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
Xxxx 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.
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“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
5
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.
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(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 XXXXX system.
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(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.
0000
Xxxxxxxxxx Xx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxx 00000
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
Attention:
Chief Financial Officer
With
a
copy to: Xxxxx
Xxxxxx LLP
0000
Xxxxxxxx
Xxx
Xxxx,
XX 00000-0000
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
Attention:
Xxxxxx X. Xxxxxx, 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/
Xxxx X. Moran________________________
Name:
Xxxx X. Xxxxx
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.
22
