Document:

Exhibit 10.3 Registration Rights

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of June 15, 2007, by and among GSE Systems, Inc.,
      a
      Delaware corporation (the “Company”),
      and
      the several purchasers signatory hereto (each a “Purchaser”
and
      collectively, the “Purchasers”).

     

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof between the Company and each Purchaser (the “Purchase
      Agreement”).

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration, the receipt and adequacy of
      which
      are hereby acknowledged, the Company and the Purchasers agree as follows:

     

    1.  Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement shall have the meanings given such terms in the Purchase
      Agreement. As used in this Agreement, the following terms shall have the
      following meanings:

     

    “Advice”
shall
      have the meaning set forth in Section 6(e).

     

    “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.

     

    “Closing”
has
      the
      meaning set forth in the Purchase Agreement.

     

    “Closing
      Date”
has
      the
      meaning set forth in the Purchase Agreement.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.01 per share, and any securities
      into which such common stock may hereinafter be reclassified. 

     

    “Effective
      Date”
means
      the date that the Registration Statement filed pursuant to Section 2(a) is
      first
      declared effective by the Commission.

     

    “Effectiveness
      Deadline”
means,
      with respect to the Registration Statement required to be filed to cover the
      resale by the Holders of the Registrable Securities, the earlier of: (i) the
      120th
      calendar
      day following the Closing Date; and (ii) the fifth (5th)
      Trading
      Day following the date on which the Company is notified by the Commission that
      the Registration Statement will not be reviewed or is no longer subject to
      further review and comments and the effectiveness of the Registration Statement
      may be accelerated; provided,
      however,
      that if
      the Effectiveness Deadline falls on a Saturday, Sunday or other day that the
      Commission is closed for business, the Effectiveness Deadline shall be extended
      to the next Business Day on which the Commission is open for business.

     

    “Effectiveness
      Period”
shall
      have the meaning set forth in Section 2(b).

     

    “Event”
shall
      have the meaning set forth in Section 2(c).

     

    “Event
      Date”
shall
      have the meaning set forth in Section 2(c).

     

    
      
        
        

      

      
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    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Filing
      Deadline”
means,
      with respect to the Registration Statement required to be filed pursuant to
      Section 2(a), the 60th
      calendar
      day following the Closing Date, provided,
      however,
      that if
      the Filing Deadline falls on a Saturday, Sunday or other day that the Commission
      is closed for business, the Filing Deadline shall be extended to the next
      business day on which the Commission is open for business.

     

    “Holder”
or
      “Holders”
means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

     

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 5(c).

     

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 5(c).

     

    “Liquidated
      Damages Warrants”
means
      the warrants that may be issued from time to time as partial liquidated damages
      pursuant to Section 2(c) of this Agreement. 

     

    “Losses”
shall
      have the meaning set forth in Section 5(a).

     

    “New
      York Courts”
means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Placement
      Agent”
means
      Roth Capital Partners, LLC and any permitted assigns.

     

    “Principal
      Market”
means
      the Trading Market on which the Common Stock is primarily listed on and quoted
      for trading, which, as of the Closing Date shall be the American Stock
      Exchange.

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), 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 a Registration Statement,
      and
      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 Securities Act and pursuant to Rule
      415,
      and the declaration or ordering of effectiveness of such Registration Statement
      or document.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Registrable
      Securities”
means
      all of (i) the Shares, (ii) the Warrant Shares issued or issuable upon the
      exercise of the Warrants, (iii) the Warrant Shares issued or issuable upon
      the
      exercise of the Liquidated Damages Warrants, (iv) any additional shares issuable
      in connection with any anti-dilution provisions in the Warrants (without giving
      effect to any limitations on exercise set forth in the Warrant), (v) any
      additional shares issuable in connection with any anti-dilution provisions
      in
      the Liquidated Damages Warrants (without giving effect to any limitations on
      exercise set forth in the Liquidated Damages Warrant) and (vi) any securities
      issued or issuable upon any stock split, dividend or other distribution,
      recapitalization or similar event with respect to the foregoing; provided,
      that
      the Holder has completed and delivered to the Company a Selling Shareholder
      Questionnaire; and provided,
      further,
      that a
      Holder’s security shall cease to be Registrable Securities upon the earliest to
      occur of the following: (A) sale pursuant to a Registration Statement or Rule
      144 under the Securities Act (in which case, only such security sold shall
      cease
      to be a Registrable Security); or (B) at such time that the Holder can sell
      such
      securities under Rule 144 without regard to volume limitations.

     

    “Registration
      Statements”
means
      any one or more registration statements of the Company filed under the
      Securities Act that covers the resale of any of the Registrable Securities
      pursuant to the provisions of this Agreement (including without limitation
      the
      Initial Registration Statement, the New Registration Statement and any Remainder
      Registration Statements), amendments and supplements to such Registration
      Statements, including post-effective amendments, all exhibits and all material
      incorporated by reference or deemed to be incorporated by reference in such
      Registration Statements.

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Rule
      415”
means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Rule
      424”
means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "SEC
      Guidance"
      means
      (i) any publicly-available written or oral guidance, comments, requirements
      or
      requests of the Commission staff and (ii) the Securities Act. 

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Selling
      Shareholder Questionnaire”
means
      a
      questionnaire in the form attached as Annex
      B
      hereto,
      or such other form of questionnaire as may reasonably be adopted by the Company
      from time to time.

     

    “Shares”
means
      the shares of Common Stock issued or issuable to the Purchasers pursuant to
      the
      Purchase Agreement.

     

    “Trading
      Day”
means
      (i) a day on which the Common Stock is listed or quoted and traded on its
      Principal Market (other than the OTC Bulletin Board), or (ii) if the Common
      Stock is not listed on a Trading Market (other than the OTC Bulletin Board),
      a
      day on which the Common Stock is traded in the over-the-counter market, as
      reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
      on any Trading Market, a day on which the Common Stock is quoted in the
      over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or
      any similar organization or agency succeeding to its functions of reporting
      prices); provided,
      that in
      the event that the Common Stock is not listed or quoted as set forth in (i),
      (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

     

    
      
        
        

      

      
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    “Trading
      Market”
means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
      or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
      on the date in question. 

     

    “Warrants”
means
      the Warrants issued pursuant to the Purchase Agreement. 

     

    “Warrant
      Shares”
means
      the shares of Common Stock issued or issuable upon exercise of the Warrants
      or
      the Liquidated Damages Warrants, as the case may be.

     

    2.  Registration.

     

    (a)  On
      or
      prior to the Filing Deadline, the Company use its commercially reasonable
      efforts to prepare and file with the Commission a “Shelf” Registration Statement
      covering the resale of all of the Registrable Securities not already covered
      by
      an existing and effective Registration Statement for an offering to be made
      on a
      continuous basis pursuant to Rule 415 or if Rule 415 is not available for offers
      and sales of the Registrable Securities by such other means of distribution
      of
      Registrable Securities as the Holders may reasonably specify and that is
      permitted under the Securities Act (the “Initial
      Registration Statement”).
      The
      Initial Registration Statement shall be on Form S-3 (except if the Company
      is
      not then eligible to register for resale the Registrable Securities on Form
      S-3,
      in which case such registration shall be on another appropriate form in
      accordance herewith, subject to the provisions of Section 2(f)) and shall
      contain (except if otherwise required pursuant to written comments received
      from
      the Commission upon a review of such Registration Statement) the “Plan of
      Distribution” section attached hereto as Annex
      A.
      Notwithstanding the registration obligations set forth in this subsection (a)
      and subsections (b) and (c) of this Section 2, in the event the Commission
      informs the Company that all of the Registrable Securities cannot, as a result
      of the application of Rule 415, be registered for resale as a secondary offering
      on a single registration statement, the Company agrees to promptly (i) inform
      each of the holders thereof and use its commercially reasonable efforts to
      file
      amendments to the Initial Registration Statement as required by the Commission
      and/or (ii) withdraw the Initial Registration Statement and file a new
      registration statement (a “New
      Registration Statement”),
      in
      either case covering the maximum number of Registrable Securities permitted
      to
      be registered by the Commission, on Form S-3 or such other form available to
      register for resale the Registrable Securities as a secondary
      offering;
      provided, however,
      that
      prior to filing such amendment or New Registration Statement, the Company shall
      be obligated to use its commercially reasonable efforts to advocate with the
      Commission for the registration of all of the Registrable Securities in
      accordance with the SEC Guidance, including without limitation, the Manual
      of
      Publicly Available Telephone Interpretations D.29. Notwithstanding any other
      provision of this Agreement and subject to the payment of liquidated damages
      in
      Section 2(c), if any SEC Guidance sets forth a limitation of the number of
      Registrable Securities permitted to be registered on a particular Registration
      Statement as a secondary offering (and notwithstanding that the Company used
      diligent efforts to advocate with the Commission for the registration of all
      or
      a greater number of Registrable Securities), unless otherwise directed in
      writing by a Holder as to its Registrable Securities, the number of Registrable
      Securities to be registered on such Registration Statement will first be reduced
      by Registrable Securities not acquired pursuant to the Purchase Agreement
      (whether pursuant to registration rights or otherwise), second by Registrable
      Securities represented by holders of Warrant Shares (applied, in the case that
      some Warrant Shares may be registered, to the Holders on a pro rata basis based
      on the total number of unregistered Warrant Shares held by such Holders) and
      third by Registrable Securities represented by Shares (applied, in the case
      that
      some Shares may be registered, to the Holders on a pro rata basis based on
      the
      total number of unregistered Shares held by such Holders, subject to a
      determination by the Commission that certain Holders must be reduced first
      based
      on the number of Shares held by such Holders). In the event the Company amends
      the Initial Registration Statement or files a New Registration Statement, as
      the
      case may be, under clauses (i) or (ii) above, the Company will use its
      commercially reasonable efforts to file with the Commission, as promptly as
      allowed by Commission or staff guidance provided to the Company or to
      registrants of securities in general, one or more registration statements on
      Form S-3 or such other form available to register for resale those Registrable
      Securities that were not registered for resale on the Initial Registration
      Statement, as amended, or the New Registration Statement (the “Remainder
      Registration Statements”).

     

    
      
        
        

      

      
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    (b)  The
      Company shall use its commercially reasonable efforts to cause each Registration
      Statement to be declared effective by the Commission as soon as practicable
      and,
      with respect to the Initial Registration Statement or the New Registration
      Statement, as applicable, no later than the Effectiveness Deadline (including
      filing with the Commission a request for acceleration of effectiveness in
      accordance with Rule 461 promulgated under the Securities Act within five (5)
      Business Days after the date that the Company is notified (orally or in writing,
      whichever is earlier) by the Commission that such Registration Statement will
      not be “reviewed,” or not be subject to further review and the effectiveness of
      such Registration Statement may be accelerated) and shall use its commercially
      reasonable efforts to keep each Registration Statement continuously effective
      under the Securities Act until the earlier of (i) such time as all of the
      Registrable Securities covered by such Registration Statement have been publicly
      sold by the Holders, or (ii) the date that all Registrable Securities covered
      by
      such Registration Statement may be sold by non-affiliates without volume
      restrictions pursuant to Rule 144(k) as determined by counsel to the Company
      pursuant to a written opinion letter to such effect, addressed and acceptable
      to
      the Company's transfer agent and the affected Holders (the “Effectiveness
      Period”).
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      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 (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading. Each Registration Statement shall also cover, to the extent
      allowable under the Securities Act and the rules promulgated thereunder
      (including Rule 416), such indeterminate number of additional shares of Common
      Stock resulting from stock splits, stock dividends or similar transactions
      with
      respect to the Registrable Securities. The Company shall telephonically request
      effectiveness of a Registration Statement as of 5:00 pm Eastern Time on the
      Effective Date. The Company shall promptly notify the Holders via facsimile
      or
      e-mail of the effectiveness of a Registration Statement on the same Trading
      Day
      that the Company telephonically confirms effectiveness with the Commission,
      which shall be the date requested for effectiveness of a Registration Statement.
      The Company shall, by 9:30 am Eastern Time on the Trading Day after the
      Effective Date (as defined in the Purchase Agreement), file a 424(b) prospectus
      with the Commission.

     

    (c) If:
      (i)
      the Initial Registration Statement is not filed with the Commission on or prior
      to the Filing Deadline, (ii) the Company fails to file with the Commission
      a
      request for acceleration in accordance with Rule 461 promulgated under the
      Securities Act, within five Trading Days of the date that the Company is
      notified (orally or in writing, whichever is earlier) by the Commission that
      a
      Registration Statement will not be “reviewed,” or not subject to further review,
      (iii) prior to its Effective Date, the Company fails to file a pre-effective
      amendment and otherwise respond in writing to comments made by the Commission
      in
      respect of such Registration Statement within fifteen (15) calendar days after
      the receipt of comments by or notice from the Commission that such amendment
      is
      required in order for a Registration Statement to be declared effective, (iv)
      an
      Initial Registration Statement or the New Registration Statement, as applicable,
      is not declared effective by the Commission (or otherwise does not become
      effective) for any reason, including in the event the Commission informs the
      Company that all of the Registrable Securities cannot, as a result of the
      application of Rule 415, be registered for resale as a secondary offering on
      a
      single 

     

    
      
        
        

      

      
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    registration
      statement, on or prior to its Effectiveness Deadline, or (v) after its Effective
      Date, such Registration Statement ceases for any reason (including without
      limitation by reason of a stop order, or the Company’s failure to update the
      Registration Statement), but excluding the inability of any Holder to sell
      the
      Registrable Securities covered thereby due to market conditions, to remain
      continuously effective as to all Registrable Securities for which it is required
      to be effective, and the Holders are not permitted to utilize the Prospectus
      therein to resell such Registrable Securities for an aggregate of more than
      30
      consecutive Trading Days or for more than an aggregate of 60 Trading Days in
      any
      12-month period (which need not be consecutive) (any such failure or breach
      in
      clauses (i) through (v) above being referred to as an “Event,”
and,
      for purposes of clauses (i) or (iv), the date on which such Event occurs, or
      for
      purposes of clause (ii), the date on which such five Trading Day period is
      exceeded, or for purposes of clause (iii), the date which such 15 calendar
      day
      period is exceeded, or for purposes of clause (v) the date on which such 30
      consecutive or 60 Trading Day period (as applicable) is exceeded, being referred
      to as the “Event
      Date”),
      then
      in addition to any other rights available to the Holders hereunder or under
      applicable law: (x) on each such Event Date, the Company shall issue, as partial
      liquidated damages and not as a penalty, to each Holder a warrant (herein
      referred to as the “Liquidated
      Damages Warrants”)
      to
      purchase such number of shares of Common Stock equal to 2.0% of the number
      of
      Registrable Securities held by such Holder on the Event Date (which remedy
      shall
      not be exclusive of any other remedies available under this Agreement) (such
      Liquidated Damages Warrants to be identical in substance (including, without
      limitation, with respect to their per share exercise price and the exercise
      term) to the Warrants); and (y) on each monthly anniversary of each such Event
      Date (if the applicable Event shall not have been cured by such date) until
      the
      applicable Event is cured, the Company shall issue to each Holder (i) an
      additional Liquidated Damages Warrant, as partial liquidated damages and not
      as
      a penalty (which remedy shall not be exclusive of any other remedies available
      under this Agreement). provided that the number of Liquidated Damages Warrants
      issuable to each Holder may not exceed more than 10% of the Registrable
      Securities held by such Holder (the “Warrant
      Cap”)
      and
      (ii) after the Warrant Cap has been reached an amount in cash (the “Cash
      Liquidated Damages”)
      equal
      to 2.0% of the aggregate purchase price paid by such Holder for the Shares
      provided that the amount of Cash Liquidated Damages paid to each Holder may
      not
      exceed more than 30% of the aggregate purchase price paid by such Holder. The
      parties agree that the Company will only be liable for liquidated damages under
      this Section 2(c) with respect to any Shares and not any Warrants or Warrant
      Shares held by such Holder. The partial liquidated damages pursuant to the
      terms
      hereof shall apply on a daily pro-rata basis for any portion of a month prior
      to
      the cure of an Event, except in the case of the first Event Date.
      Notwithstanding the foregoing, if two or more Events are occurring
      simultaneously, the Company shall only be liable for liquidated damages under
      this Section 2(c) as if one Event is occurring. In the event that the Company
      registers some but not all of the Registrable Securities, the 2.0% of liquidated
      damages referred to above for any monthly period shall be reduced to equal
      the
      percentage determined by multiplying 2.0% by a fraction, the numerator of which
      shall be the number of Registrable Securities for which there is not an
      effective Registration Statement at such time and the denominator of which
      shall
      be the number of Registrable Securities at such time.

    

    (d) The
      Company shall not, from the date hereof until the date that is 60 days after
      the
      Effective Date of the Registration Statement, prepare and file with the
      Commission a registration statement relating to an offering for its own account
      or the account of others under the Securities Act of any of its equity
      securities other than a registration statement on Form S-8 or, in connection
      with an acquisition, on Form S-4; provided
      that this Section shall not prohibit the Company from filing an amendment to
      any
      registration statement filed prior to the date hereof.

    

    
      
        
        

      

      
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    (e) Each
      Holder agrees to furnish to the Company a completed Questionnaire in the form
      attached to this Agreement as Annex
      B
      (a
“Selling
      Shareholder Questionnaire”)
      not
      more than ten (10) Trading Days following the date of this Agreement. Each
      Holder further agrees that it shall not be entitled to be named as a selling
      securityholder in a Registration Statement or use the Prospectus for offers
      and
      resales of Registrable Securities at any time, unless such Holder has returned
      to the Company a completed and signed Questionnaire. If a Holder of Registrable
      Securities returns a Questionnaire after the deadline specified in the previous
      sentence, the Company shall use its commercially reasonable efforts to take
      such
      actions as are required to name such Holder as a selling security holder in
      the
      Registration Statement or any pre-effective or post-effective amendment thereto
      and to include (to the extent not theretofore included) in the Registration
      Statement the Registrable Securities identified in such late Questionnaire.
      Each
      Holder acknowledges and agrees that the information in the Selling Shareholder
      Questionnaire will be used by the Company in the preparation of the Registration
      Statement and hereby consents to the inclusion of such information in the
      Registration Statement.

    

    (f) In
      the
      event that Form S-3 is not  available for the registration of the resale of
      Registrable Securities hereunder, the Company shall
      (i)
      register the resale of the Registrable Securities on another appropriate form
      reasonably acceptable to the Holders and (ii) undertake to register the
      Registrable Securities on Form S-3 as soon as such form is available,
provided
      that the
      Company shall maintain the effectiveness of the Registration Statement then
      in
      effect until such time as a Registration Statement on Form S-3 covering the
      Registrable Securities has been declared effective by the
      Commission.

    

    3.  Registration
      Procedures

     

    In
      connection with the Company's registration obligations hereunder, the Company
      shall:

     

    (a)  Not
      less
      than (x) five Trading Days prior to the filing of a Registration Statement
      and
      (y) one Trading Day prior to the filing of any related Prospectus or any
      amendment or supplement thereto (except
      for Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and Current
      Reports on Form 8-K and any similar or successor reports),
      the
      Company shall (i) furnish to the Holder copies of such Registration Statement,
      Prospectus or amendment or supplement thereto, as proposed to be filed, which
      documents will be subject to the review of such Holder (it being acknowledged
      and agreed that if a Holder does not object to or comment on the aforementioned
      documents within the two Trading Days after its receipt thereof (with respect
      to
      clause (x)) or one Trading Day (with respect to clause (y)), then the Holder
      shall be deemed to have consented to and approved the use of such documents).
      The Company shall not file
      any
      Registration Statement or amendment or supplement thereto in a form to which
      a
      Holder reasonably objects
      in good
      faith, provided that, the Company is notified of such objection in writing
      with
      in the applicable period set forth above. 

     

    (b)  (i)
      Prepare and file with the Commission such amendments (including post-effective
      amendments) and supplements to each Registration Statement and the Prospectus
      used in connection therewith as may be necessary to keep such Registration
      Statement continuously effective as to the applicable Registrable Securities
      for
      its Effectiveness Period and prepare and file with the Commission such
      additional Registration Statements in order to register for resale under the
      Securities Act all of the Registrable Securities; (ii) cause the related
      Prospectus to be amended or supplemented by any required Prospectus supplement
      (subject to the terms of this Agreement), and, as so supplemented or amended,
      to
      be filed pursuant to Rule 424; (iii) respond as promptly as reasonably
      practicable to any comments received from the Commission with respect to each
      Registration Statement or any amendment thereto and, as promptly as reasonably
      possible, provide the Holders true and complete copies of all correspondence
      from and to the Commission relating to such Registration Statement that pertains
      to the Holders as “Selling Stockholders” but not any comments that would result
      in the disclosure to the Holders of material and non-public information
      concerning the Company; and (iv) comply with the provisions of the Securities
      Act and the Exchange Act with respect to the disposition of all Registrable
      Securities covered by a Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of (subject to the terms of
      this
      Agreement) in accordance with the intended methods of disposition by the Holders
      thereof as set forth in such Registration Statement as so amended or in such
      Prospectus as so supplemented.
      In the
      case of amendments and supplements to a Registration Statement which are
      required to be filed pursuant to this Agreement (including pursuant to this
      Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q
      or Form 8-K or any analogous report under the Exchange Act, the Company shall
      have incorporated such report by reference into such Registration Statement,
      if
      applicable, or shall file such amendments or supplements with the Commission
      on
      the same day on which the Exchange Act report which created the requirement
      for
      the Company to amend or supplement such Registration Statement was
      filed.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (c)  Notify
      the Holders (which notice shall, pursuant to clauses (iii) through (v) hereof,
      be accompanied by an instruction to suspend the use of the Prospectus until
      the
      requisite changes have been made) as promptly as reasonably possible (and,
      in
      the case of (i)(A) below, not less than one Trading Day prior to such filing,
      in
      the case of (iii) and (iv) below, not more than one Trading Day after such
      issuance or receipt and in the case of (v) below, not less than three Trading
      Days prior to the financial statements in any Registration Statement becoming
      ineligible for inclusion therein and (if requested by any such Person) confirm
      such notice in writing no later than one Trading Day following the day (i)(A)
      when a Prospectus or any Prospectus supplement or post-effective amendment
      to a
      Registration Statement is proposed to be filed; (B) when the Commission notifies
      the Company whether there will be a “review” of such Registration Statement and
      whenever the Commission comments in writing on any Registration Statement (in
      which case the Company shall provide true and complete copies thereof and all
      written responses thereto to each of the Holders that pertain to the Holders
      as
      a “Selling Stockholder” or to the “Plan of Distribution”, but not information
      which the Company believes would constitute material and non-public
      information); and (C) with respect to each Registration Statement or any
      post-effective amendment, when the same has become effective; (ii) of any
      request by the Commission or any other Federal or state governmental authority
      for amendments or supplements to a Registration Statement or Prospectus or
      for
      additional information that pertains to the Holders as “Selling Stockholders” or
      the “Plan of Distribution”; (iii) of the issuance by the Commission or any other
      federal or state governmental authority of any stop order suspending the
      effectiveness of a Registration Statement covering any or all of the Registrable
      Securities or the initiation of any Proceedings for that purpose; (iv) of the
      receipt by the Company of any notification with respect to the suspension of
      the
      qualification or exemption from qualification of any of the Registrable
      Securities for sale in any jurisdiction, or the initiation or threatening of
      any
      Proceeding for such purpose; (v) of the occurrence of any event or passage
      of
      time that makes the financial statements included in a Registration Statement
      ineligible for inclusion therein or any statement made in such Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to such Registration Statement, Prospectus or other
      documents so that, in the case of such Registration Statement or the Prospectus,
      as the case may be, it will not contain any untrue statement of a material
      fact
      or omit to state any material fact required to be stated therein or necessary
      to
      make the statements therein (in the case of any Prospectus, form of prospectus
      or supplement thereto, in light of the circumstances under which they were
      made), not misleading.

     

    (d)  Use
      commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
      the withdrawal of (i) any order suspending the effectiveness of a Registration
      Statement, or (ii) any suspension of the qualification (or exemption from
      qualification) of any of the Registrable Securities for sale in any
      jurisdiction, as soon as reasonably practicable.

     

    (e)  If
      requested by a Holder, furnish to such Holder, without charge, at least one
      conformed copy of each Registration Statement and each amendment thereto and
      all
      exhibits to the extent requested by such Person (including those previously
      furnished or incorporated by reference) promptly after the filing of such
      documents with the Commission; provided,
      that
      the Company shall have no obligation to provide any document pursuant to this
      clause that is available on the Commission’s EDGAR system.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (f)  Prior
      to
      any resale of Registrable Securities by a Holder, use its commercially
      reasonable efforts to register or qualify, unless an exemption from registration
      and qualification applies, the Registrable Securities for offer and sale under
      the securities or Blue Sky laws of such jurisdictions within the United States
      as any Holder reasonably 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 reasonably necessary to enable the
      disposition in such jurisdictions of the Registrable Securities covered by
      the
      Registration Statements; provided,
      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 the Company to general service of process in any jurisdiction where
      it
      is not then so subject or subject the Company to any material tax in any such
      jurisdiction where it is not then so subject.

     

    (g)  If
      requested by the Holders, cooperate with the Holders to facilitate the timely
      preparation and delivery of certificates representing Registrable Securities
      to
      be delivered to a transferee pursuant to the Registration Statement, which
      certificates shall be free, to the extent permitted by the Purchase Agreement
      and under law, of all restrictive legends, and to enable such Registrable
      Securities to be in such denominations and registered in such names as any
      such
      Holders may reasonably request. In connection therewith, if required by the
      Company’s transfer agent, the Company shall promptly after the effectiveness of
      the Registration Statement cause an opinion of counsel as to the effectiveness
      of the Registration Statement to be delivered to and maintained with its
      transfer agent, together with any other authorizations, certificates and
      directions required by the transfer agent, which authorize and direct the
      transfer agent to issue such Registrable Securities without legend upon sale
      by
      the holder of such shares of Registrable Securities under the Registration
      Statement.

     

    (h)  Following
      the occurrence of any event contemplated by Section 3(c)(iii) through (v),
      as
      promptly as reasonably practicable, prepare a supplement or amendment, including
      a post-effective amendment, to the affected Registration Statements or a
      supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, no Registration Statement nor any Prospectus
      will
      contain 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 (in
      the case of any Prospectus, form of prospectus or supplement thereto, in light
      of the circumstances under which they were made), not misleading. 

     

    (i)  (i)
      In
      the time and manner required by the Principal Market, prepare and file with
      such
      Trading Market an additional shares listing application covering all of the
      Registrable Securities, (ii) take all steps necessary to cause such Registrable
      Securities to be approved for listing on the Principal Market as soon as
      possible thereafter, (iii) if requested by any Holder, provide such Holder
      evidence of such listing, and (iv) during the Effectiveness Period, maintain
      the
      listing of such Registrable Securities on the Principal Market.

     

    (j)  In
      order
      to enable the Holders to sell Shares or Warrant Shares under Rule 144, for
      a
      period of two years from the Closing (or such shorter period that the Holder
      can
      sell under Rule 144 without regard to volume limitations), the Company covenants
      to timely file (or obtain extensions in respect thereof and file within the
      applicable grace period) all reports required to be filed by the Company after
      the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. During
      such period, if the Company is not required to file reports pursuant to Section
      13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
      and make publicly available in accordance with Rule 144(c) promulgated under
      the
      Securities Act annual and quarterly financial statements, together with a
      discussion and analysis of such financial statements in form and substance
      substantially similar to those that would otherwise be required to be included
      in reports required by Section 13(a) or 15(d) of the Exchange Act, as well
      as
      any other information required thereby, in the time period that such filings
      would have been required to have been made under the Exchange Act. The Company
      further covenants that it will take such further action as any Holder may
      reasonably request, all to the extent required from time to time to enable
      such
      Person to sell Shares and Warrant Shares without registration under the
      Securities Act within the limitation of the exemptions provided by Rule 144
      promulgated under the Securities Act, including compliance with the provisions
      of the Purchase Agreement relating to the transfer of the Shares and Warrant
      Shares. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (k)  The
      Company may require each selling Holder to furnish to the Company a certified
      statement as to the number of shares of Common Stock beneficially owned by
      such
      Holder and any Affiliate thereof and as to any NASD affiliations and, if
      required by the Commission, of any natural persons who have the power to vote
      or
      dispose of the Common Stock. During any periods that the Company is unable
      to
      meet its obligations hereunder with respect to the registration of Registrable
      Securities solely because any Holder fails to furnish such information within
      three Trading Days of the Company’s request, any liquidated damages that are
      accruing at such time as to such Holder only shall be tolled and any Event
      that
      may otherwise occur solely because of such delay shall be suspended as to such
      Holder only, until such information is delivered to the Company.

     

    4.  Registration
      Expenses.
      All
      fees and expenses incident to the Company’s performance of or compliance with
      its obligations under this Agreement (excluding any underwriting discounts
      and
      selling commissions and all legal fees and expenses of legal counsel for any
      Holder) shall be borne by the Company whether or not any Registrable Securities
      are sold pursuant to a Registration Statement. The fees and expenses referred
      to
      in the foregoing sentence shall include, without limitation, (i) all
      registration and filing fees (including, without limitation, fees and expenses
      (A) with respect to filings required to be made with any Trading Market on
      which
      the Common Stock is then listed for trading, and (B) in compliance with
      applicable state securities or Blue Sky laws (including, without limitation,
      fees and disbursements of counsel for the Company in connection with Blue Sky
      qualifications or exemptions of the Registrable Securities and determination
      of
      the eligibility of the Registrable Securities for investment under the laws
      of
      such jurisdictions as requested by the Holders), (ii) printing expenses
      (including, without limitation, expenses of printing certificates for
      Registrable Securities and of printing prospectuses if the printing of
      prospectuses is reasonably requested by the Holders of a majority of the
      Registrable Securities included in the Registration Statement), (iii) messenger,
      telephone and delivery expenses, (iv) fees and disbursements of counsel for
      the
      Company, (v) Securities Act liability insurance, if the Company so desires
      such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, the Company shall be responsible for all of its
      internal expenses incurred in connection with the consummation of the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder. In no event shall the Company be
      responsible for any broker or similar commissions of any Holder or any legal
      fees or other costs of the Holders.

     

    5.  Indemnification.

     

    (a)  Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify,
      defend and hold harmless each Holder, the officers, directors, agents, partners,
      members, managers, shareholders, Affiliates and employees of each of them,
      each
      Person who controls any such Holder (within the meaning of Section 15 of the
      Securities Act or Section 20 of the Exchange Act) and the officers, directors,
      partners, members, managers, shareholders, agents and employees of each such
      controlling Person, to the fullest extent permitted by applicable law, from
      and
      against any and all losses, claims, damages, liabilities, costs (including,
      without limitation, reasonable costs of preparation and investigation and
      reasonable attorneys' fees) and expenses (collectively, “Losses”),
      as
      incurred, that arise out of or are based upon (i) any untrue or alleged untrue
      statement of a material fact contained in any Registration Statement, any
      Prospectus or any form of prospectus or in any amendment or supplement thereto
      (it being understood 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    that
      the
      Holder has approved Annex
      A
      hereto
      for this purpose) or in any preliminary prospectus, or arising out of or
      relating to any omission or alleged omission to state a material fact required
      to be stated therein or necessary to make the statements therein (in the case
      of
      any Prospectus or form of prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading, or (ii) any violation
      or alleged violation by the Company of the Securities Act, Exchange Act, any
      state securities law, any “blue sky” laws of any jurisdiction in which
      Registrable Securities are offered or any rule or regulation thereunder relating
      to the offer or sale of the Registrable Securities pursuant to a Registration
      Statement or any violation of this Agreement, except to the extent, but only
      to
      the extent, that (A) such untrue statements, alleged untrue statements,
      omissions or alleged omissions are based solely upon information regarding
      such
      Holder furnished in writing to the Company by such Holder expressly for use
      therein, or to the extent that such information relates to such Holder or such
      Holder's proposed method of distribution of Registrable Securities and was
      reviewed and approved by such Holder expressly for use in the Registration
      Statement, such Prospectus or such form of Prospectus or in any amendment or
      supplement thereto (it being understood that each Holder has approved
Annex
      A
      hereto
      for this purpose) or (B) in the case of an occurrence of an event of the type
      specified in Section 3(c)(iii)-(vi), the use by a Holder of an outdated or
      defective Prospectus after the Company has notified such Holder in writing
      that
      the Prospectus is outdated or defective and prior to the receipt by such Holder
      of the Advice contemplated and defined in Section 6(e) below, but only if and
      to
      the extent that following the receipt of the Advice the misstatement or omission
      giving rise to such Loss would have been corrected. The Company shall notify
      the
      Holders promptly of the institution, threat or assertion of any Proceeding
      arising from or in connection with the transactions contemplated by this
      Agreement of which the Company is aware. Such indemnity shall remain in full
      force and effect regardless of any investigation made by or on behalf of an
      Indemnified Party (as defined in Section 5(c)) and shall survive the transfer
      of
      the Registrable Securities by the Holders.

     

    (b)  Indemnification
      by Holders.
      Each
      Holder shall, notwithstanding any termination of this Agreement, severally
      and
      not jointly, indemnify and hold harmless the Company, its directors, officers,
      agents and employees, each Person who controls the Company (within the meaning
      of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
      the
      directors, officers, agents or employees of such controlling Persons, to the
      fullest extent permitted by applicable law, from and against all Losses, as
      incurred, arising out of or based solely upon any untrue or alleged untrue
      statement of a material fact contained in any Registration Statement, any
      Prospectus, or any form of prospectus, or in any amendment or supplement thereto
      or in any preliminary prospectus, or arising out of or relating to any omission
      or alleged omission of a material fact required to be stated therein or
      necessary to make the statements therein (in the case of any Prospectus, or
      any
      form of prospectus or supplement thereto, in light of the circumstances under
      which they were made) not misleading (i) to the extent, but only to the extent
      that, such untrue statements or omissions are based solely upon information
      regarding such Holder furnished in writing to the Company by such Holder
      expressly for use therein, (ii) to the extent that such information relates to
      such Holder or such Holder’s proposed method of distribution of Registrable
      Securities and was reviewed and approved by such Holder expressly for use in
      the
      Registration Statement (it being understood that the Holder has approved
Annex
      A
      hereto
      for this purpose), such Prospectus or such form of Prospectus or in any
      amendment or supplement thereto or (iii) in the case of an occurrence of an
      event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder
      of
      an outdated or defective Prospectus after the Company has notified such Holder
      in writing that the Prospectus is outdated or defective and prior to the receipt
      by such Holder of the Advice contemplated in Section 6(e). In no event shall
      the
      liability of any selling Holder hereunder be greater in amount than the dollar
      amount of the net proceeds received by such Holder upon the sale of the
      Registrable Securities giving rise to such indemnification
      obligation.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (c)  Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall have the right to assume the defense
      thereof, including the employment of counsel reasonably satisfactory to the
      Indemnified Party and the payment of all reasonable fees and expenses incurred
      in connection with defense thereof; provided,
      that
      the failure of any Indemnified Party to give such notice shall not relieve
      the
      Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
      except (and only) to the extent that it shall be finally determined by a court
      of competent jurisdiction (which determination is not subject to appeal or
      further review) that such failure shall have proximately and materially
      adversely prejudiced the Indemnifying Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest exists if the same counsel were to
      represent such Indemnified Party and the Indemnifying Party (in which case,
      if
      such Indemnified Party notifies the Indemnifying Party in writing that it elects
      to employ separate counsel at the expense of the Indemnifying Party, the
      Indemnifying Party shall not have the right to assume the defense thereof and
      such counsel shall be at the expense of the Indemnifying Party); provided,
      that
      the Indemnifying Party shall not be liable for the fees and expenses of more
      than one separate firm of attorneys at any time for all Indemnified Parties.
      The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld, delayed or conditioned. No Indemnifying Party shall, without the
      prior
      written consent of the Indemnified Party, effect any settlement of any pending
      Proceeding in respect of which any Indemnified Party is a party, unless such
      settlement includes an unconditional release of such Indemnified Party from
      all
      liability on claims that are the subject matter of such Proceeding.

     

    Subject
      to the terms of this Agreement, all fees and expenses of the Indemnified Party
      (including reasonable fees and expenses to the extent incurred in connection
      with investigating or preparing to defend such Proceeding in a manner not
      inconsistent with this Section) shall be paid to the Indemnified Party, as
      incurred, within twenty Trading Days of written notice thereof to the
      Indemnifying Party; provided,
      that
      the Indemnified Party shall promptly reimburse the Indemnifying Party for that
      portion of such fees and expenses applicable to such actions for which such
      Indemnified Party is finally judicially determined to not be entitled to
      indemnification hereunder) and such settlement does not require the Indemnified
      Party to pay any amount or take any action in connection therewith. The failure
      to deliver written notice to the Indemnifying Party within a reasonable time
      of
      the commencement of any such action shall not relieve such Indemnifying Party
      of
      any liability to the Indemnified Party under this Section 5, except to the
      extent that the Indemnifying Party is prejudiced in its ability to defend such
      action..

     

    (d)  Contribution.
      If a
      claim for indemnification under Section 5(a) or 5(b) is unavailable to an
      Indemnified Party (by reason of public policy or otherwise), then each
      Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
      contribute to the amount paid or payable by such Indemnified Party as a result
      of such Losses, in such proportion as is appropriate to reflect the relative
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such Indemnifying
      Party and Indemnified Party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      Indemnifying Party or Indemnified Party, and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in this Agreement, any reasonable attorneys' or other reasonable fees or
      expenses incurred by such party in connection with any Proceeding to the extent
      such party would have been indemnified for such fees or expenses if the
      indemnification provided for in this Section was available to such party in
      accordance with its terms. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 5(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      net proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission. No person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities Act)
      shall be entitled to contribution from any Person who was not guilty of such
      fraudulent misrepresentation. 

     

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties and are not in diminution or limitation of the indemnification
      provisions under the Purchase Agreement.

     

    6.  Miscellaneous.

     

    (a)  Remedies.
      In the
      event of a breach by the Company or by a Holder of any of their obligations
      under this Agreement, each Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under this Agreement. The Company and each Holder
      agree that monetary damages would not provide adequate compensation for any
      losses incurred by reason of a breach by it of any of the provisions of this
      Agreement and hereby further agrees that, in the event of any action for
      specific performance in respect of such breach, it shall waive the defense
      that
      a remedy at law would be adequate.

     

    (b)  No
      Piggyback on Registrations.
      Except
      and to the extent specified in Schedule 3.1(y) to the Purchase Agreement,
      neither the Company nor any of its security holders (other than the Holders
      in
      such capacity pursuant hereto) may include securities of the Company in a
      Registration Statement other than the Registrable Securities, and the Company
      shall not prior to the Effective Date enter into any agreement providing any
      such right to any of it security holders.

     

    (c)  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.

     

    (d)  Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it (unless an exemption
      therefrom is available) in connection with sales of Registrable Securities
      pursuant to the Registration Statement and shall sell the Registrable Securities
      only in accordance with a method of distribution described in the Registration
      Statement.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (e)  Discontinued
      Disposition.
      Each
      Holder further agrees by its acquisition of such Registrable Securities that,
      upon receipt of a notice from the Company of the occurrence of any event of
      the
      kind described in Section 3(c)(iii)-(vi), such Holder will forthwith discontinue
      disposition of such Registrable Securities under the Registration Statement
      until it is advised in writing (the “Advice”)
      by the
      Company that the use of the applicable Prospectus (as it may have been
      supplemented or amended) may be resumed. The Company may provide appropriate
      stop orders to enforce the provisions of this paragraph. The Company agrees
      and
      acknowledges that any periods during which the Holder is required to discontinue
      the disposition of the Registrable Securities hereunder shall be subject to
      the
      provisions of Section 2(c) as qualified by Section 3(a).

     

    (f)  Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee or director benefit plans, then
      the Company shall send to each Holder written notice of such determination
      and,
      if within fifteen days after receipt of such notice, any such Holder shall
      so
      request in writing, the Company shall include in such registration statement
      all
      or any part of such Registrable Securities such holder requests to be
      registered, subject to customary underwriter cutbacks applicable to all holders
      of registration rights on a pro rata basis (along with other holders of
      piggyback registration rights with respect to the Company); provided,
      that (i)
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 6(f) that are eligible for resale under Rule 144(k)
      promulgated under the Securities Act or that are the subject of a then effective
      Registration Statement and (ii) if at any time after giving written notice
      of
      its intention to register any securities and prior to the effective date of
      the
      registration statement filed in connection with such registration, the Company
      shall determine for any reason not to register or to delay registration of
      such
      securities, the Company may, at its election, give written notice of such
      determination to such Holder and, thereupon, (i) in the case of a determination
      not to register, shall be relieved of its obligation to register any Registrable
      Securities pursuant to this Section 6(f) in connection with such registration
      (but not from its obligation to pay expenses in accordance with Section 4
      hereof), and (ii) in the case of a determination to delay registering, shall
      be
      permitted to delay registering any Registrable Securities being registered
      pursuant to this Section 6(f) for the same period as the delay in registering
      such other securities.

     

    (g)  Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented unless the same shall be in writing and
      signed by the Company and Holders holding a majority of the then outstanding
      Registrable Securities, and waivers or consents to departures from the
      provisions hereof may not be given, unless the same shall be in writing and
      signed by the Company and Holders holding a majority of the then outstanding
      Registrable Securities. Notwithstanding the foregoing, a waiver or consent
      to
      depart from the provisions hereof with respect to a matter that relates
      exclusively to the rights of Holders and that does not directly or indirectly
      affect the rights of other Holders may be given by Holders of all of the
      Registrable Securities to which such waiver or consent relates; provided,
      however,
      that
      the provisions of this sentence may not be amended, modified, or supplemented
      except in accordance with the provisions of the immediately preceding sentence.
      

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (h)  Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 5:00 p.m., New York City time, on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 5:00 p.m., New York City time,
      on
      any Trading Day, (c) the Trading Day following the date of mailing, if sent
      by
      U.S. nationally recognized overnight courier service with next day delivery
      specified, or (d) upon actual receipt by the party to whom such notice is
      required to be given. The address for such notices and communications shall
      be
      as follows:

     

    If
      to the
      Company: GSE
      Systems, Inc.

    7133
      Rutherford Rd, Suite 200

    Baltimore,
      Maryland 21244

    Telephone
      No.: (410) 277-3740

    Facsimile
      No.: (410) 277-5287

    Attention:
      Chief Financial Officer

    

    With
      a
      copy to:  Duane
      Morris LLP

    1540
      Broadway 

    New
      York,
      NY 10036-4086

    Telephone
      No.: (212) 692-1000

    Facsimile
      No.: (212) 692-1020

    Attention:
      Robert J. Hasday, Esq.

    

    
      	 	
              If
                to a Purchaser: 

            	
              To
                the address set forth under such Purchaser’s name on the signature page
                hereof; 

            

    

    

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person

     

    (i)  Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. 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. The Company
      may
      not assign its rights or obligations hereunder without the prior written consent
      of all the Holders of the then outstanding Registrable Securities (other than
      by
      merger or to an entity which acquires the Company including by way of acquiring
      all or substantially all of the Company’s assets). The rights of the Holders
      hereunder, including the right to have the Company register Registrable
      Securities pursuant to this Agreement, may be assigned by each Holder to
      transferees or assignees of all or any portion of the Registrable Securities,
      but only if (i) the Holder agrees in writing with the transferee or assignee
      to
      assign such rights, and a copy of such agreement is furnished to the Company
      within a reasonable time after such assignment, (ii) the Company is, within
      a
      reasonable time after such transfer or assignment, furnished with written notice
      of the name and address of such transferee or assignee and the securities with
      respect to which such registration rights are being transferred or assigned,
      (iii) at or before the time the Company received the written notice contemplated
      by clause (ii) of this sentence, the transferee or assignee agrees in writing
      with the Company to be bound by all of the provisions contained herein and
      (iv)
      the transferee is an “accredited investor,” as that term is defined in Rule 501
      of Regulation D.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (j)  Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party,
      it
      being understood that both parties need not sign the same counterpart. In the
      event that any signature is delivered by facsimile transmission or by e-mail
      delivery of a “.pdf” format data file, such signature shall create a valid and
      binding obligation of the party executing (or on whose behalf such signature
      is
      executed) with the same force and effect as if such facsimile or “.pdf”
signature were the original thereof.

     

    (k)  Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and any other Transaction Documents (whether
      brought against a party hereto or its respective Affiliates, employees or
      agents) shall be commenced exclusively in the New York Courts. Each party hereto
      hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of any of the Transaction Documents), and hereby irrevocably
      waives, and agrees not to assert in any Proceeding, any claim that it is not
      personally subject to the jurisdiction of any such New York Court, or that
      such
      Proceeding has been commenced in an improper or inconvenient forum. Each party
      hereto hereby irrevocably waives personal service of process and consents to
      process being served in any such Proceeding by mailing a copy thereof via
      registered or certified mail or overnight delivery (with evidence of delivery)
      to such party at the address in effect for notices to it under this Agreement
      and agrees that such service shall constitute good and sufficient service of
      process and notice thereof. Nothing contained herein shall be deemed to limit
      in
      any way any right to serve process in any manner permitted by law. EACH
      PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
      APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
      ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
      HEREBY.

     

    (l)  Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

     

    (m)  Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

     

    (n)  Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (o)  Independent
      Nature of Purchasers' Obligations and Rights.
      The
      obligations of each Purchaser under this Agreement are several and not joint
      with the obligations of any other Purchaser hereunder, and no Purchaser shall
      be
      responsible in any way for the performance of the obligations of any other
      Purchaser hereunder. The decision of each Purchaser to purchase the Shares
      and
      Warrants pursuant to the Transaction Documents has been made independently
      of
      any other Purchaser. Nothing contained herein or in any other agreement or
      document delivered at any closing, and no action taken by any Purchaser pursuant
      hereto or thereto, shall be deemed to constitute the Purchasers as a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Purchasers are in any way acting in concert with
      respect to such obligations or the transactions contemplated by this Agreement.
      Each Purchaser acknowledges that no other Purchaser has acted as agent for
      such
      Purchaser in connection with making its investment hereunder and that no
      Purchaser will be acting as agent of such Purchaser in connection with
      monitoring its investment in the Shares and Warrants or enforcing its rights
      under the Transaction Documents. Each Purchaser shall be entitled to protect
      and
      enforce its rights, including, without limitation, the rights arising out of
      this Agreement, and it shall not be necessary for any other Purchaser to be
      joined as an additional party in any Proceeding for such purpose. The Company
      acknowledges that each of the Purchasers has been provided with the same
      Registration Rights Agreement for the purpose of closing a transaction with
      multiple Purchasers and not because it was required or requested to do so by
      any
      Purchaser.

     

    (p)  Currency.Unless
      otherwise indicated, all dollar amounts referred to in this Agreement are in
      United States Dollars. All amounts owing under this Agreement are in United
      States Dollars. All amounts denominated in other currencies shall be converted
      in the United States Dollar equivalent amount in accordance with the applicable
      exchange rate in effect on the date of calculation.

     

    (q)  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.

     

    

    

    

     

    
      
        
           

        

        
        

      

      
        17

        
          

        

      

      
        
        

        
        

      

    

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

     

    GSE
      SYSTEMS, INC.

    

    

    By:__/s/
      John V. Moran________________________ 

    Name: 
      John V. Moran

    Title: 
      Chief Executive Officer

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK,

    SIGNATURE
      PAGES OF HOLDERS TO FOLLOW]

     

     

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

     

    

    NAME
      OF
      INVESTING ENTITY

    

                                 
      _________________________________________________________

    

    AUTHORIZED
      SIGNATORY

     

    By:   

    Name:

    Title:

    

    ADDRESS
      FOR NOTICE

    

    c/o: 

    

    Street:
       

    

    City/State/Zip:
       

    

    Attention:
       

    

    Tel:  

    

    Fax:  

    

    Email:  

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    Annex
      A

     

    PLAN
      OF DISTRIBUTION

    

    We
      are
      registering the shares of Common Stock issued to the selling shareholders and
      issuable upon exercise of the warrants to permit the resale of these shares
      of
      Common Stock by the holders of the shares of Common Stock and warrants from
      time
      to time after the date of this prospectus. We will not receive any of the
      proceeds from the sale by the selling shareholders of the shares of Common
      Stock. We will bear all fees and expenses incident to our obligation to register
      the shares of Common Stock.

     

    The
      selling shareholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      shareholders will be responsible for underwriting discounts or commissions
      or
      agent's commissions. The shares of Common Stock may be sold on any national
      securities exchange or quotation service on which the securities may be listed
      or quoted at the time of sale, in the over-the-counter market or in transactions
      otherwise than on these exchanges or systems or in the over-the-counter market
      and in one or more transactions at fixed prices, at prevailing market prices
      at
      the time of the sale, at varying prices determined at the time of sale, or
      at
      negotiated prices. These sales may be effected in transactions, which may
      involve crosses or block transactions. The selling shareholders may use any
      one
      or more of the following methods when selling shares:

     

    
      	·  	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	·  	
              block
                trades in which the broker-dealer will attempt to sell the 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;

            

    

     

    
      	·  	
              settlement
                of short sales entered into after the effective date of the registration
                statement of which this prospectus is a
                part;

            

    

     

    
      	·  	
              broker-dealers
                may agree with the selling shareholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

     

    
      	·  	
              through
                the writing or settlement of options or other hedging transactions,
                whether such options are listed on an options exchange or
                otherwise;

            

    

     

    
      	·  	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    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, as
      permitted by that rule, or Section 4(1) under the Securities Act, if available,
      rather than under this prospectus, provided that they meet the criteria and
      conform to the requirements of those provisions.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Broker-dealers
      engaged by the selling shareholders may arrange for other broker-dealers to
      participate in sales. If the selling shareholders effect such transactions
      by
      selling shares of Common Stock to or through underwriters, broker-dealers or
      agents, such underwriters, broker-dealers or agents may receive commissions
      in
      the form of discounts, concessions or commissions from the selling shareholders
      or commissions from purchasers of the shares of Common Stock for whom they
      may
      act as agent or to whom they may sell as principal. Such commissions will be
      in
      amounts to be negotiated, but, except as set forth in a supplement to this
      Prospectus, in the case of an agency transaction will not be in excess of a
      customary brokerage commission in compliance with NASD Rule 2440; and in the
      case of a principal transaction a markup or markdown in compliance with NASD
      IM-2440. 

     

    In
      connection with sales of the shares of Common Stock or otherwise, 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 shares
      of
      Common Stock in the course of hedging in positions they assume. The selling
      shareholders may also sell shares of Common Stock short and if such short sale
      shall take place after the date that this Registration Statement is declared
      effective by the Commission, the selling shareholders may deliver shares of
      Common Stock covered by this prospectus to close out short positions and to
      return borrowed shares in connection with such short sales. The selling
      shareholders may also loan or pledge shares of Common Stock to broker-dealers
      that in turn may sell such shares, to the extent permitted by applicable law.
      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).
      Notwithstanding the foregoing, the selling shareholders have been advised that
      they may not use shares registered on this registration statement to cover
      short
      sales of our common stock made prior to the date the registration statement,
      of
      which this prospectus forms a part, has been declared effective by the
      SEC.

     

    The
      selling shareholders may, from time to time, pledge or grant a security interest
      in some or all of the warrants or shares of Common Stock owned by them and,
      if
      they default in the performance of their secured obligations, the pledgees
      or
      secured parties may offer and sell the shares of Common Stock from time to
      time
      pursuant to this prospectus or any amendment to this prospectus under Rule
      424(b)(3) or other applicable provision of the Securities Act of 1933, as
      amended, amending, if necessary, 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 and donate
      the
      shares of Common Stock in other circumstances in which case the transferees,
      donees, pledgees or other successors in interest will be the selling beneficial
      owners for purposes of this prospectus.

     

    The
      selling shareholders and any broker-dealer or agents participating in the
      distribution of the shares of Common Stock may be deemed to be “underwriters”
within the meaning of Section 2(11) of the Securities Act in connection with
      such sales. In such event, any commissions paid, or any discounts or concessions
      allowed to, any such broker-dealer or agent and any profit on the resale of
      the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Selling Stockholders 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 and may be subject to
      certain statutory liabilities of, including but not limited to, Sections 11,
      12
      and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange
      Act of 1934, as amended, or the Exchange Act.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    Each
      selling shareholder has informed the Company that it is not a registered
      broker-dealer and does not have any written or oral agreement or understanding,
      directly or indirectly, with any person to distribute the Common Stock. Upon
      the
      Company being notified in writing by a selling shareholder that any material
      arrangement has been entered into with a broker-dealer for the sale of common
      stock through a block trade, special offering, exchange distribution or
      secondary distribution or a purchase by a broker or dealer, a supplement to
      this
      prospectus will be filed, if required, pursuant to Rule 424(b) under the
      Securities Act, disclosing (i) the name of each such selling shareholder and
      of
      the participating broker-dealer(s), (ii) the number of shares involved, (iii)
      the price at which such the shares of Common Stock were sold, (iv) the
      commissions paid or discounts or concessions allowed to such broker-dealer(s),
      where applicable, (v) that such broker-dealer(s) did not conduct any
      investigation to verify the information set out or incorporated by reference
      in
      this prospectus, and (vi) other facts material to the transaction. In no event
      shall any broker-dealer receive fees, commissions and markups, which, in the
      aggregate, would exceed eight percent (8%). 

     

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    There
      can
      be no assurance that any selling shareholder will sell any or all of the shares
      of Common Stock registered pursuant to the shelf registration statement, of
      which this prospectus forms a part.

     

    The
      selling shareholder and any other person participating in such distribution
      will
      be subject to applicable provisions of the Securities Exchange Act of 1934,
      as
      amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      shareholder and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, including, without limitation, Securities
      and
      Exchange Commission filing fees and expenses of compliance with state securities
      or “blue sky” laws; provided,
      however,
      that a
      selling shareholder will pay all underwriting discounts and selling commissions,
      if any and any related legal expenses incurred by it. We will indemnify the
      selling shareholders against certain liabilities, including some liabilities
      under the Securities Act, in accordance with the registration rights agreements,
      or the selling shareholders will be entitled to contribution. We may be
      indemnified by the selling shareholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling shareholders specifically for use
      in
      this prospectus, in accordance with the related registration rights agreements,
      or we may be entitled to contribution.

     

    22Exhibit 10.4 Consent and Waiver

    
      

WAIVER
      AND CONSENT

     

    This
      WAIVER AND CONSENT (this “Waiver”),
      dated
      as
      of June 14, 2007, is entered into by and between GSE SYSTEMS, INC., a Delaware
      corporation (the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands
      company (“Laurus”), for the purpose of amending and restating and waiving
      certain terms of (i) that certain Security Agreement dated as of March 7, 2006
      by and among the Company, GSE Power Systems, Inc., a Delaware corporation
      (“GSE
      Power”),
      (together with GSE, the “Companies”
and,
      each a “Company”)
      and
      Laurus (as amended, modified or supplemented from time to time, the “Security
      Agreement”), (ii) that certain Stock Pledge Agreement, dated March 7, 2006, by
      and among Laurus, the Company GSE Power and certain other subsidiaries of the
      Company (as amended, modified or supplemented from time to time, the “Stock
      Pledge Agreement”) and the other Ancillary Agreements (as such term is defined
      in the Security Agreement)(the Security Agreement and the Ancillary Agreements
      together, the “Transaction Documents”). Capitalized terms use herein without
      definition shall have the meanings ascribed to such terms in the Security
      Agreement.

    

    WHEREAS,
      the Company intends to issue additional shares of its common stock and certain
      warrants for the purchase of shares of its common stock pursuant to that certain
      Securities Purchase Agreement (the “Purchase Agreement”), a copy of which is
      attached as Exhibit
      A
      hereto,
      by and among the Company and the investors signatory thereto (the “Purchasers”)
      and all related documents, schedules and exhibits, relating to the assignment
      and sale (the “Purchase Documents”);

    

    WHEREAS,
      the Company has requested that Laurus waive certain provisions of the
      Transaction Documents that would otherwise prohibit the Company from entering
      into the Purchase Agreement or otherwise grant Laurus a right of first refusal
      with respect to the securities being sold pursuant to the Purchase Documents
      ;

     

    WHEREAS,
      the Company and Laurus have agreed to make certain changes to the Transaction
      Documents as set forth herein, and that Laurus will waive certain provisions
      of
      the Transaction Documents.

    

    NOW,
      THEREFORE, in consideration of the above, and for other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

     

    

    WAIVER
      AND CONSENT

    

    1.  Laurus
      hereby consents to consummation of the transactions contemplated by the Purchase
      Agreement and waives its right of right of first refusal pursuant to Section
      13(u) of the Security Agreement.

    

    2. Nothing
      in this Waiver shall be deemed to release or discharge Laurus’s security
      interests, liens, pledges, mortgages and/or other charges or encumbrances
      created on or with respect to any assets of the Company or the Company’s
      Subsidiaries.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    MISCELLANEOUS

    

    1. Each
      of
      the Companies hereby represents and warrants to Laurus that after giving effect
      to this Waiver (i) on the
      date
      hereof, all representations, warranties and covenants made by each of the
      Companies in connection with the Security Agreement and the Ancillary Agreements
      are true, correct and complete (ii) on the date hereof, all of the Companies’
covenant requirements set forth in the Security Agreement and the Ancillary
      Agreement have been met, and (iii)
      no Event
      of Default exists under the
      Security Agreement or under any of the Ancillary Agreements.

    

    2. The
      parties hereto understand that the Company has an affirmative obligation to
      make
      prompt public disclosure of material agreements and material amendments to
      such
      agreements. The Company acknowledges that it shall file a Form 8-K disclosing
      this agreement within the time frame specified therefore by the Securities
      and
      Exchange Commission. 

    

    3. Each
      consent set forth herein shall be effective on the date when (i) the Company
      shall have executed and delivered to Laurus its respective counterpart to this
      Consent and (ii) delivery has been made to Laurus of the Purchase Documents,
      each duly executed and delivered by the parties thereto.

    

    4. Except
      as
      specifically set forth in this Consent, there are no amendments, modifications
      or waivers to the Transaction Documents, and all of the forms, terms and
      provisions of the Transaction Documents remain in full force and
      effect.

    

    5. This
      Waiver shall be binding upon the parties hereto and their respective successors
      and permitted assigns and shall inure to the benefit of and be enforceable
      by
      each of the parties hereto and their respective successors and permitted
      assigns. THIS
      WAIVER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
      LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAWS THEREOF.
      This
      Waiver and Consent may be executed in any number of counterparts, each of which
      shall be an original, but all of which shall constitute one instrument.

    

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each of
      the Company and Laurus has caused this Waiver and Consent to be signed in its
      name effective as of this 14th day of June 2007.

     

     

    LAURUS
      MASTER FUND, LTD.

     

    By:
      _/s/
      David Grin___________________

    Name:
      David Grin

    Title:
      Director

    Address:

     

    ACKNOWLEDGED
      AND AGREED:

     

    GSE
      SYSTEMS, INC.

     

    By:
       /s/
      Jeffery G. Hough   

    Name:
      Jeffery G. Hough

    Title:
      Senior Vice President and Chief Financial Officer

     

     

    GSE
      POWER
      SYSTEMS, INC.

     

    By: /s/
      Jeffery G. Hough   

    Name:
      Jeffery G. Hough 

    Title:
      Senior Vice President and Chief Financial Officer

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

     

     

    4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]