August 4, 2005
General Physics Corporation
6095 Marshalee Drive
Elkridge, Maryland 21075
Attention: Sharon Esposito-Mayer
Re: Financing and Security Agreement dated as of August 13, 2003 (as amended, modified, substituted,
extended, and renewed from time to time, collectively, the "Financing Agreement") by and between General
Physics Corporation, Skillright, Inc., GSE Systems, Inc., GSE Power Systems, Inc., and MSHI, Inc. (the
"Borrowers"), jointly and severally, and Wachovia Bank, National Association (the "Lender")
Ladies and Gentlemen:
Reference is made to the Financing Agreement for the meaning of capitalized terms not otherwise defined herein.
This letter shall be deemed one of the Financing Documents as defined in the Financing Agreement.
The Borrowers have advised the Lender that GSE failed to comply with the financial covenant contained in
Section 7.1.23(b) (Debt Service Coverage Ratio) as of June 30, 2005 (the "Event of Default"). The Borrowers
acknowledge and agree that the Lender is entitled to exercise any and all of its rights and remedies provided in
the Financing Agreement, any other Financing Documents or otherwise available by contract, at law or in equity.
The Borrowers have requested that the Lender forebear from exercising its remedies in response to the Event of
Default from the date this Agreement becomes effective until delivery of the financial statements of GSE for the
period ending December 31, 2005 (the "Forbearance Period").
The Lender has agreed, subject to (a) the payment of a fee in the amount of $2,500 and (b) the terms hereof, to
forbear from exercising its rights and remedies under the Financing Agreement and all other Financing Documents
arising from the Event of Default for the Forbearance Period; provided, however, the Borrowers expressly agree
that this forbearance shall automatically terminate and the Lender shall have no obligation to continue to forebear
hereunder in the event that any other Event of Default or Default occurs un