EIGHTH AMENDMENT AND REAFFIRMATION AGREEMENT
dated as of June 29, 2020 (this “Agreement”),
by and among GSE SYSTEMS, INC., a Delaware corporation (“Parent”), GSE PERFORMANCE SOLUTIONS, INC., a Delaware corporation (“GSE Performance” and collectively with Parent, the “Borrowers” and each a “Borrower”), GSE TRUE NORTH CONSULTING, LLC, a Delaware limited liability company (“True North”), HYPERSPRING, LLC, a Delaware limited liability company (“Hyperspring”),
ABSOLUTE CONSULTING, INC., a Delaware corporation (“Absolute” and together with True North and Hyperspring collectively, the “Original Guarantors” and each an “Original Guarantor”), DP ENGINEERING, LLC, formerly DP Engineering Ltd. Co., a Delaware limited liability company (“DP Engineering”
and together with the Original Guarantors collectively, the “Guarantors” and each a “Guarantor” and together with the Borrowers collectively, the “Loan Parties” and each a “Loan Party”), and CITIZENS BANK, NATIONAL ASSOCIATION (the “Bank”). Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement (as defined below) or the Guaranty (as defined below), as applicable.
WHEREAS, pursuant to the terms of that certain Credit and Security Agreement, dated as of
December 29, 2016 (as the same may have been amended, renewed, replaced, or supplemented from time to time prior to the Closing Date (as defined in the Credit Agreement), the “Original Credit Agreement”), by and among Borrowers and Bank, the Bank agreed to provide a revolving line of credit to Borrowers in an amount not to exceed $5,000,000 pursuant to a revolving line of credit note dated as of the
Initial Closing Date (as defined in the Credit Agreement) of the Borrowers payable to the order of the Bank (the “RLOC Note”);
WHEREAS, Hyperspring executed and delivered a Guaranty and Suretyship Agreement (as the same may
have been amended, restated or modified from time to time, the “Hyperspring Guaranty”) dated as of December 29, 2016 in favor of Bank in connection with
Borrower entering into the Original Credit Agreement;
WHEREAS, Absolute executed and delivered a Guaranty and Suretyship Agreement (as the same may have
been amended, restated or modified from time to time, the “Absolute Guaranty”) dated as of September 20, 2017 in favor of Bank in connection with the Original
Credit Agreement;
WHEREAS, True North executed and delivered a Guaranty and Suretyship Agreement (as the same may
have been amended, restated or modified from time to time, the “True North Guaranty”) dated as of May 11, 2018 in favor of Bank in connection with the Credit
Agreement;
WHEREAS, GSE Performance executed and delivered a Pledge Agreement (as the same
may have been amended, restated or modified from time to time, the “GSE Performance
Pledge Agreement”) dated as of September 20, 2017 in favor of Bank in connection with the Original Credit Agreement;
WHEREAS, Borrowers and Bank entered into that certain Amended and Restated
Credit Agreement (as the same may have been amended, restated or modified from time to time, the “Credit Agreement”) dated as of May 11, 2018 to continue the
RLOC and to provide for a Term Loan Facility in a principal amount up to $25,000,000;
WHEREAS, Original Guarantors and Bank entered into that certain Security Agreement (as the same
may have been amended, restated or modified from time to time, the “Security Agreement”) dated as of May 11, 2018;
WHEREAS, pursuant to that certain Amendment and Reaffirmation Agreement dated as of May 11,
2018, the Borrowers, the Original Guarantors and the Bank agreed to amend the terms and conditions of the RLOC Note and the GSE Performance Pledge Agreement;
WHEREAS, pursuant to that certain Second Amendment and Reaffirmation Agreement dated as of May
25, 2018, the Borrowers, the Original Guarantors and the Bank agreed to amend certain terms and conditions of the Credit Documents to reflect the conversion of True North to a Delaware limited liability company;
WHEREAS, on February 15, 2019, (i) GSE Performance acquired all of the membership interests of DP
Engineering, (ii) the Borrowers, the Guarantors and the Bank executed that certain Third Amendment and Reaffirmation Agreement dated as of such date and
|
(iii)
|
DP Engineering executed and delivered a (a) Guaranty and Suretyship Agreement (the “DP Engineering Guaranty” and together with the True North Guaranty, the Hyperspring Guaranty and Absolute Guaranty collectively, the “Guaranty”) in favor of Bank in connection with the Credit Agreement and (b) Pledge Agreement in favor of Bank in connection with the Credit Agreement;
|
WHEREAS, pursuant to that certain Fourth Amendment and Reaffirmation Agreement
dated as of March 20, 2019, the Borrowers, the Guarantors and the Bank agreed to amend certain terms and conditions of the Credit Documents to reflect the conversion of DP Engineering to a Delaware limited liability company;
WHEREAS, pursuant to that certain Fifth Amendment and Reaffirmation Agreement dated as of June
28, 2019, the Borrowers, the Guarantors and the Bank agreed to amend certain financial covenants in the Credit Agreement;
WHEREAS, pursuant to that certain Sixth Amendment and Reaffirmation Agreement dated December 31,
2019, the Borrowers, the Guarantors and the Bank agreed to amend certain financial covenants in the Credit Agreement;
WHEREAS, pursuant to that certain Seventh Amendment and Reaffirmation Agreement dated March 31,
2020, the Borrowers, the Guarantors, and the Bank agreed to amend certain financial covenants, definitions, and other provisions in the Credit Agreement; and
WHEREAS, the parties hereto intend to amend certain financial covenants, definitions, and other
provisions in the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree, under seal, as follows:
2.2.4 of the Credit Agreement by Borrowers to Bank for the fiscal year ending on December 31, 2020.
|
(c)
|
“Section 7.1 Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shall maintain a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00, to be tested quarterly as of the last day of each quarter beginning
with the quarter ending December 31, 2021, on rolling four-quarter basis, calculated based on the financial statements received by the Bank in accordance with the terms of this Agreement. Notwithstanding the foregoing, the Borrower’s liabilities and
expenses under the PPP Loan shall be excluded in the calculation of Fixed Charge Coverage Ratio for any period of time of determination unless, until and only to the extent it has been finally determined that 10% or more of the Borrower’s PPP Loan
will not be forgiven pursuant to Section 1106 of the CARES Act.”
|
(d)
|
“Section 7.2. Leverage Ratio. Borrower and its Subsidiaries shall not exceed a maximum Leverage Ratio, to be tested quarterly as of the last day of each quarter beginning with the quarter ending March 31, 2021, on
a rolling four-quarter basis, calculated based on the financial statements received by the Bank in accordance with the terms of this Agreement, as follows: (i) 3.00 to 1.00 for the period ending on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) 2.75 to 1.00 for the period
ending on June 30,
2021, (iii) 2.50 to 1.00 for the period ending on September 30, 2021, and (iv) 2.00
to 1.00 for the period ending on December 31, 2021 and for the periods ending on each December 31st,
March 31st, June 30th and September 30th thereafter.
Notwithstanding the foregoing, the Borrower’s liabilities and expenses under the PPP Loan shall be excluded in
the calculation of Leverage Ratio for any period of time of determination unless, until and only to the extent it has been finally determined that 10% or more of the Borrower’s PPP Loan will not be forgiven pursuant to Section 1106 of the CARES Act.”
|
(e)
|
|
(f)
|
“Section 7.5 Minimum USA Liquidity. Borrower and its Subsidiaries shall maintain a minimum USA Liquidity of at least $3,500,000.00 in the aggregate, to be tested bi-weekly as of the fifteenth (15th) and the last
day of each month beginning on September 15, 2020 and thereafter and to be reported by Borrower to Bank within five (5) Business Days of such measurement date.”
|
(b)
|
Representations and Warranties
Each Loan Party, to the extent applicable, hereby represents and warrants, which representations
and warranties shall survive execution and delivery of this Agreement, as follows:
Section 3.01. Organization. Each Loan Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.
Section 3.02. Authority; Enforceability. Each Loan Party has the corporate or limited liability company power to execute, deliver and carry out the terms and provisions of this Agreement and has taken
all necessary corporate and other action, to authorize the execution, delivery and performance by it of this Agreement. Each Loan Party has duly executed and delivered this Agreement, and this Agreement constitutes a legal, valid and binding
obligation of such Loan Party, enforceable against it in accordance with the terms hereof.
Section 3.03. Credit Documents. The representations and warranties made by each Loan Party and set forth in the Credit Documents are true and correct on and as of the date hereof with the same
effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case any such representation and warranty shall have been true and correct as of such earlier date).
Miscellaneous
Section 4.01. Conditions to Effectiveness of Agreement. The Bank’s willingness to agree to the amendments set forth in this Agreement is subject to (a) the execution and
delivery to the Bank of (i) this Agreement by the Borrowers and Guarantors and (ii) the Collateral Assignment Termination Agreement by GSE Performance; and (b) the payment by Borrowers to the Bank of (i) $7,000,000 to be applied first to the
repayment of the Hedging Contract with the Bank, and second to the repayment of the Term Loan Facility pursuant to the Credit Agreement, (ii) a $10,000 amendment fee, and (iii) the reasonable fees and expenses of the Bank’s outside and in-house
counsel in connection with this Agreement.
Section 4.02. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.9 of the Credit Agreement or Section 13 of the Guaranty, as applicable.
Section 4.03. Expenses. Each Loan Party acknowledges and agrees that the Bank shall be entitled to reimbursement of expenses as provided in Section 10.2 of the Credit Agreement
and Section 10 of the Guaranty, as applicable.
Section 4.04. Credit Document. This Agreement is a “Credit Document” executed pursuant to the Credit Agreement and shall be construed, administered and applied in accordance
with the terms and provisions thereof.
Section 4.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 4.06. No Novation. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Credit Documents, which shall
remain in full force and effect except as modified by this Agreement and the Credit Agreement.
Section 4.07. Governing Law; Waiver of Jury Trial. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. EACH LOAN PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT OR INSTITUTED BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, ON OR WITH RESPECT TO THIS AGREEMENT, ANY OF THE OTHER DOCUMENTS,
THE COLLATERAL OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, WHETHER BY CLAIM OR COUNTERCLAIM.
Section 4.08. Remaining Force and Effect. Except as specifically amended hereby, the Credit Documents remain in full force and effect in accordance with their original terms and
conditions.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed under seal by its respective authorized officers as of the day and year first above written.
|
BANK:
|
|
|
Witness/Attest:
|
CITIZENS BANK, NATIONAL ASSOCIATION
By: (SEAL)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Senior Vice President
|
