REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of this 28th day of February, 2006 by and among GSE Systems, Inc., a
Delaware corporation (the "Company"), and the undersigned investor (the
"Investor"), who has executed a Subscription Agreement with the Company (the
"Subscription Agreement").
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.
"Business Day" means a day, other than a Saturday or Sunday, on which banks
in New York City are open for the general transaction of business.
"Common Shares" means shares of the Company's common stock, par value
$0.01, and any securities into which such shares may hereinafter be
reclassified.
"Convertible Preferred Stock" means the Series A Preferred Shares
convertible into Common Shares, par value $0.01.
"Investor" means the undersigned investor or permitted transferee of such
Investor who is a subsequent holder of any Registrable Securities.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference or deemed to be incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.
"Registrable Securities" means (i) the Common Shares, par value $0.01,
issuable upon any conversion of the Convertible Preferred Stock or any exercise
of the Warrants; (ii) any other securities issued or issuable with respect to or
in exchange for Registrable Securities; and (iii) any securities issued or
issuable with respect to such securities by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization with respect to any of the securities
referenced above; provided, that, a security shall cease to be a Registrable
Security upon (A) sale pursuant to a Registration Statement or Rule 144 under
the 1933 Act; or (B) such security becoming eligible for sale by the Investor
pursuant to Rule 144(k).
"Registration Statement" means any registration statement of the Company
filed under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the provisions of this Agreement, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference or deemed to be
incorporated by reference in such Registration Statement.
"Required Investors" means the investors (including the Investor) holding a
majority of the Registrable Securities.
"SEC" means the U.S. Securities and Exchange Commission.
"Subscription Agreement" means that certain agreement by and between GSE
Systems, Inc. and each individual purchaser of Convertible Preferred Stock.
"Warrants" means the Warrants issued pursuant to the Subscription
Agreement, which for clarification shall include any additional Warrants
issuable by the Company if it misses two consecutive dividend payments on the
Convertible Preferred Stock.
"Warrant Shares" means the Common Shares, par value $0.01, issuable upon
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
2. Registration.
(a) Registration Statements.
(i) The Company shall use best efforts to prepare and file a
registration statement with respect to the resale of the Common Stock issuable
upon conversion of the Convertible Preferred Stock and exercise of the Warrants
with the SEC within 30 days after the original issuance of the Convertible
Preferred Stock and Warrants. Such Registration Statement shall include the plan
of distribution attached hereto as Exhibit A. Such Registration Statement also
shall cover, to the extent allowable under the 1933 Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional Common Shares resulting from share splits, share dividends or similar
transactions with respect to the Registrable Securities. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Investor and its counsel prior to its filing or other
submission.
(b) Expenses. The Company will pay all reasonable expenses
associated with each registration, including filing and printing fees, the
Company's counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, fees and expenses of one counsel to the Investors and the
Investor's reasonable expenses in connection with the registration, but
excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals with respect to the
Registrable Securities being sold but only to the extent that the Investor has
authorized in writing the use of such professionals and retained such
professionals specifically for the sale of its Registrable Securities.
(c) Effectiveness.
(i) The Company shall use reasonable best efforts to have
the Registration Statement declared effective within 90 days after the original
issuance of the Convertible Preferred Stock and Warrants. The Company shall
notify the Investor by facsimile or e-mail as promptly as practicable (with a
copy provided to the Investor by U.S. mail), and in any event, within
twenty-four (24) hours, after any Registration Statement is declared effective
and shall as soon as reasonably practicable provide the Investor with copies of
any related Prospectus to be used in connection with the sale or other
disposition of the securities covered thereby.
(ii) Notwithstanding anything to contrary, for not more than
twenty (20) consecutive days or for a total of not more than forty-five (45)
days in any twelve (12) month period (provided, however, the no such delay,
suspension or withdrawal shall be permitted for consecutive twenty-day periods
arising out of the same set of facts, circumstances or transactions), the
Company may delay, suspend the use of, or withdraw any Registration Statement or
qualification of Registrable Securities if the Company in good faith determines
that any such Registration Statement, or the use thereof, would materially and
adversely affect any material corporate event or would otherwise require
disclosure of nonpublic information which the Company determines, in its
reasonable judgment, is not in the best interests of the Company at such time
(an "Allowed Delay"); provided, that the Company shall promptly (a) notify the
Investor in writing of the existence of (but in no event, without the prior
written consent of the Investor, shall the Company disclose to the Investor any
of the facts or circumstances regarding) the event giving rise to an Allowed
Delay, provided that the Company shall not be required to disclose material
nonpublic information to the Investor; (b) advise the Investors in writing to
cease all sales under the Registration Statement until the end of the Allowed
Delay; and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable.
3. Company Obligations. The Company will use reasonable best efforts to
effect the registration of the Registrable Securities in accordance with the
terms hereof, and pursuant thereto the Company will, as expeditiously as
possible:
(a) use reasonable best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement as amended from time to time,
have been sold, and (ii) the date on which all Registrable Securities covered by
such Registration Statement (other than with respect to Registrable Securities
owned by Affiliates of the Company) may be sold pursuant to Rule 144(k) (the
"Effectiveness Period");
(b) prepare and file with the SEC such amendments,
prospectus supplements or post-effective amendments to the Registration
Statement and the Prospectus as may be necessary to keep the Registration
Statement effective for the period specified in Section 3(a) and to comply with
the provisions of the 1933 Act and the 1934 Act with respect to the distribution
of all of the Registrable Securities covered thereby;
(c) provide copies to and permit counsel designated by the
Investor to review each Registration Statement and all amendments and
supplements thereto no fewer than ten (10) days prior to their filing with the
SEC and not file any document to which such counsel reasonably objects based
upon such counsel's belief that such Registration Statement is not in compliance
with applicable laws, rules or regulations or contains a material misstatement
or omission;
(d) furnish to the Investor and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company (but not later than two (2) Business Days after
the filing date, receipt date or sending date, as the case may be) one (1) copy
of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor that are
covered by the related Registration Statement;
(e) use reasonable best efforts to (i) prevent the issuance
of any stop order or other suspension of effectiveness and, (ii) if such order
is issued, obtain the withdrawal of any such order at the earliest possible
moment;
(f) use reasonable best efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
(g) immediately notify the Investor, at any time when a
Prospectus relating to Registrable Securities is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event or the
passage of time as a result of which, the Prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and at the request of any such holder, promptly prepare and furnish to
such holder a reasonable number of copies of a supplement to or an amendment of
such Prospectus or the Registration Statement as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(h) otherwise use reasonable best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder;
(i) with a view to making available to the Investor the
benefits of Rule 144 (or its successor rule) and any other rule or regulation of
the SEC that may at any time permit the Investor to sell Common Shares to the
public without registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) six months after such date as all of the
Registrable Securities may be resold pursuant to Rule 144(k) or any other rule
of similar effect or (B) such date as all of the Registrable Securities shall
have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and (iii) furnish to
the Investor upon request, as long as such Investor owns any Registrable
Securities, (A) a written statement by the Company that it has complied with the
reporting requirements of the 1934 Act, and (B) such other information as may be
reasonably requested in order to avail such Investor of any rule or regulation
of the SEC that permits the selling of any such Registrable Securities without
registration;
(j) if requested by the Required Investors, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment;
(k) cooperate with the Investor to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall, if
required under the terms of this Agreement, be free of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as the Investor may request; within the applicable time
periods prescribed for the issuance of shares upon exercise of Warrants; and
(l) prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the Investor in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as the Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any ma terial tax in any such jurisdiction where it is not then
so subject.
4. Due Diligence Review; Information. The Company shall make available,
during normal business hours, upon reasonable request, for inspection and review
by the Investor, advisors to and representatives of the Investor (who may or may
not be affiliated with the Investor and who are reasonably acceptable to the
Company), all financial and other records, all filings with the SEC, and all
other documents respecting the Company, its assets, its properties or its
business (including without limitation minute books, corporate records,
financial statements, contracts, permits, licenses, approvals, technical or
engineering reports, and any title opinions or valuations which the Company has
obtained) as may be reasonably necessary for the purpose of such review, and
cause the Company's officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them) to
the extent not publicly available on EDGAR or the Company's website, prior to
and from time to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.
Notwithstanding any of the foregoing, nothing herein shall obligate the
Company to provide to the Investor, or any advisors or representatives or
underwriters, any material nonpublic information. The Company shall not disclose
material nonpublic information to the Investor, or to advisors to or
representatives of the Investor, unless prior to disclosure of such information
the Company identifies such information as being material nonpublic information
and provides the Investor, such advisors and representatives with the
opportunity to accept or refuse to accept such material nonpublic information
for review and the Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.
5. Obligations of the Investor.
(a) The Investor shall furnish in writing to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least fifteen (10) Business Days prior
to the first anticipated filing date of any Registration Statement, the Company
shall notify the Investor of the information the Company requires from the
Investor if the Investor elects to have any of the Registrable Securities
included in the Registration Statement. The Investor shall provide such
information to the Company at least two (2) Business Days prior to the first
anticipated filing date of such Registration Statement if such Investor elects
to have any of the Registrable Securities included in the Registration
Statement. The Compan y shall not be required to include the Registrable
Securities of the Investor in a Registration Statement and shall not be required
to pay any liquidated damages or other damages under Section 2 to any person who
fails to furnish to the Company such information at least two (2) Business Days
prior to such filing date.
(b) The Investor, by its acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless such Investor has notified the Company in writing of
its election to exclude all of its Registrable Securities from such Registration
Statement.
(c) The Investor agrees that, upon receipt of any notice
(which may be oral as long as written notice is provided by the next day) from
the Company of the commencement of an Allowed Delay pursuant to Section
2(c)(ii), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities, until otherwise notified in writing by the Company or until the
Investor's receipt of the copies of the supplemented or amended prospectus filed
with the SEC and until any related post-effective amendment is declared
effective and, if so directed by the Company and the Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in the Investor's possession of
the Prospectus covering the Registrable Securities current at the time of
receipt of such notice.
(d) The Investor acknowledges and agrees that, as described
in Schedule 5(d) hereto, other security holders of the Company have the right to
include such securities, in addition to the Registrable Securities, in any
Registration Statement filed or maintained by the Company pursuant to this
Agreement or the Transaction Documents.
(e) The Investor covenants and agrees that it will comply
with the prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
(f) The Investor may not use any confidential information
received by it pursuant to this Agreement or the Subscription Agreement
(including, without limitation, any notice referred to in Section 2(c)(ii) or
3(h) hereof) in violation of the 1934 Act or other applicable state or federal
securities law or reproduce, disclose, or disseminate such information to any
other person (other than his or her attorneys, agents and representatives having
a need to know, and then only if they expressly agree to be bound hereby),
unless such information has been made available to the public generally (other
than by such recipient in violation hereof) or such recipient is required to
disclose such information by a governmental body or regulatory agency or by law
in connection with a transaction that is not otherwise prohibited hereby, and
then only after reasonable notice to the Company and it has been provided a
reasonable opportunity to object to such disclosure, with the reasonable
cooperation and assi stance of such Investor. The Investor agrees to comply with
the 1933 Act and other applicable laws in connection with the offer or sale of
any Registrable Securities. The obligations in this Section 5(f) shall survive
the expiration or termination of this Agreement.
6. Indemnification.
(a) Indemnification by the Company. The Company will
indemnify and hold harmless the Investor, and each of their respective officers,
directors, members, employees and agents, successors and assigns, and each other
person, if any, who controls such Investor within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof; (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (iii) any violation by the Company or its agents of any rule or
regulation promulgated under the 1933 Act applicable to the Company or its
agents and relating to action or inaction required of the Company in connection
with such registration; or (iv) any failure to register or qualify the
Registrable Securities included in any such Registration Statement in any state
where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on
the Investor's behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with informa tion furnished by the Investor in writing
specifically for use in such Registration Statement or Prospectus, or to the
extent that such information relates to the Investor or the Investor's proposed
method of distribution of Registrable Securities and was reviewed and approved
by the Investor for use in the Registration Statement, such Prospectus or such
form of Prospectus or in any amendment or supplement thereto (it being
understood that the Investor have approved Exhibit B hereto for this purpose),
or in the case of an occurrence of an Allowed Delay or of an event of the type
specified in Section 3(h), the use by the Investor of an outdated or defective
Prospectus after the Company has notified the Investor in writing that the
Prospectus is outdated or defective and prior to the receipt by the Investor of
an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of such amended or supplemented Prospectus the
misstatement or omission giving rise to such liability would have been
corrected.
(b) Indemnification by the Investor. The Investor agrees,
severally but not jointly, to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, its directors, officers, employees, shareholders
and each person who controls the Company (within the meaning of the 1933 Act)
against any losses, claims, damages, liabilities and expense (including
reasonable attorney fees) resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in the Registration
Statement or Prospectus or preliminary prospectus or amendment or supplement
thereto or necessary to make the statements therein not misleading, to the
extent that such untrue statement or omission is contained in any information
furnished in writing by the Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto,
or to the extent that such information relates to such Investor's proposed
method of d istribution of Registrable Securities and was reviewed and approved
by the Investor for use in the Registration Statement (it being understood that
the Investor has approved Exhibit A hereto for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto, or in the
case of an occurrence of an Allowed Delay or an event of the type specified in
Section 3(h), the use by the Investor of an outdated or defective Prospectus
after the Company has notified the Investor in writing that the Prospectus is
outdated or defective and prior to the receipt by the Investor of an amended or
supplemented Prospectus, but only if and to the extent that following the
receipt of the amended or supplemented Prospectus the misstatement or omission
giving rise to such liability would have been corrected. In no event shall the
liability of the Investor be greater in amount than the dollar amount of the
proceeds (net of any damages the Investor has otherwise been required to pay by
reason of such untrue statement or omission by the Company) received by the
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification;
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses; or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person; or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such cl aims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an uncon ditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be
entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.
7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended
only by a writing signed by the Company and the Required Investors, provided
that no amendment to this Agreement that is adverse to the Investor shall be
made without the Investor's written consent. The Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company shall have obtained the written waiver or consent to
such amendment, action or omission to act, of the Required Investors, provided
that no such action or omission that is adverse to the Investor shall occur
without the Investor's written consent.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made as set forth in this Agreement to the
address for the Investor indicated on the signature page of the Subscription
Agreement or any other address provided in writing by Investor to the Company.
(c) Assignments and Transfers by Investor. The provisions of
this Agreement shall be binding upon and inure to the benefit of the Investor
and its successors and assigns. The Investor may transfer or assign, in whole or
from time to time in part, to one or more persons, which shall be an "accredited
investor" as defined in Rule 501(a) of Regulation D, as amended under the 1933
Act, and which shall agree in writing to be bound by the terms and conditions of
this Agreement, an executed counterpart of which shall be furnished to the
Company, its rights hereunder in connection with the transfer of Registrable
Securities by such Investor to such person, provided that the Investor complies
with all laws applicable thereto and provides written notice of assignment to
the Company promptly after such assignment is effected.
(d) Assignments and Transfers by the Company. This Agreement
may not be assigned by the Company (whether by operation of law or otherwise)
without the prior written consent of the Required Investors, provided, however,
that the Company may assign its rights and delegate its duties hereunder to any
surviving or successor corporation in connection with a merger or consolidation
of the Company with another corporation, or a sale, transfer or other
disposition of all or substantially all of the Company's assets to another
corporation, without the prior written consent of the Required Investors, after
notice duly given by the Company to the Investor.
(e) Benefits of the Agreement. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) Counterparts; Faxes. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.
(g) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect.
(i) Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter, except for, and as provided in the Transaction Documents.
(k) Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
[Company Signature Page]
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
GSE SYSTEMS, INC.
7133 Rutherford Road, Suite 200
Baltimore, Maryland 21244
By:_________________________
Name: John V. Moran
Title: Chief Executive Officer
[Investor Signature Page]
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
Name of Investor: __________________________
By:_________________________
Name:
Title
Exhibit A
Plan of Distribution
The selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling common shares or interests
in common shares received after the date of this prospectus from a selling
shareholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
common shares or interests in common shares on any stock exchange, market or
trading facility on which the common shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated prices.
The selling shareholders may use any one or more of the following methods
when disposing of common shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the common
shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales effected after the date of this prospectus;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling shareholders to sell a
specified number of such common shares at a stipulated price per common share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling shareholders may, from time to time, pledge or grant a security
interest in some or all of the common shares owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the common shares, from time to time, under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending the list of selling
shareholders to include the pledgee, transferee or other successors in interest
as selling shareholders under this prospectus. The selling shareholders also may
transfer the common shares in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In connection with the sale of our common shares or interests therein, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common shares in the course of hedging the positions they assume. The selling
shareholders may also sell our common shares short and deliver these securities
to close out their short positions, or loan or pledge the common shares to
broker-dealers that in turn may sell these securities. The selling shareholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).
The aggregate proceeds to the selling shareholders from the sale of the
common shares offered by them will be the purchase price of the common shares
less discounts or commissions, if any. Each of the selling shareholders reserves
the right to accept and, together with their agents from time to time, to
reject, in whole or in part, any proposed purchase of common shares to be made
directly or through agents. We will not receive any of the proceeds from this
offering.
The selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that rule.
The selling shareholders and any underwriters, broker-dealers or agents
that participate in the sale of the common shares or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling shareholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.
To the extent required, our common shares to be sold, the names of the
selling shareholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable,
the common shares may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common shares may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling shareholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling shareholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the selling shareholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.
We have agreed with the selling shareholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement,
and (2) the date on which the shares (other than shares held by our Affiliates)
may be sold pursuant to Rule 144(k) of the Securities Act.