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 This Employment Agreement involves

GSE SYSTEMS INC | GSE Systems, Inc

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Title: EMPLOYMENT AGREEMENT
Governing Law: Maryland     Date: 8/19/2016
Industry: Software and Programming     Sector: Technology

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Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of August 15, 2016 (the " Effective Date "), by and between GSE Systems, Inc., a Delaware corporation with principal executive offices at 1332 Londontown Blvd., Sykesville, MD 21784 (the " Company "), and Christopher D. Sorrells, residing at 3501 Harvard Avenue, Dallas, Texas  75205 (" Executive ").

BACKGROUND

The Company and the Executive desire that the Executive be employed by the Company and have entered into this Employment Agreement to set forth the terms and conditions on which the Executive shall be employed by the Company.

NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants, and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound hereby agree as follows:

1.   Employment .  The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement.

2.   Capacity and Duties .  Executive shall be employed in the capacity of Chief Operating Officer of the Company, shall report to the Chief Executive Officer of the Company, and shall have the duties, responsibilities and authorities normally undertaken by the Chief Operating Officer of a company as well as such other duties, responsibilities, and authorities as are assigned to him by the Chief Executive Officer or the Board of Directors of the Company (the " Board "), so long as such additional duties, responsibilities and authorities are consistent with Executive's position as Chief Operating Officer of the Company.  The Executive shall devote substantially all of his business time and attention to the performance of his duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise without the prior written consent of the Board.  Executive will spend substantially all of his working time for the Company, when not traveling on Company business, at the Company's headquarters; provided that the parties agree that Executive's working from an alternate location one day per week will not violate the foregoing requirement.  The Executive will be permitted to act or serve as a director, trustee, or committee member of any type of business, civic or charitable organization as long as such activities do not materially interfere with the performance of the Executive's duties and responsibilities to the Company as provided hereunder.  The Company acknowledges that Executive currently serves as a member of the Board of Directors of Renewable Energy Group.

3.   Term of Employment .  The term of this Agreement shall commence on the Effective Date and continue through December 31, 2018 (the " Initial Term ").  The Initial Term shall be automatically extended for an additional one year period on December 31 of each year, beginning December 31, 2018, unless either party provides written notice to the other of its intention not to extend at least 60 days prior to such date (as so extended, the " Term ").

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4.   Compensation .  During the Term, subject to all the terms and conditions of this Agreement, and as compensation for all services to be rendered by Executive under this Agreement, the Company shall pay to or provide Executive with the following:

a.   Base Salary .  The Company shall pay to Executive an annual base salary (the " Base Salary ") of Two Hundred Ninety Thousand Dollars ($290,000).  The Executive's Base Salary shall be reviewed at least annually with the Compensation Committee of the Board of Directors of the Company (the " Compensation Committee "), and the Compensation Committee may, but shall not be required to, increase the Base Salary during the Term based upon changes in cost of living, the Executive's performance and other factors deemed relevant by the Compensation Committee.  The Base Salary will be payable at such intervals as salaries are paid generally to other executive officers of the Company.

b.   Bonus .  For each fiscal year of the Term, beginning with fiscal year 2016, the Executive shall be eligible to earn an annual bonus award (the " Bonus ") of up to 50% of Base Salary, based upon the achievement of annual performance goals established with the Compensation Committee in consultation with the Executive and approved by the Board of Directors prior to the beginning of each fiscal year.  The amount of Bonus to be paid to Executive for any year of this Agreement may, at the sole discretion of the Board of Directors of the Company, be (i) prorated for the number of months which Executive was employed by the Company during such year (for fiscal year 2016, the Bonus shall be prorated to reflect the time period from the Effective Date through December 31, 2016) and (ii) paid on or prior to March 15 of the following year.

c.   Restricted Stock Units .

i.

Upon execution of this Agreement, the Executive will be granted 400,000 restricted stock units (" RSUs ") plus a cash award equivalent to an additional 75,000 RSUs, subject to vesting and all other terms and conditions set forth in the Company's 1995 Long Term Incentive Plan and in a written grant agreement issued to Executive in connection with the grant of such RSUs.

ii.

For each fiscal year during the Initial Term, commencing with fiscal year 2017, the Executive will have the potential to earn 50% of his Base Salary in RSUs, non-qualified stock options or a combination thereof, based upon metrics, such as performance against budget, profitability and stock price performance, as determined by Compensation Committee in consultation with the Executive and approved by the Board of Directors prior to the beginning of each fiscal year.  All such grants shall be made via a written grant agreement.

d.   Benefits .  Executive shall be entitled to participate in all employee benefit plans maintained by the Company for its senior executives or employees including, without limitation, the Company's medical, dental, vision, 401(k) and life insurance plans and the following benefits:

 

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i.

Vacation .  Executive shall be entitled to vacation in accordance with the Company's policy for its senior executives.

ii.

Medical and Dental/Vision Insurance .  The Company shall pay Executive's monthly Medical and Dental/Vision Insurance premiums in association with Company provided health insurance plans.

 

iii.

Other Benefits .  Executive shall be eligible to participate in all benefit plans (including 401(k) and life insurance plans) sponsored or maintained by the Company for its executive officers, to the extent permitted under applicable law and subject to the terms of each plan.  Nothing in this Agreement obligates the Company to adopt, maintain, or refrain from amending, freezing, or terminating any benefit plan, regardless of whether such action affects Executive or executive officers as a group.

5.   Business Expenses .  The Company shall reimburse Executive for all reasonable expenses (including, but not limited to, continuing education, business travel, and customer entertainment expenses) incurred by him in connection with his employment hereunder in accordance with the written policy and guidelines established by the Company for executive officers.

6.   Non-Competition, Non-Solicitation, Non-Disparagement .

a.   Acknowledgements .  The Executive acknowledges and agrees that the services to be rendered by the Executive to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company's industry, methods of doing business and marketing and investment strategies by virtue of the Executive's employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.  The Executive further acknowledges that: the amount of the Executive's compensation reflects, in part, the Executive's obligations and the Company's rights under this Agreement; that the Executive has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; and that the Executive will not be subject to undue hardship by reason of his full compliance with the terms and conditions of this Agreement or the Company's enforcement thereof.

b.   Non-Competition.   Because of the Company's legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Term and for the 12-month period beginning on the last day of the Executive's employment with the Company, the Executive agrees and covenants not to engage in Prohibited Activity within the United States. For purposes of this Section 6, " Prohibited Activity " means any activity to which the Executive contributes his knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern or any other similar capacity to an entity engaged in the same or similar business as the Company anywhere in the world.  Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.

 

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c.   Non-solicitation of Employees .  The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during the Term and the 12-month period beginning on the last day of the Executive's employment with the Company.

d.   Non-solicitation of Customers .  The Executive understands and acknowledges that because of the Executive's experience with and relationship to the Company, he will have access to and learn about much or all of the Company's customer information.  " Customer Information " includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer.  The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm to the Company.  The Executive agrees and covenants, during the Term and for the 12-month period following the effective date of termination of this Agreement for any reason, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company's current customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or for purposes of inducing any such customer to terminate its relationship with the Company.

e.   Confidential Information .  All Confidential Information which Executive may now possess, may obtain during the Term, or may create prior to the end of the Term  relating to the business of the Company or of any of its customers or suppliers shall not be published, disclosed, or made accessible by him to any other person, firm, or corporation either during or after the termination of his employment or used by him except during the Term in the business and for the benefit of the Company, in each case without prior written permission of the Company.  Executive shall return all tangible evidence of any Confidential Information to the Company prior to or at the termination of his employment. For purposes of this Agreement, " Confidential Information " means any and all information related to the Company or any of its subsidiaries that is not generally known by others with whom they compete or do business.

f.   Enforcement .  Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of his covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which the Company may have, the Company shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive.  Nothing contained herein shall prevent or delay the Company from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of his obligations hereunder.

g.   Tolling .  The period of time applicable to any covenant in this Section 6 will be extended by the duration of any violation by Executive of such covenant.

 

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h.   Reformation .  If any covenant in this Section 6 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against Executive.

7.   Patents .  Any interest in patents, patent applications, inventions, copyrights, developments, know-how and processes (" Inventions ") which Executive now or hereafter during the period he is employed by the Company under this Agreement  may own or develop relating to the fields in which the Company or any of its subsidiaries may then be engaged shall belong to the Company; and forthwith upon request of the Company, Executive shall execute all such assignments and other documents and take all such other action as the Company may reasonably request in order to vest in the Company all his right, title, and interest in and to all Inventions, free and clear of all liens, charges, and encumbrances.

8.   Termination .  Executive's employment hereunder may be terminated prior to the expiration of the Term under the following circumstances:

a.   Death .  Executive's employment hereunder shall terminate upon his death.

b.   Disability .  If, as a result of Executive's incapacity due to physical or mental illness, Executive shall have been unable to perform his duties hereunder on a full-time basis for a period of three consecutive months, or for 180 days in any 12-month period, with or without reasonable accommodation (a " Disability "), the Company may, on 30 days written Notice of Termination (defined in Section 8(e)), terminate Executive's employment if Executive fails to return to the performance of his duties hereunder on a full-time basis within said period.

c.   Cause .  The Company may terminate Executive's employment hereunder for Cause.  For purposes of this Agreement, the Company shall have " Cause " to terminate Executive's employment upon the occurrence of any of the following:

i.

the willful and continued failure by Executive to substantially perform his material duties or obligations hereunder (other than any such failure resulting from Executive's incapacity due to physical or mental


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