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):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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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.
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(4) Date Filed:
GP STRATEGIES CORPORATION
777 Westchester Avenue
White Plains, New York 10604
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 29, 2003
To the Stockholders:
The Annual Meeting of Stockholders of GP Strategies Corporation (the
"Company") will be held at the Westchester Marriott Hotel, 670 White Plains
Road, Tarrytown, New York, on the 29th day of October, 2003, at 10:00 a.m.,
local time, for the following purposes:
1. To elect nine Directors to serve until the next Annual Meeting and
until their respective successors are elected and qualify.
2. To approve the Company's 2003 Incentive Stock Plan.
3. To ratify the Board of Directors' appointment of KPMG LLP,
independent certified public accountants, as the Company's independent
auditors for the fiscal year ending December 31, 2003.
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 September 15,
2003 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, 777 Westchester
Avenue, Fourth Floor, White Plains, New York.
By Order of the Board of Directors
Lydia M. DeSantis
Secretary
New York, New York
October 3, 2003
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
777 Westchester Avenue
White Plains, New York 10604
---------------
New York, New York
October 3, 2003
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of GP Strategies Corporation, a Delaware corporation (the "Company"),
for use only at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the Westchester Marriott Hotel, 670 White Plains Road, Tarrytown, New
York, on the 29th day of October, 2003, 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 October 3,
2003.
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 nine nominees for election as directors named herein, FOR the
approval of the Company's 2003 Incentive Stock Plan (the "2003 Plan"), and FOR
the ratification of the selection of KPMG LLP 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 and Class B 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 approval
of the 2003 Plan, and for 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 and Class B 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 September 15, 2003
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 September 15, 2003 consisted of 16,234,318 shares of
Common Stock, each entitled to one vote, and 1,200,000 shares of Class B Stock,
each entitled to ten votes. A quorum of the stockholders is constituted by the
presence, in person or by proxy, of holders of record of Common Stock and Class
B Stock, representing a majority of the number of votes entitled to be cast. The
only difference in the rights of the holders of Common Stock and the rights of
holders of Class B Stock is that the former class has one vote per share and the
latter class has ten votes per share. The Class B Stock is convertible at any
time into shares of Common Stock on a share for share basis at the option of the
holders thereof.
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Class B Stock and
Common Stock beneficially owned as of September 15, 2003, by each person who is
known by the Company to own beneficially more than 5% of the Company's
outstanding Class B Stock or Common Stock.
Amount and
Name and Address Nature of Percent of
Title of Class of Beneficial Owner Beneficial Ownership Class(1)
------------------ ------------------------------------------ ------------------------ ---------
Class B Stock Jerome I. Feldman 568,750 shares(2) 47.4%
c/o GP Strategies Corporation
777 Westchester Avenue
White Plains, NY 10604
Class B Stock Bedford Oak Partners, L.P. 300,000 shares(3) 25.0%
100 South Bedford Road
Mt. Kisco, NY 10549
Class B Stock EGI-Fund (02-04) Investors, L.L.C. 300,000 shares(4) 25.0%
Two N. Riverside Plaza
Chicago, IL 60606
Common Stock Jerome I. Feldman 711,170 shares(2)(5) 4.2%
Common Stock Bedford Oak Partners, L.P. 2,431,500 shares(3)(6) 14.7%
Common Stock Gabelli Asset Management, Inc. 1,412,200 shares(7) 8.7%
One Corporate Center
Rye, NY 10580
Common Stock EGI-Fund (02-04) Investors, L.L.C. 1,390,000 shares(4)(8) 8.4%
Common Stock Caxton International Limited 1,251,200 shares(9) 7.7%
315 Enterprise Drive
Plainsboro, NJ 08536
Common Stock Dimensional Fund Advisors, Inc. 925,455 shares(10) 5.7%
1299 Ocean Avenue
Santa Monica, CA 90401
Common Stock Liberty Wanger Asset Management L.P. 870,000 shares(11) 5.4%
227 West Monroe Street
Chicago, IL 60606
Common Stock Pequot Capital Management, Inc. 805,400 shares (12) 5.0%
500 Nyala Farm Road
Westport, CT 06880
Common Stock GP Retirement Savings Plan 760,247 shares(13) 5.0%
6095 Marshalee Drive
Elkridge, Maryland 21046
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(1) The percentage of class calculation for Class B Stock assumes for each
beneficial owner that no shares of Class B Stock are converted into
Common Stock by the named beneficial owner or any other stockholder. The
percentage of class calculation for Common Stock assumes for each
beneficial owner that (i) all options are exercised in full and all
shares of Class B Stock are converted into Common Stock only by the
named beneficial owner and (ii) no other options are exercised and no
other shares of Class B Stock are converted by any other stockholder.
(2) On December 29, 1998, Martin M. Pollak granted certain rights of first
refusal with respect to his Class B Stock and options to purchase Class
B Stock to Mr. Feldman and his family, and Mr. Feldman granted certain
tag-along rights with respect to Class B Stock and options to purchase
Class B Stock to Mr. Pollak and his family. In addition, Mr. Pollak
agreed that, until May 31, 2004, during any period commencing on the
date any person or group commences or enters into, or publicly announces
an intention to commence or enter into, and ending on the date such
person abandons a tender offer, proxy fight, or other transaction that
may result in a change in control of the Company, he will vote his
shares of Common Stock and Class B Stock on any matter in accordance
with the recommendation of the Board of Directors. Mr. Pollak retired as
the Executive Vice President and Treasurer of the Company on May 31,
1999.
(3) Based on a Schedule 13D filed jointly by Bedford Oak Partners, L.P.
("Bedford Oak"), Bedford Oak Advisors, LLC and Harvey P. Eisen with the
Securities and Exchange Commission ("SEC") on July 25, 2002.
See "Certain Transactions."
(4) Based on a Schedule 13D filed by EGI-Fund (02-04) Investors, L.L.C.
("EGI") with the SEC on May 13, 2002 and information supplied by EGI.
See "Certain Transactions."
(5) Includes (i) 1,173 shares of Common Stock held by members of Mr.
Feldman's family, (ii) 568,750 shares of Common Stock issuable upon
conversion of Class B Stock held by Mr. Feldman, (iii) 120,289 shares of
Common Stock issuable upon exercise of currently exercisable stock
options held by Mr. Feldman and (iii) 4,058 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.
(6) Includes 300,000 shares of Common Stock issuable upon conversion of
Class B Stock held by Bedford Oak.
(7) Based on a Schedule 13D filed jointly by Gabelli Funds, LLC, GAMCO
Investors, Inc., MJG Associates, Inc. and Gabelli Advisors, Inc.
(collectively "Gabelli Asset Management, Inc.") with the SEC on August
20, 2003. Includes 937,500 shares issuable upon exercise of warrants to
purchase shares of the Company's
Common Stock. See "Certain Transactions."
(8) Includes 300,000 shares of Common Stock issuable upon conversion of
Class B Stock held by EGI.
(9) Based on a Schedule 13D/A filed jointly by Caxton International Limited,
Caxton Equity Growth (BVI) Ltd., Caxton Equity Growth LLC, and Caxton
Associates, L.L.C. with the SEC on June 4, 2002.
(10) Based on a Schedule 13G filed by Dimensional Fund Advisors Inc.
("Dimensional") with the SEC on February 3, 2003. Dimensional has
informed the Company that the shares are owned by advisory clients of
Dimensional and that Dimensional disclaims beneficial ownership of such
shares.
(11) Based on a Schedule 13G filed by Liberty Wanger Asset Management, L.P.
("LWAM") with the SEC on February 4, 2003. LWAM has informed the Company
that the shares have been acquired by LWAM on behalf of its
discretionary clients.
(12) Based on a Schedule 13G filed by Pequot Capital Management, Inc. with
the SEC on February 14, 2003.
(13) Shares may be voted and disposed of by participants in the GP Plan.
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth, as of September 15, 2003, the beneficial
ownership of Common Stock, Class B Stock, and voting stock by each director,
each of the named executive officers, and all directors and executive officers
as a group.
Total Number Total Number
of Shares of Percent of of Shares of
Common Stock Common Class B Stock Percent of Percent of
Beneficially Stock Beneficially Class B Voting
Owned Owned(1) Owned Stock(2) Stock(3)
Jerome I. Feldman(4)........ 711,170(5) 4.2% 568,750(6) 47.4% 20.5%
Scott N. Greenberg(4) 193,551(7) 1.2%
Harvey P. Eisen(8) 2,432,486(9) 14.7% 300,000(10) 25.0% 18.2%
Marshall S. Geller(11)...... 214,147(12) 1.3% -- -- --
Roald Hoffmann(4)(13)....... 12,603(12) * -- -- --
Bernard M. Kauderer(13) 14,282(12) * -- -- --
Mark A. Radzik(11)(13)(14) 1,968(15) * --(16) -- --
Ogden R. Reid(13)........... 23,032(12) * -- -- --
Gordon Smale(8)(11)......... 14,603(12) * -- -- --
Douglas E. Sharp............ 189,426(12)(17) 1.2% -- -- --
Andrea D. Kantor............ 53,312(12)(18) * -- -- --
Directors and Executive
Officers as a Group
(11 persons).............. 3,860,580(15)(19) 21.8% 868,750(11)(15) 72.4% 41.0%
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* The number of shares owned is less than one percent of the outstanding
shares or voting stock.
(1) The percentage of class calculation for Common Stock assumes for each
beneficial owner and directors and executive officers as a group that
(i) all options are exercised in full and all shares of Class B Stock
are converted into Common Stock only by the named beneficial owner or
members of the group and (ii) no other options are exercised and no
other shares of Class B Stock are converted by any other stockholder.
(2) The percentage of class calculation for Class B Stock assumes for each
beneficial owner and directors and executive officers as a group that no
shares of Class B Stock are converted into Common Stock by the named
beneficial owner, members of the group, or any other stockholder.
(3) The percentage of voting stock calculation sets forth the percentage of
the aggregate number of votes of all holders of Common Stock and Class B
Stock represented by the Common Stock and Class B Stock beneficially
owned by each beneficial owner and directors and executive officers as a
group and assumes for each beneficial owner and directors and executive
officers as a group that (i) all options are exercised in full only by
the named beneficial owner or members of the group, (ii) no other
options are exercised by any other stockholder, and (iii) no shares of
Class B Stock are converted into Common Stock by the named beneficial
owner, members of the group, or any other stockholder.
(4) Member of the Executive Committee.
(5) See footnotes 2 and 5 to Principal Stockholders Table.
(6) See footnote 2 to Principal Stockholders Table.
(7) Includes (i) 166,666 shares of Common Stock issuable upon exercise of
currently exercisable stock options held by Mr. Greenberg, (ii) 5,167
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.
(8) Member of the Compensation Committee
(9) Includes 2,431,500 shares of Common Stock beneficially owned by 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. See footnotes 3 and 6 to
Principal Stockholders Table.
(10) Includes 300,000 shares of Class B Stock beneficially owned by 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. See footnote 3 to Principal
Stockholders Table.
(11) Member of the Corporate Governance Committee
(12) Includes 10,000 shares for each of Messrs. Geller, Hoffmann, Kauderer,
and Smale, 20,000 shares for Mr. Reid, 183,057 shares for Mr. Sharp, and
48,332 shares for Ms. Kantor, issuable upon exercise of currently
exercisable stock options.
(13) Member of the Audit Committee.
(14) Designee of EGI.
(15) Does not include 1,390,000 shares of Common Stock beneficially owned by
EGI. Mr. Radzik disclaims beneficial ownership of such shares. See
footnotes 4 and 8 to Principal Stockholders Table.
(16) Does not include 300,000 shares of Class B Stock beneficially owned by
EGI. Mr. Radzik disclaims beneficial ownership of such shares. See
footnote 4 to Principal Stockholders Table.
(17) Includes 6,369 shares of Common Stock allocated to Mr. Sharp's account
pursuant to the provisions of the GP Plan.
(18) Includes 4,980 shares of Common Stock allocated to Ms. Kantor's account
pursuant to the provisions of the GP Plan.
(19) Includes (i) 578,344 shares of Common Stock issuable upon exercise of
currently exercisable stock options, (ii) 868,750 shares of Common Stock
issuable upon conversion of Class B Stock, and (iii) 20,574 shares of
Common Stock allocated to accounts pursuant to the provisions of the GP
Plan.
ELECTION OF DIRECTORS
Nine 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.
Jerome I. Feldman is founder and since 1959 has been Chief Executive Officer
and a Director of the Company. He has also been Chairman of the Board of the
Company since 1999. He was President of the Company from 1959 until 2001. He has
been Chairman of the Board of Five Star Products, Inc. ("Five Star"), a
wholesale distributor of home decorating, hardware and finishing products, since
1994, a Director of GSE Systems, Inc. ("GSE"), a software design and development
company, since 1994, and Chairman of the Board of GSE since 1997. Mr. Feldman is
also Chairman of the New England Colleges Fund and a Trustee of Northern
Westchester Hospital Center. Age 75.
Scott N. Greenberg has been a Director of the Company since 1987 and
President and Chief Financial Officer since 2001. He was Executive Vice
President and Chief Financial Officer from 1998 to 2001, Vice President and
Chief Financial Officer from 1989 to 1998, and Vice President, Finance from 1985
to 1989. He has been a director of GSE since 1999 and was a Director of Five
Star from 1998 to March, 2003. Age 46.
Harvey P. Eisen has been a Director of the Company since July 2002. 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. He is also a trustee of Rippowam Cisqua School in
Bedford, New York and the Northern Westchester Hospital Center. Age 61.
Marshall S. Geller has been a Director of the Company since February 2002.
Mr. Geller is Co-Founder and a Senior Managing Member of St. Cloud Capital
Partners, L.P., an SBIC (Small Business Investment Company) formed in December
2001. He is also Chairman of the Board, Chief Executive Officer, and Founding
Partner of Geller & Friend Capital Partners, Inc., a private merchant bank
formed in November 1995. From 1991 to October 1995, Mr. Geller was the Senior
Managing Partner of Golenberg & Geller, Inc., a merchant banking investment
company. Mr. Geller has spent more than thirty years in corporate finance and
investment banking, including twenty years as Senior Managing Director for Bear,
Stearns and Company, with oversight of all operations in Los Angeles, San
Francisco, Chicago, Hong Kong and the Far East. Mr. Geller currently serves as a
director of ShopNBC/Value Vision Media, Inc. and is on the Board of Governors of
Cedars-Sinai Medical Center, Los Angeles. Mr. Geller also serves on the Dean's
Advisory Council for the College of Business & Economics at California State
University, Los Angeles. Age: 64.
Roald Hoffmann, Ph.D. has been a Director of the Company since 1988. He has
been the Frank H. T. Rhodes Professor of Humane Letters and Professor of
Chemistry since 2001, and from 1974 to 2001 was the John Newman Professor of
Physical Science, at Cornell University. Dr. Hoffmann is a member of the
National Academy of Sciences and the American Academy of Arts and Sciences. In
1981, he shared the Nobel Prize in Chemistry with Dr. Kenichi Fukui. Age 66.
Bernard M. Kauderer has been a Director of the Company since 1997. He
retired from the United States Navy in 1986 as Vice Admiral. He was Former
Commander, Submarine Force, United States Atlantic and Pacific Fleets. He has
been a consultant to industry and government since 1986. Age 72.
Mark A. Radzik, a designee of EGI, has been a Director of the Company since
July 2002. He has served as a Managing Director of EGI since 1998. Prior to
1998, Mr. Radzik was a vice president of the Merchant Banking Group of Banque
Paribas and a manager at Arthur Andersen. Age 38.
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
International Edition; United States Ambassador to Israel; a six-term member of
the United States Congress and a New York State Environmental Commissioner. Age
78.
Gordon Smale has been a Director of the Company since 1997. He has been
President and a Director of Atlantic Oil Corporation, a producing oil and gas
company, since 1970; President of Atmic, Inc., an oil and gas management
company, since 1983; Chairman of the Board of Stephen Energy Company LLC, an oil
and gas exploration and development company, since 1992; and Manager of Cedar
Ridge LLC, a methane coal gas exploration and development company, since 1994.
Age 71.
Board of Directors and Committees
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 six meetings in 2002.
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 Board of Directors has an Executive Committee, Compensation Committee, Audit
Committee, and Corporate Governance Committee.
The Executive Committee, consisting of Jerome I. Feldman, Scott N.
Greenberg, and Roald Hoffmann, 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 Committee formally acted eleven times in 2002 through formal
meetings and unanimous written consents.
The Compensation Committee, consisting of Gordon Smale and Harvey P Eisen,
has the authority to act with respect to the compensation of the executive
officers of the Company, generally reviews benefits and compensation for all of
the Company's executive officers and administers the Company's stock option
plan. In 2002, the Compensation Committee formally acted eleven times through
formal meetings and unanimous written consents.
The Audit Committee, consisting of Ogden R. Reid, Roald Hoffmann, Mark A.
Radzik and Bernard M. Kauderer has a written charter, attached to this Proxy
Statement as Appendix A, which charter was amended on September 18, 2003 in
response to the revised audit committee requirements and proposals adopted by
the SEC and the New York Stock Exchange ("NYSE"). 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 four times in 2002.
Audit Committee Report
The Audit Committee of the Board of Directors in fiscal 2002 consisted of
Ogden Reid, Roald Hoffmann, Mark A. Radzik and Bernard M. Kauderer, all of whom
meet the independence and experience requirements of the SEC and the NYSE's
current listing standards.
During the year ended December 31, 2002, the Audit Committee reviewed and
discussed the Company's annual and quarterly reports on Forms 10-K and 10-Q, the
Company's earnings releases and the Company's audited financial statements with
management and the Company's independent accountants, KPMG LLP, prior to their
release. The Committee discussed with the independent accountants the matters
required to be discussed by the Statement of Auditing Standards No. 61,
Communication with Audit Committee, relating to the conduct of the audit. The
Audit Committee has received the written disclosures and the letter from KPMG
LLP required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and has discussed with KPMG LLP 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, 2002 be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002
for filing with the SEC.
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 Mark A. Radzik
Roald Hoffmann Bernard Kauderer
Independent Auditors Fees
The following table sets forth the fees billed to the Company for the fiscal
years ended December 31, 2002 and 2001 for professional services rendered by the
Company's independent auditors, KPMG LLP:
December 31, December 31,
2002 2001
---- ----
Audit Fees(a).........................$.634,850... $ 477,000
Audit-Related Fees(b).................$...26,000.. $ -0-
Tax Fees(c) $ 284,850 $ 150,000
All other Fees(d).....................$.....-0-... $ -0-
----------
(a) Audit fees consisted principally of fees for the audit of the annual
financial statements and reviews of the condensed consolidated financial
statements included in the Company's quarterly reports on Form 10-Q and
review of registration statements.
(b) Audit-related fees consisted of the audit of the financial statements of
the Company's employee benefit plan.
(c) Includes fees for tax compliance, tax advice and tax planning.
(d) All other fees consisted of permitted non-audit services that do not fall
into any other specified categories.
Directors Compensation
During 2002, directors who are not employees of the Company or its subsidiaries
received an annual fee of $5,000, payable quarterly, equally in cash and Common
Stock and received $1,000 for each meeting of the Board of Directors attended.
Dr. Hoffmann was eligible to receive $6,000 for attending meetings of the
Executive Committee in 2002. In addition, Messrs. Smale, Kauderer and Dr.
Hoffmann received $15,000, $5,000 and $5,000, respectively, for service on other
committees of the Board of Directors in 2002 and Mr. Reid received $20,000 in
2002 for his role in obtaining approximately $7 million in financing in December
2001 for Hydro Med Sciences, Inc. Employees of the Company or its subsidiaries
do not receive additional compensation for serving as directors.
Effective January 1, 2003, the directors' annual compensation was increased to
$10,000, payable quarterly, equally in cash and Common Stock and $1,500 for each
meeting of the Board of Directors attended.
In February 2000, each of the then directors of the Company who was not an
employee of the Company or its subsidiaries was granted options under the GP
Strategies Millennium Cell, LLC Plan to purchase 10,955 shares of Millennium
Cell Inc. ("Millennium") common stock owned by the Company. During 2002, Mr.
Reid exercised 5,955 of his options and realized $19,108 of value, Mr. Smale
exercised 9,355 of his options and realized $8,794 of value, Admiral Kauderer
exercised 10,955 of his options and realized $16,761 of value and Dr. Hoffmann
exercised 10,955 of his options and realized $36,590 of value, in each case
based on the difference between the exercise price of the options and the market
price of Millennium common stock on the exercise date.
EXECUTIVE COMPENSATION
The following table and notes present the compensation paid by the Company
and subsidiaries to its Chief Executive Officer and the Company's other
executive officers. No stock appreciation rights ("SARs") were granted during
2002 nor have any SARs been granted at any time in prior years.
Summary Compensation Table
Annual Long Term
Compensation Compensation
Other
Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($) ($) ($) Options(#) ($)
----------------------------------------------- --------- ------------- -------------- ---------
Jerome I. Feldman.......... 2002 436,015 -- -- 100,000(1) 32,514(2)
Chairman and Chief 2001 413,915 -- -- -- 82,622(3)
Executive Officer 2000 425,000 -- -- -- 100,472(4)
Scott N. Greenberg......... 2002 239,393 100,000(1) 7,455(5)
President and Chief 2001 233,158 -- -- -- 7,121(6)
Financial Officer 2000 234,233 -- 65,560(7) -- 6,146(8)
Douglas E. Sharp........... 2002 280,618(9) -- 75,100(1) 5,310(10)
President, General Physics 2001 249,894(9) -- 100(1) 6,777(11)
Corportion ("GPC" 2000 239,114(9) -- 5,960(7) 5,000(1) 5,987(12)
Andrea D. Kantor.......... 2002 188,003 -- 50,000(1) 6,463(13)
Vice President and 2001 192,410 -- -- -- 6,841(14)
General Counsel 2000 189,920 -- 8,906(7) -- 6,012(15)
----------
(1) Consists of options to purchase shares of Common Stock granted
pursuant to the Company's 1973 Non-Qualified Stock Option Plan, as
amended (the "Plan").
(2) Includes a $4,489 matching contribution to the GP Retirement Saving
Plan (f/n/a the General Physics Corporation Profit Investment Plan)
(the "GP Plan"); $23,792 for split dollar life insurance premiums; and
$4,233 for group term life insurance premiums.
(3) Includes $50,000 for services rendered to GPC; a $4,589 matching
contribution to the GP Plan; $19,752 for split dollar life insurance
premiums; and $8,281 for group term life insurance premiums.
(4) Includes $62,500 for services rendered to GPC; a $5,250 matching
contribution to GP Plan; $24,441 for split dollar life insurance
premiums; and $8,281 for group term life insurance premiums.
(5) Includes a $6,270 matching contribution to the GP Plan; $568 for
split dollar life insurance premiums and $617 for group term life
insurance premiums.
(6) Includes a $5,985 matching contribution to the GP Plan; $533 for
split dollar life insurance premiums; and $603 group term life
insurance premiums.
(7) Grant date present values of options to purchase shares of common stock
of Millennium owned by the Company, which options were granted on
February 11, 2000 pursuant to the terms of the GP Strategies Millennium
Cell, LLC Plan. Such options have an exercise price of $.91 per share
(the Company's estimate of the fair market value on the date of grant
is $.70), were either fully exercisable on the date of grant or 50%
exercisable on the date of grant and 50% exercisable on the first
anniversary of the date of grant, and have an expiration date, as
amended, of December 31, 2003. Grant date present values were
determined using the Black-Scholes option pricing model, using the
following assumptions: (a) time of exercise is May 11, 2002, (b) stock
price volatility is 75%, (c) the risk-free rate of return is 5.75%, and
(d) the dividend yield is 0%. No discount was applied to the option
values to account for the facts that the options are not freely
transferable and are subject to the risk of forfeiture. Includes
options to purchase 241,919, 21,910 and 32,865 shares of Millennium
Cell common stock ("Millennium Common Stock") owned by the Company,
granted to Mr. Greenberg, Mr. Sharp and Ms. Kantor, respectively.
(8) Includes a $5,250 matching contribution to the GP Plan; $494 for
split dollar life insurance premiums; and $402 group term life
insurance premiums.
(9) Paid by GPC for services rendered solely to GPC.
(10) Includes a $4,467 matching contribution to the GP Plan; $555 for split
dollar life insurance premiums paid by GPC; and $288 for group term
life insurance premiums.
(11) Includes a $5,985 matching contribution to the GP Plan; $492 for split
dollar life insurance premiums paid by GPC; and $300 for group term
life insurance premiums.
(12) Includes a $5,250 matching contribution to the GP Plan; $437 for split
dollar life insurance premiums paid by GPC; and $300 for group term
life insurance premiums.
(13) Includes a $5,407 matching contribution to the GP Plan; $439 for
split dollar life insurance premiums; and $617 for group term life
insurance premiums.
(14) Includes a $6,043 matching contribution to the GP Plan; $396 for
split dollar life insurance premiums; and $402 for group term life
insurance premiums.
(15) Includes a $5,250 matching contribution to the GP Plan; $360 for
split dollar life insurance premiums; and $402 for group term life
insurance premiums.
Option Grants in 2002
The following table and notes contain information concerning the grant
of stock options in 2002 pursuant to the Plan to the named executive officers.
Potential Realizable
Individual Grants Value at Assumed
Percent of Annual Rates of
Total Options Stock Price
Options Granted to Exercise or Appreciation for
Granted Employees in Base Price Expiration Option Term(2)
Name (#)(1) 2002 ($/Sh) Date 5%($) 10%($)
---- ------ ---- ------ ---- ----- ------
Jerome I. Feldman.................100,000 12 4.00 2/05/07 110,513 244,404
Scott N. Greenberg................100,000 12 4.00 2/05/07 110,513 244,404
Douglas E. Sharp...................75,100 9 4.40 6/25/07 91,173 201,468
Andrea D. Kantor...................50,000 6 4.00 2/05/07 55,256 122,102
(1) Options were granted at 100% of fair market value on the date of grant.
(2) The dollar amounts are the results of calculations of assumed annual rates
of stock price appreciation from the exercise prices on the dates of the
grant of the option awards to the dates of the exercise of such options of
5% and 10%, the two assumed rates being required under the rules of the
SEC. Based on these assumed annual rates of stock appreciation of 5% and
10%, the Company's stock price at February 5, 2007, is projected to be
$5.105 and $6.442, respectively, and at June 25, 2007 is projected to be
$5.616 and $7.086, respectively. These assumptions are not intended to
forecast future appreciation of the Company's stock price. Indeed, the
Company's stock price may increase or decrease in value over the time
period set forth above. The potential realizable value computation does not
take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.
Aggregate Option Exercises in 2002
And Fiscal Year-End Option Values
The following table and notes contain information concerning the exercise
of stock options under the Plan during 2002 and unexercised options under the
Plan held at the end of 2002 by the named executive officers. Unless otherwise
indicated, options are to purchase shares of Common Stock.
Shares Exercisable/Unexercisable Value of Unexercised
Acquired on Value Options at In-the-Money Options at
Exercise Realized December 31, 2002(#) December 31, 2002($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ --- --- ----------- -------------------------------------------
Jerome I. Feldman. --0-- --0-- 100,289 53,334 69,999 35,001
Scott N. Greenberg --0-- --0-- 146,666 53,334 69,999 35,001
Douglas E. Sharp.. --0-- --0-- 146,628 92,572 9,939 39,000
Andrea D. Kantor.. --0-- --0-- 45,332 19,668 34,999 17,501
----------
(1) Calculated based on $5.05, which was the closing price of the Common Stock
as reported by the NYSE on December 31, 2002.
During 2002, Douglas E. Sharp exercised 10,955 of his options granted under
the GP Strategies Millennium Cell, LLC Plan and realized $26,959 of value, based
on the difference between the exercise price of the options and the market price
of Millennium common stock on the exercise date.
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for administering the
compensation program for the executive officers of the Company. The Compensation
Committee consists of Gordon Smale and Harvey P. Eisen.
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 stock options and matching contributions to the GP Plan. 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 2002, the Company also made
matching contributions to the GP Plan for those participants.
Mr. Feldman's 2002 Compensation
Mr. Feldman's compensation in 2002 was determined principally by the terms
of his employment agreement with the Company, which was negotiated with the
Compensation Committee of the Board of Directors, and by the terms of the
incentive compensation agreement described below. Effective June 1, 1999, the
Company and Mr. Feldman entered into a five-year employment agreement, which
agreement was extended until May 31, 2007, as described below. In considering
Mr. Feldman's compensation and the terms of the employment agreement and the
incentive compensation agreement, the Compensation Committee considered Mr.
Feldman's significant contribution to the strategic redirection of the Company
over the last several years and his role with respect to the divestiture of the
Company's non-core assets. Mr. Feldman was instrumental in achieving a reduction
of the Company's debt outstanding under its revolving credit facility from
approximately $49,500,000 at December 31, 2000 to approximately $22,100,000 at
December 31, 2002, primarily through the receipt of proceeds from the sale of
the Company's Millennium common stock. In addition, Mr. Feldman led management's
efforts in securing a new three-year $40 million revolving credit agreement in
December 2001.
Mr. Feldman was not eligible to receive any incentive payment under the
terms of the incentive compensation agreement during 2002.
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.
Gordon Smale Harvey P. Eisen
Employment Agreements
Jerome I. Feldman. As of June 1, 1999, Jerome I. Feldman and the Company
entered into an employment agreement pursuant to which Mr. Feldman is employed
as Chief Executive Officer of the Company until May 31, 2004, unless sooner
terminated. The Employment Agreement also provides that Mr. Feldman is employed
as President of the Company, but effective June 12, 2001, Mr. Feldman resigned
as President of the Company and Scott 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.
Commencing June 1, 1999, Mr. Feldman's base annual salary is $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
will be 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. The Incentive Agreement
provides that Mr. Feldman is eligible to receive from the Company up to five
payments in an amount equal to $1 million each on the first date that each of
the following events occurs: (1) the closing price of the Common Stock equals or
exceeds, for at least 10 consecutive trading days, $5.40; provided that if the
first payment does not become payable prior to May 3, 2004, the first payment
shall be paid on the date, if any, that the second payment is paid; (2) the
closing price of the Common Stock equals or exceeds, for at least 10 consecutive
trading days, $6.30; provided that if the second payment does not become payable
prior to May 3, 2006, the second payment shall be paid on the date, if any, that
the third payment is paid; (3) the closing price of the Common Stock equals or
exceeds, for at least 10 consecutive trading days, $7.20; (4) the closing price
of the Common Stock equals or exceeds, for at least 10 consecutive trading days,
$8.10; and (5) the closing price of the Common Stock equals or exceeds, for at
least 10 consecutive trading days, $9.00. To the extent there are any
outstanding loans from the Company to Mr. Feldman at the time an incentive
payment is payable, the Company will set off the payment of such incentive
payment against the outstanding principal and interest under such loans. The
Incentive Agreement will terminate on the earlier to occur of (a) May 3, 2007
and (b) the date of termination of Mr. Feldman's employment with the Company
(other than termination by (i) the Company in breach of Mr. Feldman's Employment
Agreement or (ii) Mr. Feldman for Good Reason). Each incentive payment is
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
June 11, 2003 and July 23, 2003, Mr. Feldman earned an incentive payment of $1
million each. 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 must be given prior to December 1, 2003, and a deferral notice with
respect to any incentive payment earned on or after December 31, 2003 must be
given at least five business days prior to the date that such incentive payment
is earned. 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 of Fleet Bank minus 1%, which is 1% less than the interest rate accrued on
the Company's outstanding loans to Mr. Feldman. See "Certain Transactions."
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,
the market price on the date of grant. Such options vested 20% immediately and
20% on each June 1 commencing June 1, 2000 and expire 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, 2004, 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 amended 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 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.
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.
Scott N. Greenberg. As of July 1, 1999, Scott N. Greenberg and the
Company entered into an employment agreement pursuant to which Mr. Greenberg is
employed as the Executive Vice President of the Company. Effective June 12, 2001
Mr. Greenberg was elected President of the Company. Unless sooner terminated
pursuant to its terms, the employment agreement terminates on June 30, 2004,
provided that if the employment agreement has not been terminated prior to June
30, 2002, the employment agreement is 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 has not been terminated prior to June 30, 2005, the
employment agreement is extended on June 30, 2005 to June 30, 2008.
Commencing July 1, 1999, Mr. Greenberg's base annual salary is
$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, however Mr. Greenberg did not
receive a bonus for the year 2002 because of GPC's financial performance.
Pursuant to the employment agreement entered into in 1999, the Company has
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. Such options vest 20% immediately
and 20% on each July 1 commencing July 1, 2000 and expire 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 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
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
terminates 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.
Commencing July 1, 1999, Mr. Sharp's base annual salary is $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,
however, Mr. Sharp did not receive a bonus for the year 2002 because of GPC's
financial performance. Pursuant to the employment agreement entered into in
1999, the Company has 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. Such options vest 20%
immediately and 20% on each July 1 commencing July 1, 2000 and expire 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.
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 is employed as
the Vice President and General Counsel of the Company. Unless sooner terminated
pursuant to its terms, the employment agreement terminates 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.
Commencing May 1, 2001, Ms. Kantor's base annual salary is $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 did
not receive a bonus for the year 2002.
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.
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, 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.
Certain Transactions
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 937,500 warrants ("GP Warrants"), each entitling the holder thereof
to purchase (subject to adjustment) one share of the Company's Common Stock. The
aggregate purchase price for the Notes and GP Warrants was $7,500,000. Gabelli
Asset Management, Inc. beneficially owns approximately 8.7% of the Company's
common stock based on a Schedule 13D filed with the SEC on August 20, 2003. "See
Principal Stockholders."
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 property located in Pawling, New York. At any time
that less than $1,875,000 principal amount of Notes are outstanding, the Company
may defease the obligations secured by the mortgage and obtain a release of the
lien of the mortgage by depositing with an agent for the Noteholders bonds or
government securities with an investment grade rating by a nationally recognized
rating agency which, without reinvestment, will provide cash on the maturity
date of the Notes in an amount not less than the outstanding principal amount of
the Notes.
The GP Warrants have an exercise price of $8.00 per share and are
exercisable at any time until August 2008. The exercise price may be paid in
cash, by delivery of Notes, or a combination of the two. The GP Warrants contain
anti-dilution provisions for stock splits, reorganizations, mergers, and similar
transactions. The Company has agreed to file a registration statement to
register the resale of the shares of the Common Stock issuable on exercise of
the GP Warrants, and to certain other registration rights in favor of the
holders of the GP Warrants.
In July 2002, the Company announced that it was actively considering a
spin-off of certain of its non-core assets, including MXL Industries, Inc.
("MXL"), into a separate corporation named National Patent Development
Corporation ("NPDC"). In the spin-off, it is contemplated that each holder of
the Company's Common Stock will receive one share of NPDC common stock for each
share of the Company's Common Stock or Class B Stock held. The Note and Warrant
Purchase Agreement provides that, on completion of the spin-off, NPDC will issue
warrants ("NPDC Warrants") to the holders of the GP Warrants. The NPDC Warrants
will entitle the holders to purchase, in the aggregate, a number of shares of
NPDC common stock equal to 8% of the number of shares outstanding at completion
of the spin-off, subject to reduction for any GP Warrants exercised prior to the
spin-off. The NPDC Warrants will be issued to the holders of the GP Warrants on
the record date for the spin-off, and allocated among them pro-rata based on the
respective number of GP Warrants held by them on such date. The exercise price
of the GP Warrants will be adjusted to take into account the spin-off and
issuance of the NPDC Warrants by multiplying the exercise price of the GP
Warrants in effect immediately prior to the spin-off by a fraction, the
numerator of which is the average closing price of the Company's Common Stock
over the 20 consecutive trading days commencing on the record date of the
spin-off, and the denominator is the sum of the average closing prices of the
Company's Common Stock and NPDC common stock over the same period (assuming the
issuance in the spin-off of one share of NPDC common stock for each share of the
Company's Common Stock or Class B Stock held). The exercise price of the NPDC
Warrants will be 160% of the average closing price of the NPDC common stock over
the 20 consecutive trading days commencing on the record date of the spin-off.
The NPDC Warrants will be exercisable at any time after their exercise price is
calculated through August 2008. The NPDC Warrants will have similar
anti-dilution provisions similar to those contained in the GP Warrants. NPDC has
agreed to provide the holders of the NPDC Warrants with registration rights
similar to those provided by the Company to the holders of the GP Warrants.
In connection with the spin-off, the Company intends to contribute the
Pawling property, subject to the mortgage, to MXL. MXL will assume 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
such property). If there is a foreclosure on the mortgage for payment of the
Notes, the Company has agreed to indemnify MXL for loss of the value of the
property.
The spin-off is still subject to certain conditions, including certain
SEC filings. If the spin-off does not occur by January 2005, the Noteholders
will have the right to require the Company to redeem the Notes. There can be no
assurance that the spin-off will be consummated.
On October 19, 2001, the Company sold 300,000 shares of Class B Stock
(the "Bedford Shares") of the Company for an aggregate purchase price of
$900,000 to Bedford Oak in a private placement transaction. Upon the disposition
of any of the Bedford Shares (other than to an affiliate of Bedford Oak who
agrees to be bound by the provisions of the Bedford Oak Agreement) or at the
request of the Board of Directors of the Company, Bedford Oak is required to
exercise the right to convert all of the Bedford Shares then owned by Bedford
Oak into an equal number of shares of Common Stock of the Company (the "Bedford
Underlying Shares"). The Company is required, at its expense, to file a
registration statement (the "Registration Statement") to register under the
Securities Act the resale by Bedford Oak of the Underlying Shares. On any date
prior to October 19, 2003 during which the Registration Statement is not
effective under the Securities Act, Bedford Oak has the right to require the
Company to purchase from Bedford Oak all, but not less than all, of the Bedford
Shares and Bedford Underlying Shares then held by Bedford Oak for a purchase
price (the "Put Price") equal to the product of (i) the number of Bedford Shares
and Bedford Underlying Shares owned by Bedford Oak and (ii) the current market
price per share of Common Stock of the Company. The Company may pay the Put
Price by delivering to Bedford Oak, at the option of the Company, (i) cash, (ii)
shares of Millennium common stock owned by the Company with a current market
price equal to the Put Price, or (iii) a combination of cash and Millennium
common stock.
Pursuant to an agreement dated May 3, 2002, the Company sold to Bedford
Oak in a private placement transaction 1,200,000 shares of Common Stock (the
"Bedford Common Shares") of the Company for an aggregate purchase price of
$4,200,000. The Company is required, at its expense, to file, not later than
September 30, 2002, a registration statement to register under the Securities
Act the resale by Bedford Oak of the Bedford Common Shares. Harvey Eisen, the
managing member of Bedford Oak Advisors, LLC, the investment manager of Bedford
Oak, was elected a director of the Company in July 2002.
Pursuant to an agreement dated May 3, 2002, the Company sold to
Marshall Geller, a director of the Company, in a private placement transaction
100,000 shares of Common Stock (the "Geller Common Shares") of the Company for
an aggregate purchase price of $350,000. The Company is required, at its
expense, to file, not later than September 30, 2002, a registration statement to
register under the Securities Act the resale by Mr. Geller of the Geller Common
Shares.
Pursuant to an agreement dated May 3, 2002 (the "EGI Agreement"), the
Company sold to EGI in a private placement transaction 1,000,000 shares of
Common Stock (the "EGI Common Shares") of the Company for an aggregate purchase
price of $3,500,000 and 300,000 shares of Class B Stock (the "EGI Class B
Shares") of the Company for an aggregate purchase price of $1,260,000.
Until such time as EGI has disposed of more than 50% of the aggregate
number of EGI Common Shares and EGI Class B Shares, EGI is entitled to designate
one representative to serve as a member of the Board, subject to the approval of
the Company, which approval shall not be unreasonably denied or delayed. Mark
Radzik, a designee of EGI, was elected a director of the Company in July 2002.
Upon the disposition of any of the EGI Class B Shares (other than to an
affiliate of EGI or to a transferee approved by the Board who in each case
agrees to be bound by the provisions of the EGI Agreement), EGI is required to
exercise the right to convert all of the EGI Class B Shares then owned by EGI
into an equal number of shares of Common Stock (the "EGI Underlying Shares") of
the Company. Until May 3, 2003, the Company had the right to purchase all, but
not less than all, of the EGI Class B Shares then owned by EGI at a price per
share equal to the greater of (i) the 90 day trailing average of the closing
prices of the Common Stock and (ii) $5.25. If the Company exercised such right,
EGI had the right to sell to the Company all or part of the EGI Common Shares
then owned by EGI at a price per share of $3.50. If EGI exercised such right and
the Company did not then have adequate liquidity, the repurchase of such EGI
Common Shares would have taken place over a period of 21 months. On April 14,
2003, the Company irrevocably waived its right to exercise such call option with
respect to the EGI Class B Shares .
The Company was required, at its expense, to file, not later than
August 1, 2002, a registration statement to register under the Securities Act
the resale by EGI of the EGI Common Shares and the EGI Underlying Shares.
On August 13, 2002, a registration statement covering the resale of the
Bedford Underlying Shares, the Bedford Common Shares, the Geller Common Shares,
the EGI Common Shares and the EGI Underlying Shares was declared effective by
the SEC.
The Company and EGI have entered into an advisory services agreement
providing that, to the extent requested by the Company and deemed appropriate by
EGI, EGI shall assist the Company in developing, identifying, evaluating,
negotiating, and structuring financings and business acquisitions. The Company
has agreed to pay EGI a transaction fee equal to 1% of the proceeds received by
the Company in a financing, or of the consideration paid by the Company in a
business acquisition, in respect of which EGI has provided material services. To
date, EGI has not provided such services to the Company and no such fee has been
paid.
Until November 3, 2003, EGI has agreed not to (a) effect, propose to
effect, or participate in (i) any acquisition of any assets of the Company or
any of its subsidiaries; (ii) any tender or exchange offer, merger, or other
business combination involving the Company or any of its subsidiaries not
approved by the Board; (iii) any recapitalization, restructuring, liquidation,
dissolution, reverse stock split, or other extraordinary transaction with
respect to the Company or any of its subsidiaries not approved by the Board; or
(iv) any solicitation of a proxy to vote any voting securities of the Company;
(b) form, join, or participate in a group with non-affiliates; (c) otherwise
seek to control or influence the management, Board, or policies of the Company,
except through EGI's designee on the Board in his or her capacity as a member of
the Board; (d) take any action which might obligate the Company to make a public
announcement regarding any of the types of matters set forth in (a) above; or
(e) enter into any discussions or arrangements with any third party with respect
to any of the foregoing.
On April 1, 2002, Jerome I. Feldman and the Company entered into an
incentive compensation agreement pursuant to which Mr. Feldman is 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 increasing
specified levels over periods of at least 10 consecutive trading days. On June
11, 2003 and July 23, 2003, Mr. Feldman earned an incentive payment of $1
million each, which payments will be made in December 2003. To the extent there
are any outstanding loans from the Company to Mr. Feldman at the time an
incentive payment is payable, the Company will set off the payment of such
incentive payment first against the outstanding accrued interest under such
loans and next against any outstanding principal. See "Employment Agreement -
Jerome I. Feldman".
The Company has made loans to Jerome I. Feldman, the Chairman of the
Board and Chief Executive Officer of the Company. Mr. Feldman 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 are secured by the
purchased Class B Stock and certain other assets. The largest aggregate amount
of indebtedness (including principal and accrued interest) outstanding since
January 1, 2002 was $5,243,288. As of September 15, 2003, the aggregate amount
of indebtedness (including principal and accrued interest) outstanding under the
loan, after giving effect to the applications of the two $1 million incentive
payments to Mr. Feldman described above, was $3,287,327.
On July 1, 2002, the Company made a loan to Douglas Sharp, the
President of GPC in the principal amount of $150,000 in connection with Mr.
Sharp's relocation. The loan bears interest at the prime rate of Fleet Bank. The
largest aggregate amount outstanding under the loan as of January 1, 2002 was
$150,000. As of September 15, 2003, the aggregate amount of indebtedness
outstanding under the loan was $132,260.
APPROVAL OF THE COMPANY'S 2003 INCENTIVE STOCK PLAN
The Board of Directors has adopted the GP Strategies Corporation's 2003
Incentive Stock Plan (the "2003 Plan") and recommends that stockholders approve
the 2003 Plan at the Annual Meeting. As of September 15, 2003, approximately
660,000 shares of the Company's Common Stock are available for grant under the
Company's existing Non-Qualified Stock Option Plan. (the "Plan"). While this
Plan will remain in place, it does not provide sufficient shares for
market-competitive grant levels.
The 2003 Plan is integral to the Company's compensation strategies and
programs and will maintain the flexibility that the Company needs to keep pace
with its competitors and effectively recruit, motivate and retain the caliber of
employees essential for achievement of the Company's success. The Board of
Directors believes that adoption of the 2003 Plan will enhance the long-term
stockholder value of the Company by offering participants opportunities to
acquire a proprietary interest in the Company and to link their interests and
efforts to the long-term interests of the Company's stockholders.
The 2003 Plan will permit awards of incentive stock options,
nonqualified 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 or Class B Capital Stock. Stockholder approval of the
2003 Plan will permit performance-based awards available under the 2003 Plan to
qualify for deductibility under Section 162(m) of the Internal Revenue Code.
Awards and grants under the 2003 Plan are referred to collectively as
"Awards." Those eligible for Awards under the 2003 Plan include any employee,
officer or director of the Company or any entity that is directly or indirectly
controlled by the Company. Consultants, agents, advisors and independent
contractors who provide services to the Company are also eligible to receive
Awards. Persons who receive Awards are referred to as "Participants."
A summary of the principal features of the 2003 Plan is provided below,
but it is qualified in its entirety by reference to the full text of the 2003
Plan that is published in this proxy statement as Appendix B.
Shares Available for Issuance
The aggregate number of shares of Common Stock or Class B Capital Stock
available for issuance under the 2003 Plan will not exceed 2,000,000, of which
not more than 500,000 shares may be shares of Class B Capital Stock. No
Participant may receive in any one calendar year Awards relating to more than
150,000 shares of Company stock.
If there is any change in Company stock by reason of any stock split,
stock dividend, spin-off, recapitalization, merger, consolidation, combination,
or exchange of shares, distribution to stockholders other than a normal cash
dividend or other change in the Company's corporate or capital structure, the
maximum number and kind of securities (i) available for issuance under the 2003
Plan, (ii) available for issuance as incentive stock options, (iii) that may be
subject to Awards received by any Participant in any one calendar year, (iv)
that may be subject to different types of Awards and (v) that are subject to any
outstanding Award and the price of each security may be equitably adjusted by
the Compensation Committee in its discretion.
Shares covered by an Award will not count against the shares available
for issuance under the 2003 Plan until they are actually issued and delivered to
a Participant. If an Award granted under the 2003 Plan lapses, expires,
terminates or is forfeited, surrendered or canceled without having been fully
exercised or without the issuance of all of the shares subject to the Award, the
shares covered by such Award will again be available for use under the 2003
Plan. In addition, shares that are (i) tendered by a Participant or retained by
the Company as payment for the purchase price of an Award or to satisfy tax
withholding obligations, (ii) covered by an Award that is settled in cash, or
(iii) reacquired by the Company on the open market using cash proceeds received
by the Company from the exercise of Stock Options, will be available for
issuance under the 2003 Plan.
Administration
The 2003 Plan will be administered by the Compensation Committee of the
Board of Directors.
Awards
Performance Share and Performance Unit Awards
The Committee may grant Awards of performance shares and/or performance
units to Participants. Each Award of performance shares will entitle the
Participant to a payment in the form of shares of Company stock upon the
attainment of specified performance goals. Each Award of performance units will
entitle the Participant to a cash payment upon the attainment of specified
performance goals. No Participant who is a "covered employee" for purposes of
Section 162(m) of the Code may earn more than $500,000 pursuant to a performance
unit award in any one calendar year. The performance units may be paid in
Company stock, at the discretion of the Committee.
Restricted Stock and Stock Unit Awards
Restricted stock consists of shares of Company stock that are
transferred or sold by the Company to a Participant, but are subject to
substantial risk of forfeiture and to restrictions on their sale or other
transfer by the Participant. Stock Units are the right to receive shares of
Company stock, cash or a combination of shares and cash at a future date in
accordance with the terms of such grant upon the attainment of certain
conditions specified by the Committee. Upon a Participant's satisfaction of any
terms, conditions and restrictions, as determined by the Committee, the shares
covered by a restricted stock Award will be transferred to the Participant, and
stock units will be paid in cash, shares of Company stock or a combination of
both. The Committee may determine whether restricted stock or stock unit Awards
accrue dividends or dividend equivalents with respect to the shares of Company
stock underlying any Award.
Stock Options
The Committee may grant stock options to Participants either in the
form of incentive stock options or nonqualified stock options. The exercise
price of any shares subject to a stock option may be no less than 100% of the
fair market value of the shares for the date the stock option is granted. For
purposes of the 2003 Plan, for Company stock traded on the New York Stock
Exchange or another national exchange or on the Nasdaq market, fair market value
means the closing price of such stock on the date the stock option is granted
(or, if no shares were traded that day, on the last sale date, provided it was
within a reasonable period of time before the grant date); for Company stock
traded on the over-the-counter market, fair market value means the average of
the closing bid and asked prices on such date (or, if no shares were traded that
day, on the last sale date, provided it was within a reasonable period of time
before the grant date); for Company stock that is not listed on the New York
Stock Exchange or another national exchange or on the Nasdaq market, and is not
traded in the over-the-counter market (or if it is so listed or traded, but no
shares were traded within a reasonable period of time before the grant date)
fair market value is determined by the Committee from all relevant available
facts. The term of a stock option cannot exceed ten years. At the time of grant,
the Committee in its sole discretion will determine when stock options are
exercisable and when they expire.
Performance Criteria
Awards of performance shares, performance units, restricted stock,
stock units and other Awards under the 2003 Plan may be made subject to the
attainment of performance goals relating to one or more business criteria within
the meaning of Section 162(m) of the Code. These business criteria are profits
(including, but not limited to, profit growth, net operating profit or economic
profit); profit-related return ratios; return measures (including, but not
limited to, return on assets, capital, equity or sales); cash flow (including,
but not limited to, operating cash flow, free cash flow or cash flow return on
capital); earnings (including, but not limited to, net earnings, earnings per
share, or earnings before or after taxes); net sales growth; net income (before
or after taxes, interest, depreciation and/or amortization); gross or operating
margins; productivity ratios; share price (including, but not limited to, growth
measures and total stockholder return); expense targets; margins; operating
efficiency; customer satisfaction; and working capital targets. Any performance
criteria may be used to measure the performance of the Company as a whole or any
business unit of the Company. Any performance criteria may include or exclude
nonrecurring items, which are items deemed by the Committee not to be reflective
of the Company's core operating performance, including exogenous events,
acquisitions, divestitures, changes in accounting principles or extraordinary
items determined under generally accepted accounting principles.
Amendment and Termination of the 2003 Plan
The Board or the Compensation Committee may amend the 2003 Plan, except
that if any applicable statute, rule or regulation, including those of any
securities exchange, requires stockholder approval with respect to any amendment
of the 2003 Plan, then to the extent so required, stockholder approval will be
obtained. The 2003 Plan specifically provides that the Committee may not,
without the prior approval of the Company's stockholders, cancel any outstanding
Option for the purpose of reissuing the Option to the Participant at a lower
exercise price or reduce the exercise price of an outstanding Option. Unless
sooner terminated by the Board, the 2003 Plan will terminate ten years from the
date stockholders approve the 2003 Plan.
Federal Income Tax Consequences
The Company has been advised by counsel that the material tax
consequences as they relate to Awards under the 2003 Plan to the Company and to
its employees who are U.S. citizens under current U.S. federal income tax laws
are as follows:
Performance Shares, Restricted Stock and Stock Units
A Participant who receives an Award of performance shares, restricted
stock or stock units does not generally recognize taxable income at the time the
Award is granted. Instead, the Participant recognizes ordinary income in the
first taxable year in which his or her interest in the shares underlying the
Award becomes either (i) freely transferable or (ii) no longer subject to
substantial risk of forfeiture. The amount of taxable income is equal to the
fair market value of the shares less the cash, if any, paid for the shares.
A Participant may elect to recognize income at the time he or she
receives restricted stock in an amount equal to the fair market value of the
restricted stock (less any cash paid for the shares) on the date the Award is
granted.
The Company receives a compensation expense deduction in an amount
equal to the ordinary income recognized by the Participant in the taxable year
in which restrictions lapse (or in the taxable year of the Award if, at that
time, the Participant had filed a timely election to accelerate recognition of
income).
Incentive Stock Options
A Participant does not generally recognize taxable income upon the
grant or upon the exercise of an incentive stock option. Upon the sale of shares
subject to an incentive stock option, the Participant recognizes income in an
amount equal to the difference, if any, between the exercise price of the shares
and the fair market value of those shares on the date of sale. The income is
taxed at long-term capital gains rates if the Participant has not disposed of
the stock within two years after the date of the grant of the incentive stock
option and has held the shares for at least one year after the date of exercise
and the Company is not entitled to a federal income tax deduction. The holding
period requirements are waived when a Participant dies.
The exercise of an incentive stock option may in some cases trigger
liability for the alternative minimum tax.
If a Participant sells shares subject to an incentive stock option
before having held them for at least one year after the date of exercise and two
years after the date of grant, the Participant recognizes ordinary income to the
extent of the lesser of (i) the gain realized upon the sale; or (ii) the
difference between the exercise price and the fair market value of the shares on
the date of exercise. Any additional gain is treated as long-term or short-term
capital gain depending upon how long the Participant has held the shares prior
to disposition. In the year of disposition, the Company receives a federal
income tax deduction in an amount equal to the ordinary income that the
Participant recognizes as a result of the disposition.
Nonqualified Stock Options
A Participant does not recognize taxable income upon the grant of a
nonqualified stock option. Upon the exercise of a nonqualified stock option, the
Participant recognizes ordinary income to the extent the fair market value of
the shares received upon exercise of the nonqualified stock option on the date
of exercise exceeds the exercise price. The Company receives an income tax
deduction in an amount equal to the ordinary income that the Participant
recognizes upon the exercise of the nonqualified stock option.
General
The Company may not deduct compensation of more than $1 million that is
paid to an individual who, on the last day of the taxable year, is either the
Company's chief executive officer or is among one of the four other most
highly-compensated officers for that taxable year. The limitation on deductions
does not apply to certain types of compensation, including qualified
performance-based compensation. The Company believes that Awards in the form of
performance stock, performance units, performance-based restricted stock,
performance-based stock units and stock options may qualify as performance-based
compensation and, as such, be exempt from the $1 million limitation on
deductible compensation.
A new plan benefits table, as described in the federal proxy rules, is
not provided because no grants have been made under the 2003 Plan and all Awards
are discretionary. On September 25, 2003, the closing price of the Company's
common stock was $7.10. As of that date, approximately 1,200 persons were
eligible to receive Awards under the 2003 Plan.
Stockholder Approval
In order to be approved, the 2003 Plan must receive the affirmative
vote of a majority of shares present in person or by proxy and entitled to vote
at the Annual Meeting.
The Board of Directors Recommends a Vote FOR Approval of the GP
Strategies Corporation 2003 Incentive Stock Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following is information as of September 15, 2003 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. For a
description of the material terms of the Company's Non-Qualified Stock Option
Plan, see Note 11 to the Notes to the Consolidated Financial Statements included
in the Company's Annual Report for the year ended December 31, 2002.
Plan category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding options, future issuance under
outstanding options, warrants and rights equity compensation
warrants and rights plans (excluding
securities reflected in
column (a))
(a) (b) (c)
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
Equity compensation
plans approved by
security holders - - -
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
Equity compensation
plans not approved by
security holders 2,663,631(i) $6.45(i) 660,160(ii)
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
Total 2,663,631 $6.45 660,160
-------------------------- -- ----------------------- -- ---------------------- -- -------------------------
(i) Does not include warrants to purchase 300,000 shares of Common Stock issued
to a financial consulting firm at an exercise price of
$4.60 per share.
(ii) Does not include shares of Common Stock that may be issued to directors of
the Company as director's fees.
PERFORMANCE GRAPH
The following table compares the performance of the Common Stock for the
periods indicated with the performance of the NYSE Market Index and the MG Group
Index/Education and Training Services assuming $100 were invested on December
31, 1997 in the Common Stock, the NYSE Market Index and the MG Group
Index/Education and Training Services. Values are as of December 31 of the
specified year assuming that all dividends were reinvested:
Compare 5-Year Cumulative Total Return
among GP Strategies Corp.,
NYSE Market Index AND MG Group Index
[LINE GRAPH]
ASSUMES $100 INVESTED ON JAN. 1, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2002
Base
Period
Company/Index Name Dec 1997 Dec 1998 Dec 1999 Dec 2000 Dec 2001 Dec 2002
--------------------------- -------------------------------------------------------------
GP STRATEGIES $ 100.00 $ 108.11 $ 44.14 $ 31.08 $ 27.39 $ 36.40
NYSE MARKET INDEX 100.00 112.45 72.45 115.31 126.58 134.79
MG GROUP INDEX/EDUCATION
AND TRAINING SERVICES 100.00 118.99 130.30 133.40 121.52 99.27
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 NYSE, and to furnish such reports to the Company.
Based solely on a review of copies of such reports for 2002, the
Company believes that during 2002, all reports applicable to its officers,
directors and greater than 10% beneficial owners were filed on a timely basis,
except that Admiral Kauderer filed one late report and Douglas Sharp filed two
late reports.
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS AUDITORS
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of KPMG LLP to serve as independent auditors for the Company
for the year ending December 31, 2003. KPMG LLP has audited the accounts of the
Company since 1970. KPMG LLP 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
LLP 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 LLP 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 2004 proxy
statement provided they are received by the Company no later than June 4, 2004
(or, if the date of the 2004 annual meeting of stockholders is changed by more
then 30 days from the date of the 2003 Annual Meeting of Stockholders, a
reasonable time before the Company begins to print and mail its proxy materials
for the 2004 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 July 31, 2004 with
respect to the 2004 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.
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 or
telegraph 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
A-4
APPENDIX A
AMENDED 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 therefore 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 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 all
times, beginning as soon as practicable after adoption of this Charter, at least
one member 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 of
the independent auditors, and discharge or replace the independent
auditors.
o The Audit Committee shall approve in advance the provision by the
independent auditors of all services to the Company whether or not
related to the audit. 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 assure
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 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 adversely
affect the adequacy of internal controls and the financial
reporting process 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 shall review any significant reports to
management provided by the internal auditing department, if any,
and management's responses.
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 information.
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 Company policies and procedures
with respect to Company transactions in which officers or
directors have an interest; where appropriate, including when
their review is requested by management or the independent
auditors, review policies and procedures with regard to officer
use of corporate assets and consider the results of any review of
these areas by the independent auditors.
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 obtain reports from management and the
independent auditors that the Company's foreign affiliates and
subsidiaries, if any, are in conformity with applicable legal
requirements.
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 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
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 approved by the Board of Directors and made effective on September 18, 2003
Appendix B
GP STRATEGIES CORPORATION
2003 INCENTIVE STOCK PLAN
Section 1. Purpose of the Plan
The purpose of this 2003 Incentive Stock Plan (the "Plan") is to attract, retain
and motivate employees, officers, directors, consultants, agents, advisors and
independent contractors of GP Strategies Corporation (the "Company") by
providing them the opportunity to acquire a proprietary interest in the Company
and to link their interests and efforts to the long-term interests of the
Company's stockholders.
Section 2. Definitions
As used in the Plan,
"Award" means any Option, Stock Appreciation Right, Restricted Stock,
Stock Unit, Performance Share, Performance Unit, dividend equivalent, cash-based
award or other incentive payable in cash or in shares of Company Stock as may be
designated by the Committee from time to time.
"Board" means the Board of Directors of the Company.
"Class B Stock shall mean the Class B Capital Stock, par value $.01 per
share of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean the Compensation Committee of the Board, which
Committee shall consist solely of two or more outside directors within the
meaning of Treas. Reg. ss. 1.163-27(e)(3).
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means GP Strategies Corporation, a Delaware corporation.
"Company Stock" shall mean the Common Stock or the Class B Stock.
"Covered Employee" means a "covered employee" as that term is defined
in Section 162(m)(3) of the Code or any successor provision.
"Effective Date" has the meaning set forth in Section 18.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" of Company Stock of either class, as of a date of
determination, shall mean the following:
(a) Class Listed and Shares Traded On Date Of Determination.
If such class of Company Stock is listed and traded on a national securities
exchange (as such term is defined by the Exchange Act) or on the Nasdaq Stock
Market on the date of determination, the Fair Market Value per share shall be
the last sale price of a share of such class of Company Stock on the applicable
national securities exchange or Nasdaq Stock Market on the date of determination
at the close of trading on such date. If such class of Company Stock is traded
in the over-the-counter market, the Fair Market Value per share shall be the
average of the closing bid and asked prices on the date of determination.
(b) Class Listed But No Shares Traded On Date Of
Determination. If such class of Company Stock is listed on a national securities
exchange or on the Nasdaq Stock Market but no shares of such class of Company
Stock are traded on the date of determination but there were shares traded on
dates within a reasonable period before the date of determination, the Fair
Market Value shall be the last sale price of such class of Company Stock on the
most recent trade date before the date of determination at the close of trading
on such date. If such class of Company Stock is regularly traded in the
over-the-counter market but no shares of such class of Company Stock are traded
on the date of determination (or if records of such trades are unavailable or
burdensome to obtain) but there were shares traded on dates within a reasonable
period before the date of determination, the Fair Market Value shall be the
average of the closing bid and asked prices of such class of Company Stock on
the most recent date before the date of determination. If such class of Company
Stock is listed on a national securities exchange or on the Nasdaq Stock Market
or are traded in the over-the-counter market but no shares of such class of
Company Stock are traded on the date of determination or within a reasonable
period before the date of determination, then the Committee shall determine the
Fair Market Value of such class of Company Stock from all relevant available
facts, which may include opinions of independent experts as to value and may
take into account any recent sales and purchases of such class of Company Stock
to the extent they are representative.
(c) Class Not Listed. If such class of Company Stock is not
listed on a national securities exchange or on the Nasdaq Stock Market and is
not regularly traded in the over-the-counter market, then the Committee shall
determine the Fair Market Value of such class of Company Stock from all relevant
available facts, which may include the average of the closing bid and ask prices
reflected in the over-the-counter market on a date within a reasonable period
either before or after the date of determination or opinions of independent
experts as to value and may take into account any recent sales and purchases of
such class of Company Stock to the extent they are representative.
"Grant Date" means the date on which the Committee completes the
corporate action authorizing the grant of an Award or such later date specified
by the Committee, provided that conditions to the exercisability or vesting of
Awards shall not defer the Grant Date.
"Incentive Stock Option" means an Option granted with the intention
that it qualify as an "incentive stock option" as that term is defined in
Section 422 of the Code or any successor provision.
"Nonqualified Stock Option" means an Option other than an Incentive
Stock Option.
"Nonrecurring Items" means nonrecurring items deemed not reflective of
the Company's core operating performance, including, but not limited to,
exogenous events, acquisitions, divestitures, changes in accounting principles
or "extraordinary items" determined under generally accepted accounting
principles.
"Option" means a right to purchase Company Stock granted under Section
7.
"Participant" means any eligible person as set forth in Section 5 to
whom an Award is granted.
"Performance Criteria" has the meaning set forth in Section 11.1.
"Performance Share" has the meaning set forth in Section 10.1.
"Performance Unit" has the meaning set forth in Section 10.2.
"Plan" means this GP Strategies Corporation 2003 Incentive Stock Plan.
"Related Company" means any entity that is directly or indirectly
controlled by the Company, as determined under section 424 of the Code.
"Reload Option" means an Option granted to a Participant who exercises
a previously held Option by surrendering Company Stock for all or part of the
exercise price, pursuant to the provisions of Section 7.8.
"Restricted Stock" means an Award of shares of Company Stock granted
under Section 9, the rights of ownership of which may be subject to restrictions
prescribed by the Committee.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Stock Appreciation Right" has the meaning set forth in Section 8.1.
"Stock Unit" means an Award granted under Section 9 denominated
in units of Common Stock and/or Class B Stock.
"Substitute Awards" means Awards granted or shares of Common Stock
and/or Class B Stock issued by the Company in assumption of, or in substitution
or exchange for, awards previously granted by a company acquired by the Company
or with which the Company combines in accordance with the rules of section 424
of the Code.
"Termination of Service," unless otherwise defined by the Committee or
in the instrument evidencing the Award or in a written employment or services
agreement, means a termination of employment or service relationship with the
Company or a Related Company for any reason, whether voluntary or involuntary.
Any question as to whether and when there has been a Termination of Service for
the purposes of an Award and the cause of such Termination of Service shall be
determined by the Committee, and such determination shall be final. Transfer of
a Participant's employment or service relationship between wholly owned
subsidiaries of the Company, or between the Company and any wholly owned
subsidiary of the Company, shall not be considered a Termination of Service for
purposes of an Award. Unless the Committee determines otherwise, a Termination
of Service shall be deemed to occur if the Participant's employment or service
relationship is with an entity that has ceased to be a Related Company.
Section 3. Administration
3.1 Administration of the Plan
The Plan shall be administered by the Committee.
3.2 Administration and Interpretation by Committee
Except for the terms and conditions explicitly set forth in the Plan,
the Committee shall have full power and exclusive authority, subject to such
orders or resolutions not inconsistent with the provisions of the Plan and the
Code as may from time to time be adopted by the Board, to (a) select the
eligible persons as set forth in Section 5 to whom Awards may from time to time
be granted under the Plan; (b) determine the type or types of Award to be
granted to each Participant under the Plan; (c) determine the number of shares
of Company Stock to be covered by each Award granted under the Plan; (d)
determine whether shares of Company Stock to be covered by each Award granted
under the Plan shall be shares of Common Stock or shares of the Class B Stock;
(e) determine the terms and conditions of any Award granted under the Plan; (f)
approve the forms of agreements for use under the Plan; (g) determine whether,
to what extent and under what circumstances Awards may be settled in cash,
shares of Company Stock or other property or canceled or suspended; (h)
determine whether, to what extent and under what circumstances cash, shares of
Company Stock, other property and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the Participant;
(i) interpret and administer the Plan and any instrument or agreement entered
into under the Plan; (j) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
(k) delegate ministerial duties to such of the Company's officers as it so
determines; and (l) make any other determination and take any other action that
the Committee deems necessary or desirable for administration of the Plan.
Decisions of the Committee shall be final, conclusive and binding on all
persons, including the Company, any Participant, any stockholder and any
eligible person.
Section 4. Shares Subject to the Plan
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 15, the
maximum number of shares of Company Stock available for issuance under the Plan
shall be 2,000,000, of which no more than 500,000 may be shares of Class B
Stock.
4.2 Share Usage
(a) Shares of Common Stock and/or Class B Stock covered by an Award
shall not be counted as used unless and until they are actually issued and
delivered to a Participant. If any Award lapses, expires, terminates or is
canceled prior to the issuance of shares thereunder or if shares of Common Stock
and/or Class B Stock are issued under the Plan to a Participant and thereafter
are reacquired by the Company, the shares subject to such Awards and the
reacquired shares shall again be available for issuance under the Plan. Any
shares of Common Stock and/or Class B Stock (i) tendered by a Participant or
retained by the Company as full or partial payment to the Company for the
purchase price of an Award or to satisfy tax withholding obligations in
connection with an Award, (ii) covered by an Award that is settled in cash, or
(iii) reacquired by the Company on the open market using cash proceeds received
by the Company from the exercise of Options shall be available for Awards under
the Plan. The number of shares available for issuance under the Plan shall not
be reduced to reflect any dividends or dividend equivalents that are reinvested
into additional shares or credited as additional Restricted Stock, Stock Units,
Performance Shares or Performance Units. All shares issued under the Plan may be
either authorized and unissued shares or issued shares reacquired by the
Company.
(b) Notwithstanding the foregoing, the maximum number of shares that
may be issued upon the exercise of Options shall equal the aggregate share
number stated in Section 4.1, subject to adjustment as provided in Section 15;
and provided, further, that for purposes of Section 4.3, any such shares shall
be counted in accordance with the requirements of Section 162(m) of the Code.
4.3 Limitation
Subject to adjustment as provided in Section 15, no Participant shall be
eligible to receive in any one calendar year Awards relating to more than
150,000 shares of Company Stock.
Section 5. Eligibility
An Award may be granted to any employee, officer or director of the
Company or a Related Company whom the Committee from time to time selects. An
Award may also be granted to any consultant, agent, advisor or independent
contractor for bona fide services rendered to the Company or any Related Company
that (a) are not in connection with the offer and sale of the Company's
securities in a capital-raising transaction and (b) do not directly or
indirectly promote or maintain a market for the Company's securities. The above
are "eligible persons."
Section 6. Awards
6.1 Form and Grant of Awards
The Committee shall have the authority, in its sole discretion, to determine the
type or types of Awards to be granted under the Plan. Such Awards may be granted
either alone or in addition to or in tandem with any other type of Award.
6.2 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written
instrument that shall contain such terms, conditions, limitations and
restrictions as the Committee shall deem advisable and that are not inconsistent
with the Plan.
Section 7. Options
7.1 Grant of Options
The Committee may grant Options designated as Incentive Stock Options
or Nonqualified Stock Options.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Committee, but shall not be less than 100% of the Fair Market
Value of the Common Stock and/or Class B Stock issuable pursuant to the Option
on the Grant Date, except in the case of Substitute Awards. In no event shall
the Committee, without the prior approval of the Company's stockholders, cancel
any outstanding Option for the purpose of reissuing the Option to the
Participant at a lower exercise price or reduce the exercise price of an
outstanding Option.
7.3 Term of Options
Subject to earlier termination in accordance with the terms of the Plan
and the instrument evidencing the Option, the maximum term of an Option shall be
as established for that Option by the Committee and set forth in the instrument
that evidences that Option or, if not so established, shall be ten years from
the Grant Date.
7.4 Exercise of Options
The Committee shall establish and set forth in each instrument that
evidences an Option the time at which, or the installments in which, the Option
shall vest and become exercisable, any of which provisions may be waived or
modified by the Committee at any time.
To the extent an Option has vested and become exercisable, the Option
may be exercised in whole or from time to time in part by delivery as directed
by the Company to the Company or a brokerage firm designated or approved by the
Company of a written stock option exercise agreement or notice, in a form and in
accordance with procedures established by the Committee, setting forth the
number of shares with respect to which the Option is being exercised, the
restrictions imposed on the shares purchased under such exercise agreement, if
any, and such representations and agreements as may be required by the
Committee, accompanied by payment in full as described in Section 7.5. An Option
may be exercised only for whole shares and may not be exercised for less than a
reasonable number of shares at any one time, as determined by the Committee.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid
in full as directed by the Company to the Company or a brokerage firm designated
or approved by the Company by delivery of consideration equal to the product of
the Option exercise price and the number of shares purchased. Such consideration
must be paid before the Company will issue the shares being purchased and must
be in a form or a combination of forms acceptable to the Committee as indicated
in the instrument evidencing the Option for that purchase, which forms may
include: (a) check; (b) wire transfer; (c) tendering by attestation shares of
Company Stock already owned by the Participant that on the day prior to the
exercise date have a Fair Market Value equal to the aggregate exercise price of
the shares being purchased under the Option; or (d) to the extent permitted by
applicable law, delivery of a properly executed exercise notice, together with
irrevocable instructions to a brokerage firm designated or approved by the
Company to deliver promptly to the Company the aggregate amount of sale or loan
proceeds to pay the Option exercise price and any tax withholding obligations
that may arise in connection with the exercise, all in accordance with the
regulations of the Federal Reserve Board.
7.6 Post-Termination Exercise
The Committee shall establish and set forth in each instrument that
evidences an Option whether the Option shall continue to be exercisable, and the
terms and conditions of such exercise, after a Termination of Service, any of
which provisions may be waived or modified by the Committee at any time.
7.7 Incentive Stock Options
The terms of any Incentive Stock Options shall comply in all respects
with the provisions of Section 422 of the Code, or any successor provision, and
any regulations promulgated thereunder. Any such Incentive Stock Option by its
terms must not be exercisable after the expiration of ten years from the Grant
Date for the Incentive Stock Option, must not be exercisable by anyone other
than the grantee otherwise than by will or the laws of descent and distribution,
must be exercisable, during the grantee's lifetime, only by the grantee, and
must state that it is an Incentive Stock Option. Individuals who are not
employees of the Company or one of its parent or subsidiary corporations (as
such terms are defined for purposes of Section 422 of the Code) may not be
granted Incentive Stock Options. To the extent that the aggregate Fair Market
Value of Company Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000 or, if different, the maximum limitation in effect at the time of grant
under the Code (the Fair Market Value being determined as of the Grant Date for
the Option), such portion in excess of $100,000 shall be treated as Nonqualified
Stock Options.
7.8 Reload Options.
When the Committee grants an Option, it may designate in the instrument
that evidences such Option whether a Reload Option accompanies the Option and
any limitations that will apply to such Reload Option. Unless otherwise
designated by the Committee in the instrument that evidences an Option, such
Option shall not be subject to any Reload Options. If it so desires, the
Committee may permit multiple, successive Reload Options for an Option, and may
designate such in the instrument that evidences an Option; but if no number of
Reload Options is specified in the instrument that provides for such Reload
Option, then the Option shall be subject to only one Reload Option. If the
Committee has designated an Option as having an accompanying Reload Option, the
Reload Option shall be for the same number of shares as is surrendered by the
Participant in payment of the exercise price of the Option (but not for shares
surrendered for tax or other withholding obligations) upon its exercise. The
Reload Option shall have the same terms and conditions as the related original
Option, including the expiration date of the original Option, except that (i)
the exercise price for a Reload Option shall be the Fair Market Value of the
Company Stock as of the date of grant of such Reload Option, and (ii) the Reload
Option shall become fully exercisable no earlier than six months after its date
of grant.
Section 8. Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights
The Committee may grant stock appreciation rights ("Stock Appreciation
Rights" or "SARs") to Participants at any time on such terms and conditions as
shall be set forth in the instrument evidencing the Award. An SAR may be granted
in tandem with an Option or alone ("freestanding"). The grant price of a tandem
SAR shall be equal to the exercise price of the related Option, and the grant
price of a freestanding SAR shall be equal to the Fair Market Value of the
Common Stock and/or Class B Stock, as applicable, on the Grant Date. An SAR may
be exercised upon such terms and conditions and for the term as the Committee
determines in its sole discretion; provided, however, that, subject to earlier
termination in accordance with the terms of the Plan and the instrument
evidencing the SAR, (a) the term of a freestanding SAR shall be as established
for that SAR by the Committee or, if not so established, shall be ten years, and
(b) in the case of a tandem SAR, (i) the term shall not exceed the term of the
related Option and (ii) the tandem SAR may be exercised for all or part of the
shares subject to the related Option upon the surrender of the right to exercise
the equivalent portion of the related Option, except that the tandem SAR may be
exercised only with respect to the shares for which its related Option is then
exercisable.
8.2 Payment of SAR Amount
Upon the exercise of an SAR, a Participant shall be entitled to receive
payment from the Company in an amount determined by multiplying: (a) the excess
of the Fair Market Value of the Common Stock and/or Class B Stock, as
applicable, on the date of exercise over the grant price by (b) the number of
shares with respect to which the SAR is exercised. At the discretion of the
Committee, the payment upon exercise of an SAR may be in cash, in shares of
equivalent value, in some combination thereof or in any other manner approved by
the Committee in its sole discretion.
Section 9. Restricted Stock and Stock Units
9.1 Grant of Restricted Stock and Stock Units
The Committee may grant Restricted Stock and Stock Units on such terms
and conditions and subject to such repurchase or forfeiture restrictions, if any
(which may be based on continuous service with the Company or a Related Company
or the achievement of any of the Performance Criteria set forth in Section
11.1), as the Committee shall determine in its sole discretion, which terms,
conditions and restrictions shall be set forth in the instrument evidencing the
Award.
9.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions
prescribed with respect to Restricted Stock or Stock Units, or upon a
Participant's release from any terms, conditions and restrictions of Restricted
Stock or Stock Units, as determined by the Committee, and subject to the
provisions of Section 13, (a) the shares of Restricted Stock covered by each
Award of Restricted Stock shall become freely transferable by the Participant,
and (b) Stock Units shall be paid in cash, shares of Company Stock or a
combination of cash and shares of Company Stock as the Committee shall determine
in its sole discretion. Any fractional shares subject to such Awards shall be
paid to the Participant in cash.
9.3 Dividends and Distributions
Participants holding shares of Restricted Stock or Stock Units may, if
the Committee so determines, be credited with dividends paid with respect to the
underlying shares or dividend equivalents while they are so held in a manner
determined by the Committee in its sole discretion. The Committee may apply any
restrictions to the dividends or dividend equivalents that the Committee deems
appropriate. The Committee, in its sole discretion, may determine the form of
payment of dividends or dividend equivalents, including cash, shares of Company
Stock, Restricted Stock or Stock Units.
9.4 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Committee, in its
sole discretion, may waive the repurchase or forfeiture period and any other
terms, conditions or restrictions on any Restricted Stock or Stock Unit under
such circumstances and subject to such terms and conditions as the Committee
shall deem appropriate; provided, however, that the Committee may not adjust
performance goals for any Restricted Stock or Stock Unit intended to be exempt
under Section 162(m) of the Code for the year in which the Restricted Stock or
Stock Unit is settled in such a manner as would increase the amount of
compensation otherwise payable to a Participant.
Section 10 Performance Shares and Performance Units
10.1 Grant of Performance Shares
The Committee may grant Awards of performance shares ("Performance
Shares") and designate the Participants to whom Performance Shares are to be
awarded and determine the number of Performance Shares, the length of the
performance period and the other terms and conditions of each such Award. Each
Award of Performance Shares shall entitle the Participant to a payment in the
form of shares of Company Stock upon the attainment of performance goals and
other terms and conditions specified by the Committee. Notwithstanding
satisfaction of any performance goals, the number of shares issued under an
Award of Performance Shares may be adjusted on the basis of such further
consideration as the Committee shall determine in its sole discretion. However,
the Committee may not, in any event, increase the number of shares earned upon
satisfaction of any performance goal by any Covered Employee.
10.2 Grant of Performance Units
The Committee may grant Awards of performance units ("Performance
Units") and designate the Participants to whom Performance Units are to be
awarded and determine the number of Performance Units and the terms and
conditions of each such Award. Performance Units shall entitle the Participant
to a payment in cash upon the attainment of performance goals and other terms
and conditions specified by the Committee. Notwithstanding the satisfaction of
any performance goals, the amount to be paid under an Award of Performance Units
may be adjusted on the basis of such further consideration as the Committee
shall determine in its sole discretion. However, the Committee may not, in any
event, increase the amount earned under Awards of Performance Units upon
satisfaction of any performance goal by any Covered Employee, and the maximum
amount earned by such Covered Employee in any calendar year may not exceed
$500,000. The Committee, in its discretion, may substitute actual shares of
Company Stock for the cash payment otherwise required to be made to a
Participant pursuant to a Performance Unit.
Section 11. Performance Criteria
11.1 Awards Subject to Performance Goals
Awards of Restricted Stock, Stock Units, Performance Shares,
Performance Units and other Awards made pursuant to the Plan may be made subject
to the attainment of performance goals relating to one or more of the following
business criteria within the meaning of Section 162(m) of the Code: profits
(including, but not limited to, profit growth, net operating profit or economic
profit); profit-related return ratios; return measures (including, but not
limited to, return on assets, capital, equity or sales); cash flow (including,
but not limited to, operating cash flow, free cash flow or cash flow return on
capital); earnings (including, but not limited to, net earnings, earnings per
share, or earnings before or after taxes); net sales growth; net income (before
or after taxes, interest, depreciation and/or amortization); gross or operating
margins; productivity ratios; share price (including, but not limited to, growth
measures and total stockholder return); expense targets; margins; operating
efficiency; customer satisfaction; and working capital targets ("Performance
Criteria"). Performance Criteria may be stated in absolute terms or relative to
comparison companies or indices to be achieved during a period of time.
11.2 Use and Calculation of Performance Criteria
Any Performance Criteria may be used to measure the performance of the
Company as a whole or any business unit of the Company. Any Performance Criteria
may include or exclude Nonrecurring Items. Performance Criteria shall be
calculated in accordance with the Company's financial statements or generally
accepted accounting principles, or under a methodology established by the
Committee prior to the issuance of an Award that is consistently applied and
identified in the audited financial statements, including footnotes, or the
Management's Discussion and Analysis section of the Company's annual report. The
Committee may not in any event increase the amount of compensation payable to a
Covered Employee upon the satisfaction of any Performance Criteria.
Section 12. Other Stock or Cash-Based Awards
In addition to the Awards described in Sections 7 through 10, and
subject to the terms of the Plan, the Committee may grant other incentives
payable in cash or in shares of Company Stock under the Plan as it determines to
be in the best interests of the Company and subject to such other terms and
conditions as it deems appropriate.
Section 13. Withholding
The Company may require the Participant to pay to the Company the
amount of (a) any taxes that the Company is required by applicable federal,
state, local or foreign law to withhold with respect to the grant, vesting or
exercise of an Award ("tax withholding obligations") and (b) any amounts due
from the Participant to the Company or to any Related Company ("other
obligations"). The Company shall not be required to issue any shares of Company
Stock or other consideration under the Plan until such tax withholding
obligations and other obligations are satisfied.
The Committee may permit or require a Participant to satisfy all or
part of his or her tax withholding obligations and other obligations by (a)
paying cash to the Company, (b) having the Company withhold an amount from any
cash amounts otherwise due or to become due from the Company to the Participant,
(c) having the Company withhold a number of shares of Company Stock that would
otherwise be issued to the Participant (or become vested in the case of
Restricted Stock) having a Fair Market Value equal to the tax withholding
obligations and other obligations, or (d) surrendering a number of shares of
Company Stock the Participant already owns having a Fair Market Value equal to
the tax withholding obligations and other obligations.
Section 14. Assignability
No Award or interest in an Award may be sold, assigned, pledged (as
collateral for a loan or as security for the performance of an obligation or for
any other purpose) or transferred by the Participant or made subject to
attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, except that to the extent permitted by the
Committee, in its sole discretion, a Participant may designate one or more
beneficiaries on a Company-approved form who may receive payment under an Award
after the Participant's death. During a Participant's lifetime, an Award may be
exercised only by the Participant. Notwithstanding the foregoing, with the
approval of the Committee and in its sole discretion, an Award may be amended to
permit the Participant to transfer Awards under this Plan to such persons as the
Committee deems appropriate.
Section 15. Adjustments
In the event, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to stockholders other than a normal cash dividend or
other change in the Company's corporate or capital structure results in (a) the
outstanding shares of Company Stock, or any securities exchanged therefore or
received in their place, being exchanged for a different number or kind of
securities of the Company or of any other company or (b) new, different or
additional securities of the Company or of any other company being received by
the holders of shares of Company Stock, then the Committee shall make
proportional adjustments in (i) the maximum number and kind of securities
available for issuance under the Plan; (ii) the maximum number and kind of
securities issuable as Incentive Stock Options as set forth in Section 4.2 all
in accordance with section 424 of the Code and the Treasury regulations issued
thereunder; (iii) the maximum number and kind of securities that may be issued
to an individual in any one calendar year as set forth in Section 4.3; (iv) the
maximum number and kind of securities that may be made subject to the different
types of Awards available under the Plan; and (v) the number and kind of
securities that are subject to any outstanding Award and the per share price of
such securities, without any change in the aggregate price to be paid therefor.
The determination by the Committee as to the terms of any of the
foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, the issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services rendered, either upon direct sale
or upon the exercise of rights or warrants to subscribe therefore, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, outstanding Awards.
Section 16. Amendment and Termination
16.1 Amendment, Suspension or Termination of the Plan
The Board or the Committee may amend, suspend or terminate the Plan or
any portion of the Plan at any time and in such respects as it shall deem
advisable; provided, however, that, to the extent required by applicable law,
regulation or stock exchange rule, stockholder approval shall be required for
any amendment to the Plan.
16.2 Term of the Plan
Unless sooner terminated as provided herein, the Plan shall terminate
ten years from the Effective Date. After the Plan is terminated, no future
Awards may be granted, but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the Plan's terms and
conditions. Notwithstanding the foregoing, no Incentive Stock Options may be
granted more than ten years after the earlier of (a) the adoption of the Plan by
the Board and (b) the Effective Date.
16.3 Consent of Participant
The amendment, suspension or termination of the Plan or a portion thereof or the
amendment of an outstanding Award shall not, without the Participant's consent,
materially adversely affect any rights under any Award theretofore granted to
the Participant under the Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Participant, be
made in a manner so as to constitute a "modification" within the meaning of
section 424 of the Code and the Treasury regulations thereunder that would cause
such Incentive Stock Option to fail to continue to qualify as an Incentive Stock
Option. Specifically, the Committee may, with the consent of the person entitled
to exercise any outstanding Option, amend an Option in any manner consistent
with the provisions of this Plan that it may deem advisable. Notwithstanding the
foregoing, any adjustments made pursuant to Section 15 shall not be subject to
these restrictions.
Section 17. General
17.1 No Individual Rights
No individual or Participant shall have any claim to be granted any
Award under the Plan, and the Company has no obligation for uniformity of
treatment of Participants under the Plan.
Furthermore, nothing in the Plan or any Award granted under the Plan
shall be deemed to constitute an employment contract or confer or be deemed to
confer on any Participant any right to continue in the employ of, or to continue
any other relationship with, the Company or any Related Company or limit in any
way the right of the Company or any Related Company to terminate a Participant's
employment or other relationship at any time, with or without cause.
17.2 Issuance of Shares
Notwithstanding any other provision of the Plan, the Company shall have
no obligation to issue or deliver any shares of Company Stock under the Plan or
make any other distribution of benefits under the Plan unless, in the opinion of
the Company's counsel, such issuance, delivery or distribution would comply with
all applicable laws (including, without limitation, the requirements of the
Securities Act or the laws of any state or foreign jurisdiction) and the
applicable requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under the laws of any state or foreign jurisdiction, any
shares of Company Stock, security or interest in a security paid or issued
under, or created by, the Plan, or to continue in effect any such registrations
or qualifications if made. The Company may issue certificates for shares with
such legends and subject to such restrictions on transfer and stop-transfer
instructions as counsel for the Company deems necessary or desirable for
compliance by the Company with federal, state and foreign securities laws. The
Company may also require such other action or agreement by the Participants as
may from time to time be necessary to comply with applicable securities laws.
To the extent the Plan or any instrument evidencing an Award provides
for issuance of stock certificates to reflect the issuance of shares of Company
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
17.3 No Rights as a Stockholder
Unless otherwise provided by the Committee or in the instrument
evidencing the Award or in a written employment or services agreement, no Option
or Award denominated in units shall entitle the Participant to any cash
dividend, voting or other right of a stockholder unless and until the date of
issuance under the Plan of the shares that are the subject of such Award.
17.4 Compliance With Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Committee, in
its sole discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to Participants who are officers
or directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.
17.5 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or other
property, or shares of Company Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.
17.6 Successors
All obligations of the Company under the Plan with respect to Awards
shall be binding on any successor to the Company, whether the existence of such
successor is the result of a merger, consolidation, direct or indirect purchase
of all or substantially all the business and/or assets of the Company, or
otherwise.
17.7 Severability
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Committee's determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.
17.8 Choice of Law
The Plan, all Awards granted thereunder and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the laws
of the United States, shall be governed by the laws of the State of Delaware
without giving effect to principles of conflicts of law.
Section 18. Effective Date
The Plan shall become effective (the "Effective Date") immediately
following stockholder approval of the Plan.
GP STRATEGIES CORPORATION
COMMON STOCK Annual Meeting of Stockholders PROXY
To Be Held October 29, 2003
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 Jerome I. Feldman 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 and Class B Stock
of the undersigned in said Company at the Annual Meeting of Stockholders of said
Company to be held at the Westchester Marriott Hotel, 670 White Plains Road,
Tarrytown, New York on October 29, 2003, 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, Roald Hoffmann, Bernard M. Kauderer, Mark
A. Radzik, Ogden R. Reid, and Gordon Smale.
__ 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 approve the Company's 2003 Incentive Stock Plan.
__ For __ Against __ Abstain
3. To ratify the Board of Directors' appointment of KPMG LLP as the
Company's independent public accountants for the fiscal year ending
December 31, 2003.
__ 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 , 2003
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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.