SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-12
GTSI Corp.
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO] GTSI
GTSI CORP.
3901 STONECROFT BOULEVARD
CHANTILLY, VIRGINIA 20151-1010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the
"Meeting") of GTSI Corp., a Delaware corporation (the "Company"), will be held
at 9:00 a.m., Eastern Time, on Tuesday, May 15, 2001, at the Company's
headquarters located at 3901 Stonecroft Boulevard in Chantilly, Virginia, for
the following purposes, as more fully described in the Company's attached Proxy
Statement:
1. To elect three Class 1 directors to serve for a three-year
term and until their successors are elected and qualified.
2. To approve an amendment to the Company's 1996 Stock Option
Plan to increase the Company's common stock issuable
thereunder by 900,000 shares.
3. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
Only record holders of the Company's common stock at the close of
business on March 26, 2001 are entitled to notice of, and to vote at, the
Meeting and at any adjournment(s) thereof.
All stockholders are cordially invited to attend the Meeting in person.
Whether or not you expect to attend the Meeting in person, to ensure your
representation at the Meeting, please mark, sign, date and return your proxy
card as promptly as possible. IF YOU RECEIVED YOUR PROXY CARD FROM ADP, YOU MAY
ALSO VOTE YOUR SHARES BY TELEPHONE OR VIA THE INTERNET AT WWW.PROXYVOTE.COM.
PLEASE SEE THE INSTRUCTIONS APPEARING ON YOUR ADP PROXY CARD. Any stockholder
attending the Meeting may vote in person even if such stockholder has returned a
proxy.
By Order of the Board of Directors
John T. Spotila
Corporate Secretary
Chantilly, Virginia
April 13, 2001
[LOGO] GTSI
GTSI CORP.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors (the "Board") of GTSI Corp., a Delaware corporation ("GTSI" or the
"Company"), for use at the Meeting of Stockholders (the "Meeting") to be held on
Tuesday, May 15, 2001 at 9:00 a.m., Eastern Time, or at any adjournment(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Meeting of Stockholders. The Meeting will be held at the Company's headquarters
located at 3901 Stonecroft Boulevard in Chantilly, Virginia.
This Proxy Statement and the enclosed proxy are first being mailed on
or about April 13, 2001 to all stockholders entitled to notice of, and to vote
at, the Meeting. The Company's annual report for the fiscal year ended December
31, 2000 accompanies this Proxy Statement, but it is not part of the proxy
soliciting material.
Only stockholders of record at the close of business on March 26, 2001
(the "Record Date") are entitled to notice of, and to vote at, the Meeting. At
the Record Date, 9,806,084 shares of the Company's common stock, par value
$0.005 per share ("Common Stock"), were issued and, excluding 1,695,603 shares
held in treasury, 8,110,481 shares were outstanding. None of the Company's
680,850 shares of authorized preferred stock is outstanding.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company's
Corporate Secretary a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Meeting and voting in person.
VOTING AND SOLICITATION
As to all matters to be voted upon at the Meeting, each stockholder is
entitled to one vote for each share of Common Stock held. The presence in person
or by proxy of a majority of the outstanding Common Stock entitled to vote
constitutes a quorum for the conduct of business at the Meeting. If a quorum is
present at the Meeting, the three nominees for Class 1 directors receiving the
highest number of affirmative votes of Common Stock present in person or by
proxy and entitled to vote on the election of directors will be elected. The
affirmative vote of a majority of Common Stock present in person or by proxy and
voting at the Meeting is required for approval of the amendment to the Company's
1996 Stock Option Plan (Proposal 2). Abstentions are included in the
determination of the number of shares present and entitled to vote for purposes
of determining the presence of a quorum. Broker non-votes are counted as shares
that are present and entitled to vote for purposes of determining a quorum. If a
broker indicates on the proxy that it does not have discretionary authority to
vote on a particular matter as to certain shares, those shares will be counted
for purposes of determining the presence of a quorum but will not be treated as
present and entitled to vote with respect to that matter.
IF A STOCKHOLDER RETURNS A PROXY AND NO INSTRUCTIONS ARE GIVEN, SUCH
SHARES WILL BE VOTED "FOR" EACH NOMINEE AS CLASS 1 DIRECTOR AND "FOR" PROPOSAL
2.
The cost of this solicitation will be borne by the Company. The Company
has retained the services of Corporate Investor Communications, Inc. to solicit
proxies from brokers and nominees and to distribute proxy materials to brokerage
houses, banks, custodians and other nominee holders. The estimated cost of such
services is approximately $5,500 plus reasonable out-of-pocket expenses.
Pursuant to Securities and Exchange Commission ("SEC") rules, the Company will
reimburse brokerage firms and other persons representing beneficial owners of
Common Stock for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may be solicited personally or by telephone or
telegram by certain of the Company's directors, officers and regular employees,
without additional compensation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders which are intended to be presented by such
stockholders at the Company's Meeting of stockholders to be held in 2002,
including the nomination of persons to serve on the Board, must be received by
the Company's Secretary not later than December 16, 2001, for inclusion in the
proxy statement for that annual meeting. Stockholders who wish to present a
proposal at the Company's Meeting of stockholders to be held in 2002 which has
not been included in the Company's proxy materials must submit such proposal in
writing to the Company in care of the Company's Secretary. Any such proposal
received by the Company's Secretary on or after February 16, 2001 shall be
considered untimely under the provisions of the Company's bylaws governing
nominations and the proposal of other business to be considered by the Company's
stockholders at that annual meeting. In addition, the Company's bylaws contain
further requirements relating to timing and content of the notice which
stockholders must provide to the Company's Secretary for any nomination or other
business to be properly presented at an annual meeting. It is recommended that
stockholders submitting proposals direct them to the Company's Secretary by
certified mail, return receipt requested, to ensure timely delivery. No
stockholder proposals were received with respect to the Meeting.
2
PROPOSAL 1
ELECTION OF DIRECTORS
INTRODUCTION
The Company has a classified Board currently consisting of three Class
1 directors, two Class 2 directors and two Class 3 directors. The current terms
of Class 1, Class 2 and Class 3 directors continue until the annual meeting of
stockholders to be held in 2001, 2002 and 2003, respectively, and until their
respective successors are elected and qualified. At each annual stockholders
meeting, directors are elected for a full term of three years to succeed those
directors whose term expires at the annual meeting date. The election of each
director requires the vote of holders of a plurality of the outstanding Common
Stock present in person or by proxy and entitled to be voted at the Meeting.
Votes withheld from any director will be counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under Delaware
law.
Three Class 1 directors will be elected at the Meeting for three-year
terms by the holders of Common Stock as of the Record Date. Unless otherwise
instructed, proxy holders will vote the proxies received by them for the
Company's three nominees named below, all of whom are currently directors of the
Company. If any nominee of the Company is unable or declines to serve as a
director at the time of the Meeting, the proxies will be voted for any nominee
who will be designated by the current Board to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
The names of the nominees for Class 1 directors, and certain
information about them, are set forth below:
NAME AGE POSITION(S) WITH THE COMPANY
- ---------------------------- ----- ------------------------------------------
Lawrence J. Schoenberg 68 Director and Chairman Emeritus
Daniel R. Young 67 Director
M. Dendy Young 53 Chairman of the Board and Chief
Executive Officer
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE THREE CLASS 1
NOMINEES.
There is no family relationship between any director or executive
officer of the Company and any other director or executive officer of the
Company.
CLASS 1 NOMINEES
Lawrence J. Schoenberg has been a director since December 1991 and
served as Chairman of the Board from February 1995 until his election as
Chairman Emeritus in May 1998. He also previously served as a director of the
Company from March 1990 to December 1990, and as Chairman of the Board from May
1990 to December 1990. Mr. Schoenberg served as Chief Executive Officer and
Chairman of the Board of Directors of AGS Computers, Inc. from January 1967
until his retirement in December 1990, and as Chairman of its Executive
Committee from January 1991 to December 1991. Mr. Schoenberg is also a director
of Sungard Data Services, Inc.; Merisel, Inc.; and Cellular Technical Services
Company, Inc.
Daniel R. Young was appointed to the Board as a Class 1 director on
January 20, 2001, by the Board. From 1976 until October 2000, Mr. D. R. Young
had been a senior executive officer of Federal Data Corporation, a provider of
information technology products and services to government agencies, including
serving since 1995 as President and Chief Executive Officer and since 1998 as
Vice Chairman of
3
the board of directors of Federal Data Corporation. Mr. D. R. Young is also a
director of Andrulis Corporation and Entrust Technologies, Inc.
M. Dendy Young has served as Chairman of the Board since May 1998 and
has been Chief Executive Officer and a director since December 1995. From
December 1995 to May 1998, he also served as President. From August 1994 until
joining the Company, Mr. M. D. Young was principal and consultant of The Exeter
Group, a management consulting firm he founded. From January 1989 until August
1994, he served as President, Chief Executive Officer and a director of Falcon
Microsystems, Inc. ("Falcon"), a government microcomputer reseller founded by
Mr. M. D. Young, and acquired by the Company in 1994.
OTHER DIRECTORS - CLASS 2
Lee Johnson has been a director since March 1996. Since March 1984, Mr.
Johnson has been the President of Federal Airways Corporation, a provider of
highly modified, special mission high altitude aircraft to civilian and defense
agencies. From February 1986 to August 1994, Mr. Johnson served as chairman of
the board of directors of Falcon.
James J. Leto has been a director since March 1996. From June 1996
through January 2001, he was the Chairman, President and Chief Executive Officer
of Treev, Inc. (formerly known as Network Imaging Corporation), a developer and
marketer of software used to manage client/server, object-oriented, and
enterprise-wide information. From January 1992 until February 1996, he was
Chairman and Chief Executive Officer of PRC, Inc., a provider of scientific and
technology-based systems, products and services to government and commercial
clients around the world.
OTHER DIRECTORS - CLASS 3
Steven Kelman, Ph.D. has been a director since October 1997. Since
September 1997, he has been the Weatherhead Professor of Public Management at
Harvard University's John F. Kennedy School of Government. From November 1993 to
September 1997, Dr. Kelman served as Administrator of the Office of Federal
Procurement Policy at the Office of Management and Budget. From 1986 to 1993, he
was Professor of Public Policy at Harvard. Dr. Kelman is also a director of
eSASA.com, Inc.
John M. Toups has been a director since October 1997. From January 1978
until his retirement in February 1987, Mr. Toups was President and Chief
Executive Officer of PRC. Mr. Toups is also a director of NVR, Inc., CACI, Inc.,
Halifax Corporation and Thermatrix, Inc.
THE BOARD AND ITS COMMITTEES
During 2000, the Board held a total of six meetings, and each director
of the Company attended at least 75% of the meetings of the Board held during
the period that he was a director and at least 75% of all meetings held by all
Board committees on which he served. The Board has standing audit, compensation
and nominating committees, as discussed below.
The Audit Committee is currently composed of Messrs. Schoenberg (who
also serves as Chairperson), Kelman and Toups. While the Audit Committee did not
meet formally during 2000, committee business was conducted through committee
member discussions concerning audit and other Company financial matters during
meetings of the entire Board as well as telephone conferences among the Audit
Committee members, the Company's financial personnel and the Company's
independent accountants. The Audit Committee selects the Company's independent
accountants; reviews reports from accountants and from the Company's financial
officers; reviews transactions relating to officers and directors; assesses the
Company's quality of financial reporting and accounting principles as it relates
to the
4
Company's financial condition; monitors compliance with applicable laws and
regulations that may significantly impact the Company, including Federal
procurement and employment laws; monitors compliance with the Company's code of
ethical conduct; and generally performs functions related to the Company's
financial condition and policies.
The Compensation Committee is currently composed of Messrs. Leto (who
also serves as Chairperson), Toups and D. R. Young. The Compensation Committee
held one meeting in 2000, and also conducted Committee business through
committee member discussions concerning compensation matters during meetings of
the entire Board and through telephone conferences. See "Executive Compensation
and Other Information -- Compensation Committee Interlocks and Insider
Participation" and "Compensation Committee Report on Executive Compensation."
The Compensation Committee's responsibilities include administering the
Company's stock option plans (including determining the persons to whom options
are granted and the terms of such options), the Company's Purchase Plan, and the
Company's 401(k) Plan; advising the Board on employee compensation matters,
including executive bonus plans; and performing such other duties regarding
compensation matters as may be delegated to it by the Board from time to time.
The Nominating and Governance Committee is currently composed of
Messrs. Toups (who also serves as Chairperson), Johnson, Kelman, Leto,
Schoenberg and D. R. Young. While the Nominating and Governance Committee did
not meet formally during 2000, committee business was conducted through
committee member discussions concerning nomination matters during meetings of
the entire Board and through telephone conferences. The Nominating and
Governance Committee's responsibilities are to seek, evaluate and recommend to
the Board qualified individuals for election to the Board by the stockholders,
or by the Board to fill vacancies thereon whenever vacancies occur; advise the
Board on matters pertaining to the size and composition of the Board; and
consider nominees for the Board whose names are timely submitted by stockholders
in writing to the Chairperson of the Nominating and Governance Committee
accompanied by such information regarding the nominee as would be required under
the applicable rules of thee Securities and Exchange Commission ("SEC") if the
stockholder were soliciting proxies with regard to the election of such nominee.
COMPENSATION OF DIRECTORS
All non-employee directors of the Company receive automatic grants of
stock options under the Company's 1996 Stock Option Plan ("1996 Plan") of 15,000
shares upon election (30,000 in the case of the non-employee Chairperson of the
Board) and upon the first and second anniversary of their election to the Board.
Each such automatic option grant vests over a 12-month period, with the first
vesting occurring at the end of the month in which the date of grant occurred.
Such options are granted at exercise prices equal to the closing price of Common
Stock on The Nasdaq Stock Market on the date of grant. During 2000, options to
purchase an aggregate of 75,000 shares were granted to the Company's
non-employee directors under the 1996 Plan at an exercise price of $2.81 per
share. Non-employee directors of the Company are not eligible to participate in
the Company's other stock option plans or the Employee Stock Purchase Plan.
Directors of the Company do not receive any other compensation for their service
on the Board or any committee thereof, but are reimbursed for their reasonable
out-of-pocket expenses incurred in association with the performance of their
duties.
The Company and Federal Airways, a company of which Mr. Johnson is the
owner and president, entered into a consulting agreement, which began in January
1997 and will continue until Mr. Johnson ceases to be a director or until either
party terminates the agreement, which provides for the Company to pay a daily
fee of $2,000 for Mr. Johnson's consulting services on general company business
matters. During the year ended December 31, 2000, $282,084.69 was been paid to
Federal Airways under the consulting agreement for services performed during the
year 2000. The Government reimbursed the Company for $19,237.59 of the
$282,084.69 paid to Mr. Johnson in connection with a negotiation he handled on
behalf of the Company.
5
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1996 STOCK OPTION PLAN
TO INCREASE THE SHARES RESERVE FOR THE PLAN
The Board, having declared its advisability, submits and recommends for
stockholder approval a proposal to amend the Company's 1996 Stock Option Plan
(the "1996 Plan") to increase by 900,000 shares the Common Stock authorized for
issuance thereunder.
In 1996, the Board adopted and the stockholders approved the 1996 Plan
under which 600,000 shares of Common Stock were initially reserved for issuance
pursuant to the exercise of stock options granted thereunder. In May 1998, the
stockholders approved an amendment to the 1996 Plan to increase by 1,000,000
shares the Common Stock authorized for issuance thereunder. As of March 1, 2001,
options to purchase 1,452,250 shares of Common Stock had been granted under the
1996 Plan. In January 2001, the Board amended the 1996 Plan to increase by
900,000 shares the Common Stock authorized for issuance thereunder, subject to
stockholder approval at the Meeting. If the stockholders approve the amendment
to the 1996 Plan, a total of 2,500,000 shares will be authorized for issuance
under the 1996 Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)"), generally limits the allowable deduction for compensation
paid to an officer of a publicly held corporation who is the chief executive
officer or one of the four most highly compensated officers (other than the
chief executive officer) to $1 million for each taxable year beginning on or
after January 1, 1994. Certain types of compensation are exempted from the
deduction limit imposed by Section 162(m), including payments contingent on the
attainment of one or more performance goals if the performance goals are
established by a compensation committee of the board of directors that is
composed solely of two or more outside directors and the material terms of the
compensation and performance goals are disclosed to and approved by the
corporation's stockholders before payment. In the case of a stock option plan, a
payment will satisfy the requirement that compensation be paid on the basis of a
preestablished performance goal if the stock option grant is made by the
compensation committee, the plan includes a per-employee limitation on the
number of shares for which options may be granted during a specified period, the
exercise price of the option is no less than the fair market value of the stock
on the date of grant, and the plan is approved by the corporation's
stockholders.
The 1996 Plan was designed to allow options granted thereunder to
qualify for the exemption from the $1 million limit on tax deductible payments
under Section 162(m). Accordingly, upon the stockholders' approval of the 1996
Plan, the Company's entitlement to tax deductions in connection with stock
option payments to the Chief Executive Officer and the four most highly
compensated officers of the Company under the 1996 Plan is not expected to be
limited by Section 162(m).
A summary of the principal provisions of the 1996 Plan, as amended by
the Board and stockholders in 1998, and by the Board in January 2001 subject to
stockholder approval, is set forth below and is qualified in its entirety by
reference to the 1996 Plan, as amended.
PURPOSES
The purposes of the 1996 Plan are to promote the interests of the
Company and its stockholders by: (a) helping to attract and retain the services
of non-employee directors and selected key employees of the Company who are in a
position to make a material contribution to the successful operation of the
Company's business; (b) motivating such persons, by means of performance-related
incentives, to achieve the Company's business goals; and (c) enabling such
persons to participate in the long-term growth and financial success of the
Company by providing them with an opportunity to purchase stock of the Company.
6
ADMINISTRATION
The 1996 Plan is currently administered by the Compensation Committee
of the Board (the "Committee"). The interpretation and construction of any
provision of the 1996 Plan is within the sole discretion of the Committee, whose
determination is final and binding. The Committee, however, does not have the
authority to adjust or amend the exercise price of any options previously
awarded to any optionee, whether through amendment, cancellation, replacement
grant or other means.
ELIGIBILITY
The 1996 Plan provides that non-statutory stock options may be granted
to employees (including officers, and directors who are also employees) and
non-employee directors of the Company; incentive stock options may be granted
only to employees (including officers, and directors who are also employees) of
the Company. The Company selects the optionees (other than non-employee
directors) and determines the type of option (i.e., incentive or non-statutory)
and the number of shares to be subject to each option. In making such
determination, the Committee takes into account the employee's duties and
responsibilities, the value of the employee's services, the employee's current
and potential contribution to the Company's success, and other relevant factors.
All non-employee directors of the Company are granted automatically a
non-statutory stock option to purchase up to 15,000 shares and a non-employee
director elected to serve as Chairperson of the Board is granted automatically a
non-statutory stock option to purchase up to an additional 15,000 shares, of the
Common Stock: (a) as of the date such person is elected to serve as a
non-employee director and/or as Chairperson, respectively, and (b) as of the
first and second anniversary of such election. If the initial election of a
non-employee director or Chairperson occurs prior to an annual stockholders'
meeting, the non-employee director shall receive a pro rata option grant (or, in
the case of Chairperson, an additional pro rata option grant) in connection with
his or her election. As of March 1, 2001, 1,452,250 options had been granted
under the 1996 Plan.
TERMS OF OPTIONS
Options granted under the 1996 Plan are either non-statutory stock
options or, except in the case of non-employee directors, incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")). Each option will be evidenced by a written stock option
agreement between the Company and the person to whom such option is granted and
is subject to the following additional terms and conditions:
(a) EXERCISE OF OPTIONS:
(i) EMPLOYEES (INCLUDING OFFICERS, AND DIRECTORS WHO ARE
ALSO EMPLOYEES): The optionee must earn the right to
exercise the option by continuing to serve as an
employee of the Company and by meeting such other
conditions as may be determined by the Committee,
including any performance criteria with respect to the
Company and/or the optionee as may be determined by
the Committee. Any option granted to an employee shall
be exercisable at such times and under such conditions
as may be determined by the Committee; it is
anticipated (based upon the Company's experience with
the 1996 Plan) that options typically will be
exercisable ratably in cumulative annual installments
over a four-year period.
(ii) NON-EMPLOYEE DIRECTORS: All non-employee directors of
the Company are granted automatically a non-statutory
stock option to purchase up to 15,000 shares, and a
non-employee director elected to serve as Chairperson
of the Board is granted automatically a non-statutory
stock option to purchase up to an additional 15,000
shares of Common Stock: (1) as of the date such person
is elected to serve as a non-employee director/and or
as Chairperson, respectively, and (2) as of the first
7
and second anniversary of such election, provided that
such person is a non-employee director/Chairperson on
such anniversary. Any such options shall vest and
become exercisable, cumulatively, in 12 equal monthly
installments commencing on the last business day of
the month of grant; provided that if an optionee
ceases to serve as a non-employee director during any
month, the option shall cease to vest and become
exercisable with respect to any subsequent month(s).
If the initial election of a non-employee director or
Chairperson occurs prior to an annual stockholders'
meeting, the non-employee director shall receive a pro
rata option grant (or, in the case of Chairperson, an
additional pro rata option grant) in connection with
his or her election, and the related options shall
vest and become exercisable, cumulatively, in equal
monthly installments. The Committee does not have the
power to determine eligibility for grants of
non-statutory stock options or the number of shares
for which non-statutory stock options may be granted
or the timing or exercise price of non-statutory stock
options granted to any non-employee director.
If an optionee ceases to serve as a non-employee
director for any reason, he or she may, but only
within six months following the date he or she ceases
to serve on the Board, exercise his or her option to
the extent that he or she was entitled to exercise it
at the date of such termination. To the extent that he
or she does not exercise such option (which he or she
was entitled to exercise) within the time specified in
the Plan, the option shall terminate.
NEW PLAN BENEFITS
As of the Record Date, no benefits or amounts relating
to the additional benefits, including options, under
the 1996 Plan, subject to stockholder approval, have
been received by, or allocated to, any individuals
under such plan.(1)
NAME AND POSITION NUMBER OF OPTIONS (2)
----------------- ---------------------
Named Executive Officers........................... N/A
(See "Executive Compensation and Other
Information - Summary Compensation
Table" below)
All Current Executive Officers as a Group ......... N/A
All Current Non-Employee Directors as a Group ..... (3)
All Current Non-Executive Employees as a Group .... N/A
1 As of March 1, 2001, 1,452,250 options have been
granted under the 1996 Plan. The following persons
and groups have been granted options to purchase
the following number of shares of Common Stock
under the 1996 Plan as of March 1, 2001: M. Dendy
Young, 100,000; Joel Lipkin, 78,000; Robert D.
Russell, 66,000; John T. Spotila, 0; William E.
Johnson, Jr., 46,000; all current executive
officers as a group, 290,000; Lee Johnson,
125,000; Steven Kelman, 55,000;
8
James J. Leto, 75,000; Lawrence J. Schoenberg,
105,000; John M. Toups, 65,000; Daniel R. Young,
5,000; all current directors who are not executive
officers as a group, 430,000; and all current
employees who are not executive officers as a
group, 732,250. Options which will be granted in
the future under the Plan are not determinable
other than for the Non-Employee Director Group.
2 Includes an aggregate of 900,000 options which are
subject to stockholders approval of the amendment
to the 1996 Plan. Except as set forth in note 3
below, none of the additional 900,000 options have
been allocated to any specific group and all of
such options are available to be granted, subject
to stockholder approval of the amendment to the
1996 Plan.
3 As discussed above, each non-employee director is
granted automatically a non-statutory stock option
to purchase up to 15,000 shares of Common Stock,
and a non-employee director to serve as
Chairperson of the Board is granted automatically
a non-statutory stock option to purchase up to an
additional 15,000 shares of Common Stock, (a) as
of the date such person is elected to serve as a
non-employee director and, as the case may be,
Chairperson and (b) as of the first and second
anniversary of such election, provided that such
person is a non-employee director/chairperson on
such anniversary. Based on the current number of
six non-employee directors and assuming that the
Class 1 nominees (Messrs. Schoenberg and D. R.
Young) are reelected at the Meeting, options
covering a total of 90,000 shares will be
automatically granted to the six non-employee
directors as of the Meeting date (whether or not
stockholders approve the amendment to the 1996
Plan).
(iii) An option is exercised by giving written notice of
exercise to the Company that specifies the number
of shares of Common Stock as to which the option is
being exercised, and tendering payment to the
Company of the purchase price. The form of payment
for shares to be issued upon the exercise of an
option may, in the Committee's discretion, consist
entirely or in any combination of cash, check, a
commitment to pay by a broker or shares held by the
optionee or issuable upon exercise of the option,
or such other consideration and method of payment
permitted under any laws to which the Company is
subject; provided, however, that non-employee
directors may only use cash, check or broker's
commitment to pay, or some combination thereof, as
payment for the exercise of an option.
(b) EXERCISE PRICE: The exercise price per share for the shares to
be issued pursuant to the exercise of an option shall be such
price as is determined by the Committee; provided, however,
that: (i) with respect to both non-statutory stock options and
incentive stock options such price shall in no event be less
than 100% of the fair market value per share on the date of
grant, except that the Committee may specifically provide that
the exercise price of an option may be higher or lower in the
case of an option granted to employees of a company acquired
by the Company in assumption and substitution of options held
by such employees at the time such company is acquired; and
(ii) the Committee does not have the authority to adjust or
amend the exercise price of any options previously awarded to
any optionee, whether through amendment, cancellation,
replacement grant or other means. In the case of an incentive
stock option granted to an employee who, at the time the
incentive stock option is granted, owns or is deemed to own
(by reason of the attribution rules applicable under Section
424(d) of the Code) stock possessing more than 10% of the
combined voting power of all classes of stock of the Company,
the exercise price per share shall be no less than 110% of the
fair market value per share on the date of grant. The Common
Stock fair market value per share on the date of an option
grant will
9
be equal to the closing price of the Common Stock on the date
of the option grant. On March 1, 2001, the closing price of
the Common Stock on The Nasdaq Stock Market was $4.656 per
share.
(c) LIMITS ON STOCK OPTION GRANTS: The maximum number of shares
which may be subject to options awarded under the 1996 Plan
during any calendar year to any one optionee shall not exceed
100,000 shares. To the extent that the aggregate fair market
value of the shares with respect to which incentive stock
options are exercisable for the first time by an optionee
during any calendar year under all incentive stock option
plans of the Company exceeds $100,000, the options in excess
of such limit shall be treated as non-statutory stock options.
(d) TERMINATION OF EMPLOYMENT: If the optionee's employment with
the Company is terminated for any reason other than death or
total and permanent disability, the option may be exercised
within one month or within three months in the case of an
incentive stock option (or in certain cases six months), or
within six months in the case of a non-statutory stock option,
in each case as is determined by the Committee, after such
termination as to all or part of the shares as to which the
optionee was entitled to exercise at the time of termination.
(e) DEATH OR DISABILITY: If an optionee should die or become
permanently and totally disabled while employed by the
Company, the options granted to him or her may be exercised at
any time within six months (or such period of time not
exceeding one year as is determined by the Committee) after
such death or disability, but only to the extent the optionee
was entitled to exercise the options at the date of his or her
termination of employment due to such death or disability.
(f) TERM AND EXPIRATION OF OPTIONS: Options may not have a term
greater than 10 years from the grant date. No option may be
exercised after its expiration.
(g) NONTRANSFERABILITY OF OPTIONS: Options granted under the Plan
may not be sold, pledged, assigned, hypothecated, gifted,
transferred or disposed of in any manner, either voluntarily
or involuntarily by operation of law, other than by will or by
the laws of descent or distribution or, if permitted of
options granted under Rule 16b-3, transfers between spouses
incident to a divorce.
(h) OTHER PROVISIONS: The option agreement may contain such other
terms, provisions and conditions not inconsistent with the
1996 Plan as may be determined by the Committee.
10
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
- -----------------------------------------
Subject to any required action by the Company's stockholders, if a
change, such as a stock split or stock dividend, is made in the Company's
capitalization which affects the stock for which options are exercisable under
the 1996 Plan, appropriate adjustments will be made in the exercise price of and
the number of shares covered by outstanding options, and in the number of shares
available for issuance under the 1996 Plan. In the event of a dissolution or
liquidation of the Company, a sale of all or substantially all of the assets of
the Company, or the merger or consolidation of the Company with or into another
corporation, as a result of which the Company is not the surviving and
controlling corporation, the Board will make provision for the assumption of all
outstanding options by the successor corporation or the Board will declare that
any option will terminate as of a date fixed by the Board which is at least 30
days after notice thereof is given to optionees and permit each optionee to
exercise his or her option as to all or a portion of the shares covered by such
option, including shares as to which the option would not otherwise be
exercisable.
TAX INFORMATION
The federal income tax consequences of options are complex and subject
to change. The following discussion is only a brief summary of the general
federal income tax rules currently applicable to options and does not cover all
specific transactions which may arise. A taxpayer's particular situation may be
such that the general federal income tax rules described herein may not apply.
This summary does not cover the state, local or foreign tax consequences of the
grant or exercise of options under the 1996 Plan or the disposition of shares
acquired upon exercise of such options or federal estate tax or state estate,
inheritance or death taxes.
INCENTIVE STOCK OPTIONS
If an option granted under the 1996 Plan is treated as an incentive
stock option, the optionee will not recognize any income for regular income tax
purposes upon either the grant or the exercise of the option and the Company
will not be allowed a deduction for federal tax purposes. Upon a sale of the
shares, the tax treatment to the optionee and the Company will depend primarily
upon whether the optionee has met certain holding period requirements at the
time he sells the shares. In addition, as discussed below, the exercise of an
incentive stock option may subject the optionee to alternative minimum tax
liability in the year of exercise.
If an optionee exercises an incentive stock option and does not dispose
of the shares received within two years of the date of the grant of such option
or within one year after transfer of the shares to him, whichever ends later,
any gain realized upon disposition will be characterized as long-term capital
gain, and any loss will be treated as long-term capital loss. In either such
case, the Company will not be entitled to a federal income tax deduction.
If the optionee disposes of the shares either within two years after
the date the option is granted or within one year after the transfer of the
shares to him, such disposition will be treated as a disqualifying disposition
and an amount equal to the lesser of (a) the fair market value of the shares on
the date of exercise minus the purchase price or (b) the amount realized on the
disposition minus the purchase price, will be taxed as ordinary income in the
taxable year in which the disposition occurs. Any such ordinary income will
increase the optionee's tax basis for purposes of determining gain or loss on
the sale or exchange of such shares. The excess, if any, of the amount realized
over the fair market value of the shares at the time of the exercise of the
option will be treated as short-term or long-term capital gain, as the case may
be, and any loss realized upon the disposition will be treated as a capital
loss. An optionee will be generally considered to have disposed of shares if he
sells, exchanges, makes a gift of or transfers legal title to such shares
(except by pledge in certain non-taxable exchanges, a transfer in insolvency
proceedings or
11
upon death). If the amount realized from a sale or exchange of the shares is
less than the purchase price, the optionee generally will not recognize income.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability in the near of exercise because the excess of
the fair market value of the shares at the time an incentive stock option is
exercised over the purchase price is an adjustment in determining an optionee's
alternative minimum taxable income for such year. Consequently, an optionee may
be obligated to pay alternative minimum tax in the year he exercises an
incentive stock option. An optionee who makes a disqualifying disposition of
stock acquired upon exercise of an incentive stock option must still treat such
excess as an adjustment in determining alternative minimum taxable income. In
the case of a disqualifying disposition which occurs after the year of exercise,
an individual would be required to recognize alternative minimum taxable income
in the year of exercise and ordinary income in the year of such disqualifying
disposition in an amount determined under the rules described above. In
addition, an optionee's alternative minimum tax liability is affected by the
availability of special credit, a basis adjustment and other complex rules.
In general, there will be no federal income tax consequences to the
Company upon the grant, exercise or termination of an incentive stock option.
If, however, an optionee sells or disposes of stock received upon the exercise
of an incentive stock option prior to satisfying the two-year and one-year
holding periods described above, the Company will be entitled to a deduction for
federal income tax purposes in an amount equal to the ordinary income, if any,
recognized by the optionee upon disposition of the shares.
NON-STATUTORY STOCK OPTIONS
Non-statutory stock options granted under the 1996 Plan do not qualify
as "incentive stock options" and, accordingly, do not qualify for any special
tax benefits to the optionee. An optionee will not recognize any taxable income
at the time he is granted a non-statutory option. Upon its exercise, however,
the optionee will recognize ordinary income for federal income tax purposes
measured by the excess, if any, of the then fair market value of the shares over
the option price. In the case of an optionee who is subject to Section 16 of the
Securities Exchange Act, the optionee will recognize ordinary income on the
later of the date that the option is exercised and the date that is six months
after the option was granted. The income realized by an optionee who is a
current or former employee will be subject to income tax withholding by the
Company.
Upon a sale of any shares acquired pursuant to the exercise of a
non-statutory stock option, the difference between the sale price and the
optionee's tax basis in the shares will be treated as short-term or long-term
capital gain or loss, as the case may be. The optionee's tax basis for
determination of gain or loss upon any subsequent disposition of shares acquired
upon the exercise of a non-statutory stock option typically will be the amount
paid for such shares plus any ordinary income recognized as a result of the
exercise of such option.
In general, there will be no federal tax consequences to the Company
upon the grant or termination of a non-statutory stock option or a sale or
disposition of the shares acquired upon the exercise of a non-statutory stock
option. However, upon the exercise of a non-statutory stock option, the Company
will be entitled to a deduction to the extent and in the year that ordinary
income from the exercise of the option is recognized by the optionee, provided
the Company has satisfied its withholding obligations under the Code.
12
AMENDMENT AND TERMINATION OF THE PLAN
The Committee may amend or terminate the 1996 Plan, from time to time,
in such respects as the Committee may deem advisable and shall make any
amendments which may be required so that options intended to be incentive stock
options shall continue to be incentive stock options for the purpose of Section
422 of the Code; provided, however, that without approval of the holders of a
majority of the Common Stock present in person or represented and entitled to
vote at a valid meeting of stockholders, no such revision or amendment shall be
made that affects the ability of options thereafter granted to satisfy Rule
16b-3. Except as otherwise provided in the 1996 Plan, any amendment or
termination of the Plan shall not affect options already granted and the 1996
Plan shall not adversely affect the terms of any option granted prior to the
date the Plan was approved by stockholders, unless mutually agreed by the
Company and an optionee. The 1996 Plan will continue in effect until its 10th
anniversary in 2006 unless sooner terminated by the Committee.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE 1996 PLAN.
13
COMMON STOCK OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 1, 2001 (except as noted otherwise) by:
(a) each person who is known by the Company to own beneficially more than 5% of
the outstanding Common Stock; (b) each of the Company's directors who owns
Common Stock; (c) each of the executive officers named in the Summary
Compensation Table set forth below under "Executive Compensation and Other
Information"; and (d) all current directors and executive officers of the
Company as a group.
- -----------------------------------------------------------------------------------------------------------
Shares Percent
Name of Beneficial Owner 1 Beneficially Owned of Class
- -----------------------------------------------------------------------------------------------------------
Linwood A. ("Chip") Lacy, Jr. 2,011,900 24.7%
c/o Solomon, Ward, Seidenwurm & Smith
401 B Street Suite 1200
San Diego, CA 92101
- -----------------------------------------------------------------------------------------------------------
M. Dendy Young 2 1,029,630 11.5%
- -----------------------------------------------------------------------------------------------------------
Dimensional Fund Advisors 690,800 8.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
- -----------------------------------------------------------------------------------------------------------
Lawrence J. Schoenberg 3 318,002 3.9%
- -----------------------------------------------------------------------------------------------------------
Lee Johnson 4 130,000 1.6%
- -----------------------------------------------------------------------------------------------------------
William E. Johnson 5 119,573 1.4%
- -----------------------------------------------------------------------------------------------------------
James J. Leto 6 81,000 1.0%
- -----------------------------------------------------------------------------------------------------------
Robert D. Russell 7 74,167 *
- -----------------------------------------------------------------------------------------------------------
Joel Lipkin, Ph.D. 8 73,167 *
- -----------------------------------------------------------------------------------------------------------
John Toups 9 65,000 *
- -----------------------------------------------------------------------------------------------------------
Steven Kelman, Ph.D. 10 55,000 *
- -----------------------------------------------------------------------------------------------------------
John Spotila 11 50,300 *
- -----------------------------------------------------------------------------------------------------------
Daniel R. Young 12 5,000 *
- -----------------------------------------------------------------------------------------------------------
All Directors and Executive Officers as a group (11 2,000,839 20.6%
persons) 13
- -----------------------------------------------------------------------------------------------------------
* Less than one percent.
1 Such persons have sole voting and investment power with respect to all shares
of common stock shown as being beneficially owned by them, subject to
community property laws, where applicable, and the information contained in
the footnotes to this table.
2 Includes 850,000 shares for which options are exercisable and 830 shares held
in the name of Mr. Young's minor children.
3 Includes 111,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
4 Includes 125,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
5 Includes 117,417 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
6 Consists of 81,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
14
7 Includes 64,167 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
8 Consists of 73,167 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
9 Consists of 65,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
10 Consists of 55,000 of shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
11 Includes 50,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
12 Consists of 5,000 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
13 Includes 1,596,751 shares for which options are exercisable or become
exercisable within 60 days after March 1, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), requires the Company's directors and officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the SEC reports concerning their beneficial ownership
of the Company's equity securities. Directors, officers and greater than 10%
beneficial owners are required by SEC regulations to furnish the Company with
copies of all such SEC reports they file. Pursuant to Item 405 of SEC Regulation
S-K, the Company is required in this Proxy Statement to provide disclosure of
"insiders" who do not timely file such reports. Based solely on a review of such
forms furnished to the Company for the fiscal year ended December 31, 2000,
Messrs. Leto and Kelman failed to file a Form 5 timely. Thereafter, the
requisite filings were made.
EXECUTIVE OFFICERS
The executive officers of the Company, and certain information about
each of them, are as follows:
NAME AGE TITLE
- ----------------------- ------- -------------------------------------------
M. Dendy Young 53 Chairman of the Board and Chief Executive Officer
John T. Spotila 53 Chief Operating Officer, Executive Vice
President, General Counsel and Secretary
William E. Johnson, Jr. 60 Senior Vice President, Operations
Joel A. Lipkin, Ph.D. 47 Senior Vice President, Sales and Customer Support
Robert D. Russell 61 Senior Vice President and Chief Financial Officer
Officers are appointed by and serve at the discretion of the Board or,
with respect to officers at the Vice President level, the Chief Executive
Officer.
For information concerning Mr. M. D. Young, see "Election of
Directors."
Mr. Spotila joined the Company in December 2000 as Chief Operating
Officer, Executive Vice President, General Counsel and Secretary. From July 1999
to December 2000, he was Administrator of the Office of Information and
Regulatory Affairs of the Office of Management and Budget in the Executive
Office of the President of the United States. From December 1998 to June 1999,
he was Counselor for the
15
Office of Management and Budget. From September 1993 to December 1998, Mr.
Spotila was General Counsel and Regulatory Policy Officer for the U.S. Small
Business Administration. From 1975 to 1993 he was engaged in the private
practice of law in Cherry Hill, New Jersey.
Mr. Johnson joined the Company in August 1994 as a result of the
Company's acquisition of Falcon Microsystems, Inc. ("Falcon"). He served as Vice
President, Product Management from October 1994 to June 1995; as Vice President,
Purchasing & Distribution from June 1995 to January 1996; and as Vice President,
Operations from January 1996 until his promotion to Senior Vice President,
Operations in October 1997. From February 1988 until joining the Company, he
served in various inventory management positions, most recently as Senior
Director of Distribution, at Falcon.
Mr. Lipkin joined the Company in March 1997, serving as Vice President,
Business Development until his appointment in October 1999 as Senior Vice
President, Sales and Customer Support. From March 1987 to January 1997, he was
employed by Zenith Data Systems Corp., an integrator and reseller of
microcomputer products and services to the Government, where he served in
various business management positions, including serving as Vice President,
Systems Integration from August 1991 to January 1997.
Mr. Russell joined the Company in April 1999 as Senior Vice President
and Chief Financial Officer. From May 1995 until joining the Company, he served
as Vice President, Treasurer and Chief Financial Officer for TelePad
Corporation, a provider of mobile computer integration services. In March 1999,
TelePad Corporation filed a voluntary petition for relief under Chapter 11 in
the U.S. Bankruptcy Court for the District of Delaware. From August 1994 to May
1995, Mr. Russell was a consultant to the Company. From April 1986 to August
1994, he served as Vice President, Finance and Administration, Secretary and
Treasurer for Falcon.
16
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the three years
ended December 31, 2000 concerning compensation paid or accrued by the Company
to or on behalf of: (a) the Company's Chief Executive Officer ("CEO"); and (b)
the four most highly compensated executive officers other than the CEO, whose
compensation during 2000 exceeded $100,000 (collectively, the "Named Executive
Officers"):
----------------------------------- -------------------------
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
- ------------------------------- --------- ----------------------------------- -------------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
NAME AND COMP- STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS ENSATION AWARD(S) OPTIONS ($)
($)(1) ($)(2) ($)(3) ($) (#)
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
M. Dendy Young, 2000 $300,002 $92,550 $ 0 $ 0 0 $ 0
Chairman and 1999 300,000 117,500 0 0 100,000 103,846 (4)
Chief Executive Officer 1998 310,374 69,405 0 0 0 150,000 (4)
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
William E. Johnson, Jr., 2000 185,001 45,534 0 0 6,000 0
Senior Vice President, 1999 187,864 60,000 0 0 35,000 0
Operations 1998 181,846 73,381 0 0 20,000 0
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
Joel A. Lipkin, 2000 170,001 41,709 0 0 6,000 0
Senior Vice President, 1999 160,000 72,734 0 0 72,000 0
Sales & Customer Support 1998 155,073 61,961 0 0 0 0
Support
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
Judith B. Kassel, 2000 88,271 (5) 16,836 0 0 0 0
Vice President and 1999 110,000 33,165 0 0 24,000 0
General Counsel and Corporate 1998 110,669 47,515 0 0 20,000 0
Secretary
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
Robert D. Russell, 2000 165,174 65,173 0 0 6,000 0
Senior Vice President, 1999 106,827 (5) 17,778 0 0 110,000 0
Chief Executive Officer
- ------------------------------- --------- ------------ ------------ --------- ------------ ------------ -------------
(1) Includes amounts, if any, deferred by the Named Executive Officer pursuant
to the Company's 401(k) plan.
(2) Bonuses under any Executive Bonus Plan are based on corporate and
individual performance. See "Compensation Committee Report on Executive
Compensation--Executive Bonus Plan."
(3) Pursuant to SEC rules, perquisites not exceeding the lesser of $50,000 or
10% of a Named Executive Officer's combined salary and bonus are not
required to be reported.
(4) Consists of payments under the August 16, 1994 Consulting and Non-
Competition Agreement entered into between Mr. Young and the Company in
connection with the Company's acquisition of Falcon in August 1994.
(5) Represents compensation for that portion of the year in which the officer
commenced employment with the Company.
17
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options made during the year ended December 31, 2000 to each of the Named
Executive Officers:
- -------------------------------------------------------------------------------------- ----------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (4)
- -------------------------------------------------------------------------------------- ----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE EXPIRATION
OPTIONS EMPLOYEES IN PRICE (3) DATE
NAME GRANTED (1) 2000 (2) 5% 10%
(#) (%) ($/SH) ($) ($)
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
M. Dendy Young 0
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
William E. Johnson, Jr. 6,000 1.08% 3.25 11/02/2007 $7,938 $18,500
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
Joel A. Lipkin 6,000 1.08 3.31 07/10/2007 8,085 18,842
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
Judith B. Kassel 0
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
Robert D. Russell 6,000 1.08 3.25 11/02/2007 7,938 18,500
- -------------------------- --------------- -------------- ------------- -------------- ------------ ---------------
(1) Such options were granted under the Company's various stock option plans,
vest and become exercisable in equal annual installments and were granted
for a term of seven years, subject to earlier termination under certain
circumstances relating to termination of employment.
(2) During fiscal 2000, employees were granted under the Company's various
stock option plans or in accordance with employment offers, and non-
employee directors were granted automatically under the 1996 Plan, options
to purchase an aggregate of 555,000 shares of Common Stock.
(3) Represents the closing price of Common Stock on The Nasdaq Stock Market on
the grant date.
(4) Potential values are net of exercise price and before taxes payable in
connection with the exercise of such options or the subsequent sale of
shares acquired upon the exercise of such options. These values are based
on certain assumed rates of appreciation (i.e., 5% and 10% compounded
annually over the term of such options) based on SEC rules. The actual
values, if any, will depend upon, among other factors, the future
performance of Common Stock, overall market conditions and the Named
Executive Officer's continued employment with the Company. Therefore, the
potential values reflected in this table may not necessarily be achieved.
18
AGGREGATED OPTION EXERCISES IN 2000 AND OPTION VALUES AT DECEMBER 31, 2000
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the year ended, and
unexercised options held as of, December 31, 2000:
- -------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/00 (#) 12/31/00 ($)(2)
- ------------------------------- ------------------ --------------------- --------------------- --------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)(1) Unexercisable Unexercisable
- ------------------------------- ------------------ --------------------- --------------------- --------------------
M. Dendy Young 0 0 850,000 $0
50,000 0
- ------------------------------- ------------------ --------------------- --------------------- --------------------
William E. Johnson, Jr. 0 0 113,167 1,873
27,833 3,747
- ------------------------------- ------------------ --------------------- --------------------- --------------------
Joel A. Lipkin 0 0 67,667 1,873
60,333 3,747
- ------------------------------- ------------------ --------------------- --------------------- --------------------
Judith B. Kassel 0 0 0 0
0 0
- ------------------------------- ------------------ --------------------- --------------------- --------------------
Robert D. Russell 0 0 51,667 2,648
64,333 4,522
- ------------------------------- ------------------ --------------------- --------------------- --------------------
(1) Represents the excess of the market value of the shares acquired upon
exercise of such options over the exercise price of such options.
(2) Represents the excess of the market value of the shares subject to such
options over the exercise price of such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of three non-employee
directors: Messrs. Leto (Chairman), Toups and D. R. Young. No member of the
Compensation Committee is a current or former officer or employee of the
Company. Although Mr. M. D. Young is not a member of the Compensation Committee,
he is expected to attend portions of the Committee meetings at the request of
the Committee to provide information to, and respond to questions from, the
Committee. Mr. M. D. Young does not exercise any of the rights or have any of
the responsibilities of a Committee member. He is not entitled to vote on any
matters before the Compensation Committee and does not participate in any
Committee decisions regarding compensation, including his own. See "Compensation
Committee Report on Executive Compensation."
19
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL ARRANGEMENTS
Pursuant to an employment agreement dated January 1, 2001 (the "2001
Employment Agreement"), Mr. M. D. Young serves as the President and Chief
Executive Officer of the Company for a term ending December 31, 2001, and he is
nominated each year to serve as a member of its Board. Mr. M. D. Young is paid a
salary biweekly at the rate of $300,000 per year, reviewed annually by the
Board, plus a $300,000 targeted annual bonus payable periodically in accordance
with the Company's then current bonus plan for senior officers. Bonus payments
are payable in ratio to the percentage of the goal achieved contingent upon
achievement of at least 60% of the target upon attainment of earnings before
taxes (adjusted for Board-approved one-time charges (e.g., acquisition costs)).
Mr. M. D. Young is also entitled to such other benefits and perquisites as
provided to other senior officers pursuant to policies established from time to
time by the Board.
The 2001 Employment Agreement may be terminated by the Company for
cause (as defined in such agreement) upon 10 business days' notice to Mr. M. D.
Young; and other than for cause upon 180 days' notice to Mr. M. D. Young and by
paying to him in installments during the following 12 months an aggregate amount
equal to his then in effect annual salary plus a bonus in an amount equal to Mr.
M. D. Young's bonus for the previous year. Mr. M. D. Young may terminate the
2001 Employment Agreement without cause at any time upon 90 days' notice and, in
such event, he will be entitled to all compensation and other benefits that have
accrued as of the termination date. In addition, Mr. M. D. Young may terminate
the 2001 Employment Agreement upon five days' notice to the Company in the event
of a change of control (as defined in such agreement) of the Company and the
assignment of duties to him materially inconsistent with his position and status
with the Company. In such event the Company will be obligated to pay to him a
lump sum equal to 12 months' salary plus all compensation and other benefits
that have accrued as of the termination date. Mr. M. D. Young's previous
employment agreement dated January 1, 1998 with the Company expired on December
31, 2000.
Under an offer letter agreement dated April 1, 1999, Mr. Russell would
be eligible for six months' base salary and immediate vesting all outstanding
stock options if his duties or responsibility are materially modified without
his consent, or in the case of a change of control (as defined in the agreement)
of the Company and if his employment ceases for any reason other than for cause
(as defined in the agreement).
Under the Company's severance plan as amended to date (the "Severance
Plan"), officers of the Company at the Vice President level and above (not
including Mr. M. D. Young) who have completed nine full consecutive calendar
months of employment ("Eligible Officers") are entitled to receive certain
severance benefits for one year following termination of employment, if such
termination is non-temporary, involuntary and without cause. An Eligible Officer
is entitled to such severance benefits regardless of length of employment with
the Company if such termination is a result of the Company's divestment of an
operating unit and the Eligible Officer is not offered employment with the
acquiring company on substantially the same terms as his or her employment with
the Company. In addition, if there is a "change of control" of the Company, an
Eligible Officer will receive benefits under the Severance Plan regardless of
length of employment with the Company if such officer terminates his or her
employment with the Company either for any reason within one year following the
change in control or for "good reason" (which includes the assignment to the
Eligible Officer of significant duties inconsistent with his or her prior
position or a reduction in his or her compensation or benefits) within two years
following such change in control. A "change in control" of the Company is
defined in the Severance Plan to mean: (a) an acquisition of 50% or more of the
Company's outstanding voting securities; (b) during any 12-month period,
individuals who were directors at the beginning of such period cease to
constitute at least a majority of the Board, unless the election of each new
director is approved by a majority of directors then in office who were
directors at the beginning of such period; (c) certain mergers of the Company or
a sale of all or substantially all of its assets; or (d) a liquidation of the
Company. Each Eligible Officer is entitled to one year of severance pay based on
his or her highest annual compensation (base salary plus car allowance)
20
prior to termination. In addition, an Eligible Officer may elect to accept
accelerated vesting of his or her then outstanding but unvested stock options
partially or wholly in lieu of accrued severance pay. To receive severance
benefits under the Severance Plan, each Eligible Officer is required to execute
an employment separation agreement with the Company which provides, among other
things, for confidentiality, a general release in favor of the Company, and a
covenant not to compete with the Company for a period of 12 months after any
termination of Company employment.
On March 10, 1997, the Board unanimously terminated the Severance Plan.
However, such termination is not effective with respect to current Eligible
Officers, including Mr. Johnson (whose benefits under the Severance Plan, in
accordance with the terms thereof, may not be adversely affected without his
consent and, in any case, not effective with respect to Mr. M. D. Young, as
noted above), but only to officers who had not qualified as Eligible Officers
prior to March 10, 1997. Based on current compensation levels, the amount that
would be payable under the Severance Plan to Mr. Johnson if his employment were
terminated in March 2000, if he was eligible for and elected severance benefits
solely under the Severance Plan and if he did not elect accelerated vesting,
would be $190,000 payable pro rata over 24 semimonthly installments. Messrs.
Russell, Lipkin and M. D. Young are not eligible for benefits under the
Severance Plan.
Under an offer letter agreement dated February 12, 1997, Mr. Lipkin
would be eligible for immediate vesting all outstanding stock options in the
event of a change of control (as defined in the agreement) of the Company. Under
an October 29, 1999 promotion memorandum, Mr. Lipkin is eligible for six months
base salary and immediate vesting of all outstanding stock option if his duties
are materially modified without his consent or if there is a change of control
of the Company and his employment ceases for any reason other than cause.
THE FOLLOWING REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION
COMMITTEE SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT, EXCEPT
TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY
REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
POLICY AND OBJECTIVES
The Company's compensation program for executive officers is designed
to attract, motivate and retain qualified executive officers and is generally
administered by the Compensation Committee. The Company's program is based on
compensation policies and plans which seek to enhance the profitability of the
Company, and thus stockholder value, by aligning closely the financial interests
of the Company's executive officers with those of its stockholders. Accordingly,
the Committee, which is composed entirely of non-employee directors, structures
such policies and plans to pay competitive levels of compensation for
competitive levels of performance, and to provide for superior compensation
opportunities for superior levels of performance.
The Company actively collects and analyzes compensation information,
including compensation surveys from consulting firms such as Watson Wyatt and
Price Waterhouse Coopers. This information, and other market and competitive
information collected by the Company's Human Resources department, is used as
the basis for comparing the compensation of the Company's executive officers to
amounts paid to executive officers with comparable qualifications, experience
and responsibilities at other companies engaged in the industry as the Company.
21
COMPONENTS
The Company's executive compensation program includes three components,
each of which is intended to serve the overall compensation approach described
above: base salary, an executive bonus and stock options.
BASE SALARY
The Committee believes that the Company pays base salaries to its
executive officers that are set conservatively, and near the median, compared
with executive officers employed at competing companies. The Committee, among
other things, reviews and approves the annual salaries of the Company's CEO and
Executive Vice President(s). The CEO and the Chairperson of the Committee have
been delegated by the Board the collective authority to set the annual base
salaries of the remaining, less senior executive officer positions.
Additionally, all full-time executive officers are eligible to participate in
the Company's broad-based employee benefit plans.
EXECUTIVE BONUS PLAN
The Committee believes that a significant portion of each executive
officer's total compensation should be "at risk" in the form of incentive
compensation. Accordingly, under an annual Executive Bonus Plan developed and
implemented under the Committee's supervision, the Company pays cash bonuses to
all its eligible executive officers according to a formula based upon the
Company's earnings before taxes. Individual bonuses are calculated as a
percentage of base salary and range from 40% to 70% in the case of officers
generally, other than the CEO. In 2000, bonuses were earned by executive
officers based on application of the Executive Bonus Plan's formula. The CEO
additionally employs the occasional use of "spot" bonuses in recognition of
extraordinary performance.
STOCK OPTIONS
Options to purchase Common Stock are a key component of the Company's
executive compensation program. The Committee views the grant of stock options
as a valuable incentive that serves to align the interests of executive officers
with the Company's goal of enhancing stockholder value. Options will only have
value to an executive officer if the stock price increases over the exercise
price. The Committee reviews and acts upon recommendations by the Company's CEO
with regard to the grant of stock options to executive officers (other than to
himself). In determining the size and other terms of an option grant to an
executive officer, the Committee considers a number of factors, including such
officer's position, responsibilities and previous stock option grants (if any).
Options typically vest in equal installments over three to five years and,
therefore, encourage an officer to remain in the employ of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
In evaluating the CEO's compensation, the Committee reviewed the
compensation for similar positions. The Committee reviewed executive
compensation reports from Radford Associates and Price Waterhouse Coopers. The
Committee studied the base salary, annual bonuses, stock options and grants, and
other long-term compensation of the chief executive officers in each of other
companies, and recommended Mr. M. D. Young's salary to the Board by targeting
the 50th percentile of base and target bonus based upon the Committee's
research. Mr. M. D. Young's current compensation plan is intended to provide
significant incentives to him to increase the Company's value (as reflected in
its stock price) to the benefit of all Company stockholders, while the focus of
his annual bonus is on achieving short-term financial goals.
22
Mr. M. D. Young's compensation, as set forth in the 2001 Employment
Agreement (see "Employment Agreements and Termination of Employment and Change
of Control Arrangements" above), was unanimously approved by the Board. Mr.
Young has been the Company's CEO, as well as a member of its Board, since
December 18, 1995.
OTHER MATTERS
Mr. M. D. Young from time to time consulted with, and made
recommendations to, the Committee with respect to the compensation of the
Company's executive officers other than himself. Other than as delegated by the
Board (as set forth above), Mr. M. D. Young does participate in decisions
relating to executive officer compensation, excluding his own, and did not
participate on matters relating to the administration of the Company's stock
option plans.
Under Section 162(m) of the Code, a publicly held corporation such as
the Company will not be allowed a federal income tax deduction for compensation
paid to the chief executive officer or one of the four most highly compensated
officers (other than the chief executive officer) to the extent that
compensation (including stock-based compensation) paid to each such officer
exceeds $1 million in any fiscal year unless such compensation was based on
performance goals or paid under a written contract that was in effect on
February 17, 1993. The 1996 Stock Option Plan is designed so that amounts
realized on the exercise of options granted thereunder may qualify as
"performance-based compensation" that is not subject to the deduction limitation
of Section 162(m). The Committee intends to evaluate other elements of
compensation in light of Section 162(m), but may enter into arrangements that do
not satisfy exceptions to Section 162(m), as the Committee determines to be
appropriate. In particular, based upon the Company's current compensation plans
and policies and the final regulations under Section 162(m), it is possible that
the compensation to be paid to Mr. M. D. Young (primarily due to the stock
option component of his compensation arrangement) for 2001 may exceed the $1
million limitation per officer.
COMPENSATION COMMITTEE
James J. Leto (Chairperson)
John M. Toups
Daniel R. Young
23
THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the
cumulative total return on Common Stock with the cumulative total return of the
Nasdaq Composite Index and a Peer Index of companies with the same four-digit
standard industrial classification (SIC) code as the Company (SIC Code 5045 --
Computers and Peripheral Equipment and Software)1 for the period commencing
December 31, 1995 and ending December 31, 2000. The stock price performance
shown on the graph below is not necessarily indicative of future price
performance.
- ------------------------------------------------------------------------------------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1996 1997 1998 1999 2000
- -------------------- -------------- -------------- ------------- -------------- ------------- --------------
GTSI 100 128.57 131.43 103.57 62.86 72.14
- -------------------- -------------- -------------- ------------- -------------- ------------- --------------
Peer Index1 100 134.81 118.41 111.21 115.18 58.04
- -------------------- -------------- -------------- ------------- -------------- ------------- --------------
Nasdaq Index 100 124.27 152.00 214.39 378.12 237.66
- -------------------- -------------- -------------- ------------- -------------- ------------- --------------
[PERFORMANCE GRAPH]
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
1 The 41 companies listed in SIC Code 5045 are: Actrade Internet LTD; Alphanet
Solutions, Inc.; Ameriquest Technologies; Atec Group, Inc.; Bristol Retail Sol;
Capital Associates; CDW Computer Centers, Inc.; CompuCom Systems, Inc.;
Continental Info. Sys.; En Pointe Technologies.; European Micro Holdings; GTSI
Corp.; Heartland Technology, Inc.; IFS Intl., Inc.; Ikon Office Solutions;
Ingram Micro, Inc.; I-Sector Corporation; Latitude Communications; MCSI Inc.;
Merisel, Inc.; Michael Foods, Inc.; Micros-to-Mainframes, Inc.; OCG Technology
Inc.; Pacific Magtron Intl; Palm Inc.; PCC Group, Inc.; Peerless Systems Corp.;
Precis Smart Card Systems; Programmers Paradise, Inc.; Safeguard Scientific,
Inc.; Sand Technology Inc., CL A; Scansource, Inc.; SED Intl. Holdings, Inc.;
Software Spectrum, Inc.; Syscomm Intl. Corp.; Tech Data Corporation; Tekgraf
Inc., CL A.; V-One Corp.; Venturian Corp.; Wareforce.com, Inc.; and XOX Corp.
Since last year's proxy statement, Allstar Systems, Inc.; CHS
Electronics, Inc.; Mechanical Dynamics, Inc.; Miami Computer Supply Corp.;
MicroAge, Inc.; and PC Services Source, Inc. were deleted from SIC Code 5045,
and Ameriquest Technologies; Bristol Retail Sol; Capital Associates; I-Sector
Corporation; MCSI Inc.; OCG Technology, Inc.; Pacific Magtron Intl.; Palm Inc.;
Precis Smart Card Systems; Wareforce.com, Inc.; and XOX Corp. were added to SIC
Code 5045.
24
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following Report of the Audit Committee of the Board of Directors
(the "Audit Committee") does not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other Company filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act, except
to the extent the Company specifically incorporates this Report by reference in
any of those filings.
During the fiscal year ended December 31, 2000, the Audit Committee
developed a charter for the Committee, which was approved by the full Board. The
complete text of the charter is reproduced as Appendix A to this Proxy
Statement.
In overseeing the preparation of the Company's financial statements,
members of the Audit Committee met with both management and the Company's
independent auditors to review and discuss significant accounting issues. The
members of the Audit Committee have reviewed and discussed with the Company's
management the Company's audited consolidated financial statements as of and for
the fiscal year ended December 31, 2000. Management advised the members of the
Audit Committee that all of the Company's consolidated financial statements as
of and for the fiscal year ended December 31, 2000 were prepared in accordance
with generally accepted accounting principles, and the members of the Audit
Committee discussed such financial statements with both management and the
Company's independent auditors. The Audit Committee members' review included
discussion with the Company's independent auditors of matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Communication with
Audit Committees), as amended, issued by the Auditing Standard Board of the
American Institute of Certified Public Accountants.
With respect to the Company's independent auditors, members of the
Audit Committee, among other things, discussed with Arthur Andersen LLP matters
relating to its independence, including the disclosures made to the Audit
Committee as required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committee).
The Audit Committee also continued to monitor the need for an internal
auditing program.
On the basis of the reviews and discussions referred to above, the
Audit Committee recommends to the Board of Directors that the Board approve the
inclusion of the Company's audited consolidated financial statements referred to
above in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, for filing with the Securities and Exchange Commission.
Members of the Audit Committee for the year ended December 31, 2000:
Lawrence J. Schoenberg, Chairman
Steve Kelman, Ph.D.
John M. Toups
AUDIT FEES
In 2000 the services of the Company's independence accountants, Arthur
Andersen LLP, included an examination of the Company's audited consolidated
financial statements for the fiscal year ended December 31, 2000, reviews of the
Company's unaudited consolidated financial statements included in the Company's
three quarterly reports on Form 10-Q during fiscal 2000, tax consulting and
other non-audit services.
25
Arthur Andersen LLP billed the Company for professional services
rendered during the fiscal year ended December 31, 2000, as follows:
Audit fees $202,000 (1)
Financial information systems design
and implementation $ -0-
All other fees $60,700 (2)
----------------------
(1) Includes fees for review of unaudited consolidated financial
statements included in GTSI's quarterly reports on Form 10-Q
during the fiscal year ended December 31, 2000.
(2) Includes tax consulting and other non-audit services.
The Audit Committee has considered whether the provision by Arthur Andersen LLP
of non-audit services to the Company is compatible with maintaining Arthur
Andersen LLP's independence.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants for the fiscal year ended
December 31, 2000 was Arthur Andersen LLP. The Board has not yet selected the
independent accountants for the Company's fiscal year ending December 31, 2001.
A representative of Arthur Andersen LLP is expected to be present at the
Meeting, will have an opportunity to make a statement if he or she so desires,
and is expected to be available to respond to appropriate questions.
ANNUAL REPORT
A copy of the Company's 2000 Annual Report to Stockholders is being
delivered to each stockholder as of the Record Date. THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000, AS FILED WITH THE SEC,
IS ALSO AVAILABLE FREE OF CHARGE TO ALL STOCKHOLDERS OF RECORD AS OF THE RECORD
DATE BY WRITING TO THE COMPANY AT 3901 STONECROFT BOULEVARD, CHANTILLY, VIRGINIA
20151-1010, ATTENTION: INVESTOR RELATIONS.
OTHER MATTERS
The Company currently knows of no matters to be submitted at the
Meeting other than those described herein. If any other matters properly come
before the Meeting, the proxies will vote the Common Stock they represent as
they deem advisable.
By Order of the Board of Directors
John T. Spotila
Corporate Secretary
Chantilly, Virginia
April 13, 2001
26
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee ("Committee") is appointed by the Board to assist
it in monitoring (1) the integrity of the financial statements of the Company,
(2) the Company's compliance with legal and regulatory requirements, including
Federal procurement and employment laws, and (3) the independence and
performance of the Company's internal and external auditors. The Committee
members shall meet the independence and experience requirements of The Nasdaq
Stock Market, Inc. The Committee shall make regular reports to the Board.
The Committee shall have the authority to retain special legal,
accounting or other consultants to advise it. The Committee may request any
Company officer, employee, Company outside counsel or independent auditor to
attend a Committee meeting or to meet with any members of, or consultants to,
the Committee.
The Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could significantly
affect the Company's financial statements.
3. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the release of earnings and/or filing of
its Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independence Standards Board Standard 1,
discuss such reports with the auditor, and if so determined by the Committee,
take or recommend that the full Board take appropriate action to oversee the
independence of the auditor.
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Committee, recommend that the Board replace
the independent auditor.
A-1
11. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
12. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
13. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
14. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should include:
(a) Any difficulties encountered in the scope of the
audit work, including any restrictions on the scope
of activities or access to required information.
(b) Any changes required in the planned scope of the
internal audit; and
(c) The internal audit department responsibilities,
budget and staffing.
15. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
16. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and with
the Company's Code of Conduct.
17. Review at least annually with the Company's General Counsel legal
matters that may have a material impact on the financial statements, the
Company's compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
18 Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate executive
sessions.
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the 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 independence auditor. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
A-2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF GTSI CORP.
2001 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder(s) of GTSI Corp., a Delaware corporation
(the Company), hereby acknowledges receipt of the Companys Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 13, 2001, and
Annual Report for the year ended December 31, 2000, and hereby appoints M. Dendy
Young and Robert D. Russell, and each of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Stockholders
of the Company to be held at 9:00 a.m., Eastern Time, on May 15, 2001, at the
Companys headquarters located at 3901 Stonecroft Boulevard in Chantilly,
Virginia, and at any adjournment(s) thereof, and to vote all Common Stock to
which the undersigned would be entitled, if then and there personally present,
on the matters set forth below and as more particularly described in the
Companys above-mentioned Proxy Statement:
1. ELECTION OF DIRECTORS.
For All Nominees Listed Below (except as marked to the contrary below)
Withhold Authority to Vote For All Nominees Listed
(Instruction: To withhold the authority to vote for any individual nominee, mark
the box next to that nominees name below.)
Name of Nominee:
Lawrence J. Schoenberg (Class 1)
------------
Daniel R. Young (Class 1)
------------
M. Dendy Young (Class 1)
------------
2. AMENDMENT TO THE COMPANYS 1996 STOCK OPTION PLAN TO INCREASE THE
SHARES AVAILABLE FOR ISSUANCE BY 900,000.
For Against Abstain
------------- ------------ --------------
3. OTHER BUSINESS.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment(s) thereof.
Any one of such attorneys-in-fact or substitutes as shall be present and shall
act at said meeting or any adjournment(s) thereof exercise all powers of said
attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED IN
PROPOSAL 1, FOR PROPOSAL 2 ABOVE, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: , 2001
---------------------
- ---------------------------
Signature
- ---------------------------
Signature
This Proxy should be marked, dated and signed by each stockholder exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both parties should sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.