UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549


FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934


January 11, 2019
Date of Report (Date of earliest event reported)



GSE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)


Delaware
001-14785
52-1868008
(State or other jurisdiction of
incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

     
1332 Londontown Blvd.,
   
Sykesville, Maryland
 
21784
(Address of principal executive offices)
 
(Zip Code)

(410) 970-7800
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation or the registrant under any of the following provisions (see General Instructions A.2 below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Form 8-K
Item 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Amendments to Certain Agreements with Executive Officers

GSE Systems, Inc. (the "Company") previously entered into Employment Agreements with each of Kyle J. Loudermilk, Christopher D. Sorrells, and Emmett Pepe providing for an annual cash bonus payable after the end of the year. On the recommendation of the Compensation Committee, the board of directors of the Company (the "Board"), with Loudermilk and Sorrells abstaining, approved amendments to Employment Agreements with each of Loudermilk, Sorrells, and Pepe, which gives the Compensation Committee discretion to authorize payment to the executives of 10% of the amount of the bonus that is projected to be earned for the full year. If the total bonus amount actually earned, as finally calculated based on full-year financial performance, exceeds the amount paid, the executive is required to repay the Company the excess amount.

The amendments to the Employment Agreements with each of Loudermilk, Sorrells, and Pepe also change the bonus amount payable if the executive terminates his employment for good reason or the Company terminates his employment for any reason other than cause, in each case within one year following the effective date of a change in control of the Company. Before the amendment, the bonus amounts payable to Loudermilk, Sorrells, and Pepe were 100%, 100%, and 50%, respectively, of the average of the bonus amounts paid to the executive for the two years prior to the year in which the change in control takes place. The amendment changes the amount to the greater of (i) the actual amount of bonus earned by the executive as of such date or (ii) the target amount of bonus for the period during which the employment of the executive terminates.

In addition, the amendments to the Employment Agreements with each of Sorrells and Pepe (but not Loudermilk) also increase the period during which the executive’s base salary continues to be paid after either the executive terminates his employment for good reason or the Company terminates his employment for any reason other than death, disability, or cause, from a period of six months to twelve months.

Except as otherwise described herein, all other provisions of the foregoing Employment Agreements (as amended) remain in full force and effect.  Copies of the amendment to each of the Employment Agreements with Loudermilk, Sorrells, and Pepe are attached hereto as Exhibits 99.1, 99.2, and 99.3, respectively, and each is incorporated herein by reference.  The foregoing descriptions of the amendments to the Employment Agreements of Loudermilk, Sorrells, and Pepe do not purport to be complete and are qualified in their entirety by reference to the attached amendments.



Item 9.01.
 
(d)
 
Financial Statements and Exhibits.
 
99.1
Amendment No. 3 to Employment Agreement, dated January 11, 2019, between GSE Systems, Inc. and Kyle J. Loudermilk
   
99.2
Amendment No. 2 to Employment Agreement, dated January 11, 2019, between GSE Systems, Inc. and Christopher D. Sorrells
   
99.3
Amendment No. 2 to Employment Agreement, dated January 11, 2019, between GSE Systems, Inc. and Emmett Pepe
   










   


S I G N A T U R E

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
GSE SYSTEMS, INC.
     
     
 
By:
/s/ Daniel W. Pugh
   
Daniel W. Pugh
   
Secretary, Senior Vice President, General Counsel and Risk Management Officer

Date: January 11, 2019

Exhibit 99.1
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement, made as of January 11, 2019, is by and between GSE Systems, Inc., a Delaware corporation (the “ Company ”), and Kyle J. Loudermilk, an employee of the Company (the “ Executive ”).
BACKGROUND
The parties previously entered into the Employment Agreement, dated July 1, 2015, as amended July 1, 2016, and June 12, 2017 (the “ Employment Agreement ”).  The parties now desire to amend the Employment Agreement consistent herewith.
NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants, and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1.
The Employment Agreement is hereby amended to add the following as Section 4(b)(iii):
After the Company publicly reports its financial performance for the second quarter, if the Compensation Committee determines that the Company is on-target to achieve at least the minimum annual Bonus target amounts then the Compensation Committee may, in its sole discretion, authorize payment to the Executive of 10% of the amount of Bonus that is projected to be earned for the full year; provided, however, that the Executive shall be required to repay to the Company any amount so paid in the event that such amount exceeds the total Bonus amount actually earned during such year, as finally calculated based on full-year financial performance.
2.
Section 10(b) of the Employment Agreement is hereby amended in its entirety to read as follows:
In addition, if the Executive terminates his employment for Good Reason or the Company terminates his employment for any reason other than Cause, in each case within one year following the effective date of a Change of Control, in lieu of the payment described in Section 9(c)(iii), the Executive shall also be entitled to receive, on the Date of Termination, an amount, payable in one lump sum, equal to the greater of (i) the actual amount of bonus earned by the Executive as of such date or (ii) the target amount of bonus for the period during which the employment of the Executive terminates.

3.
In all other respects, the Employment Agreement is hereby ratified and affirmed.
[Remainder of the Page Intentionally Blank]

IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first above written.
GSE SYSTEMS, INC.

By:  /s/ Daniel Pugh /s/
Daniel Pugh
Senior Vice President, General Counsel
and Risk Management Officer
EXECUTIVE

/s/ Kyle J. Loudermilk
Kyle J. Loudermilk
\

Exhibit 99.2
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement, made as of January 11, 2019, is by and between GSE Systems, Inc., a Delaware corporation (the “ Company ”), and Christopher D. Sorrells, an employee of the Company (the “ Executive ”).
BACKGROUND
The parties previously entered into the Employment Agreement, dated August 15, 2016, as amended June 12, 2017 (the “ Employment Agreement ”).  The parties now desire to amend the Employment Agreement consistent herewith.
NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants, and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1.   Section 4(b) of the Employment Agreement is hereby amended in its entirety to read as follows:
Bonus .

i.
For each fiscal year of the Term, beginning with fiscal year 2016, the Executive shall be eligible to earn an annual bonus award (the “Bonus”) of up to 75% of Base Salary (or any higher amount approved by the Compensation Committee), based upon the achievement of annual performance goals established by the Compensation Committee.  The amount of Bonus to be paid to Executive for any year of this Agreement may, at the sole discretion of the Compensation Committee, be (i) prorated for the number of months which Executive was employed by the Company during such year and (ii) paid on or prior to March 15 of the following year.

ii.
After the Company publicly reports its financial performance for the second quarter, if the Compensation Committee determines that the Company is on-target to achieve at least the minimum annual Bonus target amounts then the Compensation Committee may, in its sole discretion, authorize payment to the Executive of 10% of the amount of Bonus that is projected to be earned for the full year; provided, however, that the Executive shall be required to repay to the Company any amount so paid in the event that such amount exceeds the total Bonus amount actually earned during such year, as finally calculated based on full-year financial performance.
2.   Section 9(c)(i) of the Employment Agreement is hereby amended in its entirety to read as follows:
the Company will continue to pay the Executive his Base Salary for a period of 12 months, payable at such intervals as salaries are paid generally to other executive officers of the Company;
3.   Section 10(b) of the Employment Agreement is hereby amended in its entirety to read as follows:
In addition, if the Executive terminates his employment for Good Reason or the Company terminates his employment for any reason other than Cause, in each case within one year following the effective date of a Change of Control, in lieu of the payment described in Section 9(c)(iii), the Executive shall also be entitled to receive, on the Date of Termination, an amount, payable in one lump sum, equal to the greater of (i) the actual amount of bonus earned by the Executive as of such date or (ii) the target amount of bonus for the period during which the employment of the Executive terminates.
4.   In all other respects, the Employment Agreement is hereby ratified and affirmed.
[Remainder of the Page Intentionally Blank]

IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 2 as of the date first above written.
GSE SYSTEMS, INC.

By:  /s/ Kyle J. Loudermilk
Kyle J. Loudermilk
Chief Executive Officer
EXECUTIVE

s/s/ Christopher D. Sorrells
Christopher D. Sorrells

\

Exhibit 99.3
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement, made as of January 11, 2019, is by and between GSE Systems, Inc., a Delaware corporation (the “ Company ”), and Emmett Pepe, an employee of the Company (the “ Executive ”).
BACKGROUND
The parties previously entered into the Employment Agreement, dated July 1, 2016, as amended June 12, 2017 (the “ Employment Agreement ”). The parties now desire to amend the Employment Agreement consistent herewith.
NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants, and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1.   Section 4(b) of the Employment Agreement is hereby amended in its entirety to read as follows:
Bonus .

i.
For each fiscal year of the Term, beginning with fiscal year 2016, the Executive shall be eligible to earn an annual bonus award (the “Bonus”) of up to 60% of Base Salary (or any higher amount approved by the Compensation Committee), based upon the achievement of annual performance goals established by the Compensation Committee.  The amount of Bonus to be paid to Executive for any year of this Agreement may, at the sole discretion of the Compensation Committee, be (i) prorated for the number of months which Executive was employed by the Company during such year and (ii) paid on or prior to March 15 of the following year.

ii.
After the Company publicly reports its financial performance for the second quarter, if the Compensation Committee determines that the Company is on-target to achieve at least the minimum annual Bonus target amounts then the Compensation Committee may, in its sole discretion, authorize payment to the Executive of 10% of the amount of Bonus that is projected to be earned for the full year; provided, however, that the Executive shall be required to repay to the Company any amount so paid in the event that such amount exceeds the total Bonus amount actually earned during such year, as finally calculated based on full-year financial performance.
2.   Section 9(c)(i) of the Employment Agreement is hereby amended in its entirety to read as follows:
the Company will continue to pay the Executive his Base Salary for a period of 12 months, payable at such intervals as salaries are paid generally to other executive officers of the Company;
3.   Section 10(a) of the Employment Agreement is hereby amended in its entirety to read as follows:
If Executive terminates his employment for Good Reason within one year following the effective date of a Change of Control, Executive shall, in lieu of any benefits provided for in Section 9, continue to receive the Base Salary and Benefits that Executive is receiving as of the effective date of the Change of Control for a period of 12 months from the date of termination of his employment.  Such Base Salary and Benefits shall be paid at such intervals as salaries are paid generally to other executive officers of the Company.
4.   Section 10(b) of the Employment Agreement is hereby amended in its entirety to read as follows:
In addition, if the Executive terminates his employment for Good Reason or the Company terminates his employment for any reason other than Cause, in each case within one year following the effective date of a Change of Control, in lieu of the payment described in Section 9(c)(iii), the Executive shall also be entitled to receive, on the Date of Termination, an amount, payable in one lump sum, equal to the greater of (i) the actual amount of bonus earned by the Executive as of such date or (ii) the target amount of bonus for the period during which the employment of the Executive terminates.
5.   In all other respects, the Employment Agreement is hereby ratified and affirmed.
[Remainder of the Page Intentionally Blank]

IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 2 as of the date first above written.
GSE SYSTEMS, INC.

 
By:  /s/ Kyle J. Loudermilk
Kyle J. Loudermilk
Chief Executive Officer
EXECUTIVE

/s/ Emmett Pepe
Emmett Pepe
\