any other person; proceed against or exhaust any security; or pursue
any other remedy.  Further, each Borrower consents to the taking of,
or failure to take, any action which might in any manner or to any extent vary
the risks of the Borrowers under this Agreement or which, but for this
provision, might operate as a discharge of the Borrowers.

       

      12.16 One
Agreement.

       

      This
Agreement and any related security or other agreements required by this
Agreement, collectively:

       

      (a)           represent
the sum of the understandings and agreements between the Bank and the Borrower
concerning this credit;

       

      (b)           replace
any prior oral or written agreements between the Bank and the Borrower
concerning this credit; and

       

      (c)           are
intended by the Bank and the Borrower as the final, complete and exclusive
statement of the terms agreed to by them.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      In the
event of any conflict between this Agreement and any other agreements required
by this Agreement, this Agreement will prevail.  Any reference in any
related document to a “promissory note” or a “note” executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or
restated.

       

      12.17 Notices.

       

      Unless
otherwise provided in this Agreement or in another agreement between the Bank
and the Borrower, all notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, or by overnight courier,
to the addresses on the signature page of this Agreement, or sent by facsimile
to the fax numbers listed on the signature page, or to such other addresses as
the Bank and the Borrower may specify from time to time in
writing.  Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or
(iii) if hand-delivered, by courier or otherwise (including telegram, lettergram
or mailgram), when delivered.

       

      12.18 Headings.

       

      Article
and paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

       

      12.19 Counterparts.

       

      This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same agreement.

       

      12.20 Borrower Information;
Reporting to Credit Bureaus.

       

      The
Borrower authorizes the Bank at any time to verify or check any information
given by the Borrower to the Bank, check the Borrower’s credit references,
verify employment, and obtain credit reports.  The Borrower agrees
that the Bank shall have the right at all times to disclose and report to credit
reporting agencies and credit rating agencies such information pertaining to the
Borrower and/or all guarantors as is consistent with the Bank’s policies and
practices from time to time in effect.

       

      12.21 Document Receipt Cut-Off
Date.

       

      Unless
this Agreement and any documents required by this Agreement have been signed and
returned to the Bank within thirty (30) days after the date of this Agreement
(the “Document Receipt Cut-Off
Date”), the Bank shall have the right to notify the Borrower in writing
that the Bank’s commitment to extend credit under this Agreement has
expired.  If the executed Agreement and accompanying loan documents
are received after the Document Receipt Cut-Off Date, the Bank shall have a
reasonable period of time after receipt of the executed Agreement and
accompanying loan documents to provide such notice.

       

      12.22 USA Patriot Act
Notice.

       

      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.

       

      [Signatures on next page.]

       

      
        
          
             

             

          

           

        

        
          29

          
            

          

        

        
           

        

      

      

      The Borrower executed this Agreement as
of the date stated at the top of the first page, intending to create an
instrument executed under seal.

      

      

      
        	
                Bank
      of America, N.A.

                 

              	 
      	
                GSE
      Systems, Inc.

                 

              
	
                By:          /s/
      Kevin
      Mahon                                            

                Kevin Mahon

                Senior Vice
    President

              	 
      	
                By:          /s/
      Jeffery
      Hough                                            (Seal)

                Jeffery Hough

                Chief Financial
      Officer

              
	 
      	 
      	 
      
	 
      	 
      	
                GSE
      Power Systems, Inc.

                 

              
	 
      	 
      	
                By:          /s/
      Jeffery
      Hough                                            (Seal)

                Jeffery Hough

                Chief Financial
      Officer

              

      

      

      

      
        	
                Address
      where notices to

                the
      Bank are to be sent:

                 

              	 
      	
                Address
      where notices to

                the
      Borrower are to be sent:

                 

              
	
                100
      South Charles Street, 2nd Floor

                Baltimore,
      Maryland 21201

                Facsimile:                                           

              	 
      	
                7133
      Rutherford Road, Suite 200

                Baltimore,
      Maryland 21244

                Telephone:                                           

                Facsimile:                                           

              

      

      

      

      

      

      

       

       

      

      

      
        
          
             

             

          

           

        

        
          30

          
            

          

        

        
           

        

      

      Exhibit
A

      Permitted
Liens

      

      

      Debtor:  GSE
Systems, Inc.

       

      

       

      
        	
                Financing
      Statement #

              	
                Filing
      Date

              	
                Maturity
      Date

              	
                Secured
      Party

              
	
                31048175

              	
                04/23/2003

              	
                04/23/2008

              	
                OCE-USA,
      Inc.

              

      

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Exhibit
B

       

      Controlling
Affiliate List

       

      

       

      
        	
                Borrower

              	
                Controlling
      Affiliate

              	
                Percentage
      Interest

              
	
                GSE
      Systems, Inc.

              	
                None

              	
                N/A

              
	
                GSE
      Power Systems, Inc.

              	
                MSHI,
      Inc.

              	
                100%

              
	 
      	 
      	 
      
	 
      	 
      	 
      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Exhibit
C

      Inventory
Locations

      

      

      7133
Rutherford Road, Suite 200

      Baltimore,
Maryland 21244

      

      

      2300 St.
Marys Road, Suite 2

      St.
Marys, Georgia 31558

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Exhibit
D

      Domestic
Borrowing Base Certificate

      

        
          	
                  GSE
      Systems, Inc. & GSE Power Systems, Inc.

                	 
	
                  MONTH-END
      COLLATERAL REPORT AND BORROWING CERTIFICATE

                
	 	 	 	 
      	 
      	 
      	 
	 	 	 	 
      	 
      	
                  For
      the Month-ending

                	 
	
                  DOMESTIC
      REVOLVING FACILITY

                	 
      	 
	 	
                  DOMESTIC ACCOUNTS
RECEIVABLE

                	 
      	 
	 	 	1.	)	
                  Beginning
      of Month G/L Balance

                	 	$
	 	 	2.	)	
                  ADD:

                	
                  Gross
      Sales for the Month

                	 	$
	 	 	3.	)	
                  ADD:

                	
                  Debit
      Memos, Returned Checks, Other Debit Adjustments

                	 	$
	 	 	4.	)	
                  LESS:

                	
                  Net
      Cash Collections for the Month

                	 	$
	 	 	5.	)	
                  LESS:

                	
                  Credit
      Memos, Discounts, Other Credit Adjustments

                	 	$
	 	 	6.	)	
                  End
      of Month G/L Balance as of

                	 	$
	 	 	7.	)	
                  A/R
      Aging Balance as of the same date

                	 	$
	 	 	 	 	
                  Variance, if
      any (Line 6 minus Line 7)

                	 	$
	 	 	8.	)	
                  Ineligible
      Accounts Receivable (Per
      Attached Schedule A)

                	 	$
	 	 	9.	)	
                  Net
      Eligible Accounts Receivable (Line 7 Aging Balance minus Line
      8)

                	 	$
	 	 	 	 	 
      	 
      	 
      	 
	 	
                  DOMESTIC INVENTORY

                	 
      	 
	 	 	10.	)	
                  Inventory
      Balance Month Ending

                	 	$
	 	 	11.	)	
                  Less:
      Ineligible Inventory (Per
      Attached Schedule A)

                	 	$
	 	 	12.	)	
                  Add:  Cost
      in Excess of Billings

                	 	$
	 	 	13.	)	
                  Eligible
      Inventory (Line 10 minus
      Line 11 plus line 12)

                	 	$
	 	 	 	 	 
      	 
      	 
      	 
	 	
                  DOMESTIC BORROWING BASE

                	 
      	 
	 	 	14.	)	
                  a)  Accounts
      Receivable (80% of Line 9)

                	 	$
	 	 	 	 	
                  b)  Inventory
      (30% of Line 13 or $1,500,000 max.)

                	 	$
	 	 	15.	)	
                  Gross
      Availability (Line 14a +
      Line 14b)

                	 	$
	 	 	16.	)	
                  Lessor
      of Line 15 or $1,500,000 (Line
Limit)

                	 	$
	 	 	 	 	 
      	 
      	 
      	 
	 	
                  LOAN DETAIL

                	 
      	 
      	 
	 	 	 	 	
                  Line
      Of Credit Borrowings

                	 	$
	 	 	 	 	
                  L/Cs
      at 100%

                	 
      	 	$
	 	 	 	 	
                  Other
      (Specify)

                	 
      	 	$
	 	 	17.	)	
                  Total
      Loans Outstanding at Month-end

                	 	$
	 	 	18.	)	
                  Borrowing
      Base Reserves  (Per Attached Schedule
      A)

                	 	$
	 	 	19.	)	
                  Net
      Borrowing Base Availability (Line 16 minus Line 17 &
      18)

                	 	$
	 	 	 	 	 
      	 
      	 
      	 
	 	 	 	 	 
      	 
      	 
      	 
	
                  The
      undersigned represents and warrants that:

                	 
      	 
	
                  (A) The
      information provided above and in the accompanying supporting
      documentation is true, complete and correct,

                
	
                  and
      complies fully with the conditions, terms and covenants of the Business
      Loan Agreement dated

                	 
	
                  as
      amended to the date (the "Agreement") between the undersigned and Bank of
      America (the "Bank").

                
	
                  (B) Since
      the date of the last financial statement or certification furnished to the
      Bank:

                	 
	 	
                  (a)
      There has been no material adverse change in the financial condition or
      operations of the undersigned; and

                
	 	
                  (b)
      There is no event which is, or with notice or lapse of time or both would
      be, a default under the Agreement

                
	 	 	 	 	 
      	 
      	 
      	 
	
                  GSE
      Systems, Inc. & GSE Power Systems, Inc.

                	 
      	 
	 	 	 	 	 
      	 
      	 
      	 
	 	 	 	 	 
      	 
      	 
      	 
	
                  By:
      ________________________________________

                	
                  Date:

                	 
	
                  (Signature
      & Title)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]