-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AzeUsKmDWTgNXunyXm4MdSzkAalnm3nUZvhbpe8W3RWzbEbtqHH78m14UI3GkQze y+ssApynNZDPMsQZRD2wFA== 0000070415-01-500017.txt : 20010816 0000070415-01-500017.hdr.sgml : 20010816 ACCESSION NUMBER: 0000070415-01-500017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GP STRATEGIES CORP CENTRAL INDEX KEY: 0000070415 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 131926739 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07234 FILM NUMBER: 1714491 BUSINESS ADDRESS: STREET 1: 9 W 57TH ST STREET 2: STE 4170 CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2122309500 MAIL ADDRESS: STREET 1: 9 WEST 57TH STREET STREET 2: STE 4107 CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL PATENT DEVELOPMENT CORP DATE OF NAME CHANGE: 19920703 10-Q 1 tenqgp.txt GPSTRATEGIES SECOND QTR 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 30, 2001 or [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 1-7234 GP STRATEGIES CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 13-1926739 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9 West 57th Street, New York, NY 10019 (Address of principal executive offices) (Zip code) (212) 826-8500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period) that the registrant was required to file such reports and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of each of issuer's classes of common stock as of August 6, 2001: Common Stock 12,352,594 shares Class B Capital 800,000 shares TABLE OF CONTENTS GP STRATEGIES CORPORATION AND SUBSIDIARIES Page No. Part I. Financial Information Consolidated Condensed Balance Sheets - June 30, 2001 and December 31, 2000 1 Consolidated Condensed Statements of Operations - Three Months and Six Months Ended June 30, 2001 and 2000 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000 4 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Part II. Other Information 21 Signatures 22 PART I. FINANCIAL INFORMATION GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands)
June 30, December 31, 2001 2000 ------ ---------- ASSETS (unaudited) * Current assets Cash and cash equivalents $ 2,153 $ 2,487 Trading securities 8,830 Accounts and other receivables 45,176 46,388 Inventories 1,514 1,688 Costs and estimated earnings in excess of billings on uncompleted contracts 10,422 12,515 Prepaid expenses and other current assets 5,581 3,955 --------- ---------- Total current assets 64,846 75,863 --------- --------- Investments, advances and marketable securities 62,510 62,093 --------- --------- Property, plant and equipment, net 9,873 9,787 --------- -------- Intangible assets, net of accumulated amortization of $33,473 and $31,618 59,063 59,992 --------- ---------- Other assets 4,530 4,843 --------- ----------- $200,822 $212,578 ======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 2000 has been summarized from the Company's audited Consolidated Balance Sheet as of that date. See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (in thousands)
June 30, December 31, 2001 2000 ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) * Current liabilities: Current maturities of long-term debt $ 1,401 $ 1,311 Short-term borrowings 30,093 36,162 Accounts payable and accrued expenses 22,669 25,234 Billings in excess of costs and estimated earnings on uncompleted contracts 11,054 11,322 -------- -------- Total current liabilities 65,217 74,029 -------- --------- Long-term debt less current maturities 12,209 16,301 -------- -------- Deferred tax 6,698 6,504 -------- --------- Other non-current liabilities 2,666 3,226 -------- --------- Stockholders' equity Common stock 127 125 Class B capital stock 8 8 Additional paid in capital 180,674 179,955 Accumulated deficit (86,504) (86,994) Accumulated other comprehensive income 27,540 27,237 Note receivable from stockholder (4,095) (4,095) Treasury stock, at cost (3,718) (3,718) -------- ---------- Total stockholders' equity 114,032 112,518 -------- --------- $200,822 $212,578 ======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 2000 has been summarized from the Company's audited Consolidated Balance sheet as of that date. See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months Six months ended June 30, ended June 30, ---------------- ------------------------ 2001 2000 2001 2000 ------- ------ ------- --------- Sales $ 50,347 $ 50,328 $ 99,461 $ 98,128 Cost of sales 43,373 45,379 86,128 88,817 -------- -------- ------- --------- Gross margin 6,974 4,949 13,333 9,311 Selling, general & administrative expenses (6,997) (7,579) (11,096) (12,870) Interest expense (1,155) (1,370) (2,555) (2,660) Investment and other income (loss), net 291 (50) 781 281 Gain on trading securities 2,203 137 427 468 Asset impairment charge - (18,474) - (18,474) ------------- --------- ------------- --------- Income (loss) before income taxes 1,316 (22,387) 890 (23,944) Income tax expense (582) (179) (400) (375) ---------- ---------- --------- --------- Net income (loss) $ 734 $(22,566) $ 490 $(24,319) ========== ======== ========= ======== Net income (loss) per share: Basic and diluted $ .06 $ (1.85) $ .04 $ (2.02) =========== ======== ========== ========== Dividends per share none none none none ========== =========== ========== =============
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six months ended June 30, 2001 2000 ------ ------- Cash flows from operations: Net income (loss) $ 490 $(24,319) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,042 3,583 Issuance of stock for profit incentive plan 607 754 Non-cash compensation and other expense 523 1,600 Equity (income) loss on investments (296) 229 Proceeds from sale of trading securities 9,395 616 Asset impairment charge 18,474 Gain on trading securities (427) (468) Changes in other operating items (3,179) 208 -------- -------- Net cash provided by operating activities 10,155 677 -------- -------- Cash flows from investing activities: Additions to property, plant & equipment (1,077) (294) Proceeds from disposal of fixed assets 507 Reduction of investments and other assets, net 416 96 -------- --------- Net cash used for investing activities (661) (309) --------- -------- Cash flows from financing activities: Repayment of short-term borrowings (6,069) (3,017) Proceeds from sale of Class B Stock 1,200 Proceeds from MXL mortgage 1,680 Repayment of long-term debt (5,682) (1,020) -------- ------- Net cash used for financing activities (10,071) (2,579) -------- ------- Effect of exchange rate changes on Cash and cash equivalents 243 125 -------- --------
GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands)
Six months ended June 30, 2001 2000 Net decrease in cash and cash equivalents $ (334) $ (1,468) Cash and cash equivalents at the beginning of the periods 2,487 4,068 -------- -------- Cash and cash equivalents at the end of the periods $ 2,153 $ 2,600 ======== ======== Cash paid during the periods for: Interest $ 2,172 $ 2,980 ======== ======== Income taxes $ 212 $ 311 ========= =========
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Earnings per share Income (loss) per share (EPS) for the periods ended June 30, 2001 and 2000 are as follows (in thousands, except per share amounts):
Three months Six months ended June 30, ended June 30, -------------------------- --------------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Basic and Diluted EPS Net income (loss) $ 734 $(22,566) $ 490 $(24,319) Weighted average shares outstanding basic 13,089 12,178 13,046 12,043 Weighted average shares outstanding diluted 13,141 13,098 Basic and diluted net income (loss) per share $ .06 $ (1.85) $ .04 $ (2.02)
Basic earnings per share are based upon the weighted average number of common shares outstanding, including Class B common shares, during the period. Class B common stockholders have the same rights to share in profits and losses and liquidation values as common stockholders. In 2000, even though the Company still had stock options and warrants outstanding, diluted earnings per share was not presented due to the Company's net loss, which made the effect of the potentially dilutive securities anti-dilutive. For the three and six months ended June 30, 2001, weighted average shares outstanding, assuming dilution, are 13,056,000 and 13,012,000 shares, respectively. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. Long-term debt Long-term debt consists of the following (in thousands): June 30, December 31, 2001 2000 --------- ---------- Term loan (See Note 4) $ 7,769 $13,313 Mortgage on MXL facility 1,655 Senior subordinated debentures 708 758 Subordinated convertible note 2,640 2,640 Other 838 901 -------- ----------- 13,610 17,612 Less current maturities (1,401) (1,311) -------- ---------- $12,209 $16,301 ======= ======= On March 8, 2001, MXL Industries, Inc. ("MXL"), a wholly owned subsidiary of the Company entered into a loan secured by a mortgage covering the real estate and fixtures on its property in Pennsylvania in the amount of $1,680,000. The loan requires monthly repayments of $8,333 plus accrued interest and matures on March 8, 2011 with interest at 2.5% above the one month LIBOR rate. The loan is guaranteed by the Company. The proceeds of the loan were used to repay a portion of the Company's short-term borrowings pursuant to its amended agreement described below in Note 4. See Note 8, Subsequent Event. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Comprehensive income (loss) The following are the components of comprehensive income (loss) (in thousands):
Three months ended Six months ended June 30, June 30, 2001 2000 2001 2000 ------- -------- ------- --------- Net income (loss) $ 734 (22,566) $ 490 $(24,319) --------- ------- --------- -------- Other comprehensive income (loss) before tax: Net unrealized gain (loss) on available-for-sale-securities 14,406 (665) 191 599 Foreign currency translation adjustment 50 (120) 243 125 ------------ ----------- ---------- ------- Other comprehensive income (loss), before tax 14,456 (785) 434 724 --------- --------- ---------- ---------- Income tax (expense) benefit relating to items of other comprehensive income (5,663) 13 (131) (44) --------- ----------- ---------- ----------- Comprehensive income (loss), net of tax $ 9,527 $(23,338) $ 793 $(23,639) ======== ======== ========= ========
The components of accumulated other comprehensive income (loss) are as follows:
June 30, December 31, 2001 2000 --------- --------- Net unrealized gain on available-for-sale-securities $ 45,803 $ 45,612 Foreign currency translation adjustment (438) (681) --------- -------- Accumulated other comprehensive income before tax 45,365 44,931 Accumulated income tax expense related to items of other comprehensive income (17,825) (17,694) -------- -------- Accumulated other comprehensive income, net of tax $ 27,540 $ 27,237 ======== ========
GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 4. Short-term borrowings The Company and General Physics Canada Ltd. (GP Canada), an Ontario corporation and a wholly-owned subsidiary of General Physics, entered into a credit agreement, dated as of June 15, 1998, as amended and restated as of August 31, 2000 (the "Amended and Restated Agreement") with various banks. As of June 15, 2001, the Company and GP Canada entered into the Third Amendment to the Amended and Restated Agreement (the "Third Amendment"), which among other things, (i) extended the maturity date of the revolving credit notes to October 15, 2001, (ii) reduced the amount available under the revolving credit loan to $42,000,000, (iii) amended the interest rate from LIBOR plus 2.50% to LIBOR plus 2.95% and (iv) amended certain financial covenants. The Third Amendment required certain mandatory asset sales and refinancings by August 30, 2001, which condition has been satisfied by the Company. The Company utilized the proceeds from such asset sales and refinancings to reduce its term loan from $13,313,000 at December 31, 2000 to $7,769,000 at June 30, 2001. The term loan is payable in quarterly installments of $187,500, with a final payment due on June 15, 2003. At June 30, 2001, the amount outstanding under the revolving credit facility is $30,093,000 and is included in Short-term borrowings in the Consolidated Condensed Balance Sheet. At June 30, 2001, the Company had approximately $11,000,000 available to be borrowed under the Credit Agreement and was in compliance with all of its financial covenants. Based upon ongoing discussions with its banks and the fact that the Company has been in compliance with all financial covenants under its Amended and Restated Agreement, the management of the Company believes that its credit facility will either be further extended or refinanced by October 15, 2001, the current expiration date of the Amended and Restated Agreement. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. Business segments The operations of the Company currently consist of the following four business segments, by which the Company is managed. The Company's principal operating subsidiary is General Physics Corporation (GP). GP is a performance improvement company that assists productivity driven organizations to maximize workforce performance by integrating people, processes and technology. GP is a total solutions provider for strategic training, engineering, consulting and technical support services to Fortune 1000 companies, government, utilities and other commercial customers. GP operates in two business segments. The Manufacturing & Process Group provides technology based training, engineering, consulting and technical services to leading companies in the automotive, steel, power, oil and gas, chemical, energy, pharmaceutical and food and beverage industries, as well as to the government sector. The Information Technology Group provides IT training programs and solutions, including Enterprise Solutions and comprehensive career training and transition programs. The Optical Plastics Group, which consists of MXL, manufactures and distributes coated and molded plastic products. The Hydro Med Group consists of Hydro Med Sciences, a drug delivery company which is engaged in Phase III clinical trials for the treatment of prostate cancer. Financial information for the three and six months ended June 30, 2000 has been restated to show all information for the Manufacturing Services Group and Process and Energy Group that were combined into the Manufacturing and Process Group. The management of the Company does not allocate the following items by segment: Investment and other income, net, interest expense, selling, general and administrative expenses, depreciation and amortization expense, income tax expense, significant non-cash items and long-lived assets. There are deminimis inter-segment sales. The reconciliation of gross margin to net income (loss) is consistent with the presentation on the Consolidated Condensed Statements of Operations. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. Business segments (Continued) The following tables set forth the sales and gross margin of each of the Company's operating segments (in thousands):
Three months ended Six months ended June 30, June 30, 2001 2000 2001 2000 ------- -------- ------- ------- Sales Manufacturing and Process $44,496 $40,089 $87,333 $77,083 Information Technology 2,888 7,241 6,106 14,989 Optical Plastics 2,962 2,958 6,019 5,916 Hydro Med and Other 1 40 3 140 ------------ --------- ---------- ----------- $50,347 $50,328 $99,461 $98,128 ------- ------- ------- ------- Gross margin Manufacturing and Process $ 5,848 $ 5,457 $ 11,206 $ 9,956 Information Technology 449 (1,187) 768 (2,005) Optical Plastics 822 807 1,660 1,601 Hydro Med and Other (145) (128) (301) (241) --------- ---------- -------- ---------- $ 6,974 $ 4,949 $13,333 $ 9,311 ------- ------- ------- -------
Information about the Company's net sales in different geographic regions, which are attributed to countries based on location of customers, is as follows (in thousands):
Three months ended Six months ended June 30, June 30, ------------------------ --------------------- 2001 2000 2001 2000 ------- --------- --------- ------- United States $46,740 $43,072 $92,125 $83,100 Canada 890 2,922 1,956 6,027 United Kingdom 1,641 3,123 3,400 6,761 Latin America 1,076 1,211 1,980 2,240 -------- --------- ------- ---------- $50,347 $50,328 $99,461 $98,128 ------- ------- ------- -------
GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. Business segments (Continued) Information about the Company's identifiable assets in different geographic regions, is as follows (in thousands): June 30, December 31, 2001 2000 -------- ----------- United States $190,998 $205,797 Canada 4,111 3,371 United Kingdom 2,734 1,928 Latin America and other 2,979 1,482 ---------- -------- $200,822 $212,578 -------- -------- 6. Asset impairment charge and restructuring charges During 1999, the Company adopted restructuring plans, primarily related to its IT Business segment. The Company took steps in order to change the focus of the IT group from open enrollment information technology training courses to project oriented work for corporations, which was consistent with the focus of General Physics Corporation's (GP) current business. In connection with the restructuring, the Company recorded a charge of $7,374,000 in 1999. The Company believed at that time that the strategic initiatives and cost cutting moves taken in 1999 and the first quarter of 2000 would enable the IT Group to return to profitability in the last six months of 2000. However, those plans were not successful, and the Company determined that it could no longer bring the open enrollment IT business to profitability. Additionally there had been further impairment to intangible and other assets. In July 2000, as a result of the continued operating losses incurred by the IT Group, as well as the determination that revenues would not increase to profitable levels, the Company decided to close its open enrollment IT business in the third quarter of 2000. As a result, the Company recorded asset impairment charges of $19,245,000 during the year ended December 31, 2000, related to write-offs of intangible assets, property, plant and equipment, and other assets of the IT Group. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 6. Asset impairment charge and restructuring charges (Continued) In addition, the Company recorded an $8,630,000 restructuring charge, net of reversals, in 2000. During the period ended June 30, 2001 and the year ended December 31, 2000, the Company utilized $2,120,000 (including current period adjustments of $374,000) and $3,884,000, respectively, and reversed $774,000 and $180,000, respectively. These reversals are included in Selling, general and administrative expenses in the Consolidated Condensed Statement of Operations for the period ended June 30, 2001. Of the remaining $4,345,000 balance at June 30, 2001 and $6,865,000 at December 31, 2000, $1,685,000 and $3,639,000, respectively, were included in Accounts payable and accrued expenses and $2,660,000 and $3,226,000, respectively, were included in Other non-current liabilities in the Consolidated Condensed Balance Sheet. The components of the 2001 and 2000 restructuring charges are as follows (in thousands):
Severance Lease and and related related Contractual Other benefits obligations obligations costs Total - -------------------------------------------------------------------------------------------------------------------- Balance December 31, 2000 $ 142 $ 5,298 $ 1,425 $ - $ 6,865 - -------------------------------------------------------------------------------------------------------------------- Utilization (196) (1,399) (316) (209) (2,120) Reversal of restructuring charges during 2001 (373) (401) (774) Other Adjustments during 2001 81 29 55 209 374 - -------------------------------------------------------------------------------------------------------------------- Balance June 30, 2001 $ 27 $ 3,555 $ 763 $ - $ 4,345 - --------------------------------------------------------------------------------------------------------------------
The remaining amounts that had been accrued for severance and related benefits and contractual obligations will be expended by December 31, 2001. Lease obligations are presented at their present value, net of assumed sublets. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 7. Litigation On January 4, 2001, the Company commenced an action alleging that MCI Communications Corporation, Systemhouse, and Electronic Data Systems Corporation, as successor to Systemhouse, committed fraud in connection with the Company's 1998 acquisition of Learning Technologies from the defendants for $24.3 million. The Company seeks actual damages in the amount of $117.9 million plus interest, punitive damages in an amount to be determined at trial, and costs. In February 2001, the defendants filed answers denying liability. No counterclaims against the plaintiffs have been asserted. The case is currently in discovery. The complaint, which is pending in the New York State Supreme Court, alleges that the defendants created a doctored budget to conceal the poor performance of the United Kingdom operation of Learning Technologies. The complaint also alleges that the defendants represented that Learning Technologies would continue to receive business from Systemhouse even though defendants knew that the sale of Systemhouse to EDS was imminent and that such business would cease after such sale. 8. Subsequent Event On July 3, 2001, MXL, a wholly owned subsidiary of the Company entered into a loan secured by a mortgage covering the real estate and fixtures on its property in Illinois in the amount of $1,250,000. The loan requires monthly payments of principal and interest in the amount of $11,046 and matures on June 26, 2006 with interest at a fixed rate of 8.75% per annum. The loan is guaranteed by the Company. The proceeds of the loan were used to repay a portion of the Company's term loan pursuant to its Amended and Restated Agreement described above in Note 4. GP STRATEGIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Overview During the first three quarters of 2000, the Company had five operating business segments. However, in the fourth quarter of 2000, as a result of organizational and operational changes at General Physics and the shut down of the IT open enrollment business in the third quarter of 2000, the Company combined the Manufacturing Services Group with the Process and Energy Group. The discussion and disclosure that follows assumes that the Manufacturing Services Group and the Process & Energy segments were combined as of January 1, 2000 to form the Manufacturing & Process Group. Two of these segments, the Manufacturing & Process Group and the IT Group, are managed through the Company's principal operating subsidiary General Physics, the third through its operating subsidiary MXL Industries and the fourth through its subsidiary Hydro Med Sciences. In addition, the Company holds a number of investments in publicly held companies, including publicly traded stock in Millennium Cell Inc. General Physics is a performance improvement company that assists productivity driven organizations to maximize workforce performance by integrating people, processes and technology. General Physics is a total solution provider for strategic training, engineering, consulting and technical support services to Fortune 1000 companies, government, utilities and other commercial customers. General Physics consists of two segments: the Manufacturing & Process Group and the IT Group. For the quarter ended June 30, 2001, the Company had income before income taxes of $1,316,000 compared to loss before income taxes of $22,387,000 for the quarter ended June 30, 2000. The income in the second quarter of 2001 was attributable to the $2,203,000 gain primarily from the sale of securities of Millennium Cell Inc., offset by a non-cash expense of $872,000 relating to the Company's Deferred Compensation Plan. The income before income taxes for the second quarter of 2001 also included approximately $300,000 (of which $250,000 was non-cash) relating to fees and options granted to a financial consultant. The loss before income taxes in the second quarter of 2000 was primarily due to the operating losses incurred by the now closed open enrollment IT Group, which included an Asset Impairment charge of $18,474,000. In addition, in the 2nd quarter of 2000, the Company also recorded a non-cash expense of $1,600,000 relating to the Company's Deferred Compensation Plan. The Manufacturing and Process Group had increased operating profits in the quarter ended June 30, 2001, compared to the quarter ended June 30, 2000 due to increased sales offset by a slight decrease in gross margin percentage. For the six months ended June 30, 2001, the Company had income before income taxes of $890,000 compared to a loss before income taxes of $23,944,000 for the six months ended June 30, 2000. The six months ended June 30, 2001 included a $427,000 gain from trading securities and a non-cash credit of $273,000 relating to the Company's Deferred Compensation Plan. The six months ended June 30, 2000 loss was primarily due to the operating losses and an Asset Impairment charge of $18,474,000 relating to the now closed open enrollment IT Group and a non-cash compensation expense of $1,600,000.
Three months ended Six months ended June 30, June 30, ---------------------------- ---------------------- 2001 2000 2001 2000 ------- -------- ------- ------- Sales Manufacturing and Process $44,496 $40,089 $87,333 $77,083 Information Technology 2,888 7,241 6,106 14,989 Optical Plastics 2,962 2,958 6,019 5,916 Hydro Med and Other 1 40 3 140 ------------ --------- ---------- ----------- $50,347 $50,328 $99,461 $98,128 ------- ------- ------- -------
For the quarter and six months ended June 30, 2001, sales increased by $19,000 to $50,347,000 from $50,328,000 and $1,333,000 from $98,128,000 to $99,461,000, respectively, from the corresponding periods in 2000. The increased sales in 2001 within the Manufacturing & Process Group was primarily due to increased sales from GP's e-Learning subsidiary as well as increased sales from utility customers. However, for the quarter and six months ended June 30, 2001, these increases were largely offset by reduced sales in the IT Group resulting from the Company's decision to close the open enrollment business in the third quarter of 2000 and focus on providing training for Fortune 1000 manufacturing and process clients.
Three months ended Six months ended June 30, June 30, 2001 % 2000 % 2001 % 2000 % ------- ----- -------- ----- ------- ----- ------- ----- Gross margin Manufacturing and Process $ 5,848 13.1 $ 5,457 13.6 $11,206 12.8 $ 9,956 12.9 Information Technology 449 15.5 (1,187) - 768 12.6 (2,005) - Optical Plastics 822 27.8 807 27.3 1,660 27.6 1,601 27.1 Hydro Med and Other (145) - (128) - (301) - (241) - -------- ------ ---------------- ------- ------ -------- ------ $ 6,974 13.9 $ 4,949 9.8 $13,333 13.4 $ 9,311 9.5 ------- ---- ------- ---- ------- ---- ------- ----
Consolidated gross margin of $6,974,000 or 13.9% of sales, for the quarter ended June 30, 2001, increased by $2,025,000 compared to the consolidated gross margin of $4,949,000, or 9.8% of sales, for the quarter ended June 30, 2000. For the six months ended June 30, 2001, gross margin increased by $4,022,000 from $9,311,000 to $13,333,000. The increased gross margin in both the quarter and the six months ended June 30, 2001 occurred as a result of increased sales in the Manufacturing and Process Group, which was offset by a slight reduction in the gross margin percentage. In addition, the negative gross margin incurred by the IT Group in 2000 was eliminated when the open enrollment IT business closed in the third quarter of 2000. Selling, general and administrative expenses For the quarter ended June 30, 2001, selling, general and administrative (SG&A) expenses were $6,997,000 compared to $7,579,000 in the second quarter of 2000. The reduction in SG&A of $582,000 in 2001 is attributable to the closing of the Company's open enrollment IT operations offset by a non-cash expense of $1,600,000 (as compared to $273 for the period ended June 30, 2001) relating to the Company's Deferred Compensation Plan. For the six months ended June 30, 2001, Selling, general and administrative expenses was reduced by $1,774,000 from $12,870,000 to $11,096,000 primarily the result of the $1,600,000 charge for the period ending June 30, 2000 relating to the Company's Deferred Compensation Plan (as compared to $273 for the period ended June 30, 2001). Interest expense For the quarter ended June 30, 2001, interest expense was $1,155,000 compared to $1,370,000 for the quarter ended June 30, 2000. The decreased interest expense in 2001 was attributable to both a decrease in the Company's outstanding indebtedness and a reduction in variable interest rates. For the six months ended June 30, 2001, there was a decrease in interest expenses of $105,000 from $2,660,000 to $2,555,000 due to the reduction of indebtedness in the second quarter. Investment and other income (loss), net For the three and six months ended June 30, 2001, investment and other income (loss), net was $291,000 and $781,000 as compared to $(50,000) and $281,000 for the quarter and six months ended June 30, 2000. The increase in investment and other income was primarily attributable to increased equity income recognized on investments in 20% to 50% owned companies. Income tax expense For the quarter and six months ended June 30, 2001, the Company recorded an income tax expense of $582,000 and $400,000, which represents the Company's estimated effective federal, state and local, and foreign tax rate. In the quarter and six months ended June 30, 2000, the Company recorded an income tax expense of $179,000 and $375,000, which represents the applicable federal, state and local, and foreign tax expense for these periods. Liquidity and capital resources At June 30, 2001, the Company had cash and cash equivalents totaling $2,153,000. The Company has sufficient cash and cash equivalents, long-term investments and borrowing availability under existing and potential lines of credit as well as the ability to obtain additional funds from its operating subsidiaries in order to fund its working capital requirements. For the period ended June 30, 2001, the Company's working capital decreased by $1,790,000 to a net working capital deficit of $371,000, primarily reflecting the effect of decreases in Accounts and other receivables, offset by reductions in Accounts payable and accrued expenses. The decrease in cash and cash equivalents of $334,000 for the six months ended June 30, 2001 resulted from cash provided by operations of $10,155,000 offset by cash used for financing activities of $10,071,000. Cash used in financing activities consisted primarily of repayments of short-term borrowings and the long-term debt, partially offset by proceeds from the MXL mortgage. Based upon the ongoing discussions with its banks and the fact that the Company has been in compliance with all financial covenants under its amended and restated agreement, the management of the Company believes that the credit facility agreement will be either extended or refinanced by October 15, 2001 (See Note 4). Recent accounting pronouncements In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. As of the date of adoption, the Company expects to have unamortized goodwill in the amount of approximately $56,000,000 and unamortized identifiable intangible assets in the amount of approximately $1,000,000 both of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill was approximately $2,800,000 and $1,300,000 for the year ended December 31, 2000 and the six months ended June 30, 2001, respectively. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. Adoption of a Common European Currency On January 1, 1999, eleven European countries adopted the Euro as their common currency. From that date until January 1, 2002, debtors and creditors may choose to pay or to be paid in Euros or in the former national currencies. On and after January 1, 2002, the former national currencies will cease to be legal tender. The Company is currently reviewing its information technology systems and upgrading them as necessary to ensure that they will be able to convert among the former national currencies and the Euro, and process transactions and balances in Euros, as required. The Company has sought and received assurances from the financial institutions with which it does business that they will be capable of receiving deposits and making payments both in Euros and in the former national currencies. The Company does not expect that adapting its information technology systems to the Euro will have a material impact on its financial condition or results of operations. The Company is also reviewing contracts with customers and vendors calling for payments in currencies that are to be replaced by the Euro, and intends to complete in a timely way any required changes to those contracts. Adoption of the Euro is likely to have competitive effects in Europe, as prices that had been stated in different national currencies become directly comparable to one another. In addition, the adoption of a common monetary policy throughout the countries adopting the Euro can be expected to have an effect on the economy of the region. These competitive and economic effects cannot be predicted with certainty, and there can be no assurance that they will not have a material effect on the Company's business in Europe. Forward-looking statements The forward-looking statements contained herein reflect GP Strategies' management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, all of which are difficult to predict and many of which are beyond the control of GP Strategies, including, but not limited to those risks and uncertainties detailed in GP Strategies' periodic reports and registration statements filed with the Securities and Exchange Commission. GP STRATEGIES CORPORATION AND SUBSIDIARIES QUALIFICATION RELATING TO FINANCIAL INFORMATION June 30, 2001 The financial information included herein is unaudited. In addition, the financial information does not include all disclosures required under generally accepted accounting principles because certain note information included in the Company's Annual Report has been omitted; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The results for the 2001 interim period are not necessarily indicative of results to be expected for the entire year. GP STRATEGIES CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 10. Employment Agreement dated as of May 1, 2001 between the Company and Andrea Dale Kantor. 10.1 Third Amendment to Amended and Restated Credit Agreement dated as of June 15, 2001 among GP Strategies Corporation, General Physics Canada LTD and Fleet National Bank (f/k/a/ Fleet Bank, National Association) as agent to the Lenders and as Issuing Bank. b. Reports None GP STRATEGIES CORPORATION AND SUBSIDIARIES June 30, 2001 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. GP STRATEGIES CORPORATION DATE: August 14, 2001 Jerome I. Feldman Chief Executive Officer DATE: August 14, 2001 Scott N. Greenberg President & Chief Financial Officer EX-10 3 exhbitten.txt ADK EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT AGREEMENT, dated as of May 1, 2001, between GP Strategies Corporation, a Delaware corporation with principal executive offices at 9 West 57th Street, Suite 4170, New York, New York 10019 (the "Company"), and Andrea Dale Kantor, residing at, New York, New York x ("Employee"). W I T N E S S E T H WHEREAS, the Company desires to employ Employee upon the terms and subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants, and conditions herein contained and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound hereby agree as follows: Section 1. Employment. ----------- The Company hereby agrees to continue to employ Employee, and Employee hereby agrees to continue to serve the Company, all upon the terms and subject to the conditions set forth in this Agreement. Section 2. Capacity and Duties. Employee is and shall be employed in the capacity of Vice President and General Counsel of the Company and shall have the duties, responsibilities, and authorities normally performed by the vice president and general counsel of a company and such other duties, responsibilities, and authorities as are assigned to her by the Board of Directors of the Company (the "Board") so long as such additional duties, responsibilities, and authorities are consistent with Employee's position and level of authority as Vice President and General Counsel of the Company. Employee shall devote substantially all of her business time and attention to promote and advance the business of the Company. Section 3. Term of Employment. Unless sooner terminated in accordance with the provisions of this Agreement, the term of employment of Employee by the Company pursuant to this Agreement shall be for the period (the "Employment Period") commencing on the date hereof and ending on June 30, 2004; provided, however, that if this Agreement has not been terminated in accordance with the provisions hereof prior to June 30, 2002, the Employment Period shall be extended on June 30, 2002 to June 30, 2005. Section 4. Place of Employment. Employee's principal place of work shall be located at the principal offices of the Company, currently located in New York, New York. The Company's principal offices shall not be relocated outside of the New York/New Jersey Metropolitan Area without Employee's consent. Section 5. Compensation. During the Employment Period, subject to all the terms and conditions of this Agreement and as compensation for all services to be rendered by Employee under this Agreement, the Company shall pay to or provide Employee with the following: (a) Base Salary. Commencing May 1, 2001, the Company shall pay to Employee a base annual salary at the rate of $190,000. Each May 1 during the Employment Period, the base annual salary shall be increased, as determined by the Board, by a minimum of the greater of (i) 3% and (ii) the percentage increase in the Consumer Price Index (as hereinafter defined) in effect for the month of March preceding the May 1 in question compared to the Consumer Price Index in effect for the prior month of March. The "Consumer Price Index" shall mean the Consumer Price Index for all Urban Consumers published by the Bureau of Labor Statistics, United States Department of Labor, or the supplement or successor thereto if publication of such index should be discontinued. The base salary will be payable at such intervals (at least monthly) as salaries are paid generally to other executive officers of the Company. (b) Bonus. Each December during the Employment Period, commencing in 2001, the Board shall determine Employee's bonus (the "Bonus") for the year then ending, based upon the Company's revenues, profits or losses, financing activities, and such other factors deemed relevant by the Board. Any Bonus shall be payable to Employee on or after January 2 of the following year. (c) Options. The Company shall grant to Employee under its option plan, options to purchase shares of the common stock of the Company at an exercise price equal to the market price on the date of grant. Such options shall accelerate as provided in Section 11(d)(ii)(C). (d) Vacation. Employee shall be entitled to vacation in accordance with the Company's policy for its senior executives. Vacation may be carried into the subsequent year if not used in the year earned. (e) Automobile. The Company shall provide Employee with an automobile of her choice (comparable to the automobile currently provided by the Company to Employee) at the Company's expense and shall pay the maintenance, gas, and insurance expenses in connection with such automobile. Such automobile shall be equipped with a car phone to be paid for by the Company. (f) Life and Disability Insurance. The Company shall maintain the existing life and disability insurance policies covering Employee. (g) Employee Benefit Plans. Employee shall be entitled to participate in all employee benefit plans maintained by the Company for its senior executives or employees, including without limitation the Company's medical and 401(k) plans. Section 6. Expenses. The Company shall reimburse Employee for all reasonable expenses (including, but not limited to, business travel and customer entertainment expenses) incurred by her in connection with her employment hereunder in accordance with the written policy and guidelines established by the Company for executive officers. Section 7. Non-Competition, Non-Solicitation. Employee agrees that she will not during the period she is employed by the Company under this Agreement or otherwise and for a period of nine months thereafter, directly or indirectly, (a) solicit the employment of, or encourage to leave the employment of the Company or any of its subsidiaries, any person who is now employed by the Company or any of its subsidiaries, (b) hire any employee or former employee of the Company or any of its subsidiaries, or (c) compete with or be engaged in the same business as the Company or any of its subsidiaries, or be employed by, or act as consultant or lender to, or be a director, officer, employee, owner, or partner of, any business or organization which, during the period Employee is employed by the Company under this Agreement or otherwise, directly or indirectly competes with or is engaged in the same business as the Company or any of its subsidiaries, except that in each case the provisions of this Section 7 will not be deemed breached merely because Employee owns not more than 1% of the outstanding common stock of a corporation, if, at the time of its acquisition by Employee, such stock is listed on a national securities exchange, is reported on NASDAQ, or is regularly traded in the over-the-counter market by a member of a national securities exchange. If the Employment Period ends on June 30, 2005, the Company shall pay Employee during the period after the Employment Period that Employee is subject to this Section 7, provided that Employee is in full compliance with this Section 7, at the rate of her base annual salary received from the Company during the last year of the Employment Period, payable at such intervals (at least monthly) as salaries are paid generally to executive officers of the Company, which obligation shall cease after nine months or such earlier time as the Company, in its sole discretion, releases Employee from the provisions of this Section 7. Section 8. Patents. Any interest in patents, patent applications, inventions, copyrights, developments, and processes ("Such Inventions") which Employee now or hereafter during the period she is employed by the Company under this Agreement or otherwise may own or develop relating to the fields in which the Company or any of its subsidiaries may then be engaged shall belong to the Company; and forthwith upon request of the Company, Employee shall execute all such assignments and other documents and take all such other action as the Company may reasonably request in order to vest in the Company all her right, title, and interest in and to Such Inventions free and clear of all liens, charges, and encumbrances. Section 9. Confidential Information. All confidential information which Employee may now possess, may obtain during or after the Employment Period, or may create prior to the end of the period she is employed by the Company under this Agreement or otherwise relating to the business of the Company or of any its customers or suppliers shall not be published, disclosed, or made accessible by her to any other person, firm, or corporation either during or after the termination of her employment or used by her except during the Employment Period in the business and for the benefit of the Company, in each case without prior written permission of the Company. Employee shall return all tangible evidence of such confidential information to the Company prior to or at the termination of her employment. Section 10. Termination. Employee's employment hereunder may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. Employee's employment hereunder shall terminate upon her death. (b) Disability. If, as a result of Employee's incapacity due to physical or mental illness, Employee shall have been absent from her duties hereunder on a full-time basis for the entire period of six consecutive months, and within 30 days after a Notice of Termination (as defined in Section 10(e)) is given shall not have returned to the performance of her duties hereunder on a full-time basis, the Company may terminate Employee's employment hereunder. (c) Cause. The Company may terminate Employee's employment hereunder for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate Employee's employment hereunder upon (i) the willful and continued failure by Employee to substantially perform her duties or obligations hereunder (other than any such failure resulting from Employee's incapacity due to physical or mental illness), after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes Employee has not substantially performed her duties or obligations, or (ii) the willful engaging by Employee in misconduct which is materially monetarily injurious to the Company. For purposes of this paragraph, no act, or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by her not in good faith and without reasonable belief that her action or omission was in the best interest of the Company. Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Cause without (i) reasonable notice to Employee setting forth the reasons for the Company's intention to terminate for Cause, (ii) an opportunity for Employee, together with her counsel, to be heard before the Board, and (iii) delivery to Employee of a Notice of Termination from the Board finding that in the good faith opinion of the Board Employee was guilty of conduct set forth above in clause (i) or (ii) of the preceding sentence, and specifying the particulars thereof in detail. (d) Termination by Employee. Employee may terminate her employment hereunder (i) for Good Reason (as defined below) or (ii) if her health should become impaired to an extent that makes her continued performance of her duties hereunder hazardous to her physical or mental health or her life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request, Employee shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of Employee's doctor. For purposes of this Agreement, "Good Reason" shall mean (i) a change in control of the Company (as defined below), (ii) a management change in control of the Company (as defined below), (iii) a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten days after notice of such noncompliance has been given by Employee to the Company, or (iv) any purported termination of Employee's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 10(e) (and for purposes of this Agreement no such purported termination shall be effective). For purposes of this Agreement, a "change in control" of the Company shall mean any of the following, but only if not approved by the Board, (i) a change in control of a nature that would be required to be reported in response to Item 1(a) of Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than a change of control resulting in control by Jerome Feldman, Scott Greenberg or Employee or a group including Jerome Feldman, Scott Greenberg or Employee, (ii) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than Jerome Feldman, Scott Greenberg or Employee or a group including Jerome Feldman, Scott Greenberg or Employee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, (iii) the Company and its affiliates owning less than a majority of the voting stock of General Physics Corporation ("GPC"), (iv) the sale of all or substantially all of the assets of GPC, or (v) at any time when there has not been a management change of control of the Company, individuals who were either nominated for election by the Board or were elected by the Board cease for any reason to constitute at least a majority of the Board. For purposes of this Agreement, a "management change in control" of the Company shall mean either of the following (i) an event that would have constituted a change of control of the Company if it had not been approved by the Board or (ii) a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act, resulting in control by a buy-out group including Jerome Feldman or Greenberg but not Employee. For purposes of the foregoing definitions, a group shall not be deemed to include Employee if she declines the opportunity to join such group. (e) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 10(a)) shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if Employee's employment is terminated by her death, the date of her death, (ii) if Employee's employment is terminated pursuant to Section 10(b), 30 days after Notice of Termination is given (provided that Employee shall not have returned to the performance of her duties on a full-time basis during such 30 day period), and (iii) if Employee's employment is terminated for any other reason, the date specified in the Notice of Termination, which shall not be earlier than the date on which the Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is resolved, either by mutual written agreement of the parties or by a judgment, order, or decree of a court of competent jurisdiction. Section 11. Compensation Upon Termination or During Disability. (a) During any period that Employee fails to perform her duties hereunder as a result of incapacity due to physical or mental illness ("disability period"), Employee shall continue to receive her full salary at the rate then in effect for such period until her employment is terminated pursuant to Section 10(b), provided that payments so made to Employee during the disability period shall be reduced by the sum of the amounts, if any, payable to Employee at or prior to the time of any such payment under disability benefit plans of the Company and which were not previously applied to reduce any such payment. (b) If Employee's employment is terminated by her death, the Company shall pay to Employee's spouse, or if she leaves no spouse to her estate, an amount equal to her full salary at the rate then in effect for a period of one year after the date of death. (c) If Employee's employment shall be terminated for Cause, the Company shall pay Employee her full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. (d) If (i) in breach of this Agreement, the Company shall terminate Employee's employment other than pursuant to Section 10(b) or 10(c) (it being understood that a purported termination pursuant to Section 10(b) or 10(c) which is disputed and finally determined not to have been proper shall be a termination by the Company in breach of this Agreement) or (ii) Employee shall terminate her employment for Good Reason (other than as a result of a management change of control), then (A) the Company shall (I) pay Employee her full salary and provide Employee her benefits through the Date of Termination at the rate or level in effect at the time Notice of Termination is given and (II) pay Employee her full Bonus for the calendar year in which the Date of Termination occurs, at such time as such Bonus would have been paid if Employee's employment by the Company had not so terminated; (B) in lieu of any further salary or bonus payments to Employee for periods subsequent to the Date of Termination, the Company shall pay as severance pay to Employee an amount equal to (1) Employee's average annual cash compensation received from the Company during the three full calendar years immediately preceding the Date of Termination, multiplied by (2) the greater of (w) the number of years (including partial years) that would have been remaining in the Employment Period if Employee's employment by the Company had not so terminated but the Employment Period were not thereafter extended pursuant to the proviso of Section 3 and (x) three, such payment to be made (y) if Employee's termination is based on a change of control of the Company, in a lump sum on or before the fifth day following the Date of Termination, or (z) if Employee's termination results from any other cause, in substantially equal semimonthly installments on the fifteenth and last days of each month commencing with the month in which the Date of Termination occurs and continuing for the number of consecutive semimonthly payment dates (including the first such date as aforesaid) equal to the product obtained by multiplying the number of years (including partial years) applicable under clause (w) above by 24; (C) all options to purchase the Company's common stock granted to Employee under the Company's option plan or otherwise shall immediately become fully vested and shall terminate on such date as they would have terminated if Employee's employment by the Company had not terminated and, if Employee's termination is based on a change of control of the Company and Employee elects, not more than 30 days after the Date of Termination, to surrender any or all of such options to the Company, the Company shall pay Employee on or before the fifth day following such surrender a lump sum cash payment equal to the excess of (1) the fair market value on the Date of Termination of the securities issuable upon exercise of the options surrendered over (2) the aggregate exercise price of the options surrendered; (D) the Company shall maintain in full force and effect, for the continued benefit of Employee, for a number of years equal to the greater of (1) the number of years (including partial years) that would have been remaining in the Employment Period if Employee's employment by the Company had not so terminated but the Employment Period were not thereafter extended pursuant to the proviso of Section 3 and (2) three, all employee benefit plans and programs in which Employee was entitled to participate immediately prior to the Date of Termination provided that Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that Employee's participation in any such plan or program is barred, the Company shall arrange to provide Employee with benefits substantially similar to those which Employee would otherwise have been entitled to receive under such plans and programs from which her continued participation is barred; and (E) if termination of Employee's employment arises out of a breach by the Company of this Agreement, the Company shall pay all other damages to which Employee may be entitled as a result of such breach, including damages for any and all loss of benefits to Employee under the Company's employee benefit plans which Employee would have received if the Company had not breached this Agreement and had Employee's employment continued for the then remaining term of the Employment Period but the Employment Period were not thereafter extended pursuant to the proviso of Section 3, and including all reasonable legal fees and expenses incurred by her as a result of such termination. (e) If Employee shall terminate her employment for Good Reason as a result of a management change of control, then (A) the Company shall (I) pay Employee her full salary and provide Employee her benefits through the Date of Termination at the rate or level in effect at the time Notice of Termination is given and (II) pay Employee her full Bonus for the calendar year in which the Date of Termination occurs, at such time as such Bonus would have been paid if Employee's employment by the Company had not so terminated; (B) in lieu of any further salary or bonus payments to Employee for periods subsequent to the Date of Termination, the Company shall pay as severance pay to Employee an amount equal to twice Employee's average annual cash compensation received from the Company during the three full calendar years immediately preceding the Date of Termination, such payment to be made in a lump sum on or before the fifth day following the Date of Termination; (C) all options to purchase the Company's common stock granted to Employee under the Company's option plan or otherwise shall immediately become fully vested and shall terminate on such date as they would have terminated if Employee's employment by the Company had not terminated and, if Employee elects, not more than 30 days after the Date of Termination, to surrender any or all of such options to the Company, the Company shall pay Employee on or before the fifth day following such surrender a lump sum cash payment equal to the excess of (1) the fair market value on the Date of Termination of the securities issuable upon exercise of the options surrendered over (2) the aggregate exercise price of the options surrendered; and (D) the Company shall maintain in full force and effect, for the continued benefit of Employee, for two years, all employee benefit plans and programs in which Employee was entitled to participate immediately prior to the Date of Termination provided that Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that Employee's participation in any such plan or program is barred, the Company shall arrange to provide Employee with benefits substantially similar to those which Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is barred. (f) If Employee shall terminate her employment under Section 10(d)(ii), the Company shall pay Employee her full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. (g) Employee shall not be required to mitigate the amount of any payment provided for in this Section 11 by seeking other employment or otherwise. (h) Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to pay any portion of any amount otherwise payable to Employee pursuant to this Section 11 if the Company could not reasonably deduct such portion solely by operation of Section 280G of the Internal Revenue Code of 1986, as amended. Section 12. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 12(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) Employee's rights and obligations under this Agreement shall not be transferable by assignment or otherwise, such rights shall not be subject to commutation, encumbrance, or the claims of Employee's creditors, and any attempt to do any of the foregoing shall be void. The provisions of this Agreement shall be binding upon and inure to the benefit of Employee and her personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees, and shall be binding upon and inure to the benefit of the Company and its successors under Section 12(a). If Employee should die while any amounts would still be payable to her hereunder if she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devisee, legatee, or other designee or, if there be no such designee, to Employee's estate. Section 13. No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement (except as provided in Sections 11(b) and 12). Section 14. Fees and Expenses. The Company shall pay all reasonable legal fees and related expenses (including the costs of experts, evidence, and counsel) incurred by Employee as a result of a contest or dispute over Employee's termination of employment if (a) such contest or dispute is resolved in whole or in part in Employee's favor or (b) Employee reasonably believed in good faith that she had a valid claim. In addition, the Company shall pay Employee interest, at the prime rate of Fleet Bank, National Association, on any amounts payable to Employee hereunder that are not paid when due. Section 15. Representations and Warranties of Employee. Employee represents and warrants to the Company that (a) Employee is under no contractual or other restriction or obligation which is inconsistent with the execution of this Agreement, the performance of her duties hereunder, or the other rights of the Company hereunder and (b) Employee is under no physical or mental disability that would hinder her performance of duties under this Agreement. Section 16. Life Insurance. If requested by the Company, Employee shall submit to such physical examinations and otherwise take such actions and execute and deliver such documents as may be reasonably necessary to enable the Company, at its expense and for its own benefit, to obtain life insurance on the life of Employee. Employee has no reason to believe that her life is not insurable with a reputable insurance company at rates now prevailing in the City of New York for healthy women of her age. Section 17. Modification. This Agreement and the Schedule hereto set forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements between them concerning such subject matter, and may be modified only by a written instrument duly executed by each party. Section 18. Notices. -------- Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or delivered against receipt to the party to whom it is to be given at the address of such party set forth in the preamble to this Agreement (or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 18). Notice to the estate of Employee shall be sufficient if addressed to Employee as provided in this Section 18. Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. Section 19. Waiver. ------- Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. Section 20. Headings. --------- The headings in this Agreement are solely for the convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. Section 21. Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. GP STRATEGIES CORPORATION By: ----------------------------------------- ------------------------------ Andrea Dale Kantor EX-10 4 exhibittenone.txt THIRD AMENDMENT Exhibit 10.1 EXECUTION COPY THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 15, 2001 (this "Third Amendment"), among GP STRATEGIES CORPORATION ("Parent"), a Delaware corporation, GENERAL PHYSICS CANADA LTD., ("GP Canada"), a corporation organized under the laws of Ontario, Canada (Parent and GP Canada shall individually be referred to herein as the "Borrower" and shall collectively be referred to herein as the "Borrowers"), the lenders that are signatories hereto (collectively, the "Lenders" and each individually a "Lender"), and FLEET NATIONAL BANK (f/k/a Fleet Bank, National Association) as a Lender ("Fleet"), as Agent to the Lenders (in such capacity, the "Agent") and as Issuing Bank (in such capacity, the "Issuing Bank"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrowers, the Lenders, the Issuing Bank and the Agent have heretofore entered into a certain Amended and Restated Credit Agreement (amending and restating the Credit Agreement, dated as of June 15, 1998), dated as of August 31, 2000 (the "Existing Credit Agreement" and, as heretofore amended, and together with this Third Amendment, the "Credit Agreement"); and WHEREAS, the Borrowers desire to amend the Existing Credit Agreement in order to, among other things, (i) extend the Parent Maturity Date to October 15, 2001, (ii) reduce the Parent Commitment to $42,000,000, (iii) amend the Applicable Margin for Eurodollar Advances and ABR Advances and (iv) amend certain financial covenants all as more fully set forth herein; WHEREAS, the Borrowers further desire to amend the Existing Credit Agreement in order to permit MXL and the Parent to obtain mortgage financing on certain real property owned by MXL in Downers Grove, Illinois the proceeds of which shall be used to fund the Parent Cash Collateral Account; and WHEREAS, the Lenders are willing to consent to such amendments, but only upon the terms and conditions set forth below including, but not limited to Article III; NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined or the context otherwise requires, terms used in this Third Amendment, including its preamble and recitals, have the meanings provided in the Credit Agreement. ARTICLE II AMENDMENTS TO CERTAIN PROVISIONS OF THE CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Effective Date (as defined in Section 3.1), certain terms and provisions of the Existing Credit Agreement are hereby amended in accordance with this Article II. Except as so amended, the Existing Credit Agreement shall continue in full force and effect in accordance with its terms. SECTION 2.1 Amendment to definition of Additional MXL Security Documents. The definition of Additional MXL Security Documents is hereby amended by deleting the word "Mortgage" appearing in such definition and substituting in lieu thereof the word "Mortgages". SECTION 2.2 New definition of Applicable Fee Percentage. The definition of Applicable Fee Percentage is hereby deleted in its entirety and replaced with the following new definition: "Applicable Fee Percentage": with respect to the Parent Commitment Fee and Letter of Credit Commissions, the percentage set forth below under the applicable column: Applicable Fee Percentage Parent Commitment Letter of Credit Commissions Fee Standby Trade .50% 2.95% .25% SECTION 2.3 New definition of Applicable Margin. The definition of Applicable Margin is hereby deleted in its entirety and replaced with the following new definition: "Applicable Margin" with respect to the unpaid principal balance of Parent ABR Advances and Parent Eurodollar Advances, the percentage set forth below under the applicable column: Applicable Margin (Type of Advance) ABR Eurodollar 1.50% 2.95% SECTION 2.4 Amendment to definition of Consolidated EBITDA. The definition of Consolidated EBITDA is hereby amended by deleting the figure "$3,000,000" appearing at the end of clause (ii)(a) thereof and substituting in lieu thereof the figure "$6,000,000". SECTION 2.5 Amendment to definition of Covered Event. The definition of Covered Event is hereby amended by deleting the phrase "MXL Mortgage Transaction" appearing in such definition and replacing it with the phrase "MXL Pennsylvania Mortgage Transaction". SECTION 2.6 New definition of Interest Payment Date. The definition of Interest Payment Date is hereby deleted in its entirety and replaced with the following new definition: "Interest Payment Date": (i) as to any ABR Advance, the last day of each month commencing on the first of such days to occur after such ABR Advance is made or any Eurodollar Advance is converted to an ABR Advance, (ii) as to any Eurodollar Advance, the last day of such Interest Period and (iii) as to all Advances, the Maturity Date. SECTION 2.7 Amendment to definition of Interest Period. The definition of Interest Period is hereby amended by deleting the words "one, two, three, six or nine months thereafter" appearing on the third and fourth lines thereof and replacing such words with "one month thereafter". SECTION 2.8 New definition of LaSalle. The definition of LaSalle is inserted as a new definition in its correct alphabetical order. "LaSalle": LaSalle Bank National Association, a national banking association. SECTION 2.9 New definition of MXL Illinois Assignment. The definition of MXL Illinois Assignment is inserted as a new definition in its correct alphabetical order. "MXL Illinois Assignment": the Assignment of Rents and Leases, dated as of June, 2001 by and between MXL and LaSalle. SECTION 2.10 New definition of MXL Illinois Certificate. The definition of MXL Illinois Certificate is inserted as a new definition in its correct alphabetical order. "MXL Illinois Certificate": the Certificate of Representations, Warranties and Covenants, dated as of June, 2001 by and between MXL, the Parent and LaSalle. SECTION 2.11 New definition of MXL Illinois Indemnity Agreement. The definition of MXL Illinois Indemnity Agreement is inserted as a new definition in its correct alphabetical order. "MXL Illinois Indemnity Agreement": the Environmental Indemnity Agreement, dated as of June, 2001 by and between MXL, the Parent and LaSalle. SECTION 2.12 New definition of MXL Illinois Guaranty. The definition of MXL Illinois Guaranty is inserted as a new definition in its correct alphabetical order. "MXL Illinois Guaranty": the Guaranty of Payment dated as of June, 2001 by and between LaSalle and the Parent. SECTION 2.13 New definition of MXL Illinois Mortgage. The definition of MXL Illinois Mortgage is inserted as a new definition in its correct alphabetical order. "MXL Illinois Mortgage": the Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated June, 2001 by and between MXL, as mortgagor, and LaSalle, as mortgagee, relating to the MXL Illinois Property and securing the MXL Illinois Mortgage Note. SECTION 2.14 New definition of MXL Illinois Mortgage Documents. The definition of MXL Illinois Mortgage Documents is inserted as a new definition in its correct alphabetical order. "MXL Illinois Mortgage Documents": the collective reference to the following documents (i) the MXL Illinois Mortgage, (ii) the MXL Illinois Mortgage Note, (iii) the MXL Illinois Guaranty, (iv) the MXL Illinois Assignment, (v) the MXL Illinois Indemnity Agreement, (vi) the MXL Illinois Certificate and (vii) the Additional MXL Security Documents executed in connection with the MXL Illinois Mortgage, each in form and substance satisfactory to the Agent. SECTION 2.15 New definition of MXL Illinois Mortgage Note. The definition of MXL Illinois Mortgage Note is inserted as a new definition in its correct alphabetical order. "MXL Illinois Mortgage Note": the promissory note in a maximum principal amount of $1,250,000 dated June, 2001 made by MXL and payable to the order of LaSalle, issued pursuant to the MXL Illinois Mortgage. SECTION 2.16 New definition of MXL Illinois Mortgage Transaction. The definition of MXL Illinois Mortgage Transaction is inserted as a new definition in its correct alphabetical order. "MXL Illinois Mortgage Transaction": the transactions to be consummated pursuant to the MXL Illinois Mortgage Documents, on the terms set forth in such documents. SECTION 2.17 New definition of MXL Illinois Property. The definition of MXL Illinois Property is inserted as a new definition in its correct alphabetical order. "MXL Illinois Property": the MXL Property located at 2300 Wisconsin Street, Downers Grove, Illinois. SECTION 2.18 Amendment to definition of MXL Mortgage. The definition of MXL Mortgage is hereby deleted in its entirety. SECTION 2.19 New definition of MXL Mortgages. The definition of MXL Mortgages is inserted as a new definition in its correct alphabetical order. "MXL Mortgages": collectively, the MXL Illinois Mortgage and the MXL Pennsylvania Mortgage. SECTION 2.20 Amendment to definition of MXL Mortgage Documents. The definition of MXL Mortgage Documents is hereby deleted in its entirety and replaced with the following new definition: "MXL Mortgage Documents": collectively, the MXL Illinois Mortgage Documents and the MXL Pennsylvania Mortgage Documents. SECTION 2.21 Amendment to definition to MXL Mortgage Note. The definition of MXL Mortgage Note is hereby deleted in its entirety. SECTION 2.22 Amendment to definition to MXL Mortgage Transaction. The definition of MXL Mortgage Transaction is hereby deleted in its entirety. SECTION 2.23 New definition of MXL Mortgage Transactions. The definition of MXL Mortgage Transactions is inserted as a new definition in its correct alphabetical order. "MXL Mortgage Transactions": the transactions to be consummated pursuant to the MXL Mortgage Documents, on the terms set forth in such documents. SECTION 2.24 New definition of MXL Pennsylvania Mortgage. The definition of MXL Pennsylvania Mortgage is inserted as a new definition in its correct alphabetical order. "MXL Pennsylvania Mortgage": the Open-end Mortgage and Security Agreement dated March 8, 2001 by and between MXL, as mortgagor, and Allfirst Bank, as mortgagee, relating to the MXL Pennsylvania Property and securing the MXL Pennsylvania Mortgage Note. SECTION 2.25 New definition of MXL Pennsylvania Mortgage Documents. The definition of MXL Pennsylvania Mortgage Documents is inserted as a new definition in its correct alphabetical order. "MXL Pennsylvania Mortgage Documents": the collective reference to the following documents (i) the MXL Pennsylvania Mortgage Note, (ii) the MXL Credit Agreement, (iii) the MXL Pennsylvania Mortgage, (iv) the Parent Suretyship Agreement and (v) the Additional MXL Security Documents executed in connection with MXL Pennsylvania Mortgage, each in the form delivered to the Agent. SECTION 2.26 New definition of MXL Pennsylvania Mortgage Note. The definition of MXL Pennsylvania Mortgage Note is inserted as a new definition in its correct alphabetical order. "MXL Pennsylvania Mortgage Note": the Term Note in a principal amount of $1,680,000 dated March 8, 2001 made by MXL and payable to the order of Allfirst Bank, issued pursuant to the MXL Pennsylvania Credit Agreement. SECTION 2.27 New definition of MXL Pennsylvania Mortgage Transaction. The definition of MXL Pennsylvania Mortgage Transaction is inserted as a new definition in its correct alphabetical order. "MXL Pennsylvania Mortgage Transaction": the transactions to be consummated pursuant to the MXL Pennsylvania Mortgage Documents, on the terms set forth in such documents. SECTION 2.28 Amendment to definition of Net Cash Proceeds. The definition of Net Cash Proceeds is hereby amended by deleting the phrase "MXL Mortgage Transaction" appearing in such definition and replacing it with the phrase "MXL Pennsylvania Mortgage Transaction". SECTION 2.29 New definition of Parent Maturity Date. The definition of Parent Maturity Date is hereby deleted in its entirety and replaced with the following new definition: "Parent Maturity Date": October 15, 2001, or such earlier date on which the Revolving Credit Notes shall become due and payable, whether by acceleration or otherwise. SECTION 2.30 Amendment to definition of Required Reduction Amount. The definition of Required Reduction Amount is hereby amended by deleting the phrase "MXL Mortgage Transaction" appearing in clause (a)(i) in such definition and replacing it with the phrase "MXL Pennsylvania Mortgage Transaction". SECTION 2.31 New definition of Special Counsel. The definition of Special Counsel is hereby deleted in its entirety and replaced with the following new definition: "Special Counsel": Bingham Dana LLP, special counsel to the Agent. SECTION 2.32 New definition of Third Amendment Effective Date. The definition of Third Amendment Effective Date is inserted as a new definition in its correct alphabetical order. "Third Amendment Effective Date": means June 15, 2001. SECTION 2.33 Amendment to Clause (c) of Section 2.4 (Termination or Reduction of Parent Commitments and GP Canada Credit Exposure) of the Existing Credit Agreement. Clause (c) of Section 2.4 of the Credit Agreement is hereby amended by deleting the phrase "MXL Mortgage Transaction" in each place such phrase appears in such section and replacing it with the phrase "MXL Pennsylvania Mortgage Transaction". SECTION 2.34 Amendment to Clause (d)(ii) of Section 2.5 (Payments of Loans; Overadvance Reductions; Additional Collateral) of the Existing Credit Agreement. Clause (d)(ii) of Section 2.5 is hereby amended by deleting the phrase "MXL Mortgage Transaction" in each place such phrase appears in such section and replacing it with the phrase "MXL Pennsylvania Mortgage Transaction". SECTION 2.35 Amendment to Clause (a) of Section 2.11 (Cash Collateral Accounts) of the Existing Credit Agreement. Clause (a) to Section 2.11 is hereby amended by deleting such clause in its entirety and replacing it with the following: (a)(i) The Agent shall establish and maintain at its offices at 1185 Avenue of the Americas, New York, NY in the name of the Parent but under the sole dominion and control of the Agent, a separate cash collateral account designated as "GP Strategies Corporation Cash Collateral Account" (the "Parent Cash Collateral Account"). All net proceeds of the sale by the Parent of (i) real estate, including net proceeds obtained in connection with the MXL Illinois Mortgage Transaction, and (ii) any assets not used in the calculation of the Borrowing Base, shall be immediately deposited into the Parent Cash Collateral Account. All net proceeds of the sale of the common stock of Millennium Cell Inc. ("Millennium Stock") shall be immediately deposited into the Parent Cash Collateral Account until the aggregate balance in the Parent Cash Collateral Account is not less than $6,000,000, after which point fifty-percent (50%) of the proceeds of all sales of Millennium Stock shall be immediately deposited into the Parent Cash Collateral Account, with the remaining fifty percent (50%) of such proceeds to be applied by the Parent, promptly upon its receipt thereof, to reduce the outstanding principal balance of the Revolving Credit Loans. The Parent may, at its option, direct the Agent to apply the Parent Cash Collateral (as defined below) to reduce the outstanding principal amount of the Term Loans. Such application of the Parent Cash Collateral to the Term Loans shall result in a dollar-for-dollar reduction of the minimum required balance in the Parent Cash Collateral Account. Notwithstanding anything to the contrary contained herein, in no event shall any monies deposited in the Parent Cash Collateral Account or any similar collateral account pledged to the Agent on behalf of the Lenders be included in the calculation of the Borrowing Base. (ii) The Parent hereby pledges to the Agent for its benefit, the benefit of the Issuing Bank and the pro rata benefit of the Lenders, a Lien on and security interest in the Parent Cash Collateral Account and all sums at any time and from time to time on deposit therein (the Parent Cash Collateral Account, together with all sums on deposit therein, being sometimes hereinafter collectively referred to as the "Parent Cash Collateral"), as first priority collateral security for the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise of all the Obligations. The Parent agrees that at any time and from time to time at its expense, it will promptly execute and deliver to the Agent any further instruments and documents, and take any further actions, that may be necessary or that the Agent may reasonably request, in order to perfect and protect any first priority security interest granted or purported to be granted hereby or enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Parent Cash Collateral. The Parent agrees that it will not (i) sell or otherwise dispose of any of the Parent Cash Collateral or (ii) create or permit to exist any Lien upon any of the Parent Cash Collateral. The Parent hereby authorizes the Agent, at any time any Obligations shall be required to be paid, to apply any and all cash on deposit in the Parent Cash Collateral Account towards all such Obligations which shall then be due and owing. SECTION 2.36 Amendment to Clause (b) of Section 2.11 (Cash Collateral Accounts) of the Existing Credit Agreement. Clause (b) to Section 2.11 is hereby amended by deleting the phrase ", except for Permitted Liens" in the fifth sentence in such Section. SECTION 2.37 Amendment to Clause (a) of Section 3.1 (Interest Rate and Payment Dates (Prior to Maturity)) of the Existing Credit Agreement. Clause (a) of Section 3.1(f) is hereby amended by deleting the table in such Section and replacing it with the following table: ADVANCES RATE Each Parent ABR Advance Alternate Base Rate plus 1.50%. . Each GP Canada ABR Advance Alternate Base Rate plus 1.50%. Each Parent Eurodollar Eurodollar Rate for the Advance applicable Interest Period plus 2.95%. Each GP Canada Eurodollar Eurodollar Rate for the Advance applicable Interest Period plus 2.95%. SECTION 2.38 Amendment to Clause (f) of Section 3.1 (Interest Rate and Payment Dates (Further Adjustments to Applicable Margins and Applicable Percentages)) of the Existing Credit Agreement. Clause (f) of Section 3.1 is hereby deleted in its entirety. SECTION 2.39 Amendment to Section 7.11(d) (Financial Covenants (Minimum Consolidated EBITDA)) of the Existing Credit Agreement. Clause (d) of Section 7.11 is hereby amended by deleting the table in such Clause and substituting in lieu thereof the following table: Fiscal Quarter Amount -------------- ------ June 30, 2001 $4,500,000 and each fiscal quarter thereafter SECTION 2.40 Amendment to Section 7.18 (Cash Collateral Balance) of the Existing Credit Agreement. Section 7.18 is hereby inserted as a new Section in its correct numerical order: 7.18 Cash Collateral Balance The Parent shall maintain a balance of not less than $5,000,000 in the Parent Cash Collateral Account on August 30, 2001 (which amount shall, for the avoidance of doubt, include all amounts deposited in the Parent Cash Collateral Account as of the Third Amendment Effective Date) and such balance shall be maintained at all times thereafter, subject however to any reductions set forth in Section 2.11(a)(i), until the Obligations have been paid in cash in full and the Commitments have been permanently terminated. SECTION 2.41 Amendment to Clause (n) of Section 8.1 (Indebtedness) of the Existing Credit Agreement. Clause (n) of Section 8.1 is hereby amended by deleting such clause in its entirety and substituting in lieu thereof the following: (n) Indebtedness in a principal amount not to exceed (A) $1,680,000 in respect of the MXL Pennsylvania Mortgage Transaction and (B) $1,250,000 in respect of the MXL Illinois Mortgage Transaction (including the Contingent Obligations of the Parent contemplated by the respective MXL Mortgage Documents) provided that the following conditions have been satisfied: (i) no Default or Event of Default shall exist immediately before or after giving effect thereto, (ii) the total consideration received or to be received therefor by MXL and/or the Parent shall be payable in cash, (iii) MXL and/or Parent shall apply the Net Cash Proceeds of the MXL Pennsylvania Mortgage Transaction on the Business Day of the receipt thereof as required and provided by Section 2.5(d), (iv) the Parent shall deposit the net proceeds of the MXL Illinois Mortgage Transaction immediately upon receipt thereof as required and provided by Section 2.11(a), and (v) Prior to the closing of such transaction, the Agent and the Lenders shall have received a certificate in respect thereof signed by an Authorized Signatory of MXL and the Parent identifying the Property to be sold or otherwise disposed of and stating (x) that immediately before and after giving effect thereto, no Default or Event of Default shall exist and (y) the total consideration to be received by MXL and/or the Parent in connection therewith. SECTION 2.42 Amendment to Clause (xiii) of Section 8.2 (Liens) of the Existing Credit Agreement. Clause (xiii) of Section 8.2 is hereby amended by deleting such clause in its entirety and substituting in lieu thereof the following: (xiii) a mortgage Lien on (A) the MXL Pennsylvania Property securing obligations incurred in connection with the MXL Pennsylvania Mortgage Transaction provided that (a) such Lien attaches only to the MXL Pennsylvania Property and personal property located thereon and encompassed by the definition of "Mortgaged Property" set forth in the MXL Pennsylvania Mortgage and (b) the Indebtedness secured by such Lien is permitted by Section 8.1(n) and (B) the MXL Illinois Property securing obligations incurred in connection with the MXL Illinois Mortgage Transaction provided that (a) such Lien attaches only to the MXL Illinois Property and personal property located thereon and encompassed by the definition of "Premises" set forth in the MXL Illinois Mortgage and (b) the Indebtedness secured by such Lien is permitted by Section 8.1(n). SECTION 2.43 Amendment to Section 8.3 (Merger, Consolidations and Acquisitions) of the Existing Credit Agreement. Section 8.3 is hereby amended by inserting the following proviso at the end of such Section: "provided, that after the Third Amendment Effective Date no Borrower shall be permitted to make any Acquisition of any other Person." SECTION 2.44 Amendment to Section 8.5 (Investments, Loans, Etc.) of the Existing Credit Agreement. Section 8.5 is hereby amended by inserting the following proviso at the end of such Section: "provided, that after the Third Amendment Effective Date no Borrower shall be permitted to make any equity Investment in any other Person." SECTION 2.45 Amendment to Clause (b) of Section 8.7 (Capital Expenditures; Operating Leases) of the Existing Credit Agreement. Clause (b) of Section 8.7 is hereby amended by deleting the phrase "MXL Mortgage Transaction" and substituting in lieu thereof the phrase "MXL Mortgage Transactions". SECTION 2.46 Amendment to Clause (c) of Section 9.1 (Events of Default) of the Existing Credit Agreement. Clause (c) of Section 9.1 is hereby deleted in its entirety and replaced with the following: (c) The failure of the Borrower to observe or perform any covenant or agreement contained in (i) Section 2.5, 2.6, 7.1, 7.3, 7.11, 7.12 or Section 8 or (ii) Section 7.18 and such failure has not been remedied within five (5) days of any Credit Party's knowledge of a violation of Section 7.18; or SECTION 2.47 Amendment to Section 11.2 (Notices) of the Existing Credit Agreement. Section 11.2 of the Existing Credit Agreement is hereby amended by deleting all notice information for the Agent or the Issuing Bank and substituting in lieu thereof the following: The Agent or the Issuing Bank: Fleet National Bank 777 Main Street CTEH40221A Hartford, CT 06115 Attention: Vincent Pitts Telephone: (860) 986-3783 Telecopy: (860) 986-2435 with copies to: Fleet National Bank 1185 Avenue of the Americas New York, NY 10036 Attention: Paul Chau Telephone: (212) 819-5438 Telecopy: (212) 819-4120 and: Scott M. Zemser, Esq. Bingham Dana LLP 399 Park Avenue New York, NY 10022-4689 Telephone: (212) 318-7700 Telecopy: (212) 752-5378 SECTION 2.48 Amendment to Section 11 of the Existing Credit Agreement. Section 11 is hereby amended by inserting the following new Section 11.28 in its correct numerical order. SECTION 11.28 Certain Collateral Matters. (a) The Agent is authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Loan Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Loan Documents. (b) The Lenders irrevocably authorize the Agent, at its option and in its discretion, to release any security interest or Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments and Letter of Credit Commitments and payment in full in cash of all principal and interest on the Loans, all fees payable pursuant to Section 2.10, all Reimbursement Obligations, and all other Obligations payable under the Credit Agreement and under any Loan Document; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; (iii) constituting property in which the Borrowers or any other obligor of the Borrowers owned no interest at the time the security interest and/or Lien was granted or at any time thereafter; (iv) constituting property leased to the Borrowers or any other obligor of the Borrowers under a lease which has expired or been terminated in a transaction permitted under the Credit Agreement or is about to expire and which has not been, and is not intended by the Borrowers or any of the Subsidiaries of the Borrowers to be renewed or extended; (v) consisting of an instrument evidencing Indebtedness or other debt instrument, if the Indebtedness evidenced thereby has been paid in full; or (vi) if approved, authorized or ratified by the Required Lenders or as otherwise required by Section 11.1, each Lender. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular Collateral pursuant to this Section 11.28. SECTION 2.49 Amendment to Exhibit A to the Existing Credit Agreement. The Existing Credit Agreement is hereby further amended by deleting Exhibit A to the Existing Credit Agreement in its entirety and substituting in lieu thereof the following new Exhibit A attached to this Third Amendment. ARTICLE III CONDITIONS PRECEDENT SECTION 3.1 Conditions to Effectiveness of Article II. The amendments set forth in Article II shall become effective upon the prior or concurrent satisfaction of each of the conditions precedent set forth in this Article III (the "Effective Date"). SECTION 3.2 Resolutions, etc. The Agent shall have received from each of the Borrowers and Guarantors, a certificate, dated as of the date hereof, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Third Amendment and each other Loan Document to be executed by it; and (b) the incumbency and signatures of the officers of each of the Borrowers authorized to act with respect to this Third Amendment and each other Loan Document as is to be executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary or Assistant Secretary of each of the Borrowers canceling or amending such prior certificate. SECTION 3.3 Amendment Fees. The Borrowers shall have paid to the Agent, for the pro rata account of each Lender, the portion of the Amendment Fees (as defined in Section 5.1 herein) due and payable on the date hereof. SECTION 3.4 Closing Fees, Expenses, etc. The Agent shall have been paid or reimbursed by the Borrowers for the reasonable out-of-pocket costs and expenses incurred by the Agent and the Lenders in connection with the negotiation, preparation and administration of this Third Amendment, including, without limitation, the legal fees and expenses of the Agent and Lenders' counsel. SECTION 3.5 Opinions of Counsel. The Agent and the Lenders shall have received legal opinions, dated the Effective Date, in form and substance satisfactory to the Agent from (a) Morgan Lewis & Bockius, LLP, New York counsel to the Parent and (b) Goodmans, LLP, Canadian counsel to GP Canada, as to such matters as the Agent may reasonably request. SECTION 3.6 Execution of Counterparts. The Agent shall have received counterparts of this Third Amendment duly executed by GP Canada, the Parent, the Agent, the Lenders and each of the respective parties to the Loan Documents in accordance with Section 5.4 herein, each of which counterparts shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 3.7 Execution of Amendments to Security Agreements. The Agent shall have received an execution copy of the First Amendment to the Amended and Restated Borrower Security Agreement and the First Amendment to Subsidiary Guaranty and Security Agreement, each duly executed and delivered by the respective parties thereto, which shall be in form satisfactory to the Agent. SECTION 3.8 Representations and Warranties. The Agent shall have received a certificate executed by the chief financial officer of each of the Parent and GP Canada certifying that the representations and warranties set forth in Section 4 of the Credit Agreement and in the other Loan Documents are true and correct in all material respects as of the Effective Date, and that no Default or Event of Default has occurred and is continuing. SECTION 3.9 Cash Collateral Account. The Parent shall have established a cash collateral account with the Agent in accordance with Section 2.11(a) of the Credit Agreement. SECTION 3.10 Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of GP Canada, the Parent or any other Person shall be satisfactory in form and substance to the Agent and its counsel; the Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Agent or its counsel may reasonably request. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS In order to induce the Lenders and the Agent to enter into this Third Amendment, GP Canada and the Parent jointly and severally represent and warrant unto the Agent, the Issuing Bank and each Lender as set forth in this Article IV. SECTION 4.1 Compliance With Warranties. The representations and warranties set forth in Section 4 of the Credit Agreement and in each other Loan Document delivered in connection herewith or therewith are true and correct in all material respects with the same effect as if made on and as of the Effective Date (unless stated to relate solely to an earlier date). SECTION 4.2 Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each of GP Canada and the Parent of this Third Amendment and each Loan Document to be executed by it in connection with the terms and conditions hereof, have been duly authorized by all necessary corporate action, and do not (i) contravene GP Canada's or the Parent's charter, other incorporation papers, by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon GP Canada or the Parent, (ii) contravene or result in a default under any contractual restriction, law or governmental regulation or court decree or order binding on or affecting GP Canada or the Parent or (iii) result in, or require the creation or imposition of, any Lien (except as contemplated in or created by the Loan Documents). SECTION 4.3 Validity, etc. This Third Amendment has been duly executed and delivered and is, and each other Loan Document to be executed and delivered by GP Canada or the Parent, as the case may be, will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of GP Canada and the Parent, as the case may be, enforceable in accordance with their respective terms; subject in each case to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). Each of such Loan Documents which purports to create a security interest creates a valid first priority security interest in the Collateral subject thereto, subject only to Liens permitted by Section 8.2, securing the payment of the Obligations. SECTION 4.4 No Material Adverse Change. There has been no event or occurrence, nor has any fact or state of facts existed, which could reasonably be expected to have a material adverse change in the financial condition, operations, assets, business, properties, revenues or prospects of the Parent or GP Canada, taken as a whole. SECTION 4.5 Compliance With Credit Agreement. As of the execution and delivery of this Third Amendment and as of the Effective Date, each of GP Canada, the Parent and each other Person is in compliance with all the terms and conditions of the Credit Agreement and the other Loan Documents to be observed or performed by it, and no Default has occurred and is continuing. ARTICLE V MISCELLANEOUS PROVISIONS SECTION 5.1 Amendment Fees. In consideration of the Lenders' agreement to amend the Existing Credit Agreement pursuant to the terms of this Third Amendment, the Borrowers shall pay to the Agent, for pro rata distribution to the Lenders, amendment and extension fees in such amounts and at such times as set forth in the table below (the "Amendment Fees"). The Amendment Fees, shall be deemed fully earned as of the date hereof: Date Payable Amendment Fee Payment Third Amendment Effective Date $ 100,000 October 15, 2001 $ 50,000 -------- Total Amendment Fees: $150,000 The Borrowers acknowledge and agree that the Amendment Fees set forth herein constitute Obligations under the Existing Credit Agreement. The Lenders further agree that, if the Borrowers have repaid all of their Obligations to the Agent and the Lenders in cash in full no later than 2:00 p.m. (New York time) October 15, 2001 (including repayment of the GP Canada Obligations and termination of the Commitments), the Lenders shall waive the Borrowers' payment of that portion of the Amendment Fees ($50,000) payable on October 15, 2001. SECTION 5.2 No Present Claims. Except as described further below, each of the Borrowers acknowledges and agrees that (i) it has no claim or cause of action against the Agent or the Lenders (or any of the Agent or the Lenders' directors, officers, employees or agents), (ii) it has no offset right, counterclaim or defense of any kind against any of its obligations, indebtedness or liabilities to the Agent or the Lenders, and (iii) the Agent and the Lenders have heretofore properly performed and satisfied in a timely manner all of their obligations to the Borrowers. Except as described further below, the Agent and the Lenders wish (and the Borrowers hereby agree) to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the Agent's or Lenders' rights, interests, contracts, collateral security or remedies. Therefore, each of the Borrowers hereby unconditionally releases, waives and forever discharges (A) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Agent and the Lenders to the Borrowers, except the obligations to be performed by the Agent or the Lenders for the Borrower as expressly stated in this Third Amendment, the Credit Agreement and the other Loan Documents, and (B) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrowers might otherwise have against the Agent or the Lenders or any of their directors, officers, employees or agents, in either case (A) or (B), on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever that existed, arose or occurred at any time prior to the date hereof or which could thereafter arise as the result of the execution of (or the satisfaction of any condition precedent or subsequent to) this Third Amendment, the Credit Agreement or any of the other Loan Documents; provided, however, that the foregoing shall not serve as a release by the Parent of any claims ("Non-Released Claims") to recover damages incurred by the Parent (limited, in any event, to the market value of Parent's Millennium Stock) as a result of a cause of action (a "Millennium Claim") by Millennium Cell Inc. or its successor ("Millennium") against the Parent for the recovery of the Parent's Millennium Stock (A) issued by Millennium in replacement of the Millennium Stock represented by Millennium Stock Certificate No. MC0129 and (B) owned by the Parent at the time of such Millennium Claim; provided further, that the amount of any such damages shall be reduced on a dollar-for-dollar basis to the extent of the amount of any damages actually paid by the Agent to Millennium under the terms of the Lost Securities Bond No. 06 s 103551566 BCM or otherwise as a result of any cause of action by Millennium against Agent for the recovery of the market value of Parent's Millennium Stock. The Agent agrees not to assert a defense that a Non-Released Claim is barred by the statute of limitations provided that such Non-Released Claim is brought not more than one year after the related Millennium Claim is brought. SECTION 5.3 Ratification of Existing Credit Agreement. The Existing Credit Agreement, as expressly amended by the terms hereof, is hereby ratified, approved and confirmed in each and every respect. Except as specifically amended herein, the Existing Credit Agreement shall continue in full force and effect in accordance with the provisions thereof and except as expressly set forth herein the provisions hereof shall not operate as a waiver of any right, power or privilege of the Agent and the Lenders nor shall the entering into of this Third Amendment preclude the Lenders from refusing to enter into any further or future amendments. This Third Amendment shall be deemed to be a "Loan Document" for all purposes of the Credit Agreement and all other Loan Documents. SECTION 5.4 Consent and Acknowledgment of Guarantors and obligors. By their signatures below, each Person that is a party to the Loan Documents, hereby acknowledges, consents and agrees to this Third Amendment and hereby ratifies and confirms their respective obligations under each of the Loan Documents executed and delivered by it in all respects. SECTION 5.5 Existing Credit Agreement, References, etc. All references to the Existing Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Existing Credit Agreement as modified hereby. As used in the Existing Credit Agreement, the terms "Agreement", "herein", "hereinafter", "hereunder", "hereto" and words of similar import shall mean, from and after the applicable Effective Date, the Existing Credit Agreement as modified by this Third Amendment. SECTION 5.6 Headings. The various headings of this Third Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Third Amendment or any provisions hereof. SECTION 5.7 Governing Law; Entire Agreement. THIS THIRD AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Third Amendment constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto. This Third Amendment and the provisions contained herein may be modified only by an instrument in writing executed by GP Canada, the Parent, the Guarantors and the other obligors with respect to Section 5.4, the Agent, the Issuing Bank and the Lenders. [remainder of this page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. GP STRATEGIES CORPORATION By:________________________ Name: Title: GENERAL PHYSICS CANADA LTD. By:________________________ Name: Title: FLEET NATIONAL BANK (f/k/a Fleet Bank National Association), Individually, as Issuing Bank and as Agent By:_________________________ Name: Title: KEYBANK, NATIONAL ASSOCIATION By:_________________________ Name: Title: MELLON FINANCIAL SERVICES CORPORATION, Attorney-in-Fact for Mellon Bank, N.A. By:_________________________ Name: Title: THE DIME SAVINGS BANK OF NEW YORK, FSB By:_________________________ Name: Title: ACKNOWLEDGED, CONFIRMED AND AGREED TO WITH RESPECT TO SECTION 5.4: ----------- MXL INDUSTRIES, INC. By:________________________ Name: Title: GENERAL PHYSICS CORPORATION By:________________________ Name: Title: EXHIBIT A List of Commitment Amounts Revolving Credit Term Loan Commitment Commitment Amount Amount Fleet National Bank $18,375,000.00 $ 5,660,156.25 Mellon Bank, N.A. $10,500,000.00 $ 3,234,375.00 KeyBank, N.A. $ 7,875,000.00 $ 2,425,781.25 The Dime Savings Bank $ 5,250,000.00 $ 1,617,187.50 of New York, FSB TOTAL $42,000,000.00 $12,937,500.00 -----END PRIVACY-ENHANCED MESSAGE-----