The following table sets forth certain information known to the Company regarding the beneficial ownership of the Common Stock as of the Record Date by (1) all beneficial owners of 5% or more of the Common Stock; (2) each director and nominee for election as director; (3) each executive officer named in the Summary Compensation Table appearing elsewhere in this Proxy Statement (the "Named Executive Officers"); and (4) all executive officers, directors and nominees of the Company as a group. The number of shares beneficially owned by each person is determined under the rules of the Securities and Exchange Commission (the "SEC") and the information is not necessarily indicative of beneficial ownership for any other purpose. SEC rules deem a person to be the beneficial owner of any securities which that person has the right to acquire within 60 days of the Record Date. The Common Stock is the only class of voting securities of the Company. Except as otherwise indicated in the footnotes to the tables below, the Company believes that the beneficial owners of the Common Stock have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Unless otherwise indicated, the address for each of the stockholders listed below is c/o GSE Systems, Inc., 1332 Londontown Blvd., Suite 200, Sykesville, MD 21784.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
Independent Directors
Name
|
|
Age
|
Title
|
Roger L. Hagengruber
|
(1)(3)
|
74
|
Director, Chair of the Board
|
Joseph W. Lewis
|
(1)(2)
|
82
|
Director
|
Jane Bryant Quinn
|
(2)(3)
|
78
|
Director, Chair of the Compensation Committee
|
James H. Stanker
|
(1)(2)
|
59
|
Director, Chair of the Audit Committee
|
Suresh Sundaram
|
(3)
|
51
|
Director, Chair of the Nominating Committee
|
John D. ("Jack") Fuller
|
(4)
|
66
|
Nominee
|
(1)
Member of Audit Committee
(2)
Member of Compensation Committee
(3)
Member of Nominating Committee
(4)
Nominee for election to the Board of Directors as an Independent Director
Directors who are also Executive Officers
Name
|
|
Age
|
Title
|
Kyle J. Loudermilk
|
|
49
|
Chief Executive Officer, President, and Director
|
Christopher D. Sorrells
|
|
48
|
Chief Operating Officer and Director
|
Executive Officers
Name
|
|
Age
|
Title
|
Paul T. Abbott
|
|
50
|
Senior Vice President – Training; President – Hyperspring
|
Sean M. Fuller
|
|
51
|
Senior Vice President – Sales
|
Gill R. Grady
|
|
59
|
Senior Vice President – Marketing and Business Development
|
Bahram Meyssami
|
|
55
|
Chief Technology Officer
|
Emmett A. Pepe
|
|
52
|
Chief Financial Officer
|
Daniel W. Pugh
|
|
50
|
Senior Vice President, General Counsel and Risk Management Officer, Secretary
|
Background of Directors and Executive Officers and Qualifications of Directors
Biographical information with respect to the directors and executive officers of GSE Systems is set forth below. There are no family relationships between any directors or executive officers. Dr. Hagengruber advised the Board of Directors on December 8, 2016, that he will not stand for reelection at the Annual Meeting in light of his desire to retire as a director at the end of his term.
Independent Directors
John D. ("Jack") Fuller
– Mr. Fuller is a candidate for election as an independent director of GSE Systems. Mr. Fuller retired as Chairman of the Board of GE Hitachi Nuclear Energy ("GEH"), a global alliance that is headquartered in Wilmington, North Carolina, in July 2011. Mr. Fuller has over 15 years in the nuclear industry serving in senior leadership positions covering new power plant development, nuclear services, fuels, enrichment and related nuclear technologies. He previously served as President and CEO of the GEH alliance, CEO of Global Nuclear Fuels and as the CFO for nuclear business of General Electric Company. Mr. Fuller's previous assignments with GE were in multiple business disciplines of the Aircraft Engine business, the Aerospace business, the Information Technology and Energy segments. He initially joined GE in 1972. Mr. Fuller also spent a few years as Corporate Controller of Mead Corporation. In his 38 plus year career, Mr. Fuller held senior leadership assignments in general management, business development, strategic planning, finance, product development and plant operations.
Mr. Fuller was active on the boards of both the Nuclear Energy Institute in Washington, DC, and the World Nuclear Association in London, England. Prior to retirement, he was actively engaged in supporting nuclear industry initiatives on a global basis. Mr. Fuller also has served on a variety of for profit and not for profit boards during the past 15 years, with committee assignments in the areas of finance, audit, quality, compensation development, strategic planning, executive development and board leadership. Mr. Fuller was elected Chairman of the Board for several of these boards. He is a native of northern Ohio, and earned a Bachelor degree in Aeronautics/Math from Miami University, Oxford, Ohio.
Mr. Fuller's broad and deep experience in the nuclear industry make him an ideal candidate for election as an independent director of GSE Systems. He will be able to contribute valuable business and industry insight and strategic guidance to the executive leadership team and to his fellow directors.
Joseph W. Lewis
– Mr. Lewis has served as a director of the Company since March 2000. In 1998, Mr. Lewis retired from Johnson Controls, Inc. after 39 years of service, including his tenure from 1986 to 1998 as Executive Vice-President with responsibilities for its Controls Group. Mr. Lewis served as a director of Wheaton Franciscan Services, Inc., an integrated multi-location health care provider from 1991 to 2009, serving as its Treasurer from 1993 to 2002 and as its Chair of the Board from 2003 to 2009.
As a former senior executive to a company in our industry, Mr. Lewis brings management experience, leadership capabilities, financial knowledge and business acumen to our Board. Mr. Lewis has a deep understanding of the Company and its operations, having served on our Board since 2000 and as Chair of the Audit Committee from 2003 to 2016. Mr. Lewis's experience makes him a valued and important contributor to our Board.
Jane Bryant Quinn
– Ms. Quinn has served as a director since May 2008. Ms. Quinn is one of the nation's leading experts on personal finance. She currently writes a monthly column for AARP and has authored several books on personal finance. She is the co-founder of DailyVoice.com, an online community news company. Ms. Quinn has many awards to her credit, including an Emmy Award for outstanding coverage of news on television and the Gerald Loeb award for distinguished lifetime achievement in business and financial journalism. She has been named by the World Almanac as one of the 25 most influential women in the United States. She served on the boards of the Harvard School of Public Health, the Jerome Levy Economics Institute of Bard College, and her alma mater, Middlebury College. She is currently a director of Bloomberg L.P., the financial services company.
Ms. Quinn, as one of the nation's leading experts on personal finance, brings financial knowledge and business acumen to our Board. Ms. Quinn's experience makes her a valued and important contributor as a Board member and as Chair of the Compensation Committee.
James H. Stanker
– Mr. Stanker has served as a director of the Company since August 2016. Mr. Stanker has more than 30 years of strategic audit expertise and financial leadership with multinational corporations in the technology, manufacturing, and commercial product industries. Most recently, he concluded a sixteen-year career at Grant Thornton LLP, where he served in various leadership capacities, including audit partner, professional practice director for the Atlantic Coast market, and global head of audit quality for the firm's international organization. Prior to Grant Thornton, Mr. Stanker served terms as the Chief Financial Officer of a NASDAQ-listed technology company and as the Chief Financial Officer of a privately-held life science startup. He started his career as an auditor with Touche Ross in the early 1980's. Mr. Stanker earned a Master of Business Administration from California State University, East Bay, and a B.S. degree in Aeronautics from San Jose State University. He is a Certified Public Accountant (inactive).
Mr. Stanker's career accomplishments in financial services and audit enables him to provide broad financial expertise and technology leadership as member of the Board and the Compensation Committee, and to play a critical role as a financial expert on, and as Chair of, the Company's Audit Committee.
Suresh Sundaram, Ph.D.
– Dr. Sundaram has served as a director of the Company since September 2016. Dr. Sundaram has more than 25 years of experience in product development, sales operations, and market leadership, focused on simulation technology. In August 2016 he was appointed Senior Vice President – Products and Marketing at Exa Corporation, a publicly-traded simulation software company focused on product engineering solutions. Prior to Exa, Dr. Sundaram held a variety of leadership roles during a twenty-year career at Aspen Technology, a publicly-traded process software company, where most recently he was Senior Vice President of Products and Market Strategy. Dr. Sundaram earned his Master of Science and Ph.D. degrees in Chemical Engineering from the Massachusetts Institute of Technology (MIT) and a Bachelor of Science degree in Chemical Engineering from the Indian Institute of Technology (IIT), Bombay.
Dr. Sundaram brings a wide range of applicable experience and knowledge to his role as a member of the Board, particularly with respect to providing strategic guidance regarding product development and marketing. He also serves as Chair of the Nominating Committee.
Directors who are also Executive Officers
Kyle J. Loudermilk
– Mr. Loudermilk joined the Company in August 2015 as the CEO and President and also serves as a member of the Board of Directors. He is a technology executive whose 25 year career has focused on growing technology companies through organic growth, geographic expansion and M&A, creating significant shareholder value along the way.
Mr. Loudermilk was the VP of Operations – Technology from 2013 to 2015 and VP of Corporate Development from 2005 to 2009 at MicroStrategy, a company focused on business intelligence, big data, and mobile identity solutions. From 2009 to 2012 he was the VP of Product Management at Datatel, now known as Ellucian, a firm focused on higher education solutions, growing the company significantly through new product introduction during his tenure. Mr. Loudermilk held management roles including VP of the Design and Simulation Business Unit and VP of R&D/Operations at Aspen Technology. He began his career as a Process Engineer for Mobil Oil Corporation. He earned his B.S. and M.S. from Columbia University in chemical engineering, and is an alumnus of Harvard Business School having completed The General Manager Program.
Mr. Loudermilk's extensive experience in leading and providing strategic guidance to technology driven organizations enables him to contribute valuable perspective and first-hand knowledge as a Board member.
Christopher D. Sorrells
– Mr. Sorrells has served as our Chief Operating Officer since August 2015 and as a member of our Board of Directors since March 2012. From 2005 to 2015, Mr. Sorrells served in multiple roles, including Managing Director and Operating Partner, at an affiliated fund of NGP Energy Capital Management, a premier investment franchise in the natural resources industry with $16.5 billion in cumulative capital under management since inception. Prior to NGP, Mr. Sorrells worked at Clarity Partners, a private equity firm based in Los Angeles. Before Clarity Partners, Mr. Sorrells worked as an investment banker in New York for six years, first as an Associate with Salomon Smith Barney and eventually as a Principal with Banc of America Securities. Mr. Sorrells is also Vice Chairman of the board of directors of Renewable Energy Group, one of the largest publicly traded global producers of biofuels, and also serves as Chairman of the Compensation Committee and as a member of the Governance Committee. Mr. Sorrells holds a M.B.A. from the College of William and Mary, a Master of Accounting degree from the University of Southern California, and a B.A. from Washington and Lee University.
Mr. Sorrells' financial background and the extensive operational knowledge and expertise he gained working with a variety of energy, power, and clean technology companies make him a skilled advisor, who provides critical insight into operations, strategic planning, and financial matters.
Executive Officers
Paul T. Abbott
– Mr. Abbott is the President of Hyperspring LLC, a GSE subsidiary. He has been a principal of Hyperspring helping grow that business since 2007. Prior to joining Hyperspring, he was a senior reactor operator at two different U.S. nuclear facilities and served in the U.S. Navy. He earned his B.S. in Nuclear Engineering Technology from Excelsior College.
Sean M. Fuller
– Mr. Fuller is GSE Systems' Senior Vice President of Sales. Mr. Fuller specializes in delivering value to the power industry as he has done for more than 25 years for the General Electric Company ("GE") and affiliated companies. He joined GSE on March 22, 2016, from GEH, a global company serving the nuclear industry where he served as the Regional Vice President of Sales for Fuel and Services and prior to that as Vice President Global Services Sales. From 2010 until he joined the Company, Mr. Fuller had responsibility for delivering $350 million of annual sales for GEH's nuclear business as the Global Services Sales Leader for reactor maintenance and asset management and the VP of Regional Sales for Fuel & Services in the U.S. In both roles he led a team of sales people focused on delivering value to the commercial nuclear power industry that support orders and backlog growth for GEH. In addition to commercial sales Mr. Fuller also lead the relationship aspect of the operation for marketing and customer focused innovation. He holds a B.S. in Mechanical-Nuclear Engineering from Worcester Polytechnic Institute and is a certified Six Sigma Black Belt.
Gill R. Grady
– Mr. Grady has served as a Senior Vice President since September 1999 and is currently responsible for the Company's Marketing and Business Development. Prior to September 1999, he was responsible for Eastern European, Process Industry and Department of Energy business operations. He has also held numerous senior management positions in business operations, marketing and project management with the Company as well as several administrative functions such as investor relations, human resources, contract administration and information technology. He has been employed by the Company or predecessor companies since 1980.
Bahram Meyssami, Ph.D.
– Dr. Meyssami joined the Company as its Chief Technology Officer on December 1, 2015. He brings to GSE more than 25 years of experience in complex enterprise-level software development and delivery for engineering, education, and analytics. From February 2012 until he joined the Company, Dr. Meyssami was the Senior Director of Data Analysis in the Office of Analytics at the University of Maryland University College. He served as Director of Software Development, Technology at Ellucian, Inc. (formerly Datatel, Inc.) from March 2010 to January 2012. Before that he was Vice President, Technology for Three Stage Media, Inc. (formerly BDMetrics) from July 2005 to February 2010. In general, he has held multiple technology leadership roles in several organizations developing state-of-the-art software technology and growing effective technology teams focused on delivery of customer-aligned value. He holds a B.S., a M.S., and a Ph.D. in chemical engineering from the University of Maryland College Park.
Emmett A. Pepe
– Mr. Pepe joined the Company on July 1, 2016, from MicroStrategy, Inc., a publicly-traded enterprise-analytics, mobile, and security software company. Since 2012, Mr. Pepe had served as MicroStrategy's Senior Vice President – Finance and Worldwide Controller, overseeing MicroStrategy's financial activities including accounting, financial reporting, tax, and treasury. From 2007 to 2012, Mr. Pepe served as Vice President – Accounting and Corporate Controller at BroadSoft, Inc., a software and services company that enables telecommunications service providers to deliver hosted, cloud-based unified communications to their enterprise customers. While at BroadSoft, Mr. Pepe was responsible for overall global accounting, SEC reporting, tax, treasury, human resources, and facilities, and was part of the executive management team that took BroadSoft public in 2010. Mr. Pepe also has held a number of senior financial leadership positions with various other companies including Software AG, webMethods, Inc., British Telecom Inc., Concert Communications Company, and MCI Communications Corporation. Mr. Pepe has a Bachelor of Science degree in Accounting from Penn State University and is a Certified Public Accountant.
Daniel W. Pugh
– Mr. Pugh joined the Company as its Senior Vice President, General Counsel and Risk Management Officer, and Corporate Secretary on February 1, 2016. He is a business attorney with more than 22 years of experience working with technology-enabled software and service companies. Mr. Pugh's core areas of expertise are licensing software, negotiating contracts, developing and commercializing technology, establishing intellectual property, and creating best in class corporate practices. From October 2010 through January 2016, Mr. Pugh served as General Counsel of ANCILE Solutions, Inc., a leading workforce performance improvement enterprise software company, where he was responsible for all legal and corporate matters and operational risk management. Prior to that he served as General Counsel of Synthetic Genomics, Inc., a biotechnology and biofuels research and development company, and as Counsel to other public and private businesses. He holds a Bachelor of Science degree from the Massachusetts Institute of Technology, a Juris Doctorate degree from the University of Maryland Carey School of Law, where he served as Executive Editor of the Maryland Law Review, and a M.B.A. degree from the University of Maryland Smith School of Business. Mr. Pugh also is a Certified Financial Risk Manager (FRM).
CORPORATE GOVERNANCE
The Board of Directors
The Board oversees the business affairs of the Company, monitors the performance of management and elects the executive officers of the Company. The Board has the responsibility for establishing broad corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. Members of the Board are kept informed of the Company's business by various reports and documents sent to them as well as by operating and financial reports made at Board and Committee meetings.
The Company's Certificate of Incorporation provides that the Board is divided into three classes, as nearly equal in number as possible, that serve staggered three-year terms. The stockholders elect at least one class of directors annually.
One of the current Class I directors (James H. Stanker) is standing for re-election for a three-year term at the Annual Meeting, and one new Class I director will be elected to a three-year term at the Annual Meeting. The other Class I director, Roger Hagengruber, has advised the Board that he plans to retire at the end of his term. Class II directors (Joseph W. Lewis and Jane Bryant Quinn) serve until the 2018 Annual Meeting and their successors are duly elected and qualified. Class III directors (Suresh Sundaram, Kyle Loudermilk, and Christopher Sorrells) serve until the 2019 Annual Meeting and their successors are duly elected and qualified.
Independence
The Board reviews the independence of its members on an annual basis. No directors will be deemed to be independent unless the Board affirmatively determines that the director in question has no material relationship with the Company, directly or as an officer, stockholder, member or partner of an organization that has a material relationship with the Company. The Board is subject to the standards of independence of the NYSE MKT rules. As a result of its annual review of independence of the Board, the Board determined that Joseph W. Lewis, Jane Bryant Quinn, James H. Stanker, and Suresh Sundaram meet the NYSE MKT independence standards and that all of the members of the Audit Committee meet the applicable NYSE MKT heightened standards for audit committee independence. The Board also determined that Mr. John D. Fuller meets the NYSE MKT independence standards.
Board Leadership Structure
Dr. Hagengruber currently serves as Chair of the Board of Directors. Mr. Loudermilk currently serves as Chief Executive Officer of the Company. The Company believes it is the Chair's responsibility to lead the Board of Directors and the Chief Executive Officer's responsibility to lead the day-to-day operations of the Company. As directors continue to have more oversight responsibility than ever before, we believe it is beneficial to have a Chair who is responsible for leading the Board, which allows the Chief Executive Officer to focus on running the Company. This separation of responsibilities ensures that there is no duplication of effort between the Chair and Chief Executive Officer. We believe this separation of leadership provides strong leadership for our Board, while also positioning our Chief Executive Officer as the leader of the Company in the eyes of our customers, employees and stockholders.
In addition, the non-management directors meet at the end of every Board meeting in executive session. The executive sessions of non-management directors are presided over by the Chair of the Board. Any director may request an executive session of non-management directors to discuss any matter of concern.
Board's Role in Oversight
While the Board oversees risk management, Company management is charged with managing risk. The Board and the Audit Committee monitor and evaluate the effectiveness of the internal controls at least annually. Management communicates with the Board, Board Committees and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management. The Board implements its risk oversight function both as a whole and through Committees. The Audit Committee oversees risks related to the Company's financial statements, the financial reporting process, and accounting matters. The Audit Committee oversees the audit function and the Company's ethics programs. The Audit Committee members meet separately with representatives of the Company's independent registered public accounting firm. The Compensation Committee evaluates the risks and rewards associated with the Company's compensation philosophy and programs. The Nominating Committee selects and recommends to the full Board nominees for election as directors.
Meetings of the Board of Directors
The Board held eight meetings during the fiscal year ended December 31, 2016. During the 2016 fiscal year, no director attended less than seventy-five percent (75%) of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she was a director) and (2) the total number of meetings held by all committee(s) of the Board on which she or he served (during the periods that he/she served).
Board Member Attendance at Annual Meetings
The Company encourages, but does not require, all of its directors to attend the Annual Meeting of Stockholders, and four directors attended the Annual Meeting in 2016.
Committees of the Board of Directors
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating Committee. As an NYSE MKT listed company, we are subject to the NYSE MKT listing standards. The Company is required under the NYSE MKT listing standards to have a majority of independent directors and all of the members of the audit committee are required to comply with additional, heightened independence standards applicable to service on such committee.
Audit Committee
– The Audit Committee consists of Messrs. Hagengruber, Lewis, and Stanker (Chair), each of whom meets the general as well as the heightened independence standards set by applicable SEC rules and the NYSE MKT listing standards. In addition, the Board has determined that Mr. Stanker and Mr. Lewis are "audit committee financial experts" as defined by applicable SEC and NYSE MKT rules. The Audit Committee operates under a written charter adopted by the Board. Management is responsible for the Company's internal controls and preparing the Company's consolidated financial statements. The Company's independent registered public accounting firm is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and issuing a report thereon and the Committee is responsible for overseeing the conduct of these activities. The Audit Committee makes recommendations to the full Board concerning the engagement of the independent registered public accounting firm, reviews with the independent registered public accounting firm the plans and results of the audit engagement, approves professional services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm and reviews the adequacy of the Company's internal accounting controls. The Audit Committee met five times during fiscal year 2016. See "Audit Committee Report" below. The Audit Committee Charter is available on our website at
www.gses.com
.
Compensation Committee
– The Compensation Committee consists of Mr. Lewis, Ms. Quinn (Chair), and Mr. Stanker. Mr. Lewis, Ms. Quinn, and Mr. Stanker are "independent" directors as that term is defined by applicable NYSE MKT listing standards. The Compensation Committee is responsible for recommending to the full Board the compensation for the Company's executive officers, including the granting of awards under the Company's Long-Term Incentive Plan. The Compensation Committee met four times during fiscal year 2016, and members of the Compensation Committee provided further advice and recommendations to the Board as a whole on Compensation Committee matters at Board meetings. The Compensation Committee operates pursuant to a written Charter which is available on our website at
www.gses.com
.
Nominating Committee
– The Nominating Committee consists of Dr. Hagengruber, Ms. Quinn, and Dr. Sundaram (Chair). All three members are "independent" directors as that term is defined by applicable NYSE MKT listing standards. The Nominating Committee selects and recommends to the full Board nominees for election as directors. The Nominating Committee met three times during fiscal year 2016, and members of the Nominating Committee provided further advice and recommendations to the Board as a whole on Nominating Committee matters at Board meetings. The Nominating Committee operates pursuant to a written Charter which is available on our website at
www.gses.com
.
Communications with the Board of Directors
The Board desires to foster open communications with its security holders regarding issues of a legitimate business purpose affecting the Company. The Board has adopted policies and procedures to facilitate written communications by stockholders to the Board. Persons wishing to write to our Board, or to a specified director or committee of the Board, should send correspondence to the Corporate Secretary at 1332 Londontown Blvd., Suite 200, Sykesville, MD 21784.
The Corporate Secretary will forward to the directors all communications that, in his judgment, are appropriate for consideration by the directors. Examples of communications that would not be appropriate for consideration by the directors include commercial solicitations and matters not relevant to the stockholders, to the functioning of the Board, or to the affairs of the Company. Any correspondence received that is addressed generically to the Board will be forwarded to the Chair of the Board, with a copy to the Chair of the Audit Committee.