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

Date of report (Date of earliest event reported) December 17, 2019

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


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

     
1332 Londontown Blvd., Sykesville, MD  21784
(Address of principal executive offices and zip code)

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


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))

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $.001 Par Value
 
GVP
 
The NASDAQ Capital Market

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. ☐
   

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(d) Election of Directors

On December 20, 2019, GSE Systems, Inc. (the “Company”) announced that, on December 17, 2019, its board of directors (the “Board”) unanimously elected Kathryn O’Connor Gardner to serve on the Board as a Class III director with a term expiring at the 2022 Annual Meeting of Stockholders. Ms. Gardner was also appointed to the following standing committees: Audit Committee, Compensation Committee, and Nominating & Governance Committee.

Ms. Gardner is not a party to any arrangements pursuant to which she was selected as a director. Ms. Gardner has not been involved in any transactions since the beginning of the Company’s last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant. Ms. Gardner will receive the standard compensatory and other agreements and arrangements provided to other non-employee directors of the Company.

A copy of the press release announcing the election of Ms. Gardner to the Board and her Board committee appointments is being furnished with this Form 8-K as Exhibit 99.1.

(e) Compensatory Arrangements of Certain Officers

On December 20, 2019, the Company entered into certain Retention Agreements (the “Retention Agreements”) with Kyle J. Loudermilk, the Company’s Chief Executive Officer, and Emmett A. Pepe, the Company’s Chief Financial Officer. The Retention Agreements provide for payment of a cash bonus on July 1, 2020, so long as each officer remains employed by the Company and has not given notice of resignation or retirement as of that date. The bonus would also be made upon the occurrence of a Change of Control, as that term is defined in each such officer’s Employment Agreement (the earlier of such an occurrence or the July 1, 2020, date being the “Retention Date”). Under their respective Retention Agreements, on the Retention Date, Mr. Loudermilk would be entitled to a bonus in the amount of $100,000, and Mr. Pepe would be entitled to a bonus in the amount of $70,000. The amounts set forth above are separate and in addition to any amounts provided under each officer’s previously approved Employment Agreements, as amended.

The foregoing description of the Retention Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Retention Agreements, copies of which are filed herewith as Exhibits 10.1 and 10.2, and are incorporated by reference herein.

Item 9.01 Financial Statements and Exhibits

10.1 Retention Agreement, dated December 20, 2019, between Kyle J. Loudermilk and GSE Systems, Inc.

10.2 Retention Agreement, dated December 20, 2019, between Emmett A. Pepe and GSE Systems, Inc.

99.1 Press Release, dated December 20, 2019, announcing election of Kathryn O’Connor Gardner to the Board of Directors



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 Pugh
Daniel Pugh
Secretary, Chief Legal and Risk Officer
December 20, 2019
Exhibit 10.1

December 20, 2019

Kyle J. Loudermilk
Chief Executive Officer
c/o GSE Systems, Inc.
1332 Londontown Blvd.
Sykesville, MD 21784

Dear Kyle:

GSE Systems, Inc. (“Company”) considers you to be a key employee whose efforts are critical to the success of Company and its current efforts to retain key personnel, and stabilize and improve the performance of Company.  In order to induce you to remain in Company’s employ during this effort, it offers you the benefits set forth in this letter agreement (this “Agreement”).

1. Retention Bonus.  You shall be entitled to receive a retention bonus in the amount of One Hundred Thousand Dollars and Zero Cents ($100,000.00), less all applicable deductions and withholdings, (the “Retention Bonus”) on the earlier of (a) July 1, 2020, so long as you remain employed by Company and have not given notice of your resignation or retirement as of that date, or (b) the occurrence of a Change of Control, as that term is defined in Section 10 of your Employment Agreement, dated July 1, 2015 (such earlier date, the “Retention Date”). The Retention Bonus shall be paid promptly, but in no event later than sixty (60) days after the Retention Date.

2. Termination of Employment.  Nothing in this Agreement constitutes a guarantee of employment for any specified period of time, and your employment with Company remains subject to the terms of your Employment Agreement.  If your employment terminates for any reason prior to the Retention Date, including by virtue of your death or disability, you will not be entitled to any portion of the Retention Bonus.

3. Other Compensation and Benefit Plans.  In addition to the Retention Bonus, you shall be entitled to receive all compensation, retirement benefits and any other benefits payable to you under any plan or arrangement sponsored by Company or any of its affiliates in accordance with the terms of such plans or arrangements, and, except as otherwise provided in this Agreement, the amounts payable under this Agreement shall not in any way affect, diminish, or impair any compensation or benefits payable to you under such plans or arrangements.  However, the Retention Bonus shall not be treated as compensation for purposes of computing or determining any additional benefit payable under any savings plan, insurance plan, pension plan, or other employee benefit plan maintained Company or any if its affiliates, unless otherwise specified in the applicable plan.

4. Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives.  This Agreement shall be binding upon Company and its successors.

5. Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or mailed by United States registered mail, return receipt requested, postage prepaid.

6. Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and Company.  No waiver by either party at any time of any breach by the other party of any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  This Agreement constitutes the entire agreement between the parties hereto in respect of the payment of the Retention Bonus described herein, and all prior negotiations, writings and understandings relating to it are superseded and cancelled by this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws.

7. Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

8. IRC §409A.  While it is intended that the provisions of this Agreement comply with IRC §409A, and all provisions of this Agreement will be construed and interpreted in a manner consistent with IRC §409A, the Company is not making any representation or warranty that the provisions of this Agreement comply with IRC §409A and the Company shall have no obligation to indemnify or otherwise hold you harmless from any or all additional taxes or penalties under IRC §409A.  Furthermore, notwithstanding any provision of this Agreement to the contrary, Company may make necessary amendments to this Agreement without your consent for the limited purpose of, and solely to the extent necessary to avoid the imposition of penalties and additional taxes on you under IRC §409A.

9. Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.



[Signature page follows.]


If you agree to the terms of this letter, please sign and return to Company the enclosed copy which will then constitute our agreement on this subject.

Sincerely,

GSE SYSTEMS, INC.



   
By:
 /s/ Daniel Pugh
     
Daniel Pugh, Chief Legal Officer
       
       
Agreed to as of the 20th day of December, 2019
     
       
       
 /s/ Kyle J. Loudermilk
     
Kyle J. Loudermilk
     

Exhibit 10.2

December 20, 2019

Emmett A. Pepe
Chief Financial Officer
c/o GSE Systems, Inc.
1332 Londontown Blvd.
Sykesville, MD 21784

Dear Emmett:

GSE Systems, Inc. (“Company”) considers you to be a key employee whose efforts are critical to the success of Company and its current efforts to retain key personnel, and stabilize and improve the performance of Company.  In order to induce you to remain in Company’s employ during this effort, it offers you the benefits set forth in this letter agreement (this “Agreement”).

1. Retention Bonus.  You shall be entitled to receive a retention bonus in the amount of Seventy Thousand Dollars and Zero Cents ($70,000.00), less all applicable deductions and withholdings, (the “Retention Bonus”) on the earlier of (a) July 1, 2020, so long as you remain employed by Company and have not given notice of your resignation or retirement as of that date, or (b) the occurrence of a Change of Control, as that term is defined in Section 10 of your Employment Agreement, dated July 1, 2016 (such earlier date, the “Retention Date”).  The Retention Bonus shall be paid promptly, but in no event later than sixty (60) days after the Retention Date.

2. Termination of Employment.  Nothing in this Agreement constitutes a guarantee of employment for any specified period of time, and your employment with Company remains subject to the terms of your Employment Agreement.  If your employment terminates for any reason prior to the Retention Date, including by virtue of your death or disability, you will not be entitled to any portion of the Retention Bonus.

3. Other Compensation and Benefit Plans.  In addition to the Retention Bonus, you shall be entitled to receive all compensation, retirement benefits and any other benefits payable to you under any plan or arrangement sponsored by Company or any of its affiliates in accordance with the terms of such plans or arrangements, and, except as otherwise provided in this Agreement, the amounts payable under this Agreement shall not in any way affect, diminish, or impair any compensation or benefits payable to you under such plans or arrangements.  However, the Retention Bonus shall not be treated as compensation for purposes of computing or determining any additional benefit payable under any savings plan, insurance plan, pension plan, or other employee benefit plan maintained Company or any if its affiliates, unless otherwise specified in the applicable plan.

4. Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives.  This Agreement shall be binding upon Company and its successors.

5. Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or mailed by United States registered mail, return receipt requested, postage prepaid.

6. Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and Company.  No waiver by either party at any time of any breach by the other party of any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  This Agreement constitutes the entire agreement between the parties hereto in respect of the payment of the Retention Bonus described herein, and all prior negotiations, writings and understandings relating to it are superseded and cancelled by this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws.

7. Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

8. IRC §409A.  While it is intended that the provisions of this Agreement comply with IRC §409A, and all provisions of this Agreement will be construed and interpreted in a manner consistent with IRC §409A, the Company is not making any representation or warranty that the provisions of this Agreement comply with IRC §409A and the Company shall have no obligation to indemnify or otherwise hold you harmless from any or all additional taxes or penalties under IRC §409A.  Furthermore, notwithstanding any provision of this Agreement to the contrary, Company may make necessary amendments to this Agreement without your consent for the limited purpose of, and solely to the extent necessary to avoid the imposition of penalties and additional taxes on you under IRC §409A.

9. Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.


[Signature page follows.]


If you agree to the terms of this letter, please sign and return to Company the enclosed copy which will then constitute our agreement on this subject.

Sincerely,

GSE SYSTEMS, INC.



   
By:
 /s/ Daniel Pugh
     
Daniel Pugh, Chief Legal Officer
       
       
Agreed to as of the 20th day of December, 2019
     
       
       
/s/ Emmett A. Pepe
     
Emmett A. Pepe
     
Exhibit 99.1


FOR IMMEDIATE RELEASE

GSE Systems Elects New Board Member

COLUMBIA, MD – December 20, 2019 – GSE Systems, Inc. (GSE or the Company) (Nasdaq: GVP), a leader in delivering end-to-end training, engineering, compliance, simulation, and workforce solutions to the power industry, today announced that its Board of Directors has unanimously elected Kathryn O’Connor Gardner as a Class III Director and member of the Audit, Compensation, and Nominating & Governance Committees effective December 17, 2019.

Until recently, Gardner was a Senior Vice President and Corporate Credit Research Analyst within AllianceBernstein’s high-yield research group, focusing on the energy sector. She oversaw all energy-related investments for traditional high yield portfolios with roughly $35 billion in assets under management. Prior to joining AllianceBernstein, Gardner was a Managing Director on the sell-side at Deutsche Bank where she covered industries including energy, automotive and aerospace & defense. Gardner holds a Bachelor of Science degree in economics and a Bachelor of Arts degree in business administration from the Haas School of Business at the University of California, Berkeley.

“Ms. Gardner brings an exceptional level of financial expertise from Wall Street to our Board of Directors.  With her energy market experience, she is well suited to assist GSE in our financial planning efforts as we look to optimize shareholder value,” said Kyle Loudermilk, President and Chief Executive Officer of GSE. “We welcome Kathryn and look forward to her guidance and valuable perspectives.”

“I am pleased to join GSE’s Board and look forward to contributing to the Company’s success,” said Ms. Gardner. “It is exciting to be a part of GSE’s growth at a critical time in the company’s history as it looks to enhance shareholder value in the near and long term.”

ABOUT GSE SYSTEMS, INC.
GSE Systems, Inc. is a leading provider of engineering, expert staffing and simulation software to clients in the power and process industries.  GSE’s products and services are tailored to help customers achieve performance excellence in design, training, compliance, and operations.  The Company has over four decades of experience, more than 1,100 installations, and hundreds of customers in over 50 countries spanning the globe.  GSE Systems is headquartered in Maryland, with offices in Alabama, Florida, Colorado, Texas, and Beijing, China.  Information about GSE Systems is available at www.gses.com.


FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.  These statements reflect our current expectations concerning future events and results.  We use words such as “expect,” “intend,” “believe,” “may,” “will,” “should,” “could,” “anticipates,” and similar expressions to identify forward-looking statements, but their absence does not mean a statement is not forward-looking.  These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project.  For a full discussion of these risks, uncertainties, and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections.  We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Company Contact
 
The Equity Group, Inc.
Kyle Loudermilk
 
Kalle Ahl, CFA
Chief Executive Officer
 
(212) 836-9614
GSE Systems, Inc.
 
kahl@equityny.com
(410) 970-7800