Document:

Exhibit

EXHIBIT  10.2

FORM 2019 INCENTIVE PROGRAM LETTER AGREEMENT
As approved by the Board of Directors, the amount and terms of your 2019 Incentives are as follows:
base salary:

Your base salary will be $

Bonus: 

Your bonus target will be % of your base salary.  You are eligible to earn this bonus amount as follows:

		
	•
	25% or $ will be earned on March 31, 2019;  

		
	•
	25% or $ will be earned on June 30, 2019;  

		
	•
	25% or $ will be earned on September 30, 2019; and

		
	•
	25% or $ will be earned on December 31, 2019.  

Each portion of the retention bonus is earned only if you are employed by the Company (or its subsidiaries) on each of the dates set forth above.  However, if you are terminated by the Company without Cause (as defined below), you will be paid the next installment of your bonus, subject to your executing and not revoking a General Release of Claims in such form as may be required by the Company in its sole discretion  (the “Release”) within sixty days of your termination; in this event you will forfeit any future bonus installments.  For example, if you are terminated without Cause after March 31, but prior to June 30 you would receive the June 30 payment, but would forfeit the remaining payments.  
If you quit or are terminated for Cause, then you will not be entitled to receive any further payments following your termination.  All payments will be subject to required tax withholdings and will be paid as part of the first payroll following the date it is earned, except in the case of a termination without Cause, in which case it will be paid as part of the first payroll following the date your Release becomes effective.

LTI Replacement Incentive: 

In lieu of a 2019 long-term incentive (“LTI”) award, you will be eligible to earn a cash bonus in the amount and subject to satisfaction of the performance criteria set forth on Exhibit A, as well as your continued employment by the Company (or its subsidiaries) through the dates set forth on Exhibit A. This LTI replacement incentive differs from the traditional award in that it is paid in cash and that it is fully paid in one year versus the typical three-year LTI vesting.  
If you are terminated without Cause or you terminate your employment for Good Reason and the performance goals set forth on Exhibit A are obtained, you will be eligible for a portion of the LTI replacement award as described in Exhibit A, subject to your signing and not revoking the Release in a timely manner as discuss above. If you quit or are terminated for Cause, then you will not be entitled to receive any further payments following your termination.  
The LTI replacement incentive will remain in effect unless the Company determines, in its sole discretion, that it needs to terminate or modify the program.
Summary of Total Potential 2019 Pay

	
						
	 
	2019 Base
	2019 Bonus Target %
	2019 Bonus $
	2019 Target Cash LTI
	2019 Target Direct Comp (All Cash)

	 
	 
	 
	 
	 
	 

Definitions:

For purposes of your 2019 incentives the following definitions will apply:

1

“Cause” will have the meaning set forth in your employment agreement with the Company.  If you do not have an employment agreement with the Company, then “Cause” means any of the following events:
(A) your conviction of a felony or a crime involving moral turpitude, or your entering the plea of nolo contendere to such felony or crime; 
(B) your commission of an act of fraud, or misappropriation of funds or other property, of or upon the Company or any of its affiliates; 
(C) your engagement, without the written approval of the Company, in any activity which competes with the business of the Company or any of its affiliates, or which would result in injury to the business or reputation of the Company or any of its affiliates; or 
(D) your breach or violation of any material policies of the Company or any confidentiality, covenant or restriction to which you may be bound.
“Good Reason” will have the meaning set forth in your employment agreement with the Company.  If you do not have an employment agreement with the Company, then “Good Reason” means any of the following without your prior written consent, if not cured and corrected by the Company, or any successor, within 60 days after written notice thereof is provided by you to the Company or its successor, provided such notice is delivered within 30 days after the occurrence of the applicable condition or event and you resign from employment with the Company within 15 days following expiration of such 60-day cure period: (a)  a demotion or a reduction in your title or rank or the assignment to you of duties that are materially inconsistent with your positions, duties and responsibilities with the Company, or your removal from, or any failure to nominate you for re-election to, any of such positions (other than a change due to your disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with your termination of employment for Cause, disability or death; (b) a five percent (5%) or greater reduction in your base salary; or (c) a relocation of your principal work location by more than 50 miles from its current location.
The Compensation Committee of the Board of Directors of the Company has the sole authority and discretion to determine whether any termination is for Cause or Good Reason, a Change in Control has occurred, the performance metrics are met and the amount of any payment of your 2019 Incentive and such determination will be final and binding on you and the Company.  If you wish to dispute any such determination, then such dispute will be resolved by arbitration before a single independent arbitrator in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, taking place in Houston, Texas and applying the law of the State of Texas.  Both you and the Company waive all rights to a jury trial.
This letter does not confer upon you any right to continue in the employment of the Company for any period or interfere with or otherwise restrict in any way the rights of the Company or you to terminate your employment at any time for any reason whatsoever, with or without Cause.  

2SECOND AMENDMENT AND REAFFIRMATION AGREEMENT

    THIS SECOND AMENDMENT AND REAFFIRMATION AGREEMENT is dated as of May 25, 2018 (this “Agreement”), by and among GSE SYSTEMS, INC., a Delaware corporation (“Parent”), GSE PERFORMANCE SOLUTIONS, INC., a Delaware
        corporation (“GSE Performance” and collectively with Parent, the “Borrowers” and each a “Borrower”), GSE TRUE NORTH CONSULTING, LLC, a Delaware limited liability company (“True North”),
        HYPERSPRING, LLC, a Delaware limited liability company (“Hyperspring”), ABSOLUTE CONSULTING, INC., a Delaware corporation (“Absolute” and together with True North and Hyperspring collectively, the “Guarantors” and each a “Guarantor” and together with the Borrowers collectively, the “Loan Parties” and each a “Loan Party”), and CITIZENS BANK, NATIONAL ASSOCIATION (the “Bank”).  Capitalized terms used herein but not otherwise defined
        herein shall have the meanings ascribed to such terms in the Credit Agreement (as defined below) or the Guaranty (as defined below), as applicable.

    WHEREAS, pursuant to the terms of that certain Credit and Security Agreement, dated as of December 29, 2016 (as the
        same may have been amended, renewed, replaced, or supplemented from time to time prior to the Closing Date (as defined in the Credit Agreement), the “Original Credit Agreement”),

        by and among Borrowers and Bank, the Bank agreed to provide a revolving line of credit to Borrowers in an amount not to exceed $5,000,000 pursuant to a revolving line of credit note dated as of the Initial Closing Date (as defined in the Credit
        Agreement) of the Borrowers payable to the order of the Bank (the “RLOC Note”);

    WHEREAS, Hyperspring executed and delivered a Guaranty and Suretyship Agreement (as the same may have been amended,
        restated or modified from time to time, the “Hyperspring Guaranty”) dated as of December 29, 2016 in favor of Bank in connection with Borrower entering into the Original
        Credit Agreement;

    WHEREAS, Absolute executed and delivered a Guaranty and Suretyship Agreement (as the same may have been amended,
        restated or modified from time to time, the “Absolute Guaranty”) dated as of September 20, 2017 in favor of Bank in connection with the Original Credit Agreement;

    WHEREAS, True North executed and delivered a Guaranty and Suretyship Agreement (as the same may have been amended,
        restated or modified from time to time, the “True North Guaranty” and together with the Hyperspring Guaranty and Absolute Guaranty collectively, the “Guaranty”) dated as of May 11, 2018 in favor of Bank in connection with the Credit Agreement;

    WHEREAS, GSE Performance executed and delivered a Pledge Agreement (as the same may have been amended, restated or
        modified from time to time, the “GSE Performance Pledge Agreement”) dated as of September 20, 2017 in favor of Bank in connection with the Original Credit Agreement;

    WHEREAS, Borrowers and Bank entered into that certain Amended and Restated Credit Agreement (the “Credit Agreement”) dated as of May 11, 2018 to continue the RLOC and to provide for a Term Loan Facility in a principal amount up to $25,000,000;

    WHEREAS, Guarantors and Bank entered into that certain Security Agreement (the “Security Agreement”) dated as of May 11, 2018; and

    WHEREAS, the parties hereto intend that, (a) the Credit Documents shall be amended subject to the terms and conditions
        set forth herein, (b) the obligations under the Guaranty and the Security Agreement will continue to be in effect, on the terms set forth therein,  and (c) the Guaranty and the Security Agreement will continue to support and otherwise benefit the
        Obligations (as defined in the Guaranty).

    NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree, under seal, as follows:

    Article I

    Section I.01. Amendments to Credit Documents.  The Credit Documents (as defined in the Credit Agreement) are hereby amended as
        follows:

    (a) All references in the Credit Documents to “True North Consulting LLC, a Colorado limited liability company” are hereby deleted and replaced with “GSE True North Consulting, LLC, a Delaware
        limited liability company”.

    (b) Exhibit A to the GSE Performance Pledge Agreement is hereby deleted and replaced with Exhibit A attached hereto.

    Article II

        

        

        Reaffirmation

    Section II.01. Reaffirmation.

    (a) Each Guarantor hereby: (i) affirms and confirms its guarantee and other commitments and obligations, under the
          Guaranty, the Security Agreement and any other Credit Documents executed by the Guarantor and (ii) confirms that each guarantee and other commitments and obligations under the Guaranty, the Security Agreement and any other Credit Documents
          executed by Guarantor shall continue to be in full force and effect and shall continue to accrue to the benefit of the Bank notwithstanding the effectiveness of the Credit Agreement.

    (b) Each Borrower hereby affirms the execution and delivery to Bank of the Credit Documents, and the Credit Documents are continued in full force and effect and are in all respects hereby
        affirmed and ratified.

    Article III

        

        

        Representations and Warranties

    Each Loan Party hereby represents and warrants, which representations and warranties shall survive execution and
        delivery of this Agreement, as follows:

    Section III.01. Organization.  Each Loan Party is duly organized, validly existing and in good standing under the laws of the
        jurisdiction of its organization.

    Section III.02. Authority; Enforceability.  Each Loan Party has the corporate or limited liability company power to execute,
        deliver and carry out the terms and provisions of this Agreement and has taken all necessary corporate and other action, to authorize the execution, delivery and performance by it of this Agreement.  Each Loan Party has duly executed and delivered
        this Agreement, and this Agreement constitutes a legal, valid and binding obligation of such Loan Party, enforceable against it in accordance with the terms hereof.

    Section III.03. Credit Documents.  The representations and warranties made by each Loan Party and set forth in the Credit
        Documents are true and correct on and as of the date hereof with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case any such
        representation and warranty shall have been true and correct as of such earlier date).

    Article IV

        

        

        Miscellaneous

    Section IV.01. Conditions to Effectiveness of Agreement.  The Bank’s willingness to agree to the amendments set forth in this
        Agreement is subject to the delivery by the Borrower to the Bank of the items described in summary fashion on Exhibit B attached hereto.

    Section IV.02. Notices.  All communications and notices hereunder shall be in writing and given as provided in Section 10.9 of
        the Credit Agreement or  Section 13 of the Guaranty, as applicable.

    Section IV.03. Expenses.  Each Loan Party acknowledges and agrees that the Bank shall be entitled to reimbursement of expenses as
        provided in Section 10.2 of the Credit Agreement and Section 10 of the Guaranty, as applicable.

    Section IV.04. Credit Document.  This Agreement is a “Credit Document” executed pursuant to the Credit Agreement and shall be
        construed, administered and applied in accordance with the terms and provisions thereof.

    Section IV.05. Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the
        parties hereto and their respective successors and assigns.

    Section IV.06. No Novation.  Nothing herein contained shall be construed as a substitution or novation of the obligations
        outstanding under the Credit Documents, which shall remain in full force and effect except as modified by this Agreement and the Credit Agreement.

    Section IV.07. Governing Law; Waiver of Jury Trial.  This Agreement shall be construed in accordance with and governed by the
        laws of the State of Delaware. EACH LOAN PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT OR INSTITUTED BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY,
        ON OR WITH RESPECT TO THIS AGREEMENT, ANY OF THE OTHER DOCUMENTS, THE COLLATERAL OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, WHETHER BY CLAIM OR COUNTERCLAIM.

    Section IV.08. Remaining Force and Effect.  Except as specifically amended hereby, the Credit Documents remain in full force and
        effect in accordance with their original terms and conditions.

    

    

    [Remainder of Page Intentionally Left Blank]

    
      
        

    

    IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed under seal by its
        respective authorized officers as of the day and year first above written.

    	 	
            BANK:

          
	
            Witness/Attest:

              

          	
            CITIZENS BANK, NATIONAL ASSOCIATION

            By: (SEAL) 

                 Edward S. Winslow

                 Senior Vice President

          
	 	
            BORROWERS:

          
	
            Witness/Attest:

              

          	
            GSE SYSTEMS, INC.

            By: (SEAL) 

                 Emmett Pepe

                 Chief Financial Officer

          
	
            Witness/Attest:

              

          	
            GSE PERFORMANCE SOLUTIONS, INC.

            By: (SEAL) 

                 Emmett Pepe

                 Treasurer

          
	 	
            GUARANTORS:

          
	
            Witness/Attest:

              

          	
            ABSOLUTE CONSULTING, INC.

            By: (SEAL) 

                 Emmett Pepe

                 Treasurer

          
	
            Witness/Attest:

              

          	
            HYPERSPRING, LLC

            By: (SEAL) 

                 Emmett Pepe

                 Treasurer

          
	 	 
	
            Witness/Attest:

              

          	
            GSE TRUE NORTH CONSULTING, LLC

            By: (SEAL) 

                 Emmett Pepe

                 Treasurer

          

    

    

    
      
        

    

    EXHIBIT A

    ISSUERS

    

    

    Absolute Consulting, Inc., a Delaware corporation (100%)

    GSE True North Consulting, LLC, a Delaware limited liability company (100%)

    

    

    Hyperspring, LLC, a Delaware limited liability company (100%)

    

    

    
      
        

    

    EXHIBIT B

    CLOSING CHECKLIST

    

    

    See attachment.

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