SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(A) of the Securities Exchange Act of
1934
Filed
by the Registrant x Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to ss.240.14a-11(c) or
ss.240.14a-12
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GSE
SYSTEMS, INC.
(Name
of Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate
box):
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid previously with preliminary
materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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GSE
SYSTEMS, INC.
1332
Londontown Blvd., Suite 200
Sykesville,
MD 21784
(410)
970-7800
Dear
Stockholder:
You are
cordially invited to attend the Annual Meeting of Stockholders of GSE Systems,
Inc. on June 25, 2009. The Annual Meeting will begin at 11:00 a.m. local time at
our headquarters located at 1332 Londontown Blvd, Suite 200, Sykesville,
Maryland 21784.
The
Annual Meeting will cover only the business contained in the Proxy Statement. We
urge you to read the Proxy Statement carefully. In addition to the formal items
of business, I will be available at the meeting to answer your
questions.
Under
rules recently adopted by the Securities and Exchange Commission, we are
primarily furnishing proxy materials to our stockholders on the Internet rather
than mailing paper copies of the materials to each shareholder. As a result,
some of you will receive an Important Notice Regarding Availability of Proxy
Materials instead of paper copies of this proxy statement and our annual report.
The notice contains instructions on how to access the proxy statement and the
annual report over the Internet, as well as instructions on how to request a
paper copy of our proxy materials, if you so desire.
We look
forward to seeing you at the meeting.
Very truly
yours,
Jerome I.
Feldman
Chairman of the
Board
GSE
SYSTEMS, INC.
1332
Londontown Blvd., Suite 200
Sykesville,
MD 21784
NOTICE
OF THE ANNUAL MEETING OF STOCKHOLDERS
JUNE
25, 2009
NOTICE IS
HEREBY GIVEN that the annual meeting of stockholders (the “Annual Meeting”) of
GSE Systems, Inc. (the “Company”) will be held on June 25, 2009, at 11:00 a.m.
local time, at our headquarters located at 1332 Londontown Blvd, Suite 200,
Sykesville, Maryland 21784 and thereafter as it may from time to time be
adjourned, for the purposes stated below:
1. To
elect three Class II directors to serve until the 2012 Annual Meeting or until
their respective successors are elected and qualified, or, if earlier, such
director’s resignation, death or removal; and,
2. To
ratify the selection of the Audit Committee of the Board of Directors of KPMG
LLP, independent registered public accountants, as the Company’s independent
registered public accountants for the fiscal year ending December 31, 2009;
and
3. To
transact such other business as may properly come before the Annual Meeting or
at any adjournments or postponements thereof.
The Board
of Directors has fixed the close of business on April 27,
2009 as the record date for the Annual Meeting. This means that
owners of the Company’s common stock at the close of business on that day are
entitled to (a) receive this notice of the Annual Meeting, and (b) vote at the
Annual Meeting or at any adjournments or postponements thereof. Information
regarding each of the matters to be voted on at the Annual Meeting is contained
in the attached Proxy Statement and this Notice of Annual Meeting of
Stockholders. We urge you to read the Proxy Statement carefully. In addition to
the formal items of business, I will be available at the meeting to answer your
questions.
The list
of stockholders as of the record date will be open for the examination by any
stockholder at the Company’s principal offices in Sykesville, Maryland for any
purpose germane to the meeting for a period of ten days prior to the Annual
Meeting. The list also will be available for the examination by any stockholder
present at the meeting. Please note that information relating to stockholder
proposals and submissions is located at the end of this proxy statement for your
reference. If you plan to attend the Annual Meeting, please mark the appropriate
box on the proxy card to help us plan for the Annual Meeting.
By Order of the Board of
Directors
Jeffery
G. Hough
Senior
Vice President, Chief Financial Officer,
Secretary
& Treasurer
Sykesville,
Maryland
May 1,
2009
GSE
SYSTEMS, INC.
1332
Londontown Blvd., Suite 200
Sykesville,
MD 21784
(410)
970-7800
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
To
be Held on Thursday, June 25, 2009
ANNUAL
MEETING INFORMATION
This
proxy statement contains information related to the annual meeting (the “Annual
Meeting”) of stockholders of GSE Systems, Inc. (the “Company”) to be held on
Thursday, June 25, 2009 at 11:00 a.m. local time at our
headquarters located at 1332 Londontown Blvd., Suite 200, Sykesville, Maryland
21784. The notice of the Annual Meeting will be mailed to
stockholders on or about May 15, 2009.
WHY DIDN’T I RECEIVE PAPER COPIES OF
THE PROXY MATERIALS IN THE MAIL?
Under
rules recently adopted by the Securities and Exchange Commission (“SEC”), we are
now primarily furnishing proxy materials to our stockholders on the Internet,
rather than mailing paper copies of the Proxy Statement and the Annual Report to
each shareholder. If you received only an Important Notice Regarding the
Availability of Proxy Materials (the “Notice”) by mail, you will not receive a
paper copy of these proxy materials unless you request one. Instead, the Notice
will instruct you on how you may vote your shares. The Notice will also instruct
you as to how you may access your proxy card to vote over the Internet. If you
received a Notice by mail or electronic mail and would like to receive a paper
copy of our proxy materials, free of charge, please follow the instructions
included in the Notice.
HOW
MANY VOTES DO I HAVE?
Stockholders
who owned GSE Systems Common Stock (“Common Stock”) at the close of business on
April 27, 2009 (the “Record Date”) are entitled to one vote for each share of
common stock they held on that date, in all matters properly brought before the
Annual Meeting.
On the
Record Date, there was one class of stock issued and outstanding, the Common
Stock. On that date there were 15,983,690 shares of Common Stock outstanding.
Each share of Common Stock is entitled to one vote.
The
Company will continue its long-standing practice of holding the votes of all
stockholders in confidence from directors, officers and employees except: (a) as
necessary to meet applicable legal requirements and to assert and defend claims
for or against the Company; (b) in case of a contested proxy solicitation; or
(c) if a stockholder makes a written comment on the proxy card or otherwise
communicates his/her vote to management.
WHAT
PROPOSALS WILL BE ADDRESSED AT THE ANNUAL MEETING?
We will
address the following proposals at the Annual Meeting:
1.
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Election
of three Class II directors; and
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2.
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Ratification
of the selection of KPMG LLP as the Company’s independent registered
public accountants.
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Our Board
has taken unanimous affirmative action with respect to each of the foregoing
proposals and recommends that the stockholders vote FOR each of the
proposals.
WHO
MAY VOTE ON THESE PROPOSALS?
All of
the holders of record of GSE Systems Common Stock at the close of business on
April 27, 2009 will be entitled to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had 15,983,690 shares of Common Stock
outstanding and entitled to vote.
HOW
DO I VOTE?
If you
are a holder of record (that is, if your shares are registered in your name with
Continental Stock Transfer & Trust Company, our transfer agent (the
“Transfer Agent”)), there are four ways to vote:
Telephone
Voting: You may vote by calling the toll-free telephone number indicated
on the Notice or if you received a proxy card, by following the instructions on
the proxy card. Please follow the voice prompts that allow you to vote your
shares and confirm that your instructions have been properly
recorded.
Internet
Voting: You may vote by logging on to the website indicated on the
Notice, or if you received a proxy card, by following the instructions on the
proxy card. Please follow the website prompts that allow you to vote your shares
and confirm that your instructions have been properly recorded.
Return Your Proxy
Card By Mail: If
you received your proxy materials by mail, you may vote by completing, signing
and returning the proxy card in the postage-paid envelope provided with this
proxy statement. The proxy holders will vote your shares according to your
directions. If you sign and return your proxy card without specifying choices,
your shares will be voted by the persons named in the proxy in accordance with
the recommendations of the Board of Directors as set forth in this proxy
statement.
Vote at the
Meeting: You may
cast your vote in person at the annual meeting. Written ballots will be passed
out to anyone who wants to vote in person at the meeting.
Telephone
and Internet voting for shareholders of record will be available 24 hours a day
and will close at 11:59 p.m. local time on June 24, 2009. Internet or
telephone voting is convenient, provides postage and mailing cost savings and is
recorded immediately, minimizing the risk that postal delays may cause votes to
arrive late and therefore not be counted.
Even if
you plan to attend the Annual Meeting, you are encouraged to vote your shares by
proxy. You may still vote your shares in person at the Annual Meeting even if
you have previously voted by proxy. If you are present at the Annual Meeting and
desire to vote in person, your vote by proxy will not be counted.
WHAT
IF I HOLD MY SHARES IN “STREET NAME?”
You
should follow the voting directions provided by your broker or nominee. You may
complete and mail a voting instruction card to your broker or nominee or, in
most cases, submit voting instructions by telephone or the Internet to your
broker or nominee. If you provide specific voting instructions by mail,
telephone or the Internet, your broker or nominee will vote your shares as you
have directed.
WILL
MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
If you
are the stockholder of record and you do not vote or provide a proxy, your
shares will not be voted.
Your
shares may be voted if they are held in street name, even if you do not provide
the brokerage firm with voting instructions. Brokerage firms have the authority
under the NYSE AMEX Stock Exchange rules to vote shares for which
their customers do not provide voting instructions on certain “routine”
matters.
The
election of directors and the proposal to ratify the selection of KPMG as our
independent registered public accounting firm for fiscal 2009 are considered
“routine” matters for which brokerage firms may vote unvoted shares. There are
currently no other proposals to be voted on at the annual meeting.
WHY
WOULD THE ANNUAL MEETING BE POSTPONED?
The
Annual Meeting will be postponed if a quorum is not present at the Annual
Meeting on June 25, 2009. The presence in person or by proxy of at least a
majority of the shares of Common Stock outstanding as of the Record Date, will
constitute a quorum and are required to transact business at the Annual Meeting.
If a quorum is not present, the Annual Meeting may be adjourned until a quorum
is obtained.
Shares
that abstain from voting as to a particular matter will not be counted as votes
in favor of such matter, and also will not be counted as votes cast or shares
voting on such matter. Accordingly, abstentions will not be included in vote
totals and will not affect the outcome of the voting for either proposal. Shares
held by brokers who do not have discretionary authority to vote on a particular
matter and who have not received voting instructions from their customers are
not counted or deemed to be present or represented for the purpose of
determining whether stockholders have approved that matter, but they are counted
as present for the purposes of determining the existence of a quorum at the
Annual Meeting.
A broker
non-vote occurs when a broker submits a proxy card with respect to Securities
held in a fiduciary capacity (typically referred to as being held in “street
name”), but declines to vote on a particular matter because the broker has not
received voting instructions from the beneficial owner. Under the rules that
govern brokers who are voting with respect to shares held in street name,
brokers have the discretion to vote such Securities on routine matters, but not
on non-routine matters. Routine matters include the election of directors,
increases in authorized common stock for general corporate purposes and
ratification of auditors. Non-routine matters include amendments to stock
plans.
CAN
I CHANGE MY MIND AFTER I VOTE?
Yes. If
you are a stockholder of record, you may change your vote or revoke your proxy
at any time before it is voted at the Annual Meeting by:
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submitting
a new proxy by telephone or via the Internet after the date of the earlier
voted proxy;
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signing
another proxy card with a later date and returning it to us prior to the
Annual Meeting; or
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attending
the Annual Meeting and voting in
person.
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If you
hold your shares in street name, you may submit new voting instructions by
contacting your broker, bank or other nominee. You may also vote in person at
the Annual Meeting if you obtain a legal proxy from your broker, bank or other
nominee.
CAN
I CHANGE MY MIND AFTER I VOTE?
Yes. If
you are a stockholder of record, you may change your vote or revoke your proxy
at any time before it is voted at the Annual Meeting by:
WHAT
VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
Proposal
1: Election of Directors
A
plurality of the eligible votes cast is required to elect director nominees. A
nominee who receives a plurality means he has received more votes than any other
nominee for the same director’s seat. There are three nominees for the three
Class II seats. A withheld vote will not affect the required plurality.
Abstentions shall not be considered to be votes cast.
Proposal
2: Ratification of Appointment of Independent Registered Public
Accounting Firm
The
approval of Proposal 2 requires the affirmative vote of a majority of the votes
cast, voting in person or by proxy. Abstentions will not be counted as votes
cast. Accordingly, abstentions will not affect the outcome of the voting for
this proposal.
ARE
THERE ANY DISSENTERS’ RIGHTS OF APPRAISAL?
The Board
is not proposing any action for which the laws of the State of Delaware, the
Certificate of Incorporation, as amended, or the By-Laws, as amended, of GSE
Systems provide a right of a stockholder to dissent and obtain appraisal of or
payment for such stockholder’s shares.
WHO
BEARS THE COST OF SOLICITING PROXIES?
The
Company will bear the cost of preparing, assembling and mailing the Notice and
requested proxy materials and of reimbursing brokers, nominees, fiduciaries and
other custodians for out-of-pocket and clerical expenses of transmitting the
Notice and requested copies of the proxy material to the beneficial owners of
our shares. A few of our officers and employees may participate in the
solicitation of proxies without additional compensation. We estimate that the
costs associated with solicitations of the proxies requested by this proxy
statement will be approximately $30,000.
WHERE
ARE GSE SYSTEMS’ PRINCIPAL EXECUTIVE OFFICES?
The
principal executive offices of GSE Systems are located at 1332 Londontown Blvd.,
Suite 200, Sykesville, MD 21784 and our telephone number is (410)
970-7800.
HOW
CAN I OBTAIN ADDITIONAL INFORMATION ABOUT GSE SYSTEMS?
The
Company will, upon written request of any stockholder, furnish without charge a
copy of its Annual Report on Form 10-K for the fiscal year ended December 31,
2008 (the “2008 Form 10-K”), as filed with the Securities and Exchange
Commission (“SEC”), including financial statements and financial statement
schedules required to be filed with the SEC pursuant to Rule 13a-1 under the
Act, but without exhibits. A list describing the exhibits not contained in the
2008 Form 10-K will be furnished with the 2008 Form 10-K. Please address all
written requests to GSE Systems, Inc., 1332 Londontown Blvd., Suite 200,
Sykesville, MD 21784 Attention: Corporate Secretary. Exhibits to the Form 10-K
will be provided upon written request and payment of an appropriate processing
fee which is limited to the Company’s reasonable expenses incurred in furnishing
the requested exhibits. In addition, the Company's 2008 Form 10-K can be
found on the Company's website, www.gses.com, under Investor
Relations/Financials.
GSE
Systems is subject to the informational requirements of the Securities Exchange
Act of 1934 (the “Exchange Act”) which requires that GSE Systems file reports,
proxy statements and other information with the SEC. The SEC maintains a website
on the Internet that contains reports, proxy and information statements and
other information regarding registrants, including GSE Systems, that file
electronically with the SEC. The SEC’s website address is www.sec.gov. In
addition, GSE Systems’ Exchange Act filings may be inspected and copied at the
SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C.
20549; and at the SEC’s regional offices at 233 Broadway, New York, NY 10279 and
Citicorp Center, 500 West Madison Street, Room 1400, Chicago, IL 60661. Copies
of the material may also be obtained upon request and payment of the appropriate
fee from the Public Reference Section of the SEC located at 100 F Street, N.E.,
Washington, D.C. 20549.
DO
ANY OF THE OFFICERS OR DIRECTORS HAVE AN INTEREST IN THE MATTERS TO BE ACTED
UPON?
Joseph W.
Lewis, Jane Bryant Quinn, and O. Lee Tawes, III have been nominated to stand for
re-election as Class II directors and therefore have an interest in the outcome
of Proposal 1. To the best of our knowledge, no directors or officers have an
interest, direct or indirect, in any other matters to be acted upon at the
Annual Meeting except as described herein.
The
principal place of business for each of Joseph W. Lewis, Jane Bryant Quinn, and
O. Lee Tawes, III is GSE Systems, Inc., 1332 Londontown Blvd., Suite 200,
Sykesville, MD 21784.
Within
the past year, none of the Officers and Directors listed below was party to any
contract, arrangements or understandings with any person with respect to any
Company securities including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of
proxies.
To the
best of our knowledge, no person, other than a director or executive officer of
the Company acting solely in that capacity, is a party to an arrangement or
understanding pursuant to which a nominee for election as director is proposed
to be elected.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
WHO
IS ENTITLED TO VOTE?
Only
stockholders of record at the close of business on April 27, 2009 will be
entitled to vote at the annual meeting or at any adjournments or postponements
thereof. On April 27, 2009, there were 15,983,690 shares of common stock issued
and outstanding. Each share of Common Stock is entitled to one vote on all
matters that may properly come before the Annual Meeting.
WHICH
STOCKHOLDERS OWN AT LEAST FIVE PERCENT OF THE COMPANY?
The
Common Stock is the only class of voting securities of the Company.
Except as otherwise indicated in the footnotes to the tables below, the Company
believes that the beneficial owners of the Common Stock have sole investment and
voting power with respect to such shares and subject to community property laws
where applicable. As of the close of business on the Record Date, 15,983,690
shares of Common Stock were issued and outstanding. We are not aware of any
material proceedings to which any of the parties identified under footnotes (2)
- (6) in the “Common Stock” section below, or any associate thereof, is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
Common
Stock
The
following table sets forth certain information known to the Company regarding
the beneficial ownership of the Common Stock as of April 27, 2009 by
(1) all beneficial owners of more than 5% of the Common Stock;
(2) each director and nominee for election as director; (3) each
executive officer named in the Summary Compensation Table appearing elsewhere in
this Proxy Statement; and (4) all executive officers, directors and
nominees of the Company as a group. The number of shares beneficially owned by
each person is determined under the rules of the Securities and Exchange
Commission (the “SEC”) and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under the rules of the SEC, a person
is also deemed to be a beneficial owner of any securities of which that person
has a right to acquire beneficial ownership within 60 days after the date on
which the determination of beneficial ownership is made. Unless otherwise
indicated, the address for each of the stockholders listed below is c/o GSE
Systems, Inc., 1332 Londontown Blvd., Suite 200, Sykesville, MD
21784.
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Name of Beneficial Owner
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GSE
Common Stock
Amount and Nature
of Beneficial Ownership
(A)
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Percent of
Class (B)
(1)
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Beneficial
Owners:
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Brown
Advisory Holdings, Inc.
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1,919,356
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(2)
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12.0%
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901
South Bond Street, Suite 400
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Baltimore,
MD 21231
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Babson
Capital Management LLC
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1,600,000
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(3)
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10.0%
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470
Atlantic Avenue
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Boston,
MA 02210-2208
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Dolphin
Offshore Partners, LP
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1,577,966
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(4)
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9.8%
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c/o
Dolphin Asset Management
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129
East 17th St., 2nd Floor
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New
York, NY 10003
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Wells
Fargo & Company
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1,253,140
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(5)
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7.8%
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420
Montgomery Street
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San
Francisco, CA 94104
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Jack
Silver
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897,413
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(6)
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5.6%
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c/o
SIAR Capital LLC
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660
Madison Ave.
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New
York, NY 10021
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Management:
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O.
Lee Tawes, III
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462,563
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(7)
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2.9%
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Jerome
I. Feldman
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410,317
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(8)
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2.5%
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Michael
D. Feldman
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410,317
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(9)
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2.5%
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John
V. Moran
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202,987
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(10)
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1.3%
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Jeffery
G. Hough
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96,654
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(11)
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0.6%
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Chin-Our
Jerry Jen
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90,082
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(12)
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0.6%
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George
J. Pedersen
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84,955
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(13)
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0.5%
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Gill
R. Grady
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61,827
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(14)
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0.4%
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Roger
L. Hagengruber
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20,667
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(15)
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0.1%
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Sheldon
L. Glashow
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16,676
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(16)
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0.1%
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Joseph
W. Lewis
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10,667
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(17)
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0.1%
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Jane
Bryant Quinn
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-
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0.0%
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Directors
and Executive Officers
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1,457,395
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(18)
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8.7%
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as
a group (12 persons)
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(A)
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This
table is based on information supplied by officers, directors and
principal stockholders of the Company and on any Schedules 13D or 13G
filed with the SEC including but not limited to certain Schedules 13G/A
filed for 2008 by Brown Advisory Group, Babson Capital Management LLC,
Wells Fargo & Company, and Jack Silver. On that basis, the
Company believes that certain of the shares reported in this table may be
deemed to be beneficially owned by more than one person and, therefore,
may be included in more than one table entry. Except as
otherwise indicated in the footnotes to this table, only certain
stockholders named in this table have sole voting and dispositive power
with respect to the shares indicated as beneficially owned.
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(B)
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Applicable
percentages are based on 15,983,690 shares outstanding on April 27, 2009,
adjusted as required by rules promulgated by the
SEC.
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(1) The
percentage of class calculation for Common Stock assumes for each beneficial
owner and directors and executive officers as a group that (i) all options and
warrants are exercised in full only by the named beneficial owner or members of
the group and (ii) no other options or warrants are exercised.
(2) Based on a
Schedule 13G/A filed with the SEC on February 17, 2009 by Brown Advisory
Holdings Incorporated in its capacity as a parent holding company
on behalf of Brown Advisory Securities, LLC, a Broker-Dealer as
defined in Section 15 of the Securities Exchange Act of 1934 (the “Act”) and an
Investment Advisor registered under section 203 of the Investment Advisers Act
of 1940 (whose clients own 1,916,356 shares) and on behalf of Brown Investment
Advisory & Trust Company, a Bank as defined in Section 3(a)(6) of the Act
(whose clients own 3,000 shares). The clients of these entities have the right
to receive, or the power to direct the receipt of, dividends from, or the
proceeds from the sale of, the GSE shares.
(3) Based on a
Schedule 13G/A filed with the SEC on March 27, 2009 by Babson Capital Management
LLC and Cobbs Wharf Master Fund, LP, a Cayman islands limited
partnership. Babson Capital Management LLC serves as investment
adviser to Cobbs Wharf Master Fund, LP which is the registered holder of the
1,600,000 shares reported as beneficially owned by Babson Capital.
(4) Includes
1,464,972 shares of Common Stock owned directly by Dolphin Offshore Partners, LP
(“Dolphin”) and 112,994 shares of Common Stock issuable upon exercise of
warrants held by Dolphin which are currently exercisable.
(5) Based on a
Schedule 13G/A filed with the SEC on January 23, 2009 by Wells Fargo &
Company on its own behalf and on behalf of Wells Capital Management
Incorporated, Wells Fargo Funds Management, LLC, Wachovia Bank, N.A. and Wells
Fargo Bank, N.A.
(6) Based
on a Schedule 13G/A filed by Mr. Silver with the SEC on February 17,
2009. Such shares of Common Stock beneficially owned by Mr. Silver
include 897,413 shares of Common Stock held by Sherleigh Associates Inc. Profit
Sharing Plan, a trust for which Mr. Silver is the trustee. Mr.
Silver has the sole voting and dispositive power with respect to all 897,413
shares of Common Stock beneficially owned by him.
(7) Includes
451,896 shares of Common Stock owned directly by Mr. Tawes and 10,667 shares of
Common Stock issuable upon exercise of options held by Mr. Tawes which are
currently exercisable.
(8) Includes
228,858 shares of Common Stock owned directly by Mr. Feldman, 85,000 shares of
Common Stock issuable upon exercise of stock options held by Mr. Feldman which
are currently exercisable, 1,341 shares of Common Stock allocated to Mr.
Feldman’s account pursuant to the provisions of the GP Retirement Savings Plan
(the “GP Plan”), 354 shares of Common Stock held by members of Mr. Feldman’s
family, and 94,764 shares of Common Stock issuable upon exercise of stock
options held by Mr. Feldman’s family which are currently
exercisable. Mr. Feldman disclaims beneficial ownership of all shares
held by his family.
(9) Includes
206 shares of Common Stock owned directly by Mr. Feldman, 94,764 shares of
Common Stock issuable upon exercise of stock options held by Mr. Feldman which
are currently exercisable, 229,006 shares of Common Stock held by Mr. Feldman’s
family, 85,000 shares of Common Stock issuable upon exercise of stock options
held by Mr. Feldman’s family which are currently exercisable, and 1,341 shares
of Common Stock allocated to the account of Mr. Feldman’s family pursuant to the
provisions of the GP Plan. Mr. Feldman disclaims beneficial ownership
of all shares held by his family.
(10) Includes
202,376 shares of Common Stock issuable upon exercise of stock options held by
Mr. Moran which are currently exercisable and 611 shares of Common Stock
allocated to Mr. Moran’s account pursuant to the provisions of the GP
Plan.
(11) Includes
96,654 shares of Common Stock issuable upon exercise of stock options held by
Mr. Hough which are currently exercisable.
(12) Includes
3,800 shares of Common Stock owned directly by Mr. Jen and 86,282 shares of
Common Stock issuable upon exercise of stock options held by Mr. Jen which are
currently exercisable.
(13) Includes
74,288 shares of Common Stock owned directly by Mr. Pedersen and 10,667 shares
of Common Stock issuable upon exercise of stock options held by Mr. Pedersen
which are currently exercisable.
(14) Includes
100 shares of Common Stock owned directly by Mr. Grady and 61,727 shares of
Common Stock issuable upon exercise of stock options held by Mr. Grady which are
currently exercisable.
(15) Includes
10,000 shares of Common Stock owned directly by Dr. Hagengruber and 10,667
shares of Common Stock issuable upon exercise of stock options held by Dr.
Hagengruber which are currently exercisable.
(16) Includes
6,009 shares of Common Stock owned directly by Dr. Glashow and 10,667 shares of
Common Stock issuable upon exercise of stock options held by Dr. Glashow which
are currently exercisable.
(17) Includes
10,667 shares of Common Stock issuable upon exercise of stock options held by
Mr. Lewis which are currently exercisable.
(18) Includes
775,157 shares of Common Stock owned directly by the directors and executive
officers, 680,138 shares of Common Stock issuable upon exercise of stock options
held by the directors and executive officers which are currently exercisable,
1,952 shares of Common Stock allocated to accounts pursuant to the provisions of
the GP Plan, and 148 shares of Common Stock owned by family members of the
directors and executive officers.
Preferred
Stock
The
Company has no preferred stock issued or outstanding as of the date of this
Proxy Statement.
DIRECTORS AND EXECUTIVE
OFFICERS
MATERIAL
PROCEEDINGS
The
Company is not aware of any material proceedings to which any of its directors,
officers or affiliates, any owners of record or beneficially of more than five
percent of any class of its voting securities, or any associate or of any such
directors, officers or affiliates or security holders is a party adverse to the
Company or any of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name
|
|
Age
|
|
Title
|
|
|
|
|
|
|
|
|
|
Jerome
I. Feldman
|
(1)
|
80
|
|
Director,
Chairman of the Board
|
|
Michael
D. Feldman
|
|
41
|
|
Director,
Executive Vice President
|
|
Sheldon
L. Glashow
|
(2)
(4)
|
76
|
|
Director
|
|
|
Gill
R. Grady
|
|
51
|
|
Senior
Vice President
|
|
Roger
L. Hagengruber
|
(2)
|
66
|
|
Director
|
|
|
Jeffery
G. Hough
|
|
54
|
|
Senior
Vice President, Chief Financial Officer, Treasurer,
Secretary
|
Chin-Our
Jerry Jen
|
|
60
|
|
Chief
Operating Officer, President
|
|
Joseph
W. Lewis
|
(2)
|
74
|
|
Director,
Chairman of the Audit Committee
|
|
John
V. Moran
|
(1)
|
58
|
|
Director, Chief
Executive Officer
|
|
George
J. Pedersen
|
(1)
(3) (4)
|
73
|
|
Director,
Chairman of the Compensation Committee
|
Jane
Bryant Quinn
|
|
70
|
|
Director
|
|
|
O.
Lee Tawes, III
|
(3)
|
61
|
|
Director
|
|
|
|
|
|
|
|
|
|
(1) Member
of Executive Committee
|
|
|
|
|
(2) Member
of Audit Committee
|
|
|
|
|
|
(3) Member
of Compensation Committee
|
|
|
|
|
(4) Member
of Nominating Committee
|
|
|
|
|
Biographical
information with respect to the executive officers and directors of GSE Systems
is set forth below. With the exception of the Messrs. Feldman, there are no
family relationships between any present executive officers or
directors.
Jerome I.
Feldman. Mr. Feldman has served as a Company director since 1994 and as
Chairman of the Board since 1997. In April 2007, Mr. Feldman became an executive
officer of the Company in the position of Chairman of the Board. Mr.
Feldman was founder of GP Strategies and was its Chief Executive Officer and
Chairman of the Board until April 2005 and Chairman of the Executive Committee
of GP Strategies from April 2005 to June 2007. He was Chairman of the
Board of Five Star Products, Inc., a paint and hardware distributor, from 1994
until March 2007; Chairman of the Board and Chief Executive Officer of National
Patent Development Corporation, a holding company with interests in optical
plastics, paint and hardware distribution services from August 2004 until May
2007; and a Director of Valera Pharmaceuticals, Inc., a specialty pharmaceutical
company, from January 2005 until April 2007. Mr. Feldman is also Chairman of the
New England Colleges Fund and a Trustee of Northern Westchester Hospital
Foundation.
Michael D.
Feldman. Mr. Michael Feldman has served as a director since January 2006.
Mr. Feldman joined the Company in early 2004 as Director of International Sales
and Marketing and focuses on obtaining new business in China and the Persian
Gulf. Prior to joining GSE, he was Chief Executive Officer of RedStorm
Scientific, Inc., a biotech company that assists pharmaceutical companies
in shortening the drug discovery process through its understanding of proteins.
Mr. Feldman had previously held positions with GP Strategies Corporation and
General Physics in international sales and marketing. Mr. Feldman graduated from
Cornell University with a BA in 1989. Mr. Feldman is the son of Jerome I.
Feldman, the Company's Chairman of the Board.
Sheldon L. Glashow,
Ph.D. Dr. Glashow has served as a director since 1995. Dr. Glashow is the
Higgins Professor of Physics Emeritus at Harvard University, and a university
professor and the Arthur G.B. Metcalf Professor of Mathematics & the
Sciences at Boston University since July 2000, and previously taught physics at
other major universities in Massachusetts, Texas, California and France. In
1979, Dr. Glashow received the Nobel Prize in Physics. Dr. Glashow was a
director of GP Strategies from 1997 to 2001 and a director of Interferon
Sciences, Inc., a pharmaceuticals company from 1991 to 2005. Dr. Glashow also
serves on the Board of RedStorm Scientific, Inc., a computational drug design
company. Dr. Glashow is a member of the National Academy of Science, the
American Academy of Arts and Sciences, the American Philosophical Society, and
is a foreign member of the Russian, Korean and Costa Rican Academies of
Sciences.
Gill R.
Grady. Mr. Grady has served as a Senior Vice President since September
1999 and is currently responsible for the Company’s Eastern European, Process
Industry and Department of Energy business operations. Prior to this, he was
responsible for executive oversight of business development as well as several
administrative functions such as investor relations, human resources, contract
administration and information technology. He has also held numerous senior
management positions in business operations, marketing and project management
with the Company. From 1992 through 1997, Mr. Grady was responsible for business
development for the Company’s Eastern European activities. Throughout his
tenure, he has been the Company’s liaison with the Department of Energy and with
Congress for funding related to the Company’s Eastern European activities. He
has been employed by the Company or predecessor companies since
1980.
Roger L.
Hagengruber, Ph.D. Dr. Hagengruber has served as a director since June
2001. Dr. Hagengruber retired in 2003 as the Senior Vice President for National
Security and Arms Control at the Sandia National Laboratories, where he served
as an officer for over 17 years. In his former position, he led programs in
nuclear technologies, arms control, satellite and sensor systems, security, and
international programs, including an extensive set of projects within the states
of the former Soviet Union. He served as the Senior Security Officer at Los
Alamos National Laboratory, retiring in 2008, and is currently
Associate Vice President for Research at the University of New
Mexico. Dr. Hagengruber serves on the Nuclear and Radiation Studies
Board of the National Academy of Science and the Defense Threat Reduction Agency
Threat Reduction Advisory Panel. He also has status as Senior Vice
President Emeritus at Sandia National Laboratories. Dr. Hagengruber
holds B.S., M.S. and Ph.D. degrees from the University of Wisconsin, with his
doctorate in nuclear physics. He is also a graduate of the Industrial College of
the Armed Forces.
Jeffery G.
Hough. Mr. Hough joined the Company in January 1999 as Senior Vice
President and Chief Financial Officer. During 1999, he was elected both
Treasurer and Secretary of the Company. Prior to joining the Company, from 1995
through 1998, Mr. Hough was the Chief Financial Officer and Treasurer of
Yokogawa Industrial Automation America, Inc., a supplier of process control
equipment. From 1982 through 1995, he held various financial management
positions with two other suppliers of process control equipment, ABB Process
Automation and Leeds & Northrop. Mr. Hough was an auditor for Price
Waterhouse from 1977 to 1982.
Chin-our Jerry
Jen. Mr. Jen has been with the Company and its predecessor companies
since 1980 in various engineering and senior management positions. In 1997, Mr.
Jen was promoted to Senior Vice President of the Power Business Unit, and on
November 14, 2000, he was named Chief Operating Officer of GSE. On March 27,
2001, Mr. Jen was named President. Mr. Jen served as a director from March 2001
until his resignation from the Board on January 24, 2006.
Joseph W.
Lewis. Mr. Lewis has served as a director since March 2000. In
1998, Mr. Lewis retired from Johnson
Controls, Inc. after 39 years of service, including his tenure from 1986 to 1998
as Executive Vice President
with responsibilities for its Controls Group. Mr. Lewis has served as a director
of Wheaton Franciscan Services, Inc., an integrated multi-location health care
provider, since 1991, has served as its Chairman
of the Board since 2003 and served as its Treasurer from 1993 until
2002. He previously served as director of Entek IRD International
until its sale to Allen Bradley, a division of Rockwell International
Corporation.
John V. Moran. Mr. Moran has
served as a director since October 2003. On November 11, 2003, Mr. Moran was
appointed Chief Executive Officer of GSE Systems, Inc. Mr. Moran
served as Vice President of GP Strategies Corporation from 2001 through 2005. He
served as President and Chief Executive Officer of GP e-Learning Technologies,
Inc. from 2000 to 2001, and was Group President of the Training and Technology
Group of General Physics Corporation, a wholly owned subsidiary of GP
Strategies, from 1994 to 2000. Mr. Moran has held executive positions
with Cygna Group, ICF Kaiser Engineers and Combustion Engineering (acquired by
ABB). Mr. Moran holds a BS in Marine Engineering from the U.S.
Merchant Marine Academy and an MBA from the University of
Connecticut.
George J.
Pedersen. Mr. Pedersen has served as a director since 1994 and as
Chairman of the Company's Executive Committee since 1997. He currently serves as
Chairman of the Board and Chief Executive Officer of ManTech International Corp.
Mr. Pedersen co-founded ManTech in 1968. Mr. Pedersen has also served
as President and/or Chairman of the Board of a number of ManTech subsidiaries.
Mr. Pedersen is Chairman of the Board for the Institute for Scientific Research,
Inc. He is also Chairman of the Board of MSM Security Services,
LLC. Mr. Pedersen is on the Board of the National Defense Industrial
Association (“NDIA”), and the Association for Enterprise
Integration. In 2005, he received the James Forrestal Industry
Leadership Award from NDIA and in 2006 he received the Lifetime Achievement
Award from the Association for Corporate Growth National Capital
Chapter.
Jane Bryant
Quinn. Ms. Quinn has served as a director since May
2008. Ms. Quinn is one of the nation’s leading experts on personal
finance. She currently writes a biweekly column for Bloomberg.com and has
authored several books on personal finance. Ms. Quinn has many awards
to her credit, including an Emmy Award for outstanding coverage of news on
television and the Gerald Loeb award for distinguished lifetime achievement in
business and financial journalism. She has been named by the World
Almanac as one of the 25 most influential women in the United
States. She served on the boards of the Harvard School of Public
Health, the Jerome Levy Economics Institute of Bard College, and her alma mater,
Middlebury College. She is currently a director of Bloomberg L.P.,
the financial services company.
Orrie Lee Tawes
III. Mr. Tawes has served as a director since 2006. Mr. Tawes is the
Executive Vice President and Head of Investment Banking and a member of the
Board at Northeast Securities, Inc. From 2000-2001 he was a Managing
Director for C.E. Unterberg, Towbin, an investment and merchant banking firm
specializing in high growth technology companies. Mr. Tawes spent 20 years at
Oppenheimer & Co. Inc. and CIBC World Markets, where he was Director of
Equity Research from 1991 to 1999. He was also Chairman of the Stock Selection
Committee at Oppenheimer & Co., a member of its Executive Committee and a
member of its Commitment Committee. From 1972 to 1990, Mr. Tawes was an analyst
covering the food and diversified industries at Goldman Sachs & Co. and
Oppenheimer & Co. As food analyst, he was named to the Institutional
Investor All America Research Team five times from 1979 through 1984. Mr. Tawes
is a graduate of Princeton University and received his MBA from Darden School at
the University of Virginia. He serves as a director for Houston America Energy
Corp., Baywood International, Inc. and 100 Wall Energy Partners.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires any person who was one of
our executive officers, directors or who owned more than ten percent (10%) of
any publicly traded class of our equity securities at any time during the fiscal
year (the “Reporting Persons”), to file reports of ownership and changes in
ownership of equity securities of the Company with the SEC and the NYSE
AMEX Stock Exchange. These Reporting Persons are required by the SEC’s
regulation to furnish the Company with copies of all Section 16(a)
filings.
Based
solely upon a review of Forms 3 and Forms 4 and amendments thereto furnished to
GSE Systems during the most recent fiscal year, and Forms 5 and amendments
thereto with respect to its most recent fiscal year, or written representations
from certain Reporting Persons that such filings were not required, we believe
that the following officers filed one late Form 4 in 2008: Messrs. J. Feldman,
M. Feldman, Hough, Grady, Jen and Moran.
NOMINEES
TO THE BOARD OF DIRECTORS
Joseph W.
Lewis, Jane Bryant Quinn, and O. Lee Tawes, III are the Class II nominees
standing for re-election to the Board. See “Information about Directors and
Executive Officers” above for information relating to their respective business
experience.
THE
BOARD OF DIRECTORS
The Board
oversees the business affairs of GSE Systems and monitors the performance of
management. The Board elects executive officers of the Company. In
2008, there were 9 directors. The Board held five regularly scheduled
meetings during the fiscal year ended December 31, 2008. During the
2008 fiscal year, only one of the then-serving directors attended less than one
hundred percent (100%) of the aggregate of (1) the total number of meetings of
the Board (held during the period for which he/she was a director) and (2) the
total number of meetings held by all committee(s) of the Board on which he/she
served (during the periods that he/she served).
GSE
Systems’ Certificate of Incorporation provides that the Board shall be divided
into three classes that serve staggered three-year terms and are as nearly equal
in number as possible. The stockholders elect at least one class of directors
annually. Each class generally serves for a period of three years, although a
director may be elected for a shorter term in order to keep the number of
directors in each class approximately equal.
All of
the current Class II directors are standing for re-election for a three-year
term at the Annual Meeting. All of the Class II nominees standing for election
will be deemed “independent” as that term is defined by the SEC. The Class III
Directors will stand for re-election at the next Annual Meeting and the Class I
directors will stand for re-election at the Annual Meeting in two
years.
The Class
II Incumbent Directors whose terms will expire in 2009 are Messrs. Lewis and
Tawes and Ms. Quinn. If duly elected, the Class II
Director Nominees shall have terms which will expire in 2012. The
Class III Incumbent Directors whose terms expire in 2010 are Messrs. Jerome
Feldman, Moran and Pedersen. Messrs. Glashow, Hagengruber and Michael
Feldman are presently serving Class I Directors whose terms will expire in
2011.
CORPORATE
GOVERNANCE
The Board
has the responsibility for establishing broad corporate policies and for the
overall performance of the Company, although it is not involved in day-to-day
operating details. Members of the Board are kept informed of the Company's
business by various reports and documents sent to them as well as by operating
and financial reports made at Board and Committee meetings.
The
non-management directors meet periodically in executive session. The executive
sessions of non-management directors are to be presided over by the director who
is the Chairman of the committee responsible for the issue being discussed. Any
director may request an executive session of non-management directors to discuss
any matter of concern. The Board has provided the means by which stockholders
may send communications to the Board or to individual members of the Board. Such
communications should be directed to the Secretary of the Company, 1332
Londontown Blvd., Suite 200, Sykesville, MD 21784 who will forward them to the
intended recipients.
The Board
reviews the independence of its members on an annual basis. No directors will be
deemed to be independent unless the Board affirmatively determines that the
director in question has no material relationship with the Company, directly or
as an officer, stockholder, member or partner of an organization that has a
material relationship with the Company. The Board has not adopted any
categorical standards of directors’ independence; however, the Board employs the
standards of independence of the NYSE AMEX (“AMEX”) rules currently in effect.
As a result of its Annual Review, the Board determined that Dr. Sheldon L.
Glashow, Dr. Roger Hagengruber, Joseph W. Lewis, George J. Pedersen, Jane Bryant
Quinn and Orrie Lee Tawes, III meet AMEX independence standards and that all of
the members of the Audit Committee are independent.
BOARD
MEMBER ATTENDANCE AT ANNUAL MEETINGS
The
Company encourages but does not require all of its directors to attend the
Annual Meeting of Stockholders. Two directors, Messrs. Moran and Jerome I.
Feldman, attended the 2008 annual meeting of stockholders.
COMMITTEES
OF THE BOARD OF DIRECTORS
The Board
has four standing committees: the Executive Committee, the Nominating Committee,
the Audit Committee and the Compensation Committee. As an AMEX listed company,
we are subject to the AMEX listing standards. The Company is required
under the AMEX listing standards to have a majority of independent directors and
independent audit, nominating and compensation committees.
Executive
Committee. The Executive Committee consists of Messrs. Pedersen
(Chairman), Moran and Jerome Feldman. The Executive Committee has the authority
to exercise all powers of the Board, except for actions that must be taken by
the full Board under the Delaware General Corporation Law. The Executive
Committee met once during fiscal year 2008.
Nominating
Committee. The Nominating Committee consists of Messrs. Glashow and
Pedersen. All members of the Nominating Committee are “independent” directors as
that term is defined by applicable SEC rules and the AMEX listing standards. The
Nominating Committee selects and recommends nominees for election as directors.
In considering director candidates, the Nominating Committee will consider such
factors as it deems appropriate to assist in developing a board and committees
that are diverse in nature and comprised of experienced and seasoned advisors.
Each director nominee is evaluated in the context of the full Board’s
qualifications as a whole, with the objective of establishing a Board that can
best perpetuate our success and represent stockholder interests through the
exercise of sound business judgment. Each director nominee will be evaluated
considering the relevance to us of the director nominee’s skills and experience,
which must be complimentary to the skills and experience of the other members of
the Board. The Nominating Committee met once during fiscal year 2008. The
Nominating Committee Charter is available on our website at
www.gses.com.
Audit
Committee. The Audit Committee consists of Messrs. Hagengruber, Glashow
and Lewis (Chairman), each of whom is “independent” as defined by applicable SEC
rules and the AMEX listing standards. In addition, the Board has determined that
Mr. Lewis is an “audit committee financial expert” as defined by applicable SEC
rules and established by AMEX. The Audit Committee operates under a written
charter adopted by the Board. Management is responsible for the Company's
internal controls and preparing the Company's consolidated financial statements.
The Company's independent registered public accountants are responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report
thereon. The Committee is responsible for overseeing the conduct of these
activities and appointing the Company's independent accountants. The Audit
Committee makes recommendations concerning the engagement of independent
registered public accountants, reviews with the independent registered public
accountants the plans and results of the audit engagement, approves professional
services provided by the independent registered public accountants, reviews the
independence of the independent registered public accountants and reviews the
adequacy of the Company's internal accounting controls. The Audit Committee met
four times during fiscal year 2008. See “Report of the Audit Committee” below.
The Audit Committee Charter is available on our website at
www.gses.com
Compensation
Committee. The Compensation Committee consists of Messrs. Tawes and
Pedersen (Chairman). Messrs. Pedersen and Tawes are “independent” directors as
that term is defined by applicable SEC rules and the AMEX listing standards. The
Compensation Committee is responsible for determining compensation for the
Company's executive officers and for administering and granting awards under the
Company's Long-Term Incentive Plan. The Compensation Committee met six times
during fiscal year 2008. See “Report of the Compensation Committee” below.
The Compensation Committee Charter is available on our website at www.gses.com.
AUDIT
COMMITTEE REPORT
The Audit
Committee of the GSE Systems, Inc. Board of Directors is comprised of the three
directors named below. Each member of the Audit Committee is an independent
director as defined by applicable SEC rules and AMEX listing standards. In
addition, the Board has determined that Joseph W. Lewis is an “audit committee
financial expert” as defined by applicable SEC rules and satisfies the
“accounting or related financial management expertise” criteria established by
AMEX. The Audit Committee operates under a written charter adopted by the
Board.
The Audit
Committee has:
|
•
|
|
reviewed
and discussed the Company’s audited consolidated financial statements as
of and for the year ended December 31, 2008 with management and with KPMG
LLP, GSE’s independent registered public accounting
firm;
|
|
•
|
|
discussed
with KPMG LLP the matters required to be discussed by the Statement on
Auditing Standards No. 61, as amended,
|
|
•
|
|
received
the written disclosures and the letter from KPMG LLP required
by PCAOB Rule 3526, Communication with Audit
Committees Concerning Independence and has discussed with KPMG
LLP its independence from the Company and its
management;
|
|
•
|
|
discussed
with management and with KPMG LLP the evaluation of the Company’s internal
controls and the audit of the effectiveness of the Company’s internal
control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act of 2002;
|
|
•
|
|
discussed
with KPMG LLP the overall scope and plans of their audit. The
Committee meets with KPMG LLP, with and without management present, to
discuss the results of their examinations, the evaluations of the
Company’s internal controls and the overall quality of the Company’s
financial reporting;
|
|
•
|
|
recommended,
based on the reviews and discussions referred to above, to the Board of
Directors that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008
for filing with the SEC; and
|
|
•
|
|
selected
KPMG LLP as the Company’s independent accountants for the year 2009. Such
selection is submitted for ratification by the shareholders at the annual
shareholders meeting.
|
By the
members of the Audit Committee:
Joseph W.
Lewis, Chairman
Dr.
Sheldon L. Glashow
Dr. Roger
L. Hagengruber
AUDIT
COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
The Audit
Committee pre-approves all audit and permissible non-audit services provided to
the Company by the independent registered public accountants. These services may
include audit services, audit-related services, tax services and other services.
The Audit Committee has adopted policies and procedures for the pre-approval of
services provided by the independent registered public accountants. Such
policies and procedures provide that management shall submit to the Audit
Committee a schedule of audit and non-audit services for approval as part of the
annual plan for each fiscal year. In addition, the policies and procedures
provide that the Audit Committee also may pre-approve particular services not in
the annual plan on a case-by-case basis. Management must provide a detailed
description of each proposed service and the projected fees and costs (or a
range of such fees and costs) for the service. The policies and procedures
require management to provide quarterly updates to the Audit Committee regarding
services rendered to date and services yet to be performed.
As
permitted under the Sarbanes-Oxley Act of 2002, the Audit Committee may delegate
pre-approval authority to its Chairman, for audit and permitted non-audit
services. Any service pre-approved by the Audit Committee or its Chairman must
be reported to the Audit Committee at the next scheduled quarterly meeting. In
addition, the pre-approval procedures require that all proposed engagements of
KPMG LLP for services of any kind be directed to the Company’s Chief Financial
Officer before they are submitted for approval prior to the commencement of any
service.
The
following table presents fees for professional audit services rendered by KPMG
LLP for the audit of the Company’s annual financial statements for fiscal 2008
and fees billed for other services rendered by KPMG LLP, together with a
comparison of the fees for audit services and other services rendered by KPMG
LLP in fiscal 2007. The Audit Committee approved 100% of the services described
in the following table. During the most recent fiscal year’s audit, 100% of the
hours expended on KPMG’s audit were performed by KPMG’s full-time, permanent
employees.
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
Audit
fees (1)
|
|
$ 428,000
|
|
$
426,000
|
|
|
|
|
|
|
Audit
related fees (2)
|
15,000
|
|
14,000
|
|
|
|
|
|
|
|
Total
fees
|
|
$ 443,000
|
|
$
440,000
|
|
|
|
|
|
|
(1)
|
Audit
fees consisted of fees for audits of the Company’s financial statements,
including quarterly review services in accordance with SAS No. 100,
statutory audit services for subsidiaries of the Company, and issuance of
consents related to one registration statement filed with the SEC in 2008
and three registration statements filed with the SEC in
2007.
|
(2)
|
Audit
related fees consisted of fees for audits of the financial statements of
the Company’s 401(k)
Savings Plan.
|
There
were no other fees for the last two years except as outlined in the above
table.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The
Compensation Committee consists entirely of independent directors in accordance
with the AMEX requirements. The Committee is responsible for overseeing and
administering the Company’s compensation program for its executive officers and
for granting awards under and administering the Company’s Long-Term Incentive
Plan. The Compensation Committee bases its decisions on both individual
performance and the Company’s financial results. All compensation decisions are
made solely by the Compensation Committee; however, the Compensation Committee
may consult with the Chairman of the Board and the Company’s Chief Executive
Officer as part of its decision making process when examining their respective
compensation packages. However, the Chief Executive Officer, as required by the
AMEX, may not be present during voting or deliberations as to his
compensation. In the event compensation to an officer or
director of the Company may result or be deemed to result from a related party
transaction, the Company’s Audit Committee or a majority of the Independent
Directors may review the proposed compensation arrangement.
Philosophy.
The compensation program for the executive officers of the Company is developed
and administered by the Board of Directors and its Compensation Committee.
Overall compensation policies regarding other officers and employees of the
Company are established by the Compensation Committee, but the specific
compensation program for such persons is developed and administered by Company
management. The key goals of the Company's compensation program are: (1) to
attract, retain and reward talented and productive executive officers and other
employees who can contribute (both short and long-term) to the success of the
Company; (2) provide incentives for executive officers for superior performance;
(3) and to align compensation and interests of the executive officers with those
of the Company and reward executive officers according to their contribution to
the Company’s success.
Implementation
Guidelines. To implement the general compensation philosophy described
above, the Company's executive compensation program has three primary
components: (i) a base salary, (ii) bonus awards, and (iii) long-term incentive
awards. The factors and criteria to be considered with respect to each of these
components are set forth below.
Base
Salary.
The range
of the base salary for an executive or other employee position will generally be
established based on competitive salaries for positions with a similar scope of
responsibilities and job complexities. The level of base salary within the range
of competitive salaries will be determined on the basis of individual
performance, experience and other relevant factors, such as demonstrated
leadership, job knowledge and management skills. Such determination will be made
by the Compensation Committee, with regard to the Company's executive officers,
and by management with regard to all other officers and employees consistent
with the general overall compensation policies established by the Compensation
Committee.
Base
salaries will be targeted within the appropriate competitive range, although
higher compensation may be paid if necessary or appropriate to attract or retain
unusually qualified executives. Annual or other base salary adjustments will be
based on individual performance as well as other market factors. Base salary
payments made in 2008 were made to compensate ongoing performance throughout the
year.
Bonus
Awards.
The bonus
award is intended to focus the efforts of the executives and other employees on
performance objectives in accordance with the business strategy of the
Company.
The
Compensation Committee will administer incentive awards for the Company's
executive officers. The Compensation Committee will review and assess the extent
to which the overall Company performance goals have been met during the year and
make such awards to the Company's executive officers. Management of the Company
will be responsible for awarding bonus amounts to other officers and employees
of the Company, taking into account the general compensation philosophy of the
Company.
On April
29, 2008, the Compensation Committee approved 2007 Performance Bonuses of
$16,500 and $8,000 for Messrs. Moran and Hough, respectively. No 2008
performance bonuses were awarded to any of the named executive
officers.
Long-Term Incentive
Awards.
The third
element of the Company's compensation program is provided through the Company's
Long-Term Incentive Plan (the “Plan”), which is designed to align the interests
of the officers and employees with those of stockholders. The Plan is intended
to focus the efforts of officers and employees on performance which will
increase the value of the Company for its stockholders.
Pursuant
to the Plan, the Compensation Committee may grant incentive stock options within
the meaning of the Internal Revenue Code of 1986, as amended, and may grant,
among other types of awards, non-statutory stock options to purchase shares of
common stock. The Compensation Committee also may grant stock appreciation
rights and award shares of restricted stock and incentive shares in accordance
with the terms of the Plan. Subject to the terms of the Plan, the Compensation
Committee will have discretion in making grants and awards under the Plan. The
Compensation Committee may, however, consider the recommendations of management
with respect to such grants and awards.
Total
direct compensation to the Company's executive officers (base salary, bonus
awards and long-term incentive awards) will be targeted within the appropriate
competitive range, although higher compensation may be paid if necessary to
attract or retain unusually qualified executives.
A total
of 370,000 options were granted to the named executive officers in 2008 as
outlined below in the “Grants of Plan-Based Awards” table. In
general, the Compensation Committee’s decisions concerning the specific
compensation elements for individual executive officers were made within the
broad framework previously described and in light of each executive officer’s
level of responsibility, performance, current salary, prior year bonus and other
compensation awards. In all cases, the Compensation Committee’s specific
decisions regarding 2008 executive officer compensation were ultimately based
upon the Compensation Committee’s judgment about the individual executive
officer’s performance and potential future contributions, and about whether each
particular payment or award would provide an appropriate reward and incentive
for that executive officer to contribute to, and enhance, the Company’s
performance.
Retirement and Other
Benefits
The
Company has always encouraged its employees to save for retirement and, as such,
has always offered a 401(k) savings plan. The 401(k) savings plan is
a tax-qualified retirement savings plan pursuant to which all U.S. employees,
including the named executive officers, are able to contribute up to the limit
prescribed by the Internal Revenue Code on a before-tax basis. The
Company matches 50% of contributions up to 4% of eligible compensation to all
401(k) plan participants, up to a maximum per participating employee of $4,900
per annum.
In 2008,
the named executive officers were eligible to participate in the Company’s
health and welfare programs that are generally available to other Company
employees, including medical, dental, basic life, short-term and long-term
disability, employee assistance, flexible spending, and accidental death &
dismemberment. In addition, the named executive officers receive
supplemental life insurance coverage of two times annual salary, not to exceed
$625,000 of coverage in combination with the basic life coverage. The
premiums for the supplemental insurance are paid by the Company.
Termination
Benefits.
The
Company has entered into Employment Agreements with the named executive officers
that provide for specified benefits upon termination. See the
discussion of their Employment Agreements under “Employment Contracts and
Termination of Employment.”
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
By the members of the Compensation
Committee:
George J.
Pedersen, Chairman
Orrie Lee
Tawes, III
SUMMARY
COMPENSATION TABLE
The
following table sets forth all plan and non-plan compensation awarded to, earned
by or paid for all services rendered in all capacities to GSE Systems and its
subsidiaries by the named executive officers (the “Named Executive Officers”)
for each of the last three completed fiscal years. The Named
Executive Officers listed in the following table include our principal executive
officer (“PEO”), principal financial officer (“PFO”), and our three most highly
compensated officers other than the PEO and PFO.
SUMMARY
COMPENSATION TABLE
|
|
Annual
Compensation
|
|
|
|
|
|
|
Name
and Principal
|
|
|
|
|
Option
|
|
All
Other
|
|
|
Position
|
Year
|
Salary
|
Bonus
|
|
Awards
(1)
|
|
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
John
V. Moran
|
2008
|
$ 257,000
|
$ -
|
|
$
66,571
|
|
$ 13,771
|
(2)
|
$
337,342
|
Chief
Executive Officer
|
2007
|
247,500
|
16,500
|
|
42,662
|
|
9,487
|
(3)
|
316,149
|
|
2006
|
232,500
|
60,000
|
|
50,734
|
|
36,603
|
(4)
|
379,837
|
|
|
|
|
|
|
|
|
|
|
Jeffery
G. Hough
|
2008
|
$ 179,583
|
$ -
|
|
$
24,847
|
|
$ 16,087
|
(5)
|
$ 220,517
|
Sr.
Vice President & CFO
|
2007
|
170,000
|
8,000
|
|
21,012
|
|
14,317
|
(6)
|
213,329
|
|
2006
|
158,708
|
15,500
|
|
21,084
|
|
13,873
|
(7)
|
209,165
|
|
|
|
|
|
|
|
|
|
|
Jerome
I. Feldman
|
2008
|
$ 240,000
|
$ -
|
|
$
38,917
|
|
$ 54,528
|
(8)
|
$ 333,445
|
Chairman
of Board
|
2007
|
170,000
|
-
|
|
27,906
|
|
37,844
|
(9)
|
235,750
|
|
2006
|
-
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Chin-Our
Jerry Jen
|
2008
|
$ 199,583
|
$ -
|
|
$
28,270
|
|
$ 21,621
|
(10)
|
$ 249,474
|
President
& COO
|
2007
|
190,000
|
-
|
|
25,528
|
|
19,850
|
(11)
|
235,378
|
|
2006
|
158,708
|
15,500
|
|
21,240
|
|
18,569
|
(12)
|
214,017
|
|
|
|
|
|
|
|
|
|
|
Gill
R. Grady
|
2008
|
$ 169,167
|
$ -
|
|
$
22,063
|
|
$ 19,933
|
(13)
|
$ 211,163
|
Sr.
Vice President
|
2007
|
150,000
|
-
|
|
18,057
|
|
18,614
|
(14)
|
186,671
|
|
2006
|
139,167
|
15,500
|
|
18,119
|
|
17,071
|
(15)
|
189,857
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects the
dollar amount recognized for financial statement reporting purposes for the
fiscal years ended December 31, 2008, 2007 and 2006 in accordance with FAS
123(R), assuming no forfeitures, for awards granted pursuant to the Company’s
1995 Long-Term Incentive Plan. Assumptions used in the calculation of
these amounts are included in footnote 13 to the Company’s audited financial
statements for the fiscal year ended December 31, 2008 included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 16, 2009.
(2) Consists
of $1,869 for automobile lease, $4,600 for Company retirement plan matching,
$2,967 for executive group term life insurance premiums, $525 for personal
gasoline expenditures, $3,050 for club membership dues and $760 for the waiver
of Company medical and dental insurance coverage.
(3) Consists
of $2,318 for automobile lease, $2,430 for Company retirement plan matching,
$2,967 for executive group term life insurance premiums, $1,012 for personal
gasoline expenditures, and $760 for the waiver of Company medical and dental
insurance coverage.
(4)
Consists of $19,727 from the exercise of GP Strategies stock options, $6,180 for
automobile lease, $2,925 for Company retirement plan matching, $3,148 for
executive group term life insurance premiums, $3,863 for personal gasoline
expenditures, and $760 for the waiver of Company medical and dental insurance
coverage.
(5)
Consists of $955 for Company retirement plan matching, $1,349 for executive
group term life insurance premiums, $2,583 for personal gasoline expenditures,
$4,000 for club membership dues, and $7,200 for car allowance.
(6)
Consists of $1,270 for executive group term life insurance premiums, $1,847 for
personal gasoline expenditures, $4,000 for club membership dues, and $7,200 for
car allowance.
(7)
Consists of $1,079 for executive group term life insurance premiums, $1,594 for
personal gasoline expenditures, $4,000 for club membership dues, and $7,200 for
car allowance.
(8)
Consists of $25,000 fee as Chairman of the GSE Board of Directors, $14,214 for
executive group term life insurance premiums, $4,114 for personal gasoline
expenditures, $3,667 for club membership dues, and $7,533 for car
allowance.
(9) Consists
of $18,750 fee as Chairman of the GSE Board of Directors, $10,068 for executive
group term life insurance premiums, $1,093 for personal gasoline expenditures,
$2,833 for club membership dues, and $5,100 for car allowance.
(10) Consists
of $4,216 for Company retirement plan matching, $3,660 for executive group term
life insurance premiums, $2,545 for personal gasoline expenditures, $4,000 for
club membership dues, and $7,200 for car allowance.
(11) Consists of
$3,996 for Company retirement plan matching, $2,688 for executive group term
life insurance premiums, $1,966 for personal gasoline expenditures, $4,000 for
club membership dues, and $7,200 for car allowance.
(12) Consists of
$3,417 for Company retirement plan matching, $2,064 for executive group term
life insurance premiums, $1,888 for personal gasoline expenditures, $4,000 for
club membership dues, and $7,200 for car allowance.
(13) Consists of
$3,607 for Company retirement plan matching, $1,265 for executive group term
life insurance premiums, $3,861 for personal gasoline expenditures, $4,000 for
club membership dues, and $7,200 for car allowance.
(14) Consists of
$3,133 for Company retirement plan matching, $752 for executive group term life
insurance premiums, $3,529 for personal gasoline expenditures, $4,000 for club
membership dues, and $7,200 for car allowance.
(15) Consists of
$2,115 for Company retirement plan matching, $612 for executive group term life
insurance premiums, $3,144 for personal gasoline expenditures, $4,000 for club
membership dues, and $7,200 for car allowance.
GRANTS
OF PLAN – BASED AWARDS.
The
following table provides information on stock options granted to
the named executive officers during the fiscal year ended December 31,
2008. Only non-statutory stock options were granted under the
plan.
GRANTS
OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Securities
|
|
|
|
|
|
Underlying
|
|
Exercise
or
|
|
|
Grant
|
Options
|
|
Base
Price
|
Name
|
|
Date
|
Granted
(1)
|
|
($/share)
|
|
|
|
|
|
|
John
V. Moran
|
|
10/23/08
|
150,000
|
|
$ 5.95
|
Jeffery
G. Hough
|
|
10/23/08
|
40,000
|
|
$ 5.95
|
Jerome
I. Feldman
|
10/23/08
|
100,000
|
|
$ 5.95
|
Chin-Our
Jerry Jen
|
10/23/08
|
40,000
|
|
$ 5.95
|
Gill
R. Grady
|
|
10/23/08
|
40,000
|
|
$ 5.95
|
(1)
After one year from date of grant 14.3% of the options vest with an additional
14.3% vesting after each of the next six years.
FISCAL
YEAR-END OPTION VALUES AND AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR
The
following tables set forth certain information with respect to unexercised
options held by the named executive officers at the end of the fiscal year
ended December 31, 2008 and options exercised during the fiscal year ended
December 31, 2008 by such persons.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
|
|
Securities
Underlying
|
|
Option
|
|
|
|
|
|
Option
|
|
Unexercised
Options
|
|
Exercise
|
|
Option
|
|
|
|
Grant
|
|
at
12/31/08
|
|
Price
|
|
Expiration
|
|
Name
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
($/share)
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
V. Moran
|
|
3/22/2005
|
|
48,376
|
|
-
|
|
$ 1.85
|
|
3/22/2012
|
(1)
|
|
|
3/14/2006
|
|
107,800
|
|
46,200
|
|
$ 1.61
|
|
3/14/2013
|
(2)
|
|
|
10/23/2008
|
|
-
|
|
150,000
|
|
$ 5.95
|
|
10/23/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffery
G. Hough
|
|
3/22/2005
|
|
32,654
|
|
-
|
|
$ 1.85
|
|
3/22/2012
|
(1)
|
|
|
3/14/2006
|
|
44,800
|
|
19,200
|
|
$ 1.61
|
|
3/14/2013
|
(2)
|
|
|
10/23/2008
|
|
-
|
|
40,000
|
|
$ 5.95
|
|
10/23/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
I. Feldman
|
|
3/14/2006
|
|
59,500
|
|
25,500
|
|
$ 1.61
|
|
3/14/2013
|
(2)
|
|
|
10/23/2008
|
|
-
|
|
100,000
|
|
$ 5.95
|
|
10/23/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Chin-Our
Jerry Jen
|
|
3/22/2005
|
|
36,282
|
|
-
|
|
$ 1.85
|
|
3/22/2012
|
(1)
|
|
|
3/14/2006
|
|
21,000
|
|
9,000
|
|
$ 1.61
|
|
3/14/2013
|
(2)
|
|
|
5/22/2006
|
|
14,000
|
|
6,000
|
|
$ 3.65
|
|
5/22/2013
|
(2)
|
|
|
10/23/2008
|
|
-
|
|
40,000
|
|
$ 5.95
|
|
10/23/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gill
R. Grady
|
|
3/22/2005
|
|
6,727
|
|
-
|
|
$ 1.85
|
|
3/22/2012
|
(1)
|
|
|
3/14/2006
|
|
38,500
|
|
16,500
|
|
$ 1.61
|
|
3/14/2013
|
(2)
|
|
|
10/23/2008
|
|
-
|
|
40,000
|
|
$ 5.95
|
|
10/23/2018
|
(3)
|
(1) The
options vested 100% at date of grant.
(2) The
options vest 40% one year from date of grant, another 30% two years from date of
grant; and the final 30% three years
from
date of grant.
(3) One year from date
of grant 14.3% of the options vest with an additional 14.3% vesting after each
of the next six years.
|
|
|
|
|
|
|
2008
OPTION EXERCISES
|
|
|
|
|
|
|
|
|
|
|
#
of Shares
|
|
Value
|
|
|
|
|
Acquired
on
|
|
Realized
|
|
|
|
|
Exercise
|
|
on
Exercise (1)
|
|
|
|
|
|
|
|
John
V. Moran
|
|
-
|
|
$ -
|
|
Jeffery
G. Hough
|
|
-
|
|
-
|
|
Jerome
I. Feldman
|
|
125,000
|
|
768,750
|
|
Chin-Our
Jerry Jen
|
|
-
|
|
-
|
|
Gill
R. Grady
|
|
-
|
|
-
|
|
(1) Value
realized on exercise is the difference between the sales price of the common
stock and the exercise price of the options.
EMPLOYMENT
CONTRACTS AND TERMINATION OF EMPLOYMENT
The sole
employment agreement in effect for any executive officer at December 31, 2008 is
the two-year employment agreement with Mr. Moran, the Company’s CEO, dated as of
May 1, 2008 (the “Moran Employment Agreement”).
In
recognition of the scope of Mr. Moran’s responsibilities as the Company’s CEO
and based on comparison to peer organizations with similar activities and risk
profiles, the Company agreed to pay Mr. Moran a base salary of $260,000
commencing May 1, 2008. The Board may grant Mr. Moran an annual performance
bonus at the close of each fiscal year. The 2008 fiscal year target bonus was
$150,000; however, Mr. Moran was not awarded a bonus for 2008.
Mr.
Moran’s Employment Agreement also provides that the Company will provide him an
automobile at its expense and that the Company shall pay for all related
maintenance, gas and insurance expenses incurred for that
automobile. Mr. Moran is also entitled to receive vacation and
participate in the Company’s employee benefits plan to include the Company’s
medical and 401(k) plans. In addition, Mr. Moran is entitled to
reimbursement by the Company for all reasonable expenses incurred by him in
connection with this employment such as business travel and customer
entertainment expenses.
The
Company may terminate the Employment Agreement for cause provided it gives
written notice indicating the reason for termination and that Mr. Moran has the
opportunity to be heard by the Company’s Board. In the event of
termination for cause, Mr. Moran shall continue to receive his full salary
through the date of termination. In the event of disability, Mr.
Moran will continue to receive his full salary (less any sum payable under the
Company’s disability benefit plan) until his employment is
terminated.
The
foregoing is a brief description of the terms of the Moran Employment Agreement
and by its nature is incomplete. It is qualified in its entirety by
the text of the respective agreement which was described in the Form 8-K filed
with the SEC on May 7, 2008; a copy of the Moran Employment Agreement was
included in the Exhibits to the Form 8-K and incorporated therein by reference.
All readers of this proxy are encouraged to read the entire text of the
documents referred to in the text.
In April
2007, the Company entered into an “at will” agreement (the “Feldman Employment
Agreement”) with Jerome I. Feldman to serve as an executive officer in the
position of Chairman of the Board. Mr. Feldman’s role is focused
primarily on Strategic Development, Marketing and International Customer
Relations given his in-depth knowledge of the Company and the nuclear, chemical,
petrochemical and fossil electric utility industry as well as his experience in
international development. His annual salary is $240,000, and he is eligible to
participate in the Company’s comprehensive employee benefits plan as well as in
the Company’s Executive Benefits Program, to include a monthly automobile
allowance of $600 and monthly club dues allowance of $333. As an “at
will” employee, either the Company or Mr. Feldman may terminate the employment
relationship at any time, with or without cause, provided there is no violation
of any applicable laws. The summary description of the Feldman Employment
Agreement is qualified in its entirety by the text of the respective agreements
and documents described in the Form 8-K filed with the SEC on April 6,
2007.
In
recognition of each officer’s responsibilities and based on comparisons to peer
organizations with similar activities and risk profiles, the Company agreed to
pay the following base salaries effective January 1, 2009:
Chin-our
Jerry Jen
|
$ 205,000
|
Jeffery
G. Hough
|
185,000
|
Gill
R. Grady
|
175,000
|
On the
one-year anniversary date of each Agreement, the Company shall increase the
amount of compensation by an amount equal to the greater of (i) three percent
(3%) or (ii) the percentage increase in the Consumer Price Index over
the preceding twelve (12) month period.
For each
year each Agreement is in effect, the Compensation Committee of the Board of
Directors and the Company’s Chief Executive Officer shall determine the bonus
amount for the most recently completed fiscal year and payment shall be made by
March 15 of the subsequent year. The bonus is performance based and
the performance goals shall be as jointly agreed to by each officer and the
Chief Executive Officer and the Board of Directors. For the 2009
fiscal year, the target bonus for each of the officers is $50,000.
On the
one-year anniversary date of each Agreement, the Company’s Board of Directors
shall increase the bonus target by an amount equal to the greater of (i) three
percent (3%) or (ii) the percentage increase in the Consumer Price
Index over the preceding twelve (12) month period.
In
addition, each officer shall receive:
¨
|
an
automobile allowance of seven thousand two hundred dollars ($7,200) per
year and the Company will pay for the gasoline in connection with such
automobile; and
|
¨
|
an
allowance for club membership of four thousand dollars ($4,000) per
year.
|
The
Company shall pay the monthly medical and dental insurance premiums for each
officer in association with Company-provided health insurance
plans. Each officer is entitled to receive vacation in accordance
with the Company’s policy for its senior executives and may participate in other
Company sponsored benefit plans including life insurance and 401(k) retirement
plans. Each officer is entitled to reimbursement by the Company for
all reasonable expenses incurred by him in connection with his
employment. Reimbursable expenses include, but are not limited to,
business travel and customer entertainment expenses.
The
Company may terminate each Agreement for cause. Examples of “cause”
include (i) willful and continued failure to substantially perform contractual
duties after the Company has communicated its demand for substantial
performance; (ii) willfully engaging in misconduct which has a material adverse
effect on the Company’s reputation, operations, prospects or business relations;
(iii) conviction for any felony or entry of a plea of “no contest” for a crime
of moral turpitude; (iv) or breach of the terms and conditions of each
Agreement. Notice of termination must be in writing and must state
the reason for termination and each officer (with his attorney) shall have the
opportunity to be heard by the Company’s Board of Directors. In the
event of termination for cause, each officer shall continue to receive his full
salary through the date of termination. In the event of disability,
each officer will continue to receive his full salary (less any sum payable
under the Company’s disability benefit plan) until his employment is
terminated. Termination of employment due to the death or disability
of the officer shall not constitute a breach of the Agreement.
If the
Company shall terminate the officer's employment in breach of the
terms of this Agreement, then the Company shall pay the officer his
full salary and provide his benefits for one year from the Date of
Termination. Additionally, all options to purchase the Company's common
stock granted to the officer under the Company's option plan or otherwise shall
immediately become fully vested and shall terminate on such date as they would
have terminated if the officer's employment by the Company had not
terminated.
In the
event a Change of Control occurs and the officer is either (1)
not offered employment by the Successor Company or (2) employment is offered
upon conditions that result in the officer's decision to terminate employment
for Good Reason (as defined in the Agreement); then the following shall
occur. The officer shall receive continuation of salary and
bonus programs (average of prior 2 years bonus), and all benefits (including
medical, dental and life insurance coverage and any other Company-provided
benefits, including car and club allowances that Employee is receiving as
of the Effective Date) from the Date of Termination of employment for a period
of twelve months.
The
foregoing is a brief description of the terms of the Agreements and by its
nature is incomplete. It is qualified in its entirety by the text of
the respective agreement which was described in the Form 8-K filed with the SEC
on January 7, 2009; a copies of the Agreements were included in the Exhibits to
the Form 8-K and incorporated therein by reference. All readers of
this proxy are encouraged to read the entire text of the documents referred to
in the text.
COMPENSATION
OF DIRECTORS
On
February 6, 2007, the Company’s Board approved the following compensation plan
for the directors effective for 2007:
¨
Annual Retainer: an annual retainer of $12,000 will be paid to all
directors who do not chair a committee and are classified as “Independent
Directors” based upon the SEC and AMEX criteria for Independent Directors.
The Chairman of the Board, the Chairman of the Compensation Committee and the
Chairman of the Audit Committee will each be paid an annual retainer of $25,000
per year.
¨
Board of Committee Meeting Attendance Fees: Independent Directors will be
paid $1,500 for each Board meeting attended. Members of the Audit
Committee will receive $500 for each Audit Committee meeting
attended.
¨
Stock Options: On an annual basis, each Independent Director will
be awarded non-qualified GSE stock options to purchase 10,000 shares of the
Company’s common stock, pursuant to the Company’s Plan.
On
September 27, 2007, the Company’s Board amended the compensation plan to provide
the $12,000 annual retainer to all Directors who do not chair a committee and
have not been employees of the Company for the last three years (“Non-employee
Directors”) and who are otherwise eligible in accordance with applicable Company
policies and regulatory guidelines and requirements. All Non-employee
Directors will be paid $1,500 for each Board meeting
attended. Members of the Audit committee and the Compensation
Committee will receive $500 for each Committee meeting attended.
In 2008, options with an exercise price
of $9.70 per share covering 10,000 shares of common stock were granted to
Sheldon L. Glashow, Scott N. Greenberg, Roger L. Hagengruber, Joseph W. Lewis,
George J. Pedersen and Orrie Lee Tawes, III. One third of the options
vest after one year from the date of grant, another third vest after two years
from the date of grant and the final third vest three years from the date of
grant. Jane Bryant Quinn was awarded options with an exercise price
of $5.95 per share covering 5,833 shares of common stock. After one
year from date of grant 14.3% of the options vest with an additional 14.3%
vesting after each of the next six years.
The table
below summarizes the compensation paid by the Company to Directors who are not
included in the Executive Summary Compensation Table above.
|
2008
DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
Fees
earned
|
|
|
|
|
|
|
|
or
Paid in
|
|
Option
|
|
|
|
|
|
Cash
|
|
Awards (3)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Feldman
|
$ -
|
(4)
|
$ -
|
|
$ -
|
|
|
Sheldon
L. Glashow
|
21,500
|
|
38,781
|
|
60,281
|
|
|
Scott
N. Greenberg (1)
|
7,500
|
|
-
|
|
7,500
|
|
|
Roger
L. Hagengruber
|
21,500
|
|
38,781
|
|
60,281
|
|
|
Joseph
W. Lewis
|
34,500
|
|
38,781
|
|
73,281
|
|
|
George
J. Pedersen
|
35,500
|
|
38,781
|
|
74,281
|
|
|
Jane
Bryant Quinn (2)
|
7,500
|
|
735
|
|
8,235
|
|
|
O.
Lee Tawes, III
|
22,500
|
|
38,781
|
|
61,281
|
|
|
|
|
|
|
|
|
|
(1) Mr.
Greenberg resigned from the Board of Directors effective May 29,
2008.
(2) Ms.
Quinn was appointed to the Board of Directors effective May 29, 2008 as Mr.
Greenberg’s replacement.
(3) Reflects
the dollar amount recognized for financial statement reporting purposes for the
fiscal year ended December 31, 2008 in
accordance with FAS 123(R), assuming no forfeitures, for awards granted pursuant
to the Company’s 1995 Long-TermIncentive Plan. Assumptions used in
the calculation of this amount are included in footnote 13 to the Company’s
audited financial statements for the fiscal year ended December 31, 2008
included in the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 16, 2009. As of December 31, 2008,
each director has the following number of options outstanding
(exercisable): Sheldon L. Glashow – 20,000 (3,334); Scott N.
Greenberg – 0; Roger Hagengruber – 20,000 (3,334); Joe Lewis – 20,000 (3,334);
Jane Bryant Quinn – 5,833 (0); George J. Pedersen – 20,000 (3,334); O. Lee
Tawes, III – 20,000 (3,334).
(4) Michael
D. Feldman is an employee of the Company and receives no compensation or stock
options for his services as a director.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
Compensation Committee is currently comprised of Mr. Pedersen, who is the
Chairman of the Company’s Compensation Committee, and is also Chairman of the
Board and Chief Executive Officer of ManTech; and Mr. Tawes, who is the
Executive Vice President and Head of Investment Banking and a member of the
Board of Directors at Northeast Securities, Inc.
The
Compensation Committee acts on matters related to other directors, executive
officers and related entity proposals. In accordance with applicable law, any
matter related to a member of the Compensation Committee requires ratification
by the independent directors or approval of the entire board.
STOCKHOLDER
COMMUNICATIONS WITH DIRECTORS
The Board
desires to foster open communications with its security holders regarding issues
of a legitimate business purpose affecting the Company. The Board has adopted
policies and procedures to facilitate written communications by stockholders to
the Board. Persons wishing to write to our Board, or to a specified director or
committee of the Board, should send correspondence to the Corporate Secretary at
1332 Londontown Blvd., Suite 200, Sykesville, MD 21784. Electronic submissions
of stockholder correspondence will not be accepted.
The
Corporate Secretary will forward to the directors all communications that, in
his judgment, are appropriate for consideration by the directors. Examples of
communications that would not be appropriate for consideration by the directors
include commercial solicitations and matters not relevant to the stockholders,
to the functioning of the Board, or to the affairs of GSE Systems. Any
correspondence received that is addressed generically to the Board will be
forwarded to the Chairman of the Board. If the Chairman of the Board is not an
independent director, a copy will be sent to the Chairman of the Audit Committee
as well.
STOCKHOLDER
PROPOSALS
In
accordance with rules promulgated by the SEC, any stockholder who wishes to
submit a proposal for inclusion in the proxy materials to be distributed by the
Company in connection with the 2010 annual meeting must do so no later than
January 25, 2010. Any such proposal must be in compliance
with applicable SEC regulations.
In
addition, in accordance with the Company's Bylaws, in order for a stockholder
proposal to be properly brought before the 2010 annual meeting, a stockholder
submitting a proposal must file a written notice with the Corporate Secretary
which conforms to the requirements of the Bylaws. If the board or a designated
committee or the officer who will preside at the stockholders’ meeting
determines that the information provided in such notice does not satisfy the
informational requirements of the Bylaws or is otherwise not in accordance with
law, the stockholder will be notified promptly of such deficiency and be given
an opportunity to cure the deficiency within the time period prescribed in the
Bylaws. Copies of the Company’s By-laws are available to stockholders without
charge upon request to the Corporate Secretary at the Company’s address set
forth above.
STOCKHOLDER
NOMINATIONS
Stockholders
meeting the following requirements who want to recommend a director candidate
may do so in accordance with our Bylaws and the following procedures established
by the Nominating Committee. We will consider all director candidates
recommended to the Nominating Committee by stockholders owning at least 5% of
our outstanding shares at all times during the year preceding the date on which
the recommendation is made that meet the qualifications established by the
Board. To make a nomination for director at the 2010 annual meeting, a
written nomination solicitation notice must be received by the Nominating
Committee at our principal executive office not later than January 25, 2010. The
written nomination solicitation notice must contain the following material
elements, as well as any other information reasonably requested by us or the
Nominating Committee:
|
•
|
|
the
name and address, as they appear on our books, of the stockholder giving
the notice or of the beneficial owner, if any, on whose behalf the
nomination is made;
|
|
•
|
|
a
representation that the stockholder giving the notice is a holder of
record of our common stock entitled to vote at the annual meeting and
intends to appear in person or by proxy at the annual meeting to nominate
the person or persons specified in the notice;
|
|
•
|
|
a
complete biography of the nominee, as well as consents to permit us to
complete any due diligence investigations to confirm the nominee’s
background, as we believe to be appropriate;
|
|
•
|
|
the
disclosure of all special interests and all political and organizational
affiliations of the nominee;
|
|
•
|
|
a
signed, written statement from the director nominee as to why the director
nominee wants to serve on our Board, and why the director nominee believes
that he or she is qualified to serve;
|
|
•
|
|
a
description of all arrangements or understandings between or among any of
the stockholders giving the notice, the beneficial owner, if any, on whose
behalf the notice is given, each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder giving the
notice;
|
|
•
|
|
such
other information regarding each nominee proposed by the stockholder
giving the notice as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC had the nominee been
nominated, or intended to be nominated, by our Board of Directors;
and
|
|
•
|
|
the
signed consent of each nominee to serve as a director if so
elected.
|
PROPOSALS
RECOMMENDED FOR CONSIDERATION BY STOCKHOLDERS
PROPOSAL
1: ELECTION OF DIRECTORS
Currently
there are nine directors serving on the Board. The Board is divided
into three classes that serve staggered three-year terms and are equal in
number. The stockholders elect at least one class of directors
annually. Each class generally serves for a period of three years, although a
director may be elected for a shorter term in order to keep the number of
directors in each class approximately equal. This practice is in accordance with
the Company’s Certificate of Incorporation.
All of
the directors were previously elected by the stockholders except for Jane Bryant
Quinn who was appointed to the board in May 2008 to fill the vacancy created by
Mr. Greenberg’s resignation.
The terms
of Joseph W. Lewis, Jane Bryant Quinn, and O. Lee Tawes, III will expire at the
2009 annual meeting. These directors have been nominated by the Company’s
Nominating Committee to stand for reelection at the meeting to hold office until
2012 and until their successors are elected and qualified. Biographical
information, including professional background and
business-related experience, for each of the nominees and incumbent
directors is contained in the section captioned “Information About Executive
Officers and Directors.”
The
proxies solicited hereby, unless directed to the contrary, will be voted for
election of the nominees. All of the nominees have consented to being named in
this proxy statement and to serve if elected. The Board has no reason to believe
that any of the nominees will not be a candidate or will be unable to serve, but
if either occurs proxies may be voted for such substituted nominee or nominees
as the board, in its discretion, may designate.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF JOSEPH W.
LEWIS, JANE BRYANT QUINN, AND O. LEE TAWES, III
PROPOSAL
2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Upon the
recommendation of the Audit Committee, and subject to stockholder approval, the
Board has appointed the firm of KPMG LLP as independent registered public
accountants of the Company for the current fiscal year. The Board has been
advised by KPMG LLP that neither the firm nor any member of the firm has a
direct or indirect financial interest in the Company or its
subsidiaries.
KPMG LLP
became the Company’s independent registered public accountants on March 17,
2000.
A
representative of KPMG LLP is expected to be present at the annual meeting and
will have an opportunity to make a statement if he/she desires to do so and will
be available to respond to appropriate questions from stockholders.
For a
description of the Audit Committee’s pre-approval policies and procedures
pursuant to 17 CFR 210.2-01(c)(7)(i), see the section captioned “Audit Committee
Pre-Approval of Audit and Non-Audit Services”.
Ratification
of the appointment of the independent registered public accountants requires the
affirmative vote of a majority of the votes cast by the holders of the shares of
common stock voting in person or by proxy at the annual meeting. The
stockholder’s ratification of the appointment of KPMG LLP will not impact the
Audit Committee’s responsibility pursuant to its charter to appoint, replace and
discharge the independent auditors. If the stockholders do not ratify the
appointment of KPMG LLP, the Board of Directors will reconsider the
appointment.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
OTHER
BUSINESS
As of the
date of this proxy statement, the Company does not know of any matters that will
be presented for action at the annual meeting other than those expressly set
forth herein. If other matters properly come before the meeting, proxies
submitted on the enclosed form will be voted by the persons named in the
enclosed form of proxy in accordance with their best judgment. In addition, if
(i) any of the persons named to serve as directors are unable to serve or for
good cause will not serve and the Board of Directors designates a substitute
nominee or (ii) any shareholder proposal, which is not in this proxy statement
or on the proxy card or voting instructions form pursuant to Rule 14a-8 or 14a-9
of the Securities Exchange Act of 1934, is presented for action at the meeting,
or (iii) if any matters concerning the conduct of the meeting are presented for
action, then shareholders present at the meeting may vote on such items. If you
are represented by proxy, your proxy will vote your shares using his
discretion.
CODE
OF BUSINESS CONDUCT AND ETHICS
The
Company has adopted a Code of Ethics for Senior Financial Officers of the
Company and its subsidiaries and a Conduct of Business Policy for directors,
officers and employees of the Company and its subsidiaries. It is the Company's
intention to disclose any waivers of such Code of Ethics or Conduct of Business
Policy on the Company's website at www.gses.com. The Company will provide a copy
of such Code of Ethics and Conduct of Business Policy to any person upon written
request made to the Company's Secretary in writing to the following address: GSE
Systems, Inc., Attn: Secretary, 1332 Londontown Blvd., Suite 200, Sykesville, MD
21784.
By Order
of the Board of Directors
Jeffery
G. Hough
Secretary
Sykesville,
Maryland
29