SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [x] Filed by a Party other than the Registrant Check the
appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GP STRATEGIES CORPORATION
--------------------------- --------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] 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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
GP STRATEGIES CORPORATION
6095 Marshalee Drive
Elkridge, Maryland 21075
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 14, 2006
To the Stockholders:
The Annual Meeting of Stockholders of GP Strategies Corporation (the
"Company") will be held at the BWI Airport Marriott, 1743 West Nursery Road,
Baltimore, Maryland, on the 14th day of September, 2006, at 10:00 a.m., local
time, for the following purposes:
1. To elect six Directors to serve until the next Annual Meeting and
until their respective successors are elected and qualify.
2. To amend the Amended and Restated Certificate of Incorporation to
eliminate the authorized shares of Class B Capital Stock.
3. To ratify the Board of Directors' appointment of KPMG LLP ("KPMG"),
an independent registered public accounting firm, to serve as the Company's
independent auditors for the fiscal year ending December 31, 2006.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record as of the close of business on July 31, 2006 are
entitled to receive notice of and to vote at the meeting. A list of such
stockholders shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
ten days prior to the meeting, at the offices of the Company at 6095 Marshalee
Drive, Suite 300, Elkridge, Maryland.
By Order of the Board of Directors
Lydia M. DeSantis
Secretary
Elkridge, Maryland
August 14, 2006
Whether or not you plan to attend the annual meeting, please fill in, date and
sign the enclosed Proxy and return it promptly in the enclosed postage prepaid
return envelope.
GP STRATEGIES CORPORATION
6095 Marshalee Drive
Elkridge, Maryland 21075
---------------
Elkridge, Maryland
August 14, 2006
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of the Company, for use only at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the BWI Airport Marriott, 1743 West Nursery
Road, Baltimore, Maryland, on the 14th day of September, 2006, at 10:00 a.m.,
local time, and at any adjournments thereof. The approximate date on which this
Proxy Statement and the accompanying Proxy were first given or sent to security
holders was August 14, 2006.
Each Proxy executed and returned by a stockholder may be revoked at any time
thereafter, by written notice to that effect to the Company, attention of the
Secretary, prior to the Annual Meeting, or to the Chairman, or the Inspectors of
Election, at the Annual Meeting, or by the execution and return of a later-dated
Proxy, except as to any matter voted upon prior to such revocation.
The Proxies in the accompanying form will be voted in accordance with the
specifications made and where no specifications are given, such Proxies will be
voted FOR the six nominees for election as Directors named herein, FOR the
amendment to the Certificate of Incorporation and FOR the ratification of the
selection of KPMG as the Company's independent auditors. In the discretion of
the proxy holders, the Proxies will also be voted FOR or AGAINST such other
matters as may properly come before the meeting. The management of the Company
is not aware that any other matters are to be presented for action at the
meeting. Although it is intended that the Proxies will be voted for the nominees
named herein, the holders of the Proxies reserve discretion to cast votes for
individuals other than such nominees in the event of the unavailability of any
such nominee. The Company has no reason to believe that any of the nominees will
become unavailable for election. The Proxies may not be voted for a greater
number of persons than the number of nominees named. The election of Directors
will be determined by a plurality of the votes of the holders of shares of
Common Stock present in person or represented by proxy at the Annual Meeting.
Accordingly, in the case of shares that are present or represented at the Annual
Meeting for quorum purposes, not voting such shares for a particular nominee for
Director, including by withholding authority on the Proxy, will not operate to
prevent the election of such nominee if he otherwise receives a plurality of the
votes. For the amendment to the Certificate of Incorporation, the ratification
of the selection of the Company's independent auditors and any other item voted
upon at the Annual Meeting, the affirmative vote of the holders of shares of
Common Stock entitled to cast a majority of the votes present in person or
represented by proxy at the Annual Meeting will be required for approval.
Accordingly, abstentions will have the same legal effect as a negative vote.
Broker non-votes will not be counted in determining the number of shares
necessary for approval.
VOTING SECURITIES
The Board of Directors has fixed the close of business on July 31, 2006 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting. The issued and outstanding capital stock
of the Company on July 31, 2006 consisted of 15,627,221 shares of Common Stock,
each entitled to one vote. A quorum of the stockholders is constituted by the
presence, in person or by proxy, of holders of record of Common Stock,
representing a majority of the number of votes entitled to be cast. On January
19, 2006, the Company completed a restructuring of its capital stock which had
the effect of eliminating all outstanding shares of the Company's Class B Stock.
The Company is seeking stockholder approval for an amendment to its Certificate
of Incorporation to eliminate the authorized shares of Class B Capital Stock.
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of July 31, 2006 by each person who is known by the
Company based on their SEC filings to own beneficially more than 5% of the
Company's outstanding Common Stock.
Amount and
Name and Address Nature of Percent of
Title of Class of Beneficial Owner Beneficial Ownership Class
Common Stock Caxton International Limited 1,586,071 shares(1) 10.1%
315 Enterprise Drive
Plainsboro, NJ 08536
Common Stock Pequot Capital Management, Inc. 1,457,440 shares(2) 9.3%
500 Nyala Farms Road
Westport, CT 06880
Common Stock Dimensional Fund Advisors, Inc. 1,198,555 shares(3) 7.7%
1299 Ocean Avenue
Santa Monica, CA 90401
Common Stock Gabelli Asset Management, Inc. 1,220,817 shares(4) 7.4%
One Corporate Center
Rye, NY 10580
(1) Based on a Schedule 13G/A filed jointly by Caxton International
Limited, GDK, Inc., Caxton Equity Growth LLC, Caxton Associates, LLC,
Bruce S. Kovner, and Ross Taylor with the SEC on February 15, 2006.
(2) Based on a Form 13F filed by Pequot Capital Management, Inc. with the
SEC for the quarter ended March 31, 2006.
(3) Based on a Schedule 13G/A filed by Dimensional Fund Advisors Inc.
("Dimensional") with the SEC on February 6, 2006. Dimensional has
informed the Company that the shares are owned by advisory clients of
Dimensional and that Dimensional disclaims beneficial ownership of such
shares.
(4) Based on a Schedule 13D filed jointly by GGCP, Inc., MJG Associates,
Inc., GAMCO Investors, Inc., Gabelli Funds, LLC, GAMCO Asset
Management, Inc. and Mario J. Gabelli with the SEC on January 27, 2006.
Includes 983,116 shares issuable upon exercise of warrants to purchase
shares of the Company's Common Stock. Mario Gabelli directly or
indirectly controls or acts as chief investment officer of the
aforementioned entities. See "Certain Transactions."
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SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth, as of July 31, 2006, the beneficial
ownership of Common Stock, by each Director, each of the named executive
officers, and all Directors and executive officers as a group.
Total Number of Percent of
Shares of Common Stock Common
Beneficially Stock
Owned Owned(1)
Harvey P. Eisen(2)(3)(4) 353,884(5) 2.3
Jerome I. Feldman(4) 671,991(6) 4.3
Marshall S. Geller(2)(3)(7) 217,963(8) 1.4
Scott N. Greenberg(4) 190,987(9) 1.2
Richard C. Pfenniger, Jr.(3)(7) 9,994 *
Ogden R. Reid(7) 16,848(8) *
Douglas E. Sharp 180,117(8) 1.1
Andrea D. Kantor 66,590(8) *
Sharon Esposito-Mayer 38,973(8) *
Directors and Executive Officers
as a Group (11 persons) 1,835,747(10) 11.3
----------
*Less than one percent.
(1) Assumes for each beneficial owner and Directors and executive officers
as a group that all options are exercised in full only by the named
beneficial owner or members of the group and no other options are
exercised.
(2) Member of the Nominating/Corporate Governance Committee.
(3) Member of the Compensation Committee.
(4) Member of the Executive Committee.
(5) Includes 350,000 shares of Common Stock beneficially owned by Bedford
Oak Partners, L.P. ("Bedford Oak"). Mr. Eisen is deemed to have
beneficial ownership of such shares by virtue of his position as
managing member of Bedford Oak Advisors, LLC, the investment manager of
Bedford Oak.
(6) Includes (i) 1,173 shares of Common Stock held by members of Mr.
Feldman's family, (ii) 119,716 shares of Common Stock issuable upon
exercise of currently exercisable stock options held by Mr. Feldman and
(iii) 5,275 shares of Common Stock allocated to Mr. Feldman's account
pursuant to the provisions of the GP Retirement Savings Plan (the "GP
Plan"). Mr. Feldman disclaims beneficial ownership of the 1,173 shares
of Common Stock held by members of his family.
(7) Member of the Audit Committee.
(8) Includes 11,972 shares for each of Messrs. Geller and Reid, 148,900
shares for Mr. Sharp, 59,858 shares for Ms. Kantor and 32,683 shares
for Ms. Esposito-Mayer, issuable upon exercise of currently exercisable
stock options, and 8,443 shares for Mr. Sharp, 512 shares for Ms.
Kantor and 6,265 for Ms. Esposito-Mayer allocated pursuant to the
provisions of the GP Plan.
(9) Includes (i) 119,716 shares of Common Stock issuable upon exercise of
currently exercisable stock options held by Mr. Greenberg, (ii) 7,553
shares of Common Stock allocated to Mr. Greenberg's account pursuant to
the provisions of the GP Plan and (iii) 4,000 shares of Common Stock
held by members of his family. Mr. Greenberg disclaims beneficial
ownership of the 4,000 shares held by members of his family.
(10) Includes 584,191 shares of Common Stock issuable upon exercise of
currently exercisable stock options and 36,801 shares of Common Stock
allocated to accounts pursuant to the provisions of the GP Plan.
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ELECTION OF DIRECTORS
Six Directors will be elected at the Annual Meeting to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
elected and qualify. The Proxies solicited by this proxy statement may not be
voted for a greater number of persons than the number of nominees named. It is
intended that these Proxies will be voted for the following nominees, but the
holders of these Proxies reserve discretion to cast votes for individuals other
than the nominees for Director named below in the event of the unavailability of
any such nominee. The Company has no reason to believe that any of the nominees
will become unavailable for election. Set forth below are the names of the
nominees, the principal occupation of each, the year in which first elected a
Director of the Company and certain other information concerning each of the
nominees.
Scott N. Greenberg has been a Director of the Company since 1987, President
from 2001 until February 2006 and Chief Executive Officer since April 2005. He
was Chief Financial Officer from 1989 until December 2005, Executive Vice
President from 1998 to 2001, and Vice President from 1985 to 1998. He has been a
Director of GSE Systems, Inc. ("GSE") since 1999 and was a Director of Five Star
Products, Inc. ("Five Star") from 1998 to 2003 and a Director of Valera
Pharamceuticals ("Valera') until January 2005. Mr. Greenberg has also been a
Director and Chief Financial Officer of National Patent Development Corporation
("NPDC") since 2004. Age 49
Harvey P. Eisen has been a Director since 2002 and Non-Executive Chairman of
the Board since April 2005. He has been Chairman and Managing Member of Bedford
Oak Management, LLC since 1998. Prior thereto, Mr. Eisen served as Senior Vice
President of Travelers, Inc. and of Primerica prior to its merger with Travelers
in 1993. Mr. Eisen has over thirty years of asset management experience, is
often consulted by the national media for his views on all phases of the
investment marketplace, and is frequently quoted in The Wall Street Journal, The
New York Times, PensionWorld, U.S. News & World Report, Financial World and
Business Week, among others. Mr. Eisen also appears regularly on such television
programs as Wall Street Week, CNN, and CNBC. Mr. Eisen is a Trustee of the
University of Missouri Business School where he established the first accredited
course on the Warren Buffet Principles of Investing. Mr. Eisen has also been a
Director of NPDC since August 2004. He is also a Trustee of Rippowam Cisqua
School in Bedford, New York and the Northern Westchester Hospital Center. Age 63
Jerome I. Feldman founded the Company in 1959. He has been Chairman of the
Executive Committee since April 2005. He was Chief Executive Officer from 1959
until April 2005, Chairman of the Board from 1999 until April 2005 and President
from 1959 until 2001. He has been Chairman of the Board of Five Star since 1994;
a Director of GSE since 1994; Chairman of the Board of GSE since 1997; Chairman
of the Board and Chief Executive Officer of NPDC since 2004; and a Director of
Valera since January 2005. Mr. Feldman is also Chairman of the New England
Colleges Fund and a Trustee of Northern Westchester Hospital Foundation. Age 78
Marshall S. Geller has been a Director of the Company since 2002. Mr. Geller
is Co-Founder and Senior Managing Director of St. Cloud Capital, a Los Angeles
based private investment fund formed in December 2001. He is also Chairman,
Chief Executive Officer and Founding Partner of Geller & Friend Capital
Partners, Inc., a private merchant bank formed in 1995. Mr. Geller has spent
more than forty years in corporate finance and investment banking, including
twenty one years as a Senior Managing Director of Bear, Stearns & Co. with
oversight of all operations in Los Angeles, San Francisco, Chicago, Hong Kong
and the Far East. Mr. Geller is currently Non-Executive Chairman of the Board of
ShopNBC-ValueVision Media, Inc. (NasdaqNM: VVTV), and serves as a Director of
1st Century Bank, Los Angeles (Nasdaq:FCNA), Blue Holdings, Inc. (NasdaqNM:
BLUE), National Holdings Corp. (NHLD.OB), SCPIE Holdings, Inc. (NYSE: SKP) and
is on the Board of Governors of Cedars Sinai Medical Center, Los Angeles. He was
previously the Interim Co-Chairman of Hexcel Corporation (NYSE:HXL) and Interim
President and Chief Operating Officer of Players International, Inc. Mr. Geller
also serves on the Dean's Advisory Council for the College of Business &
Economics at California State University, Los Angeles. Age 67
Richard C. Pfenniger, Jr. has been a Director of the Company since January
2005. Mr. Pfenniger is the Chairman of the Board, President, and Chief Executive
Officer of Continucare Corporation, a provider of primary care physician
services. Mr. Pfenniger was appointed President and Chief Executive Officer in
October 2003 after having served as a member of the board of Continucare since
March 2002 and as Chairman since September 2002. Mr. Pfenniger was the Chief
Executive Officer and Vice Chairman of Whitman Education Group, Inc., a provider
of career-oriented higher education, from 1997 until June 2003. From 1994 to
1997, Mr. Pfenniger served as the Chief Operating Officer of IVAX Corporation,
and from 1989 to 1994 he served as the Senior Vice President-Legal Affairs and
General Counsel of IVAX Corporation, a multi-national pharmaceutical company.
Mr. Pfenniger currently serves as a Director of Cellular Technical Services
Company, Inc. Age 50
Ogden R. Reid has been a Director of the Company since 1979. Mr. Reid had
been Editor and Publisher of the New York Herald Tribune and of its
4
International Edition; United States Ambassador to Israel; a six-term member of
the United States Congress and a New York State Environmental Commissioner. Mr.
Reid is a Director of Valera. Mr. Reid is currently Chairman of the Council of
American Ambassadors. Age 81
Corporate Governance
The Board of Directors 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 of
Directors 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 Board of Directors held fourteen meetings in
2005. All of the Directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of Committees of the Board on which they
served.
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. The Board intends to schedule at least two executive sessions of
non-management Directors each year. However, any Director may request additional
executive sessions of non-management Directors to discuss any matter of concern.
The Board of Directors 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, 777
Westchester Avenue, White Plains, NY 10604, or by email at
ldesantis@genphysics.com, with a copy to the General Counsel at the same
address, or by email at akantor@genphysics.com, who will forward them to the
intended recipients.
The Board of Directors reviews the independence of its members on an annual
basis. No Director 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 Director independence,
however, the Board of Directors employs the standards of independence of the
NYSE rules currently in effect in making its determination that a Director
qualifies as independent. In its annual review of Director independence, the
Board considers all commercial, banking, consulting, legal, accounting,
charitable or other business relationships any Director may have with the
Company. As a result of its annual review, the Board of Directors has determined
that Harvey P. Eisen, Marshall S. Geller, Richard C. Pfenniger, Jr., and Ogden
R. Reid are independent and that Jerome I. Feldman and Scott N. Greenberg are
not independent. The Company has Nominating/Corporate Governance, Compensation
and Audit Committees and based on these standards, all current members of such
Committees are independent.
The Board of Directors established the Nominating/Corporate Governance
Committee, which met twice in 2005. The Nominating/Corporate Governance
Committee acts under a written charter, which may be viewed online on the
Company's website at www.gpstrategies.com under the "Corporate Governance"
section. The members of the Nominating/Corporate Governance Committee are Harvey
P. Eisen and Marshall S. Geller. All members satisfy the independence
requirements of the NYSE rules currently in effect. The principal functions of
the Nominating/Corporate Governance Committee are to:
(i) develop policies on the size and composition of the Board of
Directors; (ii) identify individuals qualified to become
members of the Board of Directors; (iii) recommend a slate of
nominees to the Board of Directors annually;
(iv) ensure that the Audit, Compensation and Nominating/Corporate
Governance Committees of the Board of Directors have the
benefit of qualified and experienced independent Directors;
(v) review and reassess the adequacy of the Board of Directors'
corporate governance principles (which principles may be
viewed online on the Company's website at www.gpstrategies.com
under the "Corporate Governance" section); and
(vi) advise the full Board of Directors on corporate governance
matters.
When the Board of Directors decides to recruit a new member, it seeks strong
candidates who possess qualifications and expertise that will enhance the
composition of the Board of Directors. The criteria for selecting new Directors
can be viewed online on the Company's website at www.gpstrategies.com under the
"Corporate Governance" section. The Board of Directors will consider any such
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strong candidate provided he or she possesses integrity and ethical character.
If the Board of Directors does not believe that a candidate possesses the above
personal characteristics, that candidate will not be considered. In recommending
candidates for election to the Board of Directors, the Nominating/Corporate
Governance Committee considers nominees recommended by Directors, officers,
employees, stockholders and others, using the same criteria to evaluate all
candidates. Upon selection of a qualified candidate, the Nominating/Corporate
Governance Committee would recommend the candidate for consideration by the full
Board of Directors.
To recommend a prospective nominee for the Nominating/Corporate Governance
Committee's consideration, stockholders should submit the candidate's name and
qualification to the Company's Secretary in writing at 777 Westchester Avenue,
White Plains, NY 10604, with a copy to the General Counsel at the same address.
When submitting candidates for nomination to be elected at the Company's annual
meeting of stockholders, stockholders must also follow the notice procedures and
provide the information required by the Company's By-laws. The Company's By-laws
provide that any stockholder wishing to nominate a candidate for Director or to
propose other business at an annual meeting of stockholders of the Company must
give written notice that is received by the Secretary of the Company not less
than 90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders no later than June 16, 2007 with respect to the 2007
Annual Meeting of Stockholders); provided that in the event that the annual
meeting is called for a date that is not within 30 days before or after such
anniversary date, such notice must be received not later than the close of
business on the tenth day following the day on which public disclosure of the
date of the annual meeting was first made. Such notice must provide certain
information specified in the Company's By-laws. Copies of the Company's By-laws
are available to stockholders without charge upon request to the Company's
Secretary at the Company's address set forth above.
The Compensation Committee acts under a written charter, which may be viewed
online on the Company's website at www.gpstrategies.com under the "Corporate
Governance" section. The members of the Compensation Committee are Harvey P.
Eisen, Marshall S. Geller and Richard C. Pfenniger, Jr. All members satisfy the
independence requirements of the NYSE rules currently in effect. The principal
function of the Compensation Committee is to assist the Board of Directors in
discharging its responsibilities in respect of the Company's executive officers
by:
(i) evaluating the Chief Executive Officer's performance and setting
the Chief Executive Officer's compensation based on such
evaluation; and
(ii) developing guidelines and reviewing the compensation and performance
of officers of the Company.
The Compensation Committee administers the Company's Stock Option Plan and
Incentive Stock Plan. In 2005, the Compensation Committee formally acted four
times through formal meetings and unanimous written consents.
The Executive Committee meets on call and has authority to act on most
matters during the intervals between Board meetings and acts as an advisory body
to the Board of Directors by reviewing various matters prior to submission to
the Board. The members of the Executive Committee are Jerome I. Feldman, Scott
N. Greenberg and Harvey P. Eisen. The Committee formally acted twice in 2005
through formal meetings and unanimous written consents.
The members of the Audit Committee are Ogden R. Reid, Marshall S. Geller and
Richard C. Pfeniniger, Jr. All members satisfy the independence and experience
requirements of the SEC and the NYSE current listing standards. The Board of
Directors has determined that Richard C. Pfenniger, Jr. is the Audit Committee
financial expert. The Audit Committee acts under a written charter, which is
required to be provided to stockholders every three fiscal years, unless amended
earlier. The Audit Committee Charter was amended by the Audit Committee on May
4, 2006 and approved by the Board of Directors at its July 26, 2006 meeting. The
amended charter is attached hereto as Annex A. The Audit Committee charter may
also be viewed online on the Company's website at www.gpstrategies.com under the
"Corporate Governance" section.
The charter sets forth the responsibilities of the Audit Committee, which
include (i) reviewing the independence, qualifications, services, fees and
performance of the independent auditors, (ii) appointing, replacing and
discharging the independent auditors, (iii) approving the professional services
provided by the independent auditors, (iv) reviewing the scope of the annual
audit and quarterly reports and recommendations submitted by the independent
auditors, and (v) reviewing the Company's financial reporting, the system of
internal financial controls, and accounting policies, including any significant
changes, with management and the independent auditors. The Committee met seven
times in 2005.
Audit Committee Report
During the year ended December 31, 2005, the Audit Committee reviewed and
discussed the Company's annual and quarterly reports on Forms 10-K and 10-Q, the
6
Company's earnings releases and the Company's audited financial statements with
management and the Company's independent auditors, KPMG, prior to their release.
The Committee discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61, Communication with Audit
Committees, relating to the conduct of the audit. The Audit Committee has
received the written disclosures and the letter from KPMG required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with KPMG their independence and satisfied itself
as to the auditor's independence.
Based on the Audit Committee's review of the audited financial statements
and the review and discussions described in the foregoing paragraph, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for the fiscal year ended December 31, 2005 be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005
for filing with the SEC. In addition, the Audit Committee approved KPMG as the
independent auditors for the Company for the fiscal year 2006.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 (the "Securities Act") or the
Securities Exchange Act of 1934 (the "Exchange Act") that might incorporate
future filings made by the Company under those statutes, in whole or in part,
this report shall not be deemed to be incorporated by reference into any such
filings, nor will this report be incorporated by reference into any future
filings made by the Company under those statutes.
Ogden R. Reid, Chairman, Marshall S. Geller and Richard C. Pfenniger, Jr.
Policy on Pre-Approval of Services Provided by Independent Auditors
Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of
the engagement of KPMG are subject to specific pre-approval policies of the
Audit Committee. All audit and permitted non-audit services to be performed by
KPMG require pre-approval of the Audit Committee or the Chairman of the Audit
Committee in accordance with pre-approval policies established by the Audit
Committee. The procedures require all proposed engagements of KPMG for services
of any kind be directed to the Company's Chief Financial Officer and then
submitted for approval to the Audit Committee prior to the beginning of any
service.
Independent Registered Public Accounting Firms' Fees
The following table sets forth the fees billed to the Company for the years
ended December 31, 2005 and 2004 for professional services rendered by the
Company's independent registered public accountants, KPMG LLP:
2005 2004(e)
---- -------
Audit Fees (a)...........................$808,000.........$1,020,000
Audit-Related Fees (b)...................$..50,000........$..216,200
Tax Fees (c) ............................$ 66,000 $ 151,500
All Other Fees (d).......................$..40,000........$ 0
------------------
(a) Audit-fees for 2005 consisted of fees for the audit of the Company's
consolidated financial statements, including quarterly review services in
accordance with SAS No. 100, fees with respect to the audit of Internal
Control over Financial Reporting for the Company, and review of SEC
reporting matters for the Company. Audit fees for 2004 include GSE. See (e)
below.
(b) Audit-related fees consisted of the audit of the financial statement of
employee benefit plans and statutory audit services for subsidiaries of GPC
in 2005 and 2004, and accounting research for the Company in 2004.
(c) Includes fees for tax compliance services and research.
(d) Other fees paid to KPMG for 2005 consisted of a SAS 70 Readiness Assessment
on the Company's Business Process Outsourcing ("BPO") services. There were
no other fees paid to KPMG for 2004 that do not fall into any other
specified categories.
(e) The amounts for 2004 include fees for GSE, which was a majority-owned
subsidiary of the Company from October 23, 2003 to September 30, 2005. For
2004, audit fees attributable to GSE were $140,000, audit-related fees
attributable to GSE were $38,000 and tax fees attributable to GSE were
$5,000.
7
Directors Compensation
During 2005, Directors who were not employees of the Company or its
subsidiaries received an annual fee of $10,000, payable quarterly. At the option
of the Director, up to one half of the annual fee could be paid in Common Stock.
In addition, the Directors received $1,500 for each meeting of the Board of
Directors attended and generally did not receive any additional compensation for
service on the Committees of the Board of Directors except as disclosed herein.
In 2005, Marshall S. Geller, Richard C. Pfenniger, Jr. and Ogden R. Reid
received $25,000, $15,000 and $15,000, respectively, for serving on a Special
Committee of the Board of Directors in connection with the repurchases and
exchange transactions described in "Certain Transactions - Share Repurchases and
Exchanges." Employees of the Company or its subsidiaries do not receive
additional compensation for serving as Directors.
Effective July 1, 2006, each non-employee Director receives an annual
retainer of $25,000. At the option of the Directors, up to one-half of the
annual retainer may be paid in shares of Common Stock. The Non-Executive
Chairman of the Board receives a fee of $40,000, in addition to the non-employee
Director annual retainer of $25,000. The Chairman of the Audit Committee
receives an annual retainer of $15,000 in addition to the non-employee Director
annual retainer of $25,000. Members of the Audit Committee receive a fee of
$5,000 in addition to the non-employee Director annual retainer of $25,000. The
Chairman of the Compensation Committee receives an annual retainer of $5,000 in
addition to the non-employee Director annual retainer of $25,000. Members of the
Compensation Committee receive a fee of $2,500 in addition to the non-employee
Director annual retainer of $25,000. Each non-employee Director receives
compensation of $1,500 for each Board meeting attended and $750 for each
Committee meeting, provided however that the Committee meeting does not occur on
the same day as a Board meeting.
8
Executive Compensation
The following table and notes present the compensation paid by the Company
and subsidiaries to its Chief Executive Officer and the Company's other named
executive officers.
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------------- ------------------------------
-------------- -- --------------- --------------- - ------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Awards Options Compensation
Name and Principal Position Year ------------- ($) ($) (#) ($)
($)
------------------------------ ---------- --------------- --------------- ------------ ----------------
------------------------------ ---------- --------------- --------------- ------------ ----------------
Scott N. Greenberg 2005 288,852 100,000(1) -- -- 9,003(2)
Chief Executive Officer 2004 289,296 350,000(3) 296,100(4) -- 8,491(5)
2003 285,500 75,000(6) -- -- 24,584(7)
Douglas E. Sharp 2005 363,041 85,000(1) -- -- 7,281(8)
President 2004 347,517 50,000(9) 239,700(10) -- 6,718(11)
2003 317,725 -- -- -- 5,384(12)
Andrea D. Kantor 2005 235,932 50,000(13) 150,700(14) 8,773(15)
Executive Vice President 2004 221,557 50,000(3) -- -- 8,170(16)
and General Counsel 2003 218,490 -- -- -- 7,220(17)
Sharon Esposito-Mayer 2005 174,668 75,000(13) 173,305(18) -- 6,437(19)
Executive Vice President 2004 152,588 50,000(3) -- -- 5,242(20)
and Chief Financial 2003 132,989 25,000(21) -- -- 40,568(22)
Officer
Jerome I. Feldman 2005 102,708(24) -- -- -- 39,824(25)
Chairman of the 2004 504,950 2,000,000(26) -- -- 199,322(27)
Executive Committee(23) 2003 508,583 3,000,000(26) -- -- 73,271(28)
-----------------------
(1) Bonus for 2005 pursuant to employment agreement.
(2) Includes a $7,000 matching contribution to the GP Plan and $2,003 for
life insurance premiums.
(3) Discretionary bonus for 2004.
(4) Represents the value of restricted stock based on the closing market
price of the Common Stock on the date of grant, March 23, 2005 (the
expense was accrued in 2004). Restricted stock was fully vested on the
date of grant but contains a restriction on sale until December 31,
2007. Dividends, if any, are paid on the restricted stock. At December
31, 2005, Mr. Greenberg held 42,000 shares of restricted stock with a
market value of $342,720.
(5) Includes a $6,500 matching contribution to the GP Plan and $1,991 for
life insurance premiums.
(6) Bonus for 2003 pursuant to employment agreement.
(7) Includes a $6,056 matching contribution to the GP Plan and $1,278 for
life insurance premiums. Also includes $17,250 paid to Mr. Greenberg
during the year ended December 31, 2003 by GSE as compensation for
serving as a Director of GSE. GSE was a majority-owned subsidiary of
the Company from October 23, 2003 to September 30, 2005.
(8) Includes a $4,978 matching contribution to the GP Plan and $2,303 for
life insurance premiums.
(9) Bonus for 2004 pursuant to employment agreement.
9
(10) Represents the value of restricted stock based on the closing market
price of the Common Stock on the date of grant, March 23, 2005 (the
expense was accrued in 2004). Restricted stock was fully vested on the
date of grant but contains a restriction on sale until December 31,
2007. Dividends, if any, are paid on the restricted stock. At December
31, 2005, Mr. Sharp held 34,000 shares of restricted stock with a value
of $277,440.
(11) Includes a $4,570 matching contribution to the GP Plan and $2,148 for
life insurance premiums.
(12) Includes a $4,271 matching contribution to the GP Plan and $1,113 for
life insurance premiums.
(13) Discretionary bonus for 2005.
(14) Represents the value of restricted stock units based on the closing
market price of the Common Stock on the date of grant, April 11, 2005.
Restricted stock units vested 50% on December 31, 2005 and will vest
50% on December 31, 2006. Vesting accelerates upon a change of control
or the sale of the Company. At the time of vesting, restricted stock
units are settled in shares of Common Stock, and dividends, if any, are
not paid on the restricted stock units until shares of Common Stock are
issued. At December 31, 2005, Ms. Kantor held 10,000 non-vested
restricted stock units with a value, based on the closing market price
of the underlying Common Stock, of $81,600. This does not include
10,000 shares of Common Stock held by Ms. Kantor on December 31, 2005
with a value of $81,600, representing the settlement of the vested
portion of restricted stock units granted on April 11, 2005.
(15) Includes a $7,000 matching contribution to the GP Plan and $1,773 for
life insurance premiums.
(16) Includes a $6,500 matching contribution to the GP Plan and $1,670 for
life insurance premiums.
(17) Includes a $6,076 matching contribution to the GP Plan and $1,144 for
life insurance premiums.
(18) Represents the value of restricted stock units based on the closing
market price of the Common Stock on the date of grant, April 11, 2005.
Restricted stock units will vest 40% on April 5, 2007 and 20% on each
of April 5, 2008, 2009, and 2010. Vesting accelerates upon a change of
control or the sale of the Company. At the time of vesting, restricted
stock units are settled in shares of Common Stock, and dividends, if
any, are not paid on the restricted stock units until shares of Common
Stock are issued. At December 31, 2005, Ms. Esposito-Mayer held 23,000
non-vested restricted stock units with a value, based on the closing
market price of the underlying Common Stock, of $187,680.
(19) Includes a $5,669 matching contribution to the GP Plan and $768 for
life insurance premiums.
(20) Includes a $4,572 matching contribution to the GP Plan and $670 for
life insurance premiums.
(21) Discretionary bonus for 2003.
(22) Includes a $4,236 matching contribution to the GP Plan, $432 for life
insurance premiums and $35,900 of value realized on the exercise of
options to purchase shares of the Company's Common Stock pursuant to
1973 Non-Qualified Stock Option Plan.
10
(23) On April 26, 2005, Mr. Feldman resigned as Chairman of the Board
and Chief Executive Officer of the Company and became Chairman of the
Executive Committee.
(24) Pursuant to a management services agreement, commencing November 24,
2004, NPDC pays the Company a management fee to cover a portion of the
compensation of certain officers of the Company who provide services to
NPDC, which included reimbursement of approximately 80% of Mr.
Feldman's compensation in 2005. The amount shown in the table is
presented net of such reimbursed amounts. Mr. Feldman's gross salary
for 2005 was $513,541 before reimbursement from NPDC. See Certain
Transactions."
(25) The amount shown in the table is presented net of the amounts
reimbursed by NPDC (see (24) above). Mr. Feldman's gross other
compensation includes a $5,104 matching contribution to the GP Plan and
$194,017 for life insurance premiums, before reimbursement from NPDC.
(26) Bonus earned pursuant to the Incentive Compensation Agreement dated
April 1, 2002, as amended. See "Employment Agreements -Jerome I. Feldman."
(27) Includes a $4,625 matching contribution to the GP Plan and $194,697 for
life insurance premiums.
(28) Includes a $4,404 matching contribution to the GP Plan and $32,867 for
life insurance premiums. Also includes $36,000 paid to Mr. Feldman
during the year ended December 31, 2003 by GSE as compensation for
serving as a Director of GSE. GSE was a majority-owned subsidiary of
the Company from October 23, 2003 to September 30, 2005.
Option Grants in 2005
No options were granted to the named executive officers in 2005.
Aggregate Option Exercises in 2005
And Fiscal Year-End Option Values
The following table and notes contain information concerning the exercise of
stock options under the Plan during 2005 and unexercised options under the Plan
held at the end of 2005 by the named executive officers. Unless otherwise
indicated, options are to purchase shares of Common Stock.
Shares Exercisable/Unexercisable Value of Unexercised
Acquired on Value Options at In-the-Money Options at
Exercise Realized December 31, 2005(#) December 31, 2005($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
Scott N. Greenberg 0 0 119,716 0 577,031 0
Douglas E. Sharp 0 0 130,942 17,958 426,785 80,452
Andrea D. Kantor 0 0 59,858 0 288,516 0
Sharon Esposito-Mayer 0 0 26,697 5,986 111,397 26,817
Jerome I. Feldman 0 0 119,716 0 577,031 0
-----------------
(1) Calculated based on $8.16, which was the closing price of the Common Stock
as reported by the NYSE on December 30, 2005.
In addition, Scott N. Greenberg, Andrea D. Kantor and Sharon Esposito-Mayer
realized value of $221,029, $19,893 and $1,906, respectively, upon the exercise
11
in 2005 of the remaining options to purchase shares of Millennium Cell, LLC
Common Stock, a former affiliated company, granted under the terms of the GP
Strategies Millennium Cell, LLC Stock Option Plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for administering the
compensation program for the executive officers of the Company. In fiscal 2005,
the Compensation Committee consisted of Harvey P. Eisen and Marshall S. Geller
and in 2006 Richard C. Pfenniger, Jr. joined the Committee.
The Compensation Committee's executive compensation policies are designed to
offer competitive compensation opportunities for all executives which are based
on personal performance, individual initiative, and achievement, as well as
assisting the Company in attracting and retaining qualified executives. The
Compensation Committee also endorses the position that stock ownership by
management and stock-based compensation arrangements are beneficial in aligning
management's and stockholders' interests in the enhancement of stockholder
value.
Compensation paid to the Company's executive officers generally consists of
the following elements: base salary, annual bonus, and long-term compensation in
the form of incentive stock options, non-qualified stock options, restricted
stock, stock units, performance shares, performance units and other incentives
payable in cash or in shares of the Company's Common Stock. The compensation for
the executive officers of the Company is determined by a consideration of each
officer's initiative and contribution to overall corporate performance and the
officer's managerial abilities and performance in any special projects that the
officer may have undertaken. Competitive base salaries that reflect the
individual's level of responsibility are important elements of the Company's
executive compensation philosophy. Subjective considerations of individual
performance are considered by the Compensation Committee in establishing annual
bonuses and other incentive compensation.
The Company has certain broad-based employee benefit plans in which all
employees, including the named executives, are permitted to participate on the
same terms and conditions relating to eligibility and subject to the same
limitations on amounts that may be contributed. In 2005, the Company also made
matching contributions to the GP Plan for those participants.
Mr. Greenberg's 2005 Compensation
Mr. Greenberg's compensation in 2005 was determined principally by the terms
of his employment agreement with the Company, which was negotiated with the
Compensation Committee. In addition, Mr. Greenberg received a performance bonus
of $100,000 payable in 2006 for 2005 pursuant to the terms of his employment
agreement with the Company based upon the percentage increase in GPC's EBITDA
from GPC's EBITDA for the prior year. See "Employment Agreements-Scott
Greenberg."
Effective June 1, 1999, the Company and Mr. Greenberg entered into an
employment agreement, pursuant to which Mr. Greenberg was employed as the
Executive Vice President of the Company. Effective June 12, 2001, Mr. Greenberg
was elected President of the Company, and effective April 26, 2005, Mr.
Greenberg was elected Chief Executive Officer. Mr. Geenberg's employment
agreement was extended through June 30, 2008, as described below.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act or the Securities Exchange Act that
might incorporate future filings made by the Company under those statutes, in
whole or in part, this report shall not be deemed to be incorporated by
reference into any such filings, nor will this report be incorporated by
reference into any future filings made by the Company under those statutes.
Harvey P. Eisen and Marshall S. Geller
12
Employment Agreements
Scott N. Greenberg. As of July 1, 1999, Scott N. Greenberg and the Company
entered into an employment agreement pursuant to which Mr. Greenberg was
employed as the Executive Vice President of the Company. Effective June 12,
2001, Mr. Greenberg was elected President of the Company, and effective April
26, 2005, Mr. Greenberg was elected Chief Executive Officer. Unless sooner
terminated pursuant to its terms, the employment agreement terminated on June
30, 2004, provided that if the employment agreement was not terminated prior to
June 30, 2002, the employment agreement would have been extended on June 30,
2002 to June 30, 2005. On April 1, 2002, the Compensation Committee amended Mr.
Greenberg's employment agreement, which amendment was ratified unanimously by
the Board of Directors on May 3, 2002, with Mr. Greenberg abstaining, to provide
that the employment agreement now terminates on June 30, 2007, provided that if
the employment agreement was not terminated prior to June 30, 2005, the
employment agreement was extended on June 30, 2005 to June 30, 2008. On January
21, 2005, the Compensation Committee amended Mr. Greenberg's employment
agreement to provide that the employment agreement now terminates on June 30,
2008.
Commencing July 1, 1999, Mr. Greenberg's base annual salary was $250,000,
with annual increases to be determined by the Board of Directors of not less
than the greater of (i) 3% and (ii) the percentage increase in the Consumer
Price Index. The Company agreed to pay Mr. Greenberg a signing bonus in 1999 of
$300,000, which Mr. Greenberg waived. Mr. Greenberg is entitled to an annual
bonus based upon the percentage increase in GPC's earnings before interest,
taxes, depreciation and amortization, excluding extraordinary or unusual
nonrecurring items of income and expense ("EBITDA"), from GPC's EBITDA for the
prior year, up to 50% of his base salary. Pursuant to such provision, Mr.
Greenberg received a bonus of $100,000 in 2006 for 2005 and a bonus of $75,000
in 2004 for 2003. Mr. Greenberg received a discretionary bonus of $350,000 in
2005 for 2004 that was in excess of his formula bonus. Pursuant to the
employment agreement entered into in 1999, the Company granted Mr. Greenberg
under the Company's option plan, options to purchase 100,000 shares of the
Company's Common Stock at an exercise price of $8.00 per share, the market price
on the date of grant, which options expired on June 30, 2004. The Company is
required to provide Mr. Greenberg with an automobile and to maintain the
existing life and disability insurance covering Mr. Greenberg.
The Company may terminate the employment agreement for Cause, which is
defined as (i) the willful and continued failure by Mr. Greenberg to
substantially perform his duties or obligations or (ii) the willful engaging by
Mr. Greenberg in misconduct which is materially monetarily injurious to the
Company. If the employment agreement is terminated for Cause, the Company is
required to pay Mr. Greenberg his full salary through the date his employment is
terminated. If Mr. Greenberg's employment is terminated by his death, the
Company is required to pay to his spouse or estate his full salary for a period
of one year. If, as a result of Mr. Greenberg's incapacity due to physical or
mental illness, he is absent from his duties on a full-time basis for the entire
period of six consecutive months, and he does not return within 30 days of
notice, the Company may terminate his employment. Mr. Greenberg is entitled to
receive his full salary during the disability period until his employment is
terminated.
Mr. Greenberg can terminate the employment agreement for Good Reason, which
is defined to include (i) a change in control of the Company, (ii) a management
change in control of the Company, or (iii) a failure by the Company to comply
with any material provision of the employment agreement which has not been cured
within ten days after notice. A "change in control" of the Company is defined as
any of the following, but only if not approved by the Board of Directors, (i) a
change in control of a nature that would be required to be reported in response
to Item 1(a) of Form 8-K, other than a change of control resulting in control by
Mr. Feldman or Mr. Greenberg or a group including Mr. Feldman or Mr. Greenberg,
(ii) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than Mr. Feldman or Mr. Greenberg or a group including Mr.
Feldman or Mr. Greenberg, is or becomes the "beneficial owner" (as defined in
13
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities, (iii) the Company and its affiliates owning less
than a majority of the voting stock of GPC, (iv) the sale of all or
substantially all of the assets of GPC, or (v) at any time when there has not
been a management change of control of the Company, individuals who were either
nominated for election or elected by the Board of Directors of the Company cease
for any reason to constitute at least a majority of the Board. A "management
change in control" of the Company is defined as (i) an event that would have
constituted a change of control of the Company if it had not been approved by
the Board of Directors or (ii) a change in control of the Company of a nature
that would be required to be reported in response to Item 1(a) of Form 8-K,
resulting in control by a buy-out group including Mr. Feldman but not Mr.
Greenberg.
If the Company wrongfully terminates the employment agreement or Mr.
Greenberg terminates the employment agreement for Good Reason (other than as a
result of a management change of control), (i) the Company is required to pay
Mr. Greenberg his full salary and provide him his benefits through the
termination date, and pay him his full annual bonus for the calendar year in
which termination occurs; (ii) the Company is required to pay as severance pay
to Mr. Greenberg an amount equal to (a) Mr. Greenberg's average annual cash
compensation received from the Company during the three full calendar years
immediately preceding the termination date, multiplied by (b) the greater of (I)
the number of years (including partial years) that would have been remaining in
the employment period if the employment agreement had not so terminated but was
not subsequently extended and (II) three, such payment to be made (c) if
termination is based on a change of control of the Company, in a lump sum or (d)
if termination results from any other cause, in substantially equal semimonthly
installments payable over the number of years (including partial years) that
would have been remaining in the employment period if the employment agreement
had not so terminated but was not subsequently extended; (iii) all options to
purchase the Company's Common Stock granted to Mr. Greenberg under the Company's
option plan or otherwise immediately become fully vested and terminate on such
date as they would have terminated if Mr. Greenberg's employment by the Company
had not terminated and, if Mr. Greenberg's termination is based on a change of
control of the Company and Mr. Greenberg elects to surrender any or all of such
options to the Company, the Company is required to pay Mr. Greenberg a lump sum
cash payment equal to the excess of (a) the fair market value on the termination
date of the securities issuable upon exercise of the options surrendered over
(b) the aggregate exercise price of the options surrendered; (iv) the Company is
required to maintain in full force and effect, for a number of years equal to
the greater of (a) the number of years (including partial years) that would have
been remaining in the employment period if the employment agreement had not so
terminated but was not subsequently extended and (b) three, all employee benefit
plans and programs in which Mr. Greenberg was entitled to participate
immediately prior to the termination date; and (v) if termination of the
employment agreement arises out of a breach by the Company, the Company is
required to pay all other damages to which Mr. Greenberg may be entitled as a
result of such breach.
If Mr. Greenberg terminates the employment agreement for Good Reason as a
result of a management change of control, (i) the Company is required to pay Mr.
Greenberg his full salary and provide him his benefits through the termination
date, and pay him his full annual bonus for the calendar year in which
termination occurs; (ii) the Company is required to pay as severance pay to Mr.
Greenberg a lump sum amount equal to twice Mr. Greenberg's average annual cash
compensation received from the Company during the three full calendar years
immediately preceding the termination date; (iii) all options to purchase the
Company's Common Stock granted to Mr. Greenberg under the Company's option plan
or otherwise immediately become fully vested and terminate on such date as they
would have terminated if Mr. Greenberg's employment by the Company had not
terminated and, if Mr. Greenberg elects to surrender any or all of such options
to the Company, the Company is required to pay Mr. Greenberg a lump sum cash
payment equal to the excess of (a) the fair market value on the termination date
of the securities issuable upon exercise of the options surrendered over (b) the
14
aggregate exercise price of the options surrendered; and (iv) the Company is
required to maintain in full force and effect for two years all employee benefit
plans and programs in which Mr. Greenberg was entitled to participate
immediately prior to the termination date.
Notwithstanding the foregoing, the Company shall not be obligated to pay any
portion of any amount otherwise payable to Mr. Greenberg if the Company could
not reasonably deduct such portion solely by operation of Section 280G.
Douglas E. Sharp. As of July 1, 1999, Douglas E. Sharp and GPC entered into
an employment agreement pursuant to which Mr. Sharp was employed as Group
President of GPC. Mr. Sharp was elected President of GPC on September 4, 2002.
Unless sooner terminated pursuant to its terms, the employment agreement
terminated on June 30, 2004, provided however, that since the employment
agreement was not terminated prior to June 30, 2002, the employment agreement
provided that it was extended on June 30, 2002 to June 30, 2005. On January 21,
2005, the Compensation Committee amended the employment agreement, to provide
that the employment agreement now terminates on June 30, 2008.
Commencing July 1, 1999, Mr. Sharp's base annual salary was $230,000, with
annual increases to be determined by the Board of Directors of GPC of not less
than 3%. GPC paid Mr. Sharp a signing bonus in 1999 of $300,000. Mr. Sharp is
entitled to an annual bonus based upon the percentage increase in GPC's EBITDA
from GPC's EBITDA for the prior year, up to 50% of his base salary. Pursuant to
such provision, Mr. Sharp received a bonus of $85,000 in 2006 for 2005 and
$50,000 in 2005 for 2004. Pursuant to the employment agreement entered into in
1999, the Company granted Mr. Sharp under the Company's option plan, options to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$8.00 per share, the market price on the date of grant, which options expired on
June 30, 2004. GPC is required to provide Mr. Sharp with an automobile.
GPC may terminate the employment agreement for Cause, which is defined as
(i) the willful and continued failure by Mr. Sharp to substantially perform his
duties or obligations or (ii) the willful engaging by Mr. Sharp in misconduct
which is materially monetarily injurious to GPC. If the employment agreement is
terminated for Cause, GPC is required to pay Mr. Sharp his full salary through
the date his employment is terminated. If Mr. Sharp's employment is terminated
by his death, GPC is required to pay to his spouse or estate his full salary for
a period of one year. If, as a result of Mr. Sharp's incapacity due to physical
or mental illness, he is absent from his duties on a full-time basis for the
entire period of six consecutive months, and he does not return within 30 days
of notice, GPC may terminate his employment. Mr. Sharp is entitled to receive
his full salary during the disability period until his employment is terminated.
Mr. Sharp can terminate the employment agreement for Good Reason, which is
defined to include (i) a change in control of the Company, (ii) a management
change in control of the Company, or (ii) a failure by GPC to comply with any
material provision of the employment agreement which has not been cured within
ten days after notice. A "change in control" of the Company is defined as any of
the following, but only if not approved by the Board of Directors, (i) a change
in control of a nature that would be required to be reported in response to Item
1(a) of Form 8-K, other than a change of control resulting in control by Mr.
Feldman or a group including Mr. Feldman (ii) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than Mr. Feldman or a
group including Mr. Feldman, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities, (iii) the Company and its affiliates owning less
than a majority of the voting stock of GPC, (iv) the sale of all or
substantially all of the assets of the Company, or (v) at any time when there
has not been a management change of control of the Company, individuals who were
either nominated for election or elected by the Board of Directors of the
Company cease for any reason to constitute at least a majority of the Board. A
"management change in control" of the Company is defined as (i) an event that
would have constituted a change of control of the Company if it had not been
approved by the Board of Directors or (ii) a change in control of the Company of
a nature that would be required to be reported in response to Item 1(a) of Form
8-K, resulting in control by a buy-out group including Mr. Feldman.
15
If GPC wrongfully terminates the employment agreement or Mr. Sharp
terminates the employment agreement for Good Reason, (i) GPC is required to pay
Mr. Sharp his full salary and provide him his benefits through the termination
date, and pay him his full annual bonus for the calendar year in which
termination occurs; (ii) GPC is required to pay as severance pay to Mr. Sharp an
amount equal to (a) Mr. Sharp's average annual cash compensation received from
GPC during the three full calendar years immediately preceding the termination
date, multiplied by (b) the greater of (I) the number of years (including
partial years) that would have been remaining in the employment period if the
employment agreement had not so terminated but was not subsequently extended and
(II) three, such payment to be made (c) if termination is based on a change of
control of the Company, in a lump sum or (d) if termination results from any
other cause, in substantially equal semimonthly installments payable over the
number of years (including partial years) that would have been remaining in the
employment period if the employment agreement had not so terminated but was not
subsequently extended; (iii) all options to purchase the Company's Common Stock
granted to Mr. Sharp under the Company's option plan or otherwise immediately
become fully vested and terminate on such date as they would have terminated if
Mr. Sharp's employment by GPC had not terminated and, if Mr. Sharp's termination
is based on a change of control of the Company and Mr. Sharp elects to surrender
any or all of such options to GPC, GPC is required to pay Mr. Sharp a lump sum
cash payment equal to the excess of (a) the fair market value on the termination
date of the securities issuable upon exercise of the options surrendered over
(b) the aggregate exercise price of the options surrendered; (iv) GPC is
required to maintain in full force and effect, for a number of years equal to
the greater of (a) the number of years (including partial years) that would have
been remaining in the employment period if the employment agreement had not so
terminated but was not subsequently extended and (b) three, all employee benefit
plans and programs in which Mr. Sharp was entitled to participate immediately
prior to the termination date; and (v) if termination of the employment
agreement arises out of a breach by GPC, GPC is required to pay all other
damages to which Mr. Sharp may be entitled as a result of such breach.
Notwithstanding the foregoing, GPC shall not be obligated to pay any portion
of any amount otherwise payable to Mr. Sharp if GPC could not reasonably deduct
such portion solely by operation of Section 280G.
The Company guaranteed the performance by GPC of its obligations under Mr.
Sharp's employment agreement.
Andrea D. Kantor. As of May 1, 2001, Andrea D. Kantor and the Company
entered into an employment agreement pursuant to which Ms. Kantor was employed
as the Vice President and General Counsel of the Company. Unless sooner
terminated pursuant to its terms, the employment agreement terminated on June
30, 2004, provided however, that since the employment agreement was not
terminated prior to June 30, 2002, the employment agreement provided that it was
extended on June 30, 2002 to June 30, 2005. On January 21, 2005, the
Compensation Committee amended Ms. Kantor's employment agreement, to provide
that the employment agreement now terminates on June 30, 2007.
Commencing May 1, 2001, Ms. Kantor's base annual salary was $190,000, with
annual increases to be determined by the Board of Directors of not less than the
greater of (i) 3% and (ii) the percentage increase in the Consumer Price Index.
Ms. Kantor is entitled to an annual bonus, as determined by the Board based upon
the Company's revenues, profits or losses, financing activities, and such other
factors deemed relevant by the Board. Ms. Kantor received a discretionary bonus
of $50,000 in 2006 for 2005 and $50,000 in 2005 for 2004. The Company is
required to provide Ms. Kantor with an automobile and to maintain the existing
life and disability insurance covering Ms. Kantor.
The Company may terminate the employment agreement for Cause, which is
defined as (i) the willful and continued failure by Ms. Kantor to substantially
perform her duties or obligations or (ii) the willful engaging by Ms. Kantor in
misconduct which is materially monetarily injurious to the Company. If the
employment agreement is terminated for Cause, the Company is required to pay Ms.
Kantor her full salary through the date her employment is terminated. If Ms.
16
Kantor's employment is terminated by her death, the Company is required to pay
to her spouse or estate her full salary for a period of one year. If, as a
result of Ms. Kantor's incapacity due to physical or mental illness, she is
absent from her duties on a full-time basis for the entire period of six
consecutive months, and she does not return within 30 days of notice, the
Company may terminate her employment. Ms. Kantor is entitled to receive her full
salary during the disability period until her employment is terminated.
Ms. Kantor can terminate the employment agreement for Good Reason, which is
defined to include (i) a change in control of the Company, (ii) a management
change in control of the Company, or (iii) a failure by the Company to comply
with any material provision of the employment agreement which has not been cured
within ten days after notice. A "change in control" of the Company is defined as
any of the following, but only if not approved by the Board of Directors, (i) a
change in control of a nature that would be required to be reported in response
to Item 1(a) of Form 8-K, other than a change of control resulting in control by
Mr. Feldman or Mr. Greenberg or a group including Mr. Feldman or Mr. Greenberg,
(ii) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than Mr. Feldman or Mr. Greenberg or a group including Mr.
Feldman or Mr. Greenberg, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities, (iii) the Company and its affiliates owning less
than a majority of the voting stock of GPC, (iv) the sale of all or
substantially all of the assets of GPC, or (v) at any time when there has not
been a management change of control of the Company, individuals who were either
nominated for election or elected by the Board of Directors of the Company cease
for any reason to constitute at least a majority of the Board. A "management
change in control" of the Company is defined as (i) an event that would have
constituted a change of control of the Company if it had not been approved by
the Board of Directors or (ii) a change in control of the Company of a nature
that would be required to be reported in response to Item 1(a) of Form 8-K,
resulting in control by a buy-out group including Mr. Feldman or Mr. Greenberg.
If the Company wrongfully terminates the employment agreement or Ms. Kantor
terminates the employment agreement for Good Reason (other than as a result of a
management change of control), (i) the Company is required to pay Ms. Kantor her
full salary and provide her benefits through the termination date, and pay her
full annual bonus for the calendar year in which termination occurs; (ii) the
Company is required to pay as severance pay to Ms. Kantor an amount equal to (a)
Ms. Kantor's average annual cash compensation received from the Company during
the three full calendar years immediately preceding the termination date,
multiplied by (b) the greater of (I) the number of years (including partial
years) that would have been remaining in the employment period if the employment
agreement had not so terminated but was not subsequently extended and (II)
three, such payment to be made (c) if termination is based on a change of
control of the Company, in a lump sum or (d) if termination results from any
other cause, in substantially equal semimonthly installments payable over the
number of years (including partial years) that would have been remaining in the
employment period if the employment agreement had not so terminated but was not
subsequently extended; (iii) all options to purchase the Company's Common Stock
granted to Ms. Kantor under the Company's option plan or otherwise immediately
become fully vested and terminate on such date as they would have terminated if
Ms. Kantor's employment by the Company had not terminated and, if Ms. Kantor's
termination is based on a change of control of the Company and Ms. Kantor elects
to surrender any or all of such options to the Company, the Company is required
to pay Ms. Kantor a lump sum cash payment equal to the excess of (a) the fair
market value on the termination date of the securities issuable upon exercise of
the options surrendered over (b) the aggregate exercise price of the options
surrendered; (iv) the Company is required to maintain in full force and effect,
for a number of years equal to the greater of (a) the number of years (including
partial years) that would have been remaining in the employment period if the
employment agreement had not so terminated but was not subsequently extended and
(b) three, all employee benefit plans and programs in which Ms. Kantor was
entitled to participate immediately prior to the termination date; and (v) if
termination of the employment agreement arises out of a breach by the Company,
17
the Company is required to pay all other damages to which Ms. Kantor may be
entitled as a result of such breach.
If Ms. Kantor terminates the employment agreement for Good Reason as a
result of a management change of control, (i) the Company is required to pay Ms.
Kantor her full salary and provide her benefits through the termination date,
and pay her full annual bonus for the calendar year in which termination occurs;
(ii) the Company is required to pay as severance pay to Ms. Kantor a lump sum
amount equal to twice Ms. Kantor's average annual cash compensation received
from the Company during the three full calendar years immediately preceding the
termination date; (iii) all options to purchase the Company's Common Stock
granted to Ms. Kantor under the Company's option plan or otherwise immediately
become fully vested and terminate on such date as they would have terminated if
Ms. Kantor's employment by the Company had not terminated and, if Ms. Kantor
elects to surrender any or all of such options to the Company, the Company is
required to pay Ms. Kantor a lump sum cash payment equal to the excess of (a)
the fair market value on the termination date of the securities issuable upon
exercise of the options surrendered over (b) the aggregate exercise price of the
options surrendered; and (iv) the Company is required to maintain in full force
and effect for two years all employee benefit plans and programs in which Ms.
Kantor was entitled to participate immediately prior to the termination date.
Notwithstanding the foregoing, the Company shall not be obligated to pay any
portion of any amount otherwise payable to Ms. Kantor if the Company could not
reasonably deduct such portion solely by operation of Section 280G.
Sharon Esposito-Mayer. As of August 16, 2005, Sharon Esposito-Mayer and GPC
entered into an employment agreement pursuant to which Ms. Esposito-Mayer is
employed as Executive Vice President of GPC. The employment agreement amended
and restated a prior employment agreement between GPC and Ms. Esposito-Mayer
dated as of April 11, 2005. Unless sooner terminated pursuant to its terms, the
employment agreement terminates on July 31, 2007.
Commencing April 11, 2005, Ms. Esposito-Mayer's base annual salary was
$180,000, with annual increases to be determined by the Board of Directors of
not less than the greater of (i) 3% and (ii) the percentage increase in the
Consumer Price Index. GPC is required to provide Ms. Esposito-Mayer with an
automobile and cellular phone and to maintain the existing life and disability
insurance covering Ms. Esposito-Mayer. Ms. Esposito-Mayer received a $75,000
bonus in 2006 for 2005. In addition, Ms. Esposito-Mayer was granted 23,000 Stock
Units of the Company's Common Stock pursuant to the Plan. Upon the occurrence of
a "Change in Control" or a "Sale of the Company" during the term of the
employment agreement, all of Ms. Esposito-Mayer's stock options to purchase the
Company's Common Stock will immediately become fully vested and exercisable and
all of Ms. Esposito-Mayer's stock units will immediately be paid in unrestricted
shares of the Company's Common Stock. For purposes of the employment agreement,
a Change in Control is deemed to have occurred if any person who was not on
March 18, 2005 a "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing 15% of more of the combined voting power
of the Company's outstanding securities becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's outstanding securities and a "Sale of the
Company" is deemed to have occurred if (i) the Company engages in a transaction
or series of transactions (including, without limitation, a merger or
consolidation) with another corporation, partnership, limited liability company,
joint venture, trust or other entity, and the stockholders of the Company
immediately prior to such transaction(s) do not, after such transaction(s), hold
at least 50% of the voting power of the Company or its successor, (ii) the
Company and its affiliates cease to own more than 80% of the voting stock of
GPC, (iii) all or substantially all of the assets of the Company, GPC, or the
business unit of GPC with regard to which Ms. Esposito-Mayer is assigned are
sold, or (iv) the Company's Common Stock is neither listed on a national
securities exchange nor authorized to be quoted in an inter-dealer quotation
system of a registered national securities association.
18
GPC may terminate the employment agreement if (i) Ms. Esposito-Mayer is
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge her duties for a period of 90 consecutive days, (ii) Ms.
Esposito-Mayer is convicted, plead guilty, or enter a plea of nolo contendere to
a felony or a crime involving moral turpitude, (iii) Ms. Esposito-Mayer commits
any act or omit to take any action in bad faith and to the detriment of GPC, or
(iv) Ms. Esposito-Mayer (A) willfully and continually fails to perform her
duties or obligations under any provision of the employment agreement (other
than provisions relating to non-competition, non-solicitation, or protection of
confidential information) in any material respect, and does not correct such
failure within 10 days after receipt of written notice thereof, or (B) fails to
perform her duties or obligations under the provisions of the employment
agreement relating to non-competition, non-solicitation, or protection of
confidential information in any material respect. Upon such termination, GPC is
required to pay Ms. Esposito-Mayer her full salary through the date her
employment is terminated.
Ms. Esposito-Mayer can resign for "Just Cause," which occurs if Ms.
Esposito-Mayer resigns within 30 days following (A) GPC, without the express
written consent of Ms. Esposito-Mayer, (i) imposing any significant change in
Ms. Esposito-Mayer's function, duties, or responsibilities that is not
consistent with Ms. Esposito-Mayer being an executive of GPC and failing to
rescind or modify such change within 10 business days after receipt of written
notice from Ms. Esposito-Mayer, or (ii) failing to make any material payment or
provide any material benefit contemplated under the employment agreement to Ms.
Esposito-Mayer, and failing to correct any such deficiency within 10 business
days after receipt of written notice from Ms. Esposito-Mayer, or (B) GPC
breaching any other term of the employment agreement and not correcting such
failure or breach within 30 days after written notice from Ms. Esposito-Mayer.
If Ms. Esposito-Mayer resigns for Just Cause or GPC wrongfully terminates Ms.
Esposito-Mayer's employment, and Ms. Esposito-Mayer is in full compliance with
her obligations under the provisions of the employment agreement relating to
non-competition, non-solicitation, and protection of confidential information,
then for the period that would have been remaining in the term of the employment
agreement if Ms. Esposito-Mayer had not so resigned or been terminated or for a
period of 6 months after termination (whichever is longer), (1) GPC will
continue to pay Ms. Esposito-Mayer her base annual salary at the rate in effect
on the date of such employment termination, and (2) Ms. Esposito-Mayer will
continue to be eligible to receive such benefits as she would have been entitled
to had her employment not terminated. In addition, in such case, for purposes of
her stock units, Ms. Esposito-Mayer will be deemed to have been employed by GPC
through April 10, 2008. Such benefits will terminate if Ms. Esposito-Mayer does
not remain in compliance with the provisions of the employment agreement
relating to non-competition, non-solicitation, and protection of confidential
information. If Ms. Esposito-Mayer resigns for Just Cause or GPC wrongfully
terminates Ms. Esposito-Mayer's employment, and Ms. Esposito-Mayer is not in
full compliance with her obligations under the provisions of the employment
agreement relating to non-competition, non-solicitation, and protection of
confidential information, then GPC is only required to pay Ms. Esposito-Mayer
her full salary through the date her employment is terminated.
If Ms. Esposito-Mayer's employment is terminated by her death, GPC is
required to pay to her estate her full salary to the end of the calendar month
and for the next two months. In addition, in such case, for purposes of her
stock units, Ms. Esposito-Mayer will be deemed to have been employed by GPC
through July 31, 2007.
If the employment agreement expires on July 31, 2007 and during the period
commencing on August 1, 2007 and ending on April 10, 2008, (i) (A) Ms.
Esposito-Mayer resigns within 30 days following GPC's, without the express
written consent of Ms. Esposito-Mayer, (I) imposing any significant change in
Ms. Esposito-Mayer's function, duties, or responsibilities that is not
consistent with Ms. Esposito-Mayer being an executive of GPC and failing to
rescind or modify such change within 10 business days after receipt of written
notice from Ms. Esposito-Mayer, or (II) materially reducing Ms. Esposito-Mayer's
compensation or benefits from those provided under the employment agreement, and
failing to rescind such reduction within 10 business days after receipt of
19
written notice from Ms. Esposito-Mayer, or (B) GPC terminates Ms.
Esposito-Mayer's employment for reasons other than (I) Ms. Esposito-Mayer's
physical or mental incapacity or disability or other inability to fully to
discharge her duties for a period of 90 consecutive days, (II) Ms.
Esposito-Mayer is convicted, plead guilty, or enter a plea of nolo contendere to
a felony or a crime involving moral turpitude, (III) Ms. Esposito-Mayer commits
any act or omit to take any action in bad faith and to the detriment of GPC, or
(IV) Ms. Esposito-Mayer fails to perform her duties or obligations to GPC and
does not corrects such failure or breach within 10 days after receipt of written
notice thereof and (ii) Ms. Esposito-Mayer is in full compliance with her
obligations under the provisions of the employment agreement relating to
non-competition, non-solicitation, and protection of confidential information,
then, for purposes of her stock units, Ms. Esposito-Mayer will be deemed to have
been employed by GPC through April 10, 2008. Such benefits will terminate if Ms.
Esposito-Mayer does not remain in compliance with the provisions of the
employment agreement relating to non-competition, non-solicitation, and
protection of confidential information.
Jerome I. Feldman. As of June 1, 1999, Jerome I. Feldman and the Company
entered into an employment agreement pursuant to which Mr. Feldman was employed
as President and Chief Executive Officer of the Company until May 31, 2004,
unless sooner terminated. Effective June 12, 2001, Mr. Feldman resigned as
President of the Company and Scott N. Greenberg was elected to that office. On
April 1, 2002, the Compensation Committee extended Mr. Feldman's Employment
Agreement until May 31, 2007, which extension was ratified unanimously by the
Board of Directors on May 3, 2002, with Mr. Feldman abstaining. Effective April
26, 2005, Mr. Feldman was appointed Chairman of the Executive Committee and
Scott Greenberg was elected Chief Executive Officer. Pursuant to a management
services agreement, commencing November 24, 2004, NPDC pays the Company a
management fee to cover a portion of the compensation of certain officers of the
Company who provide services to NPDC, which includes reimbursement of
approximately 80% of Mr. Feldman's compensation. See "Certain Transactions."
Commencing June 1, 1999, Mr. Feldman's base annual salary was $400,000, with
annual increases of $25,000. The Company and Mr. Feldman also agreed to
negotiate in good faith to formulate an annual incentive based compensation
arrangement based on the Company's achieving certain financial milestones which
were fair and equitable to Mr. Feldman and the Company and its stockholders.
Pursuant to such provision, the Compensation Committee approved an Incentive
Compensation Agreement (the "Incentive Agreement") with Mr. Feldman on April 1,
2002, which Incentive Agreement was ratified unanimously by the Board of
Directors on May 3, 2002, with Mr. Feldman abstaining.
Pursuant to the Incentive Agreement, Mr. Feldman, was eligible to receive
from the Company up to five payments in an amount of $1 million each, based on
the closing price of the Company's Common Stock sustaining or averaging
increasing specified levels over periods of at least 10 consecutive trading
days. On each of June 11, 2003, July 23, 2003, December 22, 2003, November 3,
2004 and December 10, 2004, Mr. Feldman earned an incentive payment of $1
million. To the extent there were any outstanding loans from the Company to Mr.
Feldman at the time an incentive payment was payable, the Company had the right
to set-off the payment of such incentive payment first against the outstanding
accrued interest under such loans and next against any outstanding principal.
Each incentive payment was payable on the date earned, except that any
incentive payment earned prior to December 31, 2003 is payable on the Company's
last payroll date in December. On October 1, 2003, the Incentive Agreement was
amended to allow Mr. Feldman to defer receipt of any incentive payment for a
period of at least six months. The deferral period will automatically renew
unless Mr. Feldman gives a termination notice at least 30 days prior to the
expiration of the deferral period. However, no deferral period may end later
than May 31, 2007. A deferral notice with respect to any incentive payment
earned prior to December 31, 2003 was required to be given prior to December 1,
2003 (which deferral notice was timely given by Mr. Feldman) and a deferral
notice with respect to any incentive payment earned on or after December 31,
2003 was required to be given at least five business days prior to the date that
20
such incentive payment was earned (which deferral notice was timely given by Mr.
Feldman). Pursuant to such deferral provisions, all five incentive payments are
payable in January 2007, unless further deferred. A deferral notice cannot be
given, and any deferral period will end, if any outstanding loan from the
Company to Mr. Feldman is due and payable and is not otherwise paid. Interest
accrues on each deferred amount at the prime rate minus 1%, which is 1% less
than the interest rate accrued on the Company's outstanding loans to Mr.
Feldman.
Although any set-off of the payments earned on June 11, 2003, July 23, 2003,
December 22, 2003, November 3, 2004 and December 10, 2004 will take place in
future periods when such amounts are payable, for accounting purposes, the
set-offs will be deemed to have occurred on the dates earned since the Company
possesses the right of set-off under the Incentive Agreement. As a result, for
accounting purposes only, the Company applied the first $1 million earned by Mr.
Feldman against $1 million of accrued interest, the second $1 million against
$163,000 of accrued interest and $837,000 of principal, the third $1 million
against $64,000 of accrued interest and $936,000 of principal, the fourth $1
million against $86,000 of accrued interest and $914,000 of principal, and the
fifth million against $67,000 of accrued interest and $933,000 of principal,
which resulted in the outstanding principal balance of the note being reduced,
for accounting purposes only, to approximately $619,000 as of December 31, 2004
and December 31, 2005. On January 19, 2006, Mr. Feldman repaid approximately
$496,000 of the principal balance of the note.
Pursuant to the employment agreement entered into in 1999, the Company
granted Mr. Feldman under the Company's option plan, options to purchase 100,000
shares of the Company's Common Stock at an exercise price of $8.00 per share,
which options expired on May 31, 2004. The Company is required to provide Mr.
Feldman with an automobile, to pay for country club dues, which membership is to
be used primarily to further the Company's business, and to maintain the
existing life and disability insurance covering Mr. Feldman. The maturity date
of the Company's presently outstanding loans to Mr. Feldman was extended to May
31, 2007, and all contractual restrictions imposed by the Company on the
disposition by Mr. Feldman of shares of Class B Stock were terminated. On April
1, 2002, the Compensation Committee amended the Employment Agreement to extend
the maturity date of such loans to May 31, 2007, which amendment was ratified
unanimously by the Board of Directors on May 3, 2002, with Mr. Feldman
abstaining.
The Company may terminate the employment agreement for Cause, which is
defined as (i) the willful and continued failure by Mr. Feldman to substantially
perform his duties or obligations or (ii) the willful engaging by Mr. Feldman in
misconduct which is materially monetarily injurious to the Company. If the
employment agreement is terminated for Cause, the Company is required to pay Mr.
Feldman his full salary through the date his employment is terminated. If Mr.
Feldman's employment is terminated by his death, the Company is required to pay
to his heirs, in a lump sum, an amount equal to his full salary for the period
ending May 31, 2007. If, as a result of Mr. Feldman's incapacity due to physical
or mental illness, he is absent from his duties on a full-time basis for the
entire period of six consecutive months, and he does not return within 30 days
of notice, the Company may terminate his employment. Mr. Feldman is entitled to
receive his full salary during the disability period until his employment is
terminated.
Mr. Feldman can terminate the employment agreement for Good Reason, which is
defined to include (i) a change in control of the Company or (ii) a failure by
the Company to comply with any material provision of the employment agreement
which has not been cured within ten days after notice. A "change in control" of
the Company is defined as (i) a change in control of a nature that would be
required to be reported in response to Item 1(a) of Current Report on Form 8-K
("Form 8-K") pursuant to Section 13 or 15(d) of the Exchange Act, other than a
change of control resulting in control by Mr. Feldman or a group including Mr.
Feldman, (ii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than Mr. Feldman or a group including Mr. Feldman, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
21
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities,
or (iii) at any time individuals who were either nominated for election or
elected by the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board. Mr. Feldman has agreed that he will
not seek to terminate the employment agreement for Good Reason as a result of no
longer serving as President and Chief Executive Officer of the Company or being
assigned his present duties.
If the Company wrongfully terminates the employment agreement or Mr. Feldman
terminates the employment agreement for Good Reason, then (i) the Company is
required to pay Mr. Feldman his full salary through the termination date; (ii)
the Company is required to pay as severance pay to Mr. Feldman an amount equal
to (a) Mr. Feldman's average annual cash compensation received from the Company
during the three full calendar years immediately preceding the termination date,
multiplied by (b) the greater of (i) the number of years (including partial
years) that would have been remaining in the employment period if the employment
agreement had not so terminated and (ii) three, such payment to be made (c) if
termination is based on a change of control of the Company, in a lump sum or (d)
if termination results from any other cause, in substantially equal semimonthly
installments payable over the number of years (including partial years) that
would have been remaining in the employment period if the employment agreement
had not so terminated; (iii) all options to purchase the Company's Common Stock
granted to Mr. Feldman under the Company's option plan or otherwise immediately
become fully vested and terminate on such date as they would have terminated if
Mr. Feldman's employment by the Company had not terminated and, if Mr. Feldman's
termination is based on a change of control of the Company and Mr. Feldman
elects to surrender any or all of such options to the Company, the Company is
required to pay Mr. Feldman a lump sum cash payment equal to the excess of (a)
the fair market value on the termination date of the securities issuable upon
exercise of the options surrendered over (b) the aggregate exercise price of the
options surrendered; (iv) the Company is required to maintain in full force and
effect, for a number of years equal to the greater of (a) the number of years
(including partial years) that would have been remaining in the employment
period if the employment agreement had not so terminated and (b) three, all
employee benefit plans and programs in which Mr. Feldman was entitled to
participate immediately prior to the termination date; and (v) if termination of
the employment agreement arises out of a breach by the Company, the Company is
required to pay all other damages to which Mr. Feldman may be entitled as a
result of such breach.
Notwithstanding the foregoing, the Company shall not be obligated to pay any
portion of any amount otherwise payable to Mr. Feldman if the Company could not
reasonably deduct such portion solely by operation of Section 280G ("Section
280G") of the Internal Revenue Code of 1986, as amended.
Certain Transactions
Share Repurchases and Exchanges
On January 19, 2006, the Company purchased from (i) EGI-Fund (02-04)
Investors, L.L.C. ("EGI") 1,090,000 shares of the Company's Common Stock for a
price per share equal to $6.80 and 300,000 shares of the Company's Class B Stock
for a price per share equal to $8.30 (the aggregate purchase price paid by the
Company to EGI was $9,902,000) and (ii) Bedford Oak 1,031,500 shares of the
Company's Common Stock for a price per share equal to $6.80 and 300,000 shares
of the Company's Class B Stock for a price per share equal to $8.30 (the
aggregate purchase price paid by the Company to Bedford Oak was $9,504,200).
Simultaneously with such purchases, Jerome I. Feldman agreed with the Company to
exchange 568,750 shares of the Company's Class B Stock for Common Stock, at a
rate of one share of Class B Stock for one share of Common Stock, for a price of
$1.50 per share exchanged (the aggregate price paid by the Company to Mr.
Feldman was $853,125, which Mr. Feldman applied toward repayment of indebtedness
owed by him to the Company).
Harvey Eisen, the Non-Executive Chairman of the Board of the Company, is
22
deemed to have beneficial ownership of the shares owned by Bedford Oak by virtue
of his position as managing member of Bedford Oak Advisors, LLC, the investment
manager of Bedford Oak. EGI had designated Matthew Zell as a Director of the
Company. Mr. Zell resigned from the Board of Directors of the Company
simultaneously with such repurchase. Mr. Feldman is the Chairman of the
Executive Committee of the Company and the former Chairman of the Board and
Chief Executive Officer of the Company. The repurchase and exchange transactions
were negotiated and approved by a Special Committee of the Board of Directors.
Loans
The Company has made loans to Mr. Feldman, who primarily utilized the
proceeds of such loans to exercise options to purchase Class B Stock. Such loans
bear interest at the prime rate of Fleet Bank and were secured by the purchased
Class B Stock and certain other assets. The largest aggregate amount of
indebtedness (including principal and accrued interest) outstanding from January
1, 2005 through March 31, 2006, after giving effect to the application of the
five $1 million incentive payments as described under "Employment Agreements -
Jerome I. Feldman" and the application of the exchange premium as described
above, was $972,000, which was the amount outstanding on December 31, 2005. As
of June 30, 2006, the aggregate amount of indebtedness (including principal and
accrued interest) outstanding under the loans for accounting purposes only,
after giving effect to the application of the five $1 million incentive payments
as described under "Employment Agreements - Jerome I. Feldman" and the
application of the exchange premium as described above, was approximately
$150,000.
NPDC
On August 8, 2003, pursuant to a Note and Warrant Purchase Agreement, the
Company issued and sold to Gabelli Asset Management, Inc. $7,500,000 aggregate
principal amount of 6% Conditional Subordinated Notes due 2008 (the "Notes") and
warrants to purchase Company Common Stock. The Notes mature August 2008 with
interest at the rate of 6% per annum payable semi-annually commencing on
December 31, 2003. The Notes are secured by a mortgage on the Company's former
property located in Pawling, New York that was contributed to MXL Industries,
Inc. ("MXL") in connection with the spin-off (the "Spin-Off") of NPDC, which
occurred on November 24, 2004. MXL, which is now a subsidiary of NPDC, assumed
the mortgage, but without liability for repayment of the Notes or any other
obligations of the Company under the Note and Warrant Purchase Agreement (other
than foreclosure on the property). If there is a foreclosure on the mortgage for
payment of the Notes, the Company has agreed to indemnify MXL for the loss of
the value of the property.
Prior to the Spin-Off, NPDC was a wholly-owned subsidiary of the Company. In
connection with the Spin-Off and while NPDC was a wholly-owned subsidiary of the
Company, the Company and NPDC entered into contracts that govern certain
relationships between them. The Company and NPDC believe that these agreements
are at fair market value and are on terms comparable to those that would have
been reached in arm's-length negotiations had the parties been unaffiliated at
the time of the negotiations.
Certain of the Company's executive officers are also executive officers of
NPDC. Such executive officers, who do not receive any compensation from NPDC,
provide NPDC with management services under a management agreement between the
Company and NPDC entered into while NPDC was a wholly-owned subsidiary of the
Company and in connection with the Spin-Off. Services under the management
agreement relate to corporate federal and state income taxes, corporate legal
services, corporate secretarial administrative support, and executive management
consulting. The term of the agreement extends for three years from the date of
the Spin-Off, or through November 24, 2007, and may be terminated by either the
Company or NPDC on or after July 30, 2006 with 180 days prior written notice,
with the exception of the fee relating to Mr. Feldman's services for which NPDC
is liable through May 31, 2007.
Prior to July 1, 2005, under this management agreement, NPDC paid the
23
Company a management fee to cover an allocable portion of the compensation of
these officers, based on the time they spent providing services to NPDC, in
addition to an allocable portion of certain other corporate expenses. The
Company and NPDC amended the management agreement effective July 1, 2005.
Pursuant to the amendment, NPDC pays the Company an annual fee of not less than
$970,000 as compensation for the management services, payable in equal monthly
installments. The fee includes $698,000 for the period July 1, 2005 through June
30, 2006 relating to the services of Jerome I. Feldman, the Chairman of the
Company's Executive Committee, representing approximately 80% of the cost of the
compensation and benefits required to be provided by the Company to Mr. Feldman.
For the year ended December 31, 2005, NPDC reimbursed the Company approximately
$1,141,000 for services under the management agreement.
NPDC also occupies a portion of corporate office space leased by the
Company. NPDC compensates the Company approximately an additional $205,000
annually for use of this space. The Company's lease extends through December 31,
2006.
While NPDC was a wholly-owned subsidiary of the Company and in connection
with the Spin-Off, NPDC had entered into a separate management agreement with
the Company pursuant to which NPDC provided certain general corporate services
to the Company. Under this management agreement, the Company paid NPDC a
management fee to cover an allocable portion of corporate overhead related to
services performed by NPDC for the Company and its subsidiaries. Effective as of
July 1, 2005, the Company and NPDC terminated this management agreement. For the
year ended December 31, 2005, the Company paid NPDC $82,000 for services under
the management agreement.
Under the distribution agreement relating to the Spin-Off, the Company and
NPDC each agreed that neither would take any action that might cause the
Spin-Off to not qualify as a tax-free distribution. Should one party take an
action which causes the Spin-Off not to so qualify, then that party would be
liable to the other for any taxes incurred by the other from the failure of the
Spin-Off to qualify as a tax-free distribution.
In connection with the Spin-off, the Company agreed to make an additional
capital contribution to NPDC in an amount equal to the first $5 million of any
proceeds (net of litigation expenses and taxes incurred, if any), and 50% of any
proceeds (net of litigation expenses and taxes incurred, if any) in excess of
$15 million, received by the Company from its claims relating to the acquisition
by its wholly-owned subsidiary, GPC, of Learning Technologies. In January 2005,
the Company made a $5 million additional capital contribution to NPDC pursuant
to such agreement. In addition, as of December 31, 2005 and as of the date
hereof, the Company had a payable to NPDC of approximately $1,201,000 for an
additional capital contribution relating to litigation proceeds in the amount of
$9,000,000 received by the Company in December 2005.
Jerome I. Feldman, the Chairman of the Company's Executive Committee, is
also Chairman and Chief Executive Officer of NPDC, as well as Chairman of the
Board of Five Star, a subsidiary of NPDC. Scott N. Greenberg, the Company's
President and Chief Executive Officer, is a Director and the Chief Financial
Officer of NPDC. Andrea D. Kantor, the Company's Executive Vice President and
General Counsel, is the Vice President and General Counsel of NPDC. Harvey P.
Eisen, a Director of the Company, is also a Director of NPDC.
GSE
Pursuant to a management services agreement, the Company provides corporate
support services to GSE. GSE pays the Company an annual fee of $685,000 for
these services and can terminate the agreement by providing sixty days written
notice. The management services agreement can be renewed by GSE for successive
one-year terms and was renewed through December 31, 2006. Subsequent to the
spin-off by the Company to its stockholders of its 58% interest in GSE effective
September 30, 2005, the Company continues to provide GSE with corporate support
services through December 31, 2006.
24
GSE was an additional borrower under GPC's credit agreement, and the Company
also agreed to guarantee GSE's borrowings as part of its fee pursuant to the
management services agreement described above. On March 8, 2006, GSE repaid its
borrowings of $1,182,000 under GPC's credit agreement and GSE ceased to be a
borrower under such agreement.
Michael Feldman received an annual salary of approximately $110,000 from GSE
as Executive Vice President in 2005. Michael Feldman currently receives an
annual salary of $110,000 from GSE. Michael Feldman is the son of Jerome I.
Feldman, the Chairman of the Company's Executive Committee.
Jerome I. Feldman, the Chairman of the Company's Executive Committee and the
Company's former Chairman of the Board and Chief Executive Officer, is also
Chairman of the Board of GSE. Scott N. Greenberg, the Company's Chief Executive,
Officer and Director, Douglas Sharp, the President of the Company, Andrea D.
Kantor, the Company's Executive Vice President and General Counsel, and Michael
Feldman, the son of Jerome Feldman, is each a Director of GSE.
Guarantees
The Company guarantees certain operating leases for Five Star's New Jersey
and Connecticut warehouses, totaling approximately $1,589,000 per year through
the first quarter of 2007. The Company's guarantee of Five Star's leases
remained in effect subsequent to the spin-off of NPDC.
Subsequent to the spin-off of NPDC, the Company continues to guarantee the
repayment of two debt obligations of MXL, which are secured by property and
certain equipment of MXL. The aggregate outstanding balance as of December 31,
2005 was $1.4 million. The Company's guarantees expire upon the maturity of the
debt obligations which are October 1, 2006 and March 31, 2011.
The Company continued to guarantee GSE's borrowings under GPC's Credit
Agreement (for which $1,500,000 is allocated for use by GSE) subsequent to the
spin-off on September 30, 2005. As of December 31, 2005, GSE had borrowings of
$1,182,000 under the Credit Agreement. In March 2006, GSE repaid its borrowings
in full and ceased to be a Borrower under the Credit Agreement.
25
EQUITY COMPENSATION PLAN INFORMATION
The following is information as of December 31, 2005 about shares of Company
Common Stock that may be issued upon the exercise of options, warrants and
rights under the Company's Non-Qualified Stock Option Plan, which were not
approved by security holders, and 2003 Incentive Stock Plan, which was approved
by security holders. For a description of the material terms of the Company's
Non-Qualified Stock Option Plan and the Company's 2003 Incentive Stock Plan, see
Note 12 to the Notes to the Consolidated Financial Statements included in the
Company's Annual Report for the year ended December 31, 2005.
Non-Qualified
Stock Option Incentive
Plan Stock Plan
Plan category:
Equity compensation plans not approved by security holders:
(a) Number of securities to be issued upon exercise
of outstanding options(1) 1,411,345
(b) Weighted average exercise price of outstanding
options(1) $ 4.83
(c) Number of securities remaining available for
future issuance under equity compensation
plans (excluding securities reflected in row
(a))(2) 1,331,094
Equity compensation plans approved by security holders:
(a) Number of securities to be issued upon exercise
of outstanding options, warrants and rights(3) 268,000
(b) Weighted average exercise price of outstanding
options, warrants and rights(3)
(c) Number of securities remaining available for
future issuance under equity compensation plans 1,732,000
(1) Does not include warrants to purchase 300,000 shares of Common Stock with
an exercise price of $2.67 per share, as adjusted following the spin-offs
of NPDC and GSE, and warrants to purchase 984,116 shares issued and sold to
four Gabelli funds in conjunction with the 6% Conditional Subordinated
Notes due 2008 at an exercise price of $5.85 per share, as adjusted
following the spin-offs of NPDC and GSE.
(2) Does not include shares of Common Stock that may be issued to Directors of
the Company as Director fees.
(3) The Plan is the Company's 2003 Incentive Stock Plan and includes restricted
stock awards. The restricted stock grants were not included in the
calculation of the weighed average exercise price.
PERFORMANCE GRAPH
The following table compares the performance of the Common Stock for the
periods indicated with the performance of the Hemscott Group Index for Education
and Training Services and the NYSE Market Index assuming $100 were invested on
December 31, 2000 in the Common Stock of the Hemscott Group Index for Education
and Training Services and the NYSE Market Index. This chart does not reflect the
Company's dividend to its shareholders of shares of NPDC in November 2004 and
shares of GSE in September 2005. Values are as of December 31 of the specified
year assuming that all dividends were reinvested:
26
[GRAPHIC O[OBJECT OMITTED]
Base Period
Company/Index Name Dec 2000 Dec 2001 Dec 2002 Dec 2003 Dec 2004 Dec 2005
------------------------------------ --------------- ----------- ----------- ----------- ----------- -----------
GP Strategies $100.00 $ 88.11 $ 117.09 $ 185.49 $172.73 $189.20
------------------------------------ --------------- ----------- ----------- ----------- ----------- -----------
Education & Training Services 100.00 109.78 116.90 192.88 203.74 178.58
------------------------------------ --------------- ----------- ----------- ----------- ----------- -----------
NYSE Market Index 100.00 91.09 74.41 96.39 108.85 117.84
------------------------------------ --------------- ----------- ----------- ----------- ----------- -----------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than 10% of a registered class of the
Company's securities, to file reports of ownership and changes in ownership with
the SEC and the New York Stock Exchange, and to furnish such reports to the
Company.
Based solely on a review of copies of such reports for 2005, the Company
believes that during 2005 all reports applicable to its officers, Directors and
greater than 10% beneficial owners were filed on a timely basis, except that
Messrs. Eisen, Geller, Pfenniger and Reid inadvertently filed the incorrect form
reporting the receipt of shares constituting Director's fees and have corrected
such filings, and Ms. Kantor filed one late report.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics for Directors,
officers and employees of the Company and its subsidiaries, including, but not
limited to, the Chief Executive Officer, the Chief Financial Officer, the
Director of Financial Reporting and other senior managers in the accounting and
finance department of the Company and its subsidiaries. A copy of this Code of
Business Conduct and Ethics can be found on our website at www.gpstrategies.com.
If the Company makes any substantive amendments to the Code of Ethics for its
27
executive officers or Directors or grants any waiver from a provision of the
Code of Ethics for its executive officers or Directors, the Company will within
five (5) business days disclose the nature of such amendment or waiver in a
Report on Form 8-K or on its website at www.gstrategies.com.
PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO ELIMINATE THE AUTHORIZED SHARES OF CLASS B CAPITAL STOCK
On January 19, 2006, the Board of Directors approved, subject to
stockholder approval submitted hereby, a proposal to amend Article Fourth of the
Amended and Restated Certificate of Incorporation (the "Charter') to eliminate
the authorized shares of Class B Capital Stock (the "Amendment").
A Special Committee of the Board of Directors recommended that the Company
amend its Charter to delete all references to Class B Stock. The Board of
Directors believes that the elimination of the authorized shares of Class B
Capital Stock is the final step in the Company's restructuring of its capital
stock, which included the repurchase and exchange of its outstanding Class B
shares. The Company believes that the elimination of the outstanding Class B
shares in January 2006 will improve corporate governance and will enable the
Company to attract institutional investors that generally do not invest in
corporations with outstanding supervoting stock.
A form of the Certificate of Amendment is attached hereto as Annex B.
VOTE REQUIRED
In order to effect the Amendment, the Amended and Restated Certificate of
Incorporation must be amended, which requires under Delaware law, the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock. The Board of Directors recommends that you vote FOR the proposal to
effect the Amendment.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of KPMG, an independent registered public accounting firm, to
serve as independent auditors for the Company and its subsidiaries for the year
ending December 31, 2006. KPMG has audited the accounts of the Company since
1970. KPMG has no financial interest in the Company and neither it nor any
member or employee of the firm has had any connection with the Company in the
capacity of promoter, underwriter, voting trustee, Director, officer or
employee. The stockholder's ratification of the appointment of KPMG will not
impact the Audit Committee's responsibility pursuant to its charter, to appoint,
replace and discharge the independent auditors. In the event the stockholders
fail to ratify this selection, the matter of the selection of independent
auditors will be reconsidered by the Board of Directors.
A representative of KPMG is expected to be present at the Annual Meeting,
will have the opportunity to make a statement if he so desires and is expected
to be available to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the Company's proxy
statement for the 2007 Annual Meeting of Stockholders provided they are received
by the Company no later April 16, 2007 (or, if the date of the 2007 Annual
Meeting of Stockholders is changed by more than 30 days from the date of the
2006 Annual Meeting of Stockholders, a reasonable time before the Company begins
to print and mail its proxy materials for the 2007 Annual Meeting of
Stockholders) and are otherwise in compliance with applicable SEC regulations.
In addition to the above requirements, the Company's By-laws provide that any
stockholder wishing to nominate a candidate for Director or to propose other
business at an annual meeting of stockholders of the Company must give written
notice that is received by the Secretary of the Company not less than 90 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders (no later than June 16, 2007 with respect to the 2007 Annual
Meeting of Stockholders); provided that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, such notice must be received not later than the close of business on the
tenth day following the day on which public disclosure of the date of the annual
meeting was first made. Such notice must provide certain information specified
in the Company's By-laws. Copies of the Company's By-laws are available to
stockholders without charge upon request to the Company's Secretary at the
Company's address set forth above.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 2005,
28
which is not a part of the proxy soliciting materials, was mailed to the
Company's stockholders on approximately April 30, 2006.
GENERAL
So far as is now known, there is no business other than that described above
to be presented for action by the stockholders at the meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the meeting and any adjournments thereof in
accordance with the discretion of the persons named therein.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. It is
expected that the solicitations will be made primarily by mail, but employees or
representatives of the Company may also solicit proxies by telephone and in
person, and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxy material to their principals at the expense of the
Company.
Lydia M. DeSantis
Secretary
29
Annex A
AUDIT COMMITTEE CHARTER
I. Overview.
The Audit Committee is appointed by the Board of Directors (the
"Board") to be directly responsible for the appointment, compensation and
oversight of the work of any registered public accounting firm employed by the
Company and to assist in Board oversight of: (1) the integrity of the financial
statements of the Company; (2) the adequacy of the Company's system of internal
controls; (3) the compliance by the Company with legal and regulatory
requirements; (4) the qualifications and independence of the Company's
independent auditors; and (5) the performance of the Company's independent and
internal auditors. The Audit Committee shall have the authority to engage, and
obtain advice and assistance from, outside legal, accounting and other advisers,
and the Company shall provide appropriate funding therefor as determined by the
Audit Committee.
II. Committee Membership.
The Audit Committee of the Board shall consist of a minimum of three
Directors. The members shall be appointed by the Board and may be removed by the
Board in its discretion. The members shall, in the judgment of the Board of
Directors, meet the independence, experience and expertise requirements of the
applicable provisions of the federal securities laws and the NYSE listing
standards for Audit Committee members and, at least one member, in the judgment
of the Board of Directors, shall be an Audit Committee "financial expert" as
that term is defined by applicable Securities and Exchange Commission and NYSE
rules and regulations.
III. Committee Powers, Authority, Duties and Responsibilities.
A. Approval of Audit and Non-Audit Services.
o The Audit Committee shall have the sole authority to appoint the
independent auditors of the Company, approve the compensation and
engagement terms of the independent auditors, and discharge or
replace the independent auditors.
o The Audit Committee shall pre-approve all permitted non-audit
services to be performed by the independent auditors and establish
policies and procedures for the engagement by the independent
auditors to provide permitted audit and non-audit services. The
Company shall provide for appropriate funding, as determined by the
Audit Committee, for payment of compensation to the independent
auditors.
B. Independent Auditor Evaluation.
o The Audit Committee shall receive from, and discuss with, the
independent auditors, periodic reports, at least annually regarding:
the auditors' independence; the auditors' internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years respecting one or more
independent audits carried out by the firm, and any steps taken to
deal with any such issues; and all relationships between the
independent auditors and the Company.
o The Audit Committee shall evaluate the performance of the
independent auditors at such times as are appropriate.
o The Audit Committee will oversee Company hiring policies for former
employees of the independent auditors.
C. Planning and Reviewing Auditing Activities.
o The Audit Committee shall meet with the independent auditors prior
to the annual audit to review the planning and staffing of the audit
and other examinations or reviews of the Company's quarterly, annual
and other financial information.
o The Audit Committee shall also review with management and the
independent auditors the coordination of audit efforts to assess
completeness of coverage, reduction of redundant efforts and the
effective use of internal and external audit resources.
o In connection with the annual audit, the Audit Committee shall
review with the independent auditors any problems or difficulties
the auditors may have encountered (including any restrictions on the
scope of the auditors' activities and access to required
information, and any significant disagreements with management) and
any management letter provided by the auditors and management's
response to any such problems or difficulties and to any management
letter.
o The Audit Committee shall review major changes to the Company's
auditing and accounting principles and practices suggested by the
independent auditors or management.
o The Audit Committee shall inquire of management, internal auditors
and the Company's independent auditors concerning any deficiencies
in the Company's policies and procedures that could materially
adversely affect the adequacy of internal controls and the financial
reporting process, including management reports and review the
timeliness and reasonableness of proposed corrective actions.
o The Audit Committee shall review the appointment and replacement of
the senior internal auditing executive, if any.
o The Audit Committee should review with outside auditors the scope of
the internal audit function.
D. Review of Unaudited and Audited Financial Statements, Earnings Releases,
Preparation of Proxy Disclosure.
o The Audit Committee shall review the annual audited financial
statements with management and the independent auditors, including
major issues regarding accounting and auditing principles and
practices, the Company's disclosures under "Management's Discussion
and Analysis of Results of Operations and Financial Condition," the
adequacy of internal controls that could significantly affect the
Company's financial statements, any material correcting adjustments
that have been identified by the independent auditors, any material
off-balance sheet transactions, arrangements, obligations and other
relationships of the Company with unconsolidated entities and other
matters related to the conduct of the audit which are to be
communicated to the Audit Committee under Statement on Auditing
Standards No. 61, Communications with Audit Committees.
o The Audit Committee shall determine whether to recommend to the
Board that the annual audited financial statements be included in
the Company's annual report on Form 10-K.
o The Audit Committee shall review analyses and reports prepared by
management and the independent auditors of significant financial
reporting issues and judgments and critical accounting policies and
practices in connection with the preparation of the Company's
financial statements and the ramifications of the use of alternative
disclosures and treatments, the treatment preferred by the
independent auditors, and other material written communications
between the independent auditors and management, including any
management letter or schedule of unadjusted differences.
o The Audit Committee shall meet periodically with management and the
independent auditors to review the Company's major financial risk
exposures and the steps management has taken to monitor and control
such exposures. The Audit Committee shall also review and evaluate
the Company's processes for identifying and assessing key financial
statement risk areas and for formulating and implementing steps to
address such risk areas.
o The Audit Committee shall review with management and the independent
auditors the Company's quarterly financial statements and the
Company's disclosures under "Management's Discussion and Analysis of
Results of Operations and Financial Condition" included in the
Company's Form 10-Q's.
o The Audit Committee shall review with management and the independent
auditors, as appropriate, earnings press releases and financial
2
information or earnings guidance provided to analysts or rating
agencies.
o The Audit Committee shall prepare the report required by the rules
of the Securities and Exchange Commission to be included in the
Company's annual proxy statement and shall receive the information
to be provided by the independent auditors for inclusion in the
proxy statement, including with regard to fees relating to the
audit.
E. Review of Conflicts of Interest.
o The Audit Committee shall review all related party transactions and
similar matters to the extent required by the NYSE's listing
standards to be approved by an Audit Committee or comparable body.
F. Compliance with Law and the Procedures for Handling complaints about
Accounting Matters.
o The Audit Committee shall establish procedures for the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing
matters and the confidential, anonymous submission by employees of
the Company of concerns regarding questionable accounting or
auditing matters.
o The Audit Committee shall review with the Board as necessary in the
Audit Committee's judgment the Company's policies and procedures
regarding compliance with applicable laws and regulations and with
the Company's Code of Conduct, if any.
o The Audit Committee shall discuss with the independent auditors any
information brought to its attention by the auditors regarding
potential illegal acts and shall handle such information as required
by appropriate law.
o The Audit Committee shall review with the Company's general counsel
material legal and regulatory matters that may have a material
impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from
external counsel, regulators or governmental agencies.
G. Periodic Reports to the Board, Executive Sessions and Annual Review.
o The Audit Committee shall make a report to the Board at the next
regularly scheduled meeting following a meeting of the Audit
Committee accompanied by any recommendation to the Board.
o The Audit Committee shall meet at least annually with the chief
financial officer, and the general counsel, and the independent
auditors, each in separate executive sessions.
o The Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board for
approval.
o The Audit Committee shall annually review its own performance.
H. Conducting or Authorizing Investigations.
o The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Audit Committee's scope
of responsibilities.
o The Audit Committee shall be empowered to retain independent
counsel, accountants or others to assist in the conduct of any
investigations.
o The Audit Committee may ask members of management or others to
attend its meetings and provide pertinent information as necessary.
IV. Responsibilities of Others.
While the Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Audit Committee to plan or
3
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditors. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditors or to assure compliance with laws and regulations and the Company Code
of Conduct, if any.
As amended and approved by the Board of Directors and effective on July 26,
2006.
4
Annex B
AMENDMENT TO THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
ARTICLE FOURTH
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is fifty million (50,000,000) shares
of which forty million (40,000,000) are to be Common Stock with a par value of
One Cent ($.01) per share (hereinafter called the "Common Stock") and of which
ten million (10,000,000) shares are to be Preferred Stock with a par value of
One Cent ($.01) per share (hereinafter called the "Preferred Stock"), to be
issued in such series and with such terms and conditions as the Board of
Directors may determine.
(a) In any and all matters requiring the vote or consent of the
stockholders of the Corporation, each issued and outstanding share of Common
Stock shall be entitled to one (1) vote.
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of Directors of
the Corporation. Each series shall be distinctly designated. All shares of any
one series of the Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends (if any) thereon shall be
cumulative, if made cumulative. The powers, preferences and relative,
participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding. The Board of
Directors of the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of each
particular series of the Preferred Stock, the designations, powers, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, if any, of such series,
including, but without limiting the generality of the foregoing, the following:
(1) the distinctive designation of, and the number of shares
of the Preferred Stock which shall constitute the series, which number may be
increased (except as otherwise fixed by the Board of Directors) or decreased
(but not below the number of shares thereof then outstanding) from time to time
by action of the Board of Directors;
(2) the rate and times at which, and the terms and conditions
upon which, dividends, if any, on shares of the series may be paid, the extent
of preferences or relation, if any, of such dividends to the dividends payable
on any other class or classes of stock of the Corporation, or on any series of
the Preferred Stock or of any other class or classes of stock of the
Corporation, or on any series of the Preferred Stock or of any other class or
classes of stock of the Corporation, and whether such dividends shall be
cumulative or non-cumulative;
(3) the right, if any, of the holders of shares of the series
to convert the same into, or exchange the same for, shares of any other class or
classes of stock of the Corporation, or of any series of the Preferred Stock or
of any other class or classes of stock of the Corporation, and the terms and
conditions of such conversion or exchange;
(4) whether shares of the series shall be subject to
redemption, and the redemption price or prices and the time or times at which,
and the terms and conditions upon which, shares of the series may be redeemed;
(5) the rights, if any, of the holders of shares of the series
upon voluntary or involuntary liquidation, merger, consolidation, distribution
or sale of assets, dissolution or winding-up of the Corporation;
(6) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(7) the voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing, include the
right, voting as a series by itself or together with other series by itself or
together with other series of the Preferred Stock or all series of the Preferred
Stock as a class, (i) to vote more or less than once vote per share on any or
all matters voted upon by the shareholders, (ii) to elect one or more Directors
of the Corporation in the event there shall have been a default in the payment
of dividends on any one or more series of the Preferred Stock or under such
other circumstances and upon such conditions as the Board of Directors may fix.
(c) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each other
series of Preferred Stock shall, in each case, be as fixed from time to time by
the Board of Directors in the resolution or resolutions adopted pursuant to
authority granted in this Article FOURTH and the consent by class or series vote
or otherwise, of the holders of the Preferred Stock of such of the series of the
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Board of Directors of any other series of Preferred Stock
whether the powers, preferences and rights of such other series shall be fixed
by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in such resolution or
resolutions adopted with respect to any series of Preferred Stock that the
consent of the holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
(d) Shares of Common Stock and Preferred Stock (subject to the
provisions of paragraph (c) of this Article FOURTH) of the Corporation may be
issued by the Corporation, from time to time, for such consideration, wholly or
partly, in cash, labor done, personal property, or real property or leases
thereof, as may be determined, from time to time, by the Board of Directors, and
such determination by the Board of Directors shall be final and conclusive. All
shares of Common Stock and Preferred Stock of the Corporation issued as herein
provided shall be deemed fully paid stock and not liable for any further call or
assessment thereon, and the holder of such shares shall not be liable for any
further payments in respect thereto.
(e) No holder of any of the shares of stock of the Corporation of any
class shall be entitled, as such holder, to purchase or subscribe for any
unissued stock of any class or any additional shares of any class to be issued
by reason of any increase of the authorized capital stock of the Corporation of
any class, or bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the Corporation, or carrying any right to
purchase stock of any class, but any such unissued stock or such additional
authorized issue of any stock or of other securities convertible into stock or
carrying any right to purchase stock may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations or
associations and upon such terms as may be deemed advisable by the Board of
Directors in exercise of its discretion.
2
GP STRATEGIES CORPORATION
COMMON STOCK Annual Meeting of Stockholders PROXY
To Be Held September 14, 2006
This proxy is solicited on behalf of the Board of Directors
Revoking any such prior appointment, the undersigned, a stockholder of
GP Strategies Corporation, hereby appoints Harvey P. Eisen and Scott N.
Greenberg, and each of them, attorneys and agents of the undersigned, with full
power of substitution, to vote all shares of the Common Stock of the undersigned
in said Company at the Annual Meeting of Stockholders of said Company to be held
at the BWI Airport Marriott, 1743 West Nursery Road, Baltimore, Maryland on
September 14, 2006, at 10:00 a.m., local time, and at any adjournments thereof,
as fully and effectually as the undersigned could do if personally present and
voting, hereby approving, ratifying and confirming all that said attorneys and
agents or their substitutes may lawfully do in place of the undersigned as
indicated below.
This proxy when properly executed will be voted as directed. If no
direction is indicated, this proxy will be voted For proposals 1, 2 and 3.
1. Election for Directors: Harvey P. Eisen, Jerome I. Feldman, Marshall S.
Geller, Scott N. Greenberg, Richard C. Pfenniger, Jr., and Ogden R.
Reid.
For Withhold For All Except
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
2. To amend the Restated Certificate of Incorporation to eliminate the
authorized shares of Class B Capital Stock.
For Against Abstain
3. To ratify the Board of Directors' appointment of KPMG LLP, an
independent registered public accounting firm, as the Company's
independent auditors for the fiscal year ending December 31, 2006.
For Against Abstain
4. Upon any other matters which may properly come before the meeting or any
adjournments thereof.
Please sign exactly as name appears
below.
Dated , 2006
-------------------------
Signature
Signature if held jointly
Please mark, sign, date and return the proxy card promptly using the
enclosed envelope. When shares are held by joint tenants both should
sign. When signing as attorney, as executor, administrator, trustee or
guardian, please give full title as such. If signer is a corporation,
please sign in full corporate name by President or other authorized
officer. If a partnership please sign in partnership name by authorized
person.