o
|
Preliminary
Proxy Statement
|
o
|
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
X
|
Definitive
Proxy Statement
|
o
|
Definitive
Additional Materials
|
o
|
Soliciting
Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
|
X
|
No
fee required.
|
o
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|
|
(1)
|
Title
of each class of securities to which transaction applies:
|
|
|
N/A
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
|
|
N/A
|
|
(3)
|
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):
|
|
|
N/A
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
N/A
|
|
(5)
|
Total
fee paid:
|
|
|
N/A
|
o
|
Fee
paid previously with preliminary materials.
|
o
|
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.
|
|
(1)
|
Amount
Previously Paid:
|
|
|
N/A
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
N/A
|
|
(3)
|
Filing
Party:
|
|
|
N/A
|
|
(4)
|
Date
Filed:
|
|
|
N/A
|
1.
|
Election
of three Class III directors;
|
2.
|
Ratification
of the selection of KPMG LLP as the Company’s independent registered
public accountants; and
|
3.
|
Ratification
of the 1998 grant of non-plan options awarded to certain
directors.
|
|
•
|
|
FOR
the election of the three Class III director nominees;
|
|
•
|
|
FOR
the ratification of the selection of KPMG LLP as the Company’s independent
registered public accountants.
|
•
|
FOR
the ratification of the grant of options awarded in 1998 to certain
directors.
|
|
•
|
|
You
may send in another proxy with a later date; or
|
|
•
|
|
You
may notify the Secretary of GSE Systems in writing (by you or your
attorney authorized in writing, or if the stockholder is a corporation,
under its corporate seal, by an officer or attorney of the corporation)
at
our principal executive offices before the Annual Meeting, that you
are
revoking your proxy; or
|
|
•
|
|
You
may vote in person at the Annual Meeting.
|
GSE
Common Stock
|
||||||||||||
|
Amount
and Nature
|
|||||||||||
|
of
Beneficial
|
Percent
of
|
||||||||||
|
Name
of Beneficial Owner
|
|
Ownership
(A)
|
|
Class
(B) (1)
|
|
||||||
Beneficial
Owners:
|
||||||||||||
Wells
Fargo & Company
|
1,671,819
|
(2
|
)
|
12.7
|
%
|
|||||||
420
Montgomery Street
|
||||||||||||
San
Francisco, CA 94104
|
||||||||||||
Dolphin
Offshore Partners, LP
|
1,577,966
|
(3
|
)
|
11.9
|
%
|
|||||||
c/o
Dolphin Asset Management
|
||||||||||||
129
East 17th St., 2nd Floor
|
||||||||||||
New
York, NY 10003
|
||||||||||||
Kaizen
Management, LP
|
1,283,092
|
(4
|
)
|
9.6
|
%
|
|||||||
4200
Montrose Blvd, Suite 400
|
||||||||||||
Houston,
TX 77006
|
||||||||||||
Marathon
Capital Management. LLC
|
816,725
|
(5
|
)
|
6.1
|
%
|
|||||||
4
North Park Drive, Suite 106
|
||||||||||||
Hunt
Valley, MD 21030
|
||||||||||||
Jack
Silver
|
715,424
|
(6
|
)
|
5.5
|
%
|
|||||||
c/o
SIAR Capital LLC
|
||||||||||||
660
Madison Ave.
|
||||||||||||
New
York, NY 10021
|
||||||||||||
Management:
|
||||||||||||
O.
Lee Tawes, III
|
484,896
|
(7
|
)
|
3.7
|
%
|
|||||||
Jerome
I. Feldman
|
363,606
|
(8
|
)
|
2.7
|
%
|
|||||||
Michael
D. Feldman
|
363,606
|
(9
|
)
|
2.7
|
%
|
|||||||
George
J. Pedersen
|
271,750
|
(10
|
)
|
2.0
|
%
|
|||||||
John
V. Moran
|
110,102
|
(11
|
)
|
0.8
|
%
|
|||||||
Chin-Our
Jerry Jen
|
108,032
|
(12
|
)
|
0.8
|
%
|
|||||||
Hal
D. Paris
|
83,122
|
(13
|
)
|
0.6
|
%
|
|||||||
Gill
R. Grady
|
58,827
|
(14
|
)
|
0.4
|
%
|
|||||||
Jeffery
G. Hough
|
58,254
|
(15
|
)
|
0.4
|
%
|
|||||||
Scott
N. Greenberg
|
46,881
|
(16
|
)
|
0.4
|
%
|
|||||||
Roger
Hagengruber
|
10,000
|
(17
|
)
|
0.1
|
%
|
|||||||
Sheldon
L. Glashow
|
6,004
|
(18
|
)
|
0.0
|
%
|
|||||||
Joseph
W. Lewis
|
-
|
0.0
|
%
|
|||||||||
Directors
and Executive Officers
|
1,601,574
|
(19
|
)
|
11.5
|
%
|
|||||||
as
a group (13 persons)
|
||||||||||||
(A)
|
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 2006 by Wells Capital Management, Inc., Marathon Capital
Management, LLC, and by Jack Silver and the Schedule 13G filed
by Kaizen
Management, LP on May 2, 2007. 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.
|
(B)
|
Applicable
percentages are based on 13,125,821 shares outstanding on May 25,
2007,
adjusted as required by rules promulgated by the SEC.
|
Name
|
Age
|
Title
|
||||||||
Jerome
I. Feldman
|
(1) |
78
|
Director,
Chairman of the Board
|
|||||||
Michael
D. Feldman
|
39
|
Director,
Executive Vice President
|
||||||||
Sheldon
L. Glashow
|
(2) (4) |
74
|
Director
|
|||||||
Gill
R. Grady
|
49
|
Senior
Vice President
|
||||||||
Scott
N. Greenberg
|
50
|
Director
|
||||||||
Roger
L. Hagengruber
|
(2) |
64
|
Director
|
|||||||
Jeffery
G. Hough
|
52
|
Senior
Vice President, Chief Financial Officer,
Treasurer,
|
||||||||
|
|
Secretary
|
||||||||
Chin-Our
Jerry Jen
|
58
|
Chief
Operating Officer, President
|
||||||||
Joseph
W. Lewis
|
(2) |
72
|
Director,
Chairman of the Audit Committee
|
|||||||
John
V. Moran
|
(1) |
56
|
Director,
Chief Executive Officer
|
|||||||
Harold
D. Paris
|
52
|
Senior
Vice President
|
||||||||
George
J. Pedersen
|
(1) (3) (4) |
71
|
Director,
Chairman of the Compensation Committee
|
|||||||
O.
Lee Tawes, III
|
(3) |
59
|
Director
|
|||||||
(1)
Member of Executive Committee
|
||||||||||
(2)
Member of Audit Committee
|
||||||||||
(3)
Member of Compensation Committee
|
||||||||||
(4)
Member of Nominating Committee
|
||||||||||
|
•
|
|
reviewed
and discussed GSE Systems’ audited financial statements with management;
|
•
|
discussed
with GSE Systems’ independent registered public accountants the matters
required to be discussed by the statement on Auditing Standards
No. 61, as
amended (AICPA, Professional Standards, Vol. 1 AU section 380),
as adopted
by the Public Company Accounting Oversight Board in Rule
3200T;
|
||
|
•
|
|
SAS
61 requires independent registered public accountants to communicate
certain matters related to the scope and conduct of an audit, including
the adequacy of staffing and compensation, to those who have
responsibility for oversight of the financial reporting process,
specifically the Audit Committee. Among the matters to be communicated
to
the Audit Committee are: (i) methods used to account for significant
or
material transactions; (ii) the effect of significant accounting
policies
in controversial or emerging areas for which there is a lack of
authoritative guidance or consensus; (iii) the process used by
management
in formulating particularly sensitive accounting estimates and
the basis
for the auditor’s conclusions regarding the reasonableness of those
estimates, and (iv) disagreements with management over the application
of
accounting principles, the basis for management’s accounting estimates,
and the disclosures in the financial statements in addition to
discussing
the adequacy and effectiveness of the accounting and financial
controls
(including the Company’s system to monitor and manage business risk) and
legal and ethical compliance programs;
|
|
•
|
|
received
the written disclosures and the letter from the independent registered
public accountants required by Independence Standards Board Standard
(“ISB”) No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees),
as adopted by the Public Company Accounting Oversight Board in
Rule 3600T,
and has discussed with the independent registered public accountants
the
independent registered public accountants’ independence from the Company’s
management and from the Company and the matters included in the
written
disclosures required by the ISB in accordance with SEC Rule 201-2.01,
and
reviewed and recommended to the Board the selection of the Company’s
independent registered public accountants;
|
|
•
|
|
reviewed
the interim financial statements with the Company’s management and the
independent registered public accountants prior to filing the Company’s
Quarterly Reports on Form 10-Q and discussed the results of the
quarterly
reviews and other matters to be communicated to the Audit Committee
by the
independent registered public accountants under generally accepted
auditing standards;
|
|
•
|
|
based
on the review and discussions above with the Company’s management and the
independent registered public accountants concerning the quality
of
accounting principles, reasonableness of significant judgments,
clarity of
disclosures in the financial statements, results of the annual
audit and
other matters to be communicated to the Audit Committee by the
independent
registered public accountants under generally accepted auditing
standards,
the Audit Committee recommended to the Board of Directors that
the audited
financial statements be included in GSE Systems’ annual report on Form
10-K, the annual report to shareholders required by section 30(e)
of the
Investment Company Act of 1940 and Rule 30d-1 for the fiscal year
ended
December 31, 2006 for filing with the SEC; and
|
|
•
|
|
approved
KPMG as the independent registered public accountants for the Company
for
the fiscal year 2006.
|
2006
|
2005
|
||||
Audit
fees (1)
|
$
239,000
|
$
193,250
|
|||
Audit
related fees (2)
|
13,000
|
12,500
|
|||
Tax
fees (3)
|
-
|
1,500
|
|||
Total
fees
|
$
252,000
|
$
207,250
|
|||
(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 two registration statements filed with the SEC.
|
(2) |
Audit
related fees consisted principally of fees for audits of financial
statements of certain employee benefit
plans.
|
(3) |
Tax
fees consisted of fees for tax consultation and tax compliance services.
|
|
Annual
Compensation
|
|||||||||||||||||||||
Name
and Principal
|
Option
|
All
Other
|
||||||||||||||||||||
Position
*
|
Year
|
Salary
|
Bonus
|
Awards
|
Compensation
|
Total
|
||||||||||||||||
John
V. Moran (1)
|
2006
|
$
|
232,500
|
$
|
60,000
|
$
|
42,662
|
$
|
36,603
|
(2
|
)
|
$
|
371,765
|
|||||||||
Chief
Executive Officer
|
2005
|
226,356
|
-
|
-
|
35,766
|
(3
|
)
|
262,122
|
||||||||||||||
2004
|
289,000
|
-
|
-
|
1,922
|
(4
|
)
|
290,922
|
|||||||||||||||
Chin-Our
Jerry Jen
|
2006
|
$
|
158,708
|
$
|
15,500
|
$
|
19,667
|
$
|
18,569
|
(5
|
)
|
$
|
212,444
|
|||||||||
President
& COO
|
2005
|
173,305
|
-
|
-
|
18,490
|
(6
|
)
|
191,795
|
||||||||||||||
2004
|
172,500
|
-
|
-
|
17,800
|
(7
|
)
|
190,300
|
|||||||||||||||
Jeffery
G. Hough
|
2006
|
$
|
158,708
|
$
|
15,500
|
$
|
17,729
|
$
|
13,873
|
(8
|
)
|
$
|
205,810
|
|||||||||
Sr.
Vice President & CFO
|
2005
|
157,051
|
-
|
-
|
13,317
|
(9
|
)
|
170,368
|
||||||||||||||
2004
|
155,250
|
-
|
-
|
12,074
|
(10
|
)
|
167,324
|
|||||||||||||||
Gill
R. Grady
|
2006
|
$
|
139,167
|
$
|
15,500
|
$
|
15,237
|
$
|
41,446
|
(11
|
)
|
$
|
211,350
|
|||||||||
Sr.
Vice President
|
2005
|
140,607
|
-
|
-
|
17,649
|
(12
|
)
|
158,256
|
||||||||||||||
2004
|
138,958
|
-
|
-
|
16,449
|
(13
|
)
|
155,407
|
|||||||||||||||
Hal
D. Paris
|
2006
|
$
|
146,083
|
$
|
50,000
|
$
|
22,162
|
$
|
17,409
|
(14
|
)
|
$
|
235,654
|
|||||||||
Sr.
Vice President
|
2005
|
138,926
|
-
|
-
|
19,072
|
(15
|
)
|
157,998
|
||||||||||||||
2004
|
136,083
|
-
|
-
|
16,312
|
(16
|
)
|
152,395
|
GRANTS
OF PLAN-BASED AWARDS
|
|||||||||||||||
|
Number
of
|
||||||||||||||
|
Securties
|
||||||||||||||
|
Underlying
|
Exercise
of
|
Grant
Date
|
||||||||||||
|
Grant
|
Options
|
Base
Price
|
Fair
Value
|
|||||||||||
Name
|
Date
|
Granted
(1)
|
|
($/share)
|
|
($/share)
|
|
||||||||
John
V. Moran
|
3/14/06
|
154,000
|
$
|
1.61
|
$
|
1.03
|
|||||||||
Chin-Our
Jerry Jen
|
3/14/06
|
30,000
|
$
|
1.61
|
$
|
1.03
|
|||||||||
Chin-Our
Jerry Jen
|
5/22/06
|
20,000
|
$
|
3.65
|
$
|
2.32
|
|||||||||
Jeffery
G. Hough
|
3/14/06
|
64,000
|
$
|
1.61
|
$
|
1.03
|
|||||||||
Gill
R. Grady
|
3/14/06
|
55,000
|
$
|
1.61
|
$
|
1.03
|
|||||||||
Hal
D. Paris
|
3/14/06
|
80,000
|
$
|
1.61
|
$
|
1.03
|
(1) |
These
options vest 40% after one year from date of grant, an additional
30%
after two years from date of grant and an additional 30% three years
from
date of grant.
|
2006
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
||||||||||||||||
|
Number
of
|
|||||||||||||||
Securities
Underlying
|
Option
|
|||||||||||||||
|
Option
|
Unexercised
Options
|
Exercise
|
Option
|
||||||||||||
|
Grant
|
at
12/31/06
|
Price
|
Expiration
|
||||||||||||
Name
|
Date
|
Exercisable
|
Unexercisable
|
($/share)
|
|
Date
|
||||||||||
John
V. Moran
|
3/22/2005
|
48,376
|
-
|
$
|
1.85
|
3/22/2012
|
||||||||||
|
3/14/2006 |
61,600
|
92,400
|
$
|
1.61
|
3/14/2013
|
||||||||||
Chin-Our
Jerry Jen
|
12/1/1997
|
25,000
|
-
|
$
|
3.88
|
12/1/2007
|
||||||||||
|
5/3/2001 |
22,950
|
-
|
$
|
2.00
|
5/3/2008
|
||||||||||
|
3/22/2006 |
36,282
|
-
|
$
|
1.85
|
3/22/2012
|
||||||||||
|
3/14/2006 |
12,000
|
18,000
|
$
|
1.61
|
3/14/2013
|
||||||||||
|
5/22/2006 |
8,000
|
12,000
|
$
|
3.65
|
5/22/2013
|
||||||||||
Jeffery
G. Hough
|
3/22/2005
|
32,654
|
-
|
$
|
1.85
|
3/22/2012
|
||||||||||
|
3/14/2006 |
25,600
|
38,400
|
$
|
1.61
|
3/14/2013
|
||||||||||
Gill
R. Grady
|
12/1/1997
|
7,500
|
-
|
$
|
3.88
|
12/1/2007
|
||||||||||
|
3/22/2005 |
29,227
|
-
|
$
|
1.85
|
3/22/2012
|
||||||||||
|
3/14/2006 |
22,000
|
33,000
|
$
|
1.61
|
3/14/2013
|
||||||||||
Harold
D. Paris
|
12/1/1997
|
7,500
|
-
|
$
|
3.88
|
12/1/2007
|
||||||||||
|
5/3/2001 |
15,000
|
-
|
$
|
2.00
|
5/3/2008
|
||||||||||
|
3/22/2005 |
28,622
|
-
|
$
|
1.85
|
3/22/2012
|
||||||||||
|
3/14/2006 |
32,000
|
48,000
|
$
|
1.61
|
3/14/2013
|
OPTION
EXERCISES
|
|||||||
#
of Shares
|
Value
|
||||||
Acquired
on
|
Realized
|
||||||
Exercise
|
on
Exercise
|
||||||
John
V. Moran
|
-
|
$
-
|
|||||
Chin-Our
Jerry Jen
|
-
|
-
|
|||||
Jeffery
G. Hough
|
-
|
-
|
|||||
Gill
R. Grady
|
15,000
|
28,800
|
|||||
Harold
D. Paris
|
-
|
-
|
Plan
category
|
Number
of Securities to
be
Issued Upon Exercise
of
Outstanding Options,
Warrants
and Rights
(a)
|
Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
(b)
|
Number
of Securities
Remaining
Available for
Future
Issuance Under Equity
Compensation
Plans (Excluding
Securities
Reflected in Column (a)
(c)
|
Equity
compensation plans approved by security holders
|
1,892,702
|
$2.48
|
224,186
|
Equity
compensation plans not approved by security holders
|
--
|
$
--
|
--
|
Total
|
1,892,702
|
$2.48
|
224,186
|
(1)
|
The
equity compensation plan approved by security holders is the 1995
Long-Term Incentive Plan, as amended and restated, effective April
28,
2005.
|
Estimated
|
||||||||
Annual
|
Annual
|
|||||||
Title
|
Retainer
|
Meetings
|
Compensation
|
|||||
Chairman,
Audit Committee
|
$
15,000
|
$
8,000
|
(1)
|
$
23,000
|
||||
Audit
Committeee Member
|
$
10,000
|
$
8,000
|
(1)
|
$
18,000
|
(1) |
Includes
$6,000 for estimated number of board meetings (4 times $1,500 each)
and
$2,000 for estimated number of Audit Committee meetings (4 times
$500
each).
|
¨ |
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.
|
|
•
|
|
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.
|