10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File Number:  0-19394

GTSI CORP.

(Exact name of registrant as specified in its charter)

Delaware	54-1248422
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3901 Stonecroft Boulevard, Chantilly, VA	20151-1010
(Address of principal executive offices)	(Zip Code)
703-502-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:  None

Securities registered pursuant to section 12(g) of the Act:  Common Stock, par value $0.005 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes x No o

The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of June 30, 2004 was 98,698,256.

The number of shares outstanding of the registrant’s common stock on March 1, 2005 was 8,988,143.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K are incorporated by reference to GTSI’s proxy statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held on April 21, 2005.

CONTENTS

			Page
PART I	Item 1.	Business	3
	Item 2.	Properties	15
	Item 3.	Legal Proceedings	15
	Item 4.	Submission of Matters to a Vote of Security Holders	15
PART II	Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	16
	Item 6.	Selected Financial Data	17
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 8.	Financial Statements and Supplementary Data	30
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	49
	Item 9A.	Controls and Procedures	49
PART III	Item 10.	Directors and Executive Officers of the Registrant	51
	Item 11.	Executive Compensation	51
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	51
	Item 13.	Certain Relationships and Related Transactions	51
	Item 14.	Principal Accounting Fees and Services	51
	Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	52
		Signatures	53
Schedule II		Valuation and Qualifying Accounts	55
		Exhibit Index	56

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Disclosure Regarding Forward-Looking Statements

Readers are cautioned that this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) relating to our operations that are based on our current expectations, estimates and projections. Words such as “expect,” “believe,” “anticipate,” “plan,” “intend” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from what is expressed or projected in these forward-looking statements. The reasons for this include the factors discussed in the Risk Factors subheading in this Business section. We specifically disclaim any obligation to update these forward-looking statements. These forward-looking statements should not be relied on as representing our estimates or views as of any subsequent date.

PART I

ITEM 1.     BUSINESS

Overview

GTSI Corp. is a recognized IT solutions leader, providing products and services primarily to federal government customers. We use the terms “GTSI,” “we,” “our,” and “us” to refer to GTSI Corp. and its subsidiaries. GTSI, a Delaware corporation, was founded in 1983 and has more than 20 years of government-focused experience. Our complete product and solution offering, technical expertise, logistics strengths, extensive contracts portfolio, customer relationships and proven performance record make GTSI equally valuable to our customers and technology partners.

We offer our customers a convenient and cost-effective centralized source for computer, workstation, software, networking and other IT solutions through our broad selection of popular products and services at competitive prices. We specialize in understanding both the various IT needs and the procurement processes of government customers. GTSI sells to most departments and agencies of the U.S. Federal Government, as well as state and local governments, and prime contractors. Our total sales were $1.08 billion, $954.1 million and $934.7 million for the years ended December 31, 2004, 2003 and 2002, respectively. The approximate percentage of our sales by customer type as of December 31 was:

	2004		2003		2002
Federal Government	75	%	80	%	76	%
Prime Contractors	20		17		21
State and Local Governments	5		3		3
Total	100	%	100	%	100	%

Additional information related to net income, total assets, significant customers and long-lived assets is provided in the consolidated financial statements and in Note 15 of the financial statements appearing in Part II, Item 8 of this Form 10-K.

GTSI currently offers access to approximately 350,000 IT products from over 1,380 key manufacturers including Panasonic, HP, Sun Microsystems, Cisco Systems and Microsoft. We believe we provide our vendor partners with a cost effective marketing and distribution channel to the many end-users constituting the government market, while substantially insulating these partners from complex government procurement rules and regulations.

We fulfill many of our customers’ orders from our state-of-the-art 140,000 square-feet distribution center located in Northern Virginia in close proximity to Washington Dulles International Airport. We inventory many popular IT products to enable quick delivery to our customers. In addition, we leverage our Distribution Center and logistics expertise to offer a wide variety of managed fulfillment services to our

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customers. Within the Distribution Center, we manage a 30,000 square foot integration center where we perform a number of value added services including:

·Standard hardware integration;

·Customer image propagation;

·Automated system diagnostics and data capture;

·Customer asset tagging; and

·Complex configurations of various IT Solutions, such as Voice over Internet Protocol.

GTSI’s distribution and integration operations are ISO 9001:2000 certified.

“GTSI” is a registered service mark of GTSI Corp. All other trademarks and service marks are proprietary to their respective owners.

Business Strategy

GTSI is committed to and focused on the government customer. We believe there are significant opportunities to increase our relatively low market share within the growing government IT market, and to improve our overall profitability as we grow our revenue base. In mid 2004, we launched a strategic growth plan to accomplish the following key business initiatives during the next three years:

·Double the revenue base of GTSI from $1 billion to $2 billion primarily through organic measures, supplemented by strategic acquisitions,

·Improve our gross margins each year during the next three years through enhanced focus on purchasing and pricing initiatives, and

·Drive enhanced profitability through continued process re-engineering initiatives aimed at streamlining processes and procedures, while enhancing overall corporate wide productivity.

We plan to continue to increase our work force to take advantage of the growing government IT market. Our management has undertaken a number of initiatives consistent with this revenue and earnings growth strategy (e.g., hiring and training additional personnel, creating a centralized pricing organization, creating a centralized purchasing organization and implementing the final phase of our new ERP system).

Focus on the Growing Government IT Market

Because of our historical focus on government, GTSI has developed the expertise and established the partner and customer relationships necessary to be a leader in this market. As a result, our marketing and sales force are effective at reaching and servicing the government market, which consists of procurement and contracting officers, information resource managers, Chief Information Officers, government IT executives, systems integrators, value-added resellers, prime contractors and a wide array of end-users. We continue to increase our sales organization to widen customer coverage and broaden our enterprise solutions, products and services. In addition, by concentrating on the government market, we have avoided the higher credit risk of commercial customers.

Execute New Government Contracts and Utilize Flexible Contract Vehicles

GTSI holds a wide range of government contracts, including multimillion dollar, multi-year contracts with the Department of Defense (“DoD”) and certain civilian agencies, as well as several multiple award schedules and blanket purchasing agreements with a variety of DoD and civilian agencies. We also serve as a subcontractor, providing products and services to other companies holding government contracts. GTSI intends to continue to identify and pursue contract vehicles that best leverage our broad selection of solutions, services, integration and distribution capabilities and partner relationships.

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Provide a High-Quality Centralized Source for Procuring IT Products and Services

In addition to offering a full line of computer hardware, software and peripheral products, GTSI offers its customers pre- and post-sale technical support and assistance in the selection, configuration, installation and maintenance of the products and systems that we sell. Furthermore, by offering a wide range of IT solutions and products through a variety of procurement mechanisms, we offer our customers the convenience, flexibility and cost savings of purchasing from a centralized source. In our interactions with our customers, our employees focus on providing high quality customer services associated with the order, delivery, installation and repair of the products we sell. In addition to our product offerings, we now offer service solutions to meet our customer needs in networking and telecommunications, storage and continuity of operations solutions, enterprise software deployment and managed logistics support.

Establish and Maintain Strong Partner Relationships

To provide a centralized source of products and solutions for our customers, GTSI maintains strong relationships with leading hardware, software and services partners. GTSI offers our partners a wide range of marketing and sales services, which provide them with access to the millions of end-users constituting the government market. In addition, we insulate our partners from the procurement regulatory complexities, costs and complicated billing requirements associated with the government market.

Improve Internal Efficiencies

GTSI has undertaken a variety of activities aimed at improving financial performance. We believe that our improved product pricing, supply chain management, and quality and expense control will lead to improved operating and net margins. In addition, we plan to increase employee productivity through training, use of the improved technology from our new Enterprise Resource Planning (“ERP”) system, and a heightened focus on our customer relationship management (“CRM”) initiatives.

Customers

GTSI’s sales are predominantly generated from multiple agencies and departments of the U.S. Federal Government, either directly or ultimately through prime contractors. Our revenue from the federal government accounted for approximately 95%, 98% and 97% of our sales during 2004, 2003 and 2002, respectively. Federal government sales were earned from numerous agencies and departments as approximated below:

	2004		2003		2002
Department of Defense	37	%	41	%	41	%
Civilian Agencies and Departments	42		41		38
Prime Contractors	21		18		21
Total	100	%	100	%	100	%

Contracts

GTSI achieves its sales through federal, state and local government contracts and open market procurements. Our contracts with the federal government include a General Services Administration (“GSA”) Schedule contract, Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts and Blanket Purchase Agreements (“BPAs”). We pursue formal government bids for IDIQ contracts and BPAs. Substantially all of these bids are awarded on a “best value” to the government basis (which, depending on the bid, can be a combination of price, technical expertise, past performance on other government contracts and other factors). We seek to use our partner contacts, purchasing power, distribution strength and procurement expertise to compete successfully on these bids. These major procurements may equal millions of dollars in total revenue, span multiple years and provide a purchasing vehicle for many

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government agencies. In some cases, various government agencies levy an administrative fee on purchases made by departments outside of the agency that awarded the contract. These fees are collected by GTSI and remitted to the respective agency on a contract specified payment schedule. Items offered under our contracts include platform solutions, peripherals, maintenance, training and services. All of our contracts allow for the addition of products under certain circumstances. Additional details regarding our platform solutions and peripherals are provided in the Products, Solutions, and Services subheading in this Business section.

General Services Administration

GTSI holds a GSA designated Schedule 70 contract for the sale of IT products and services. Schedule 70 contracts are multi-award schedule contracts managed by the GSA IT Acquisition Center. In March 2002, the government formally exercised its first of three five-year options to extend the GTSI contract through 2007. GSA contracts provide all government agencies, certain international organizations, authorized prime contractors, and state and local governments with an efficient and cost-effective means for buying commercial products. GSA purchasers may place unlimited orders for products under GSA contracts.

Our GSA contract contains price reduction clauses requiring that we pass on to government customers certain reduced prices we may receive from our partners, but prohibits us from passing on price increases for a period of one year. To mitigate the potentially adverse impact of any such price increase, we require substantially all of our partners who supply our GSA contract to provide us with supply and price protection.

Indefinite Delivery/Indefinite Quantity

IDIQ contracts offer greater flexibility than GSA contracts because they allow products to be added quickly and allow contractors more pricing flexibility. IDIQ contracts are pre-competed; therefore, orders placed under these contracts are not subject to protest unless the order is beyond the scope of the contract. There are three types of IDIQ contracts: government-wide acquisition contracts (“GWAC”), multi-agency contracts (“MAC”), and single agency contracts. A GWAC is a task-order or delivery-order contract for information technology established by a single federal agency for government-wide use upon approval by the Office of Management and Budget, while MACs accept orders from other agencies under the authority of the Economy Act.

Details regarding our IDIQ contracts are as follows:

Contract Name	IDIQ Type	Contracting Agency	Expiration Date
Scientific Engineering Workstation Procurement III(a)	GWAC	NASA	July 30, 2006
Electronic Commodity Store III	GWAC	NIH(b)	Nov. 26, 2012
Maxi-Minis and Databases	MAC	Army	May 25, 2005(c)
Information Technology Enterprise Solutions	MAC	Army	Nov. 1, 2006(c)
Procurement of Computer Hardware and Software -2	single agency	Veterans Administration	April 2, 2005(c)

(a) Comprises three contracts which each relate to a specific category of IT products

(b) National Institute of Health

(c) Contract contains extension options

The products are sold under the contract at a fixed price; however, the government typically negotiates a lower price for large quantity or high value orders.

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Blanket Purchase Agreements

Individual GSA ordering agencies may enter into GSA-authorized BPAs with GSA contract holders. BPAs are similar to second-tier contracts under a contractor’s GSA contract. BPAs enable agencies to obtain better pricing based on volume ordering and they decrease an agency’s administrative costs by streamlining the ordering process.

GTSI maintains several Federal Supply Schedule BPAs that are authorized under our GSA Schedule 70 contract. GSA authorized BPAs incorporate many terms, conditions and products offered on GSA Schedule contracts, often at prices lower than those available on the GSA schedules. We normally enter into separate agreements with partners to offer reduced BPA prices to the government. Our BPAs are agency specific and allow us to focus specific partner relationships on specific customers.

State and Local

In 2003, GTSI was awarded U.S. Communities, a multi-state contract available to cities, counties, special districts (airport, water, etc.), state agencies, schools and large non-profits such as hospitals and clinics. In addition, GSA now allows state and local government agencies to utilize GSA Schedules. Multi-state contracts enable individual states to utilize the buying power of multiple states, which results in lower costs based on volume purchasing. The initial term of the U.S. Communities contract expires on May 1, 2006 and the contract has three one-year extension options.

The products are sold under the contract at a fixed price; however, governments typically negotiate a lower price for large quantity or high value orders. In addition, these contracts include an administrative fee calculated on the product price. We collect this fee and remit it on a quarterly basis to the contract’s administering agency.

Many purchases in the state and local government market are still made through individual competitive procurements, although many state and local governments issue invitations to bid for statewide computer term contracts. State and local procurements typically require formal responses from a prospective bidder. Each state maintains a separate code of procurement regulations that must be understood. Compliance is required to successfully market and sell to individual states. GTSI currently maintains several state and local IT contracts, regularly submits oral and written bids to state and local governments and is on a number of state and local government bid lists.

Open Market

We also sell many IT products through open market procurements. These procurements are separate and apart from GSA Schedules, IDIQs and BPAs. Open market procurements include simplified acquisition procedures, requests for quotes, invitations for bids and requests for proposals. GTSI is on most government bid lists relevant to its product offerings and responds with proposals to hundreds of such bid solicitations each year. We also sell to prime contractors to the government, including systems integrators, through open market procurements.

Products, Solutions and Services

GTSI is a leading, dedicated business-to-government provider of IT solutions. We continuously monitor and evaluate existing and emerging technologies to ensure that we offer our customers state-of-the-art technology products and solutions. GTSI also offers simplified buying through our website, gtsi.com.

Hardware

GTSI has strong strategic relationships with global market leaders such as Sun Microsystems, HP, Panasonic, Cisco Systems, Network Appliance, IBM, Dell, Gateway, Apple, APC and SGI. It also has resources dedicated to incubating new partners as technology develops and emerges. Whether it is

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high-performance computing, physical security or telecommunication technology, GTSI offers state-of-the-art hardware solutions targeted at meeting a wide variety of customer needs. In addition to reselling workstations, desktops, laptops, notebooks, servers, facsimile products, and internet and extranet products; peripherals resold by us include disk drives, CD-ROM and DVD drives, printers, monitors, scanners, modems and related products. Our networking products including LANs, WANs, metropolitan area networks, and personal area networks are supplemented by GTSI services, which include assisting customers in selecting, configuring, installing and maintaining networks. Through its extensive relationships, GTSI is able to secure state-of-the-art hardware to meet ever changing customer needs.

Software

We provide products and solutions from virtually every leading desktop and enterprise software publisher including Adobe, BEA, BMC/Remedy, Citrix, Computer Associates, IBM, McAfee, Mercury, Microsoft, Novell, Oracle, Red Hat and Symantec/Veritas. GTSI’s breadth of software providers is one of the broadest in the industry.

Solutions

GTSI has a number of Enterprise Technology Practices. Each practice brings together talent that is focused on specific industry and technical disciplines. Practices include focused concentration in software, physical security, enterprise security, satellite, power, networks, telecommunications, enterprise computing, storage and mobile technologies. The practices are designed to provide a thorough understanding and alignment to specific partners such as Sun Microsystems, Cisco Systems, Hewlett Packard, IBM and Panasonic. Each team includes professionals with extensive industry knowledge and experience in systems engineering, project management and customized solution development.

Services and Warranty

We provide professional management of the creation and delivery of services to our customers. GTSI’s services solutions capitalize on core business capabilities through managed fulfillment and support services, implementation of technical product services and technology consulting services, either through our own business resources or through our alliance with partners. GTSI typically offers warranties on products for the same term as the manufacturer’s warranty. We also sell extended warranties ranging from three to five years beyond the manufacturer’s warranty on certain products.

The following table indicates, for the years ended December 31 (dollars in millions), the approximate sales by product category along with related percentages of total sales.

Products	2004				2003				2002
Hardware	$	834.1	77.5	%	$	692.5	72.6	%	$	673.7	72.1	%
Software	155.7		14.5		154.5		16.2		196.4		21.0
Resold third-party service products	66.6		6.2		91.2		9.5		50.8		5.4
Services	19.7		1.8		15.9		1.7		13.8		1.5
Total	$	1,076.1	100.0	%	$	954.1	100.0	%	$	934.7	100.0	%

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Partner Relationships

To offer our customers a centralized source for their IT needs, we establish and maintain relationships with key partners. GTSI offers partners a number of advantages including:

·Proactive sales of products and solutions;

·Access to the government market through a significant number of diverse contract vehicles and a large and experienced sales organization;

·Helping to lower costs to comply with procurement regulations involved in selling directly to the government market;

·Facilitate the reduction of costs related to reduction or elimination of selling, marketing and various administrative programs; and

·Participation in value-added services, including numerous government-specific marketing programs and end-user technical support.

The terms of agreements with our partners vary widely but typically permit us to purchase products for resale to the government market. Virtually none of our agreements require us to purchase any specified quantity of product. GTSI typically requires partners, acting as suppliers to us under our term government contracts to provide us with supply and price protection for the duration of such contracts. Other than supply agreements under term government contracts, our partner agreements are typically terminable by the partner on short notice, at will or immediately upon default by GTSI, and may contain limitations on partner liability. These partner agreements also generally permit GTSI to return previous product purchases at no charge within certain time limits for a restocking fee or in exchange for other products of such partner. We also purchase some products from independent distributors.

Our partners provide us with various forms of marketing and sales assistance, including sales incentives and market development funds. Partners provide sell-through and other sales incentives in connection with certain product promotions. Additionally, key partners participate with us in cooperative advertising and sales events and typically provide funding that can offset all or part of the costs of such efforts.

Inventory Management

Aggressive inventory management allows us to limit our inventory investment. We purchase products for resale both directly from manufacturers and indirectly through distributors and other sources. During 2004, we purchased approximately 75% of the products we sold directly from manufacturers and the remaining amount from distributors and other sources.

We manage our inventory in an aggressive, cost-efficient manner, resulting in a rapid-turn inventory model. We generally only stock items that have consistent customer demand. Our distribution process is highly automated with real-time shipment tracking and status system. All product picking is performed using bar-coded labels, UPC bar codes and radio frequency scanning. We implemented an RFID Solution in January, 2005, which enables us to apply RFID tags to case and pallet-load shipments that meet published Department of Defense requirements.

We generally ship products by UPS, FedEx, DHL and other commercial delivery services and, where applicable, invoice customers for shipping charges.

Marketing and Sales

GTSI Marketing develops and manages our branding and positioning activities on a worldwide basis. These activities inform the government market of our capabilities and value proposition in order to acquire new customers and improve retention of existing business. Most activities are funded by our partners in exchange for the entry that GTSI’s relationships and knowledge offer in selling to the government. Each

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activity is fully integrated with other GTSI marketing programs to provide compelling awareness, consistency across media and a maximum return on investment.

Our marketing activities include sponsorship of major trade shows and customer events, advertising in broadcast media, solutions focused collateral, e-commerce Web sites located at gtsi.com, pinpointed e-mail marketing, outbound telemarketing and sales-related incentive programs. We develop and distribute two publications: “ClarITy”, an enterprise solution focused magazine and “The GTSI Catalog”, an IT product focused directory. In addition, GTSI advertising is a familiar and welcome face on the pages of virtually all government related publications.

GTSI recognizes that the size and diversity of the government market make it imperative for us to identify and understand the needs of our customers. Through years of intensive effort, GTSI has compiled and maintained a proprietary database that contains an extensive list of agency procurement and contracting officers, information resource managers, senior policy makers, technology influencers, end-users, systems integrators, VARs and prime contractors. We use this database to target our marketing efforts and perform data mining for various market research purposes. We conduct frequent customer surveys to assess the opinions and interests of our customer base.

Our sales organization is focused on understanding the current and emerging needs of our customers and to provide products, services and bundled solutions to meet those needs. Our sales organization continues to provide deep coverage for existing customers while expanding sales coverage to focus on new accounts and new product and service offerings to current customers. Our Customer Teams work closely with our Enterprise Technology Practices to best meet the requirements of our customers.

We offer lease and finance solutions to our customers as an alternative to outright purchase. This growing practice warranted a more structured approach to support the business. Therefore, we established GTSI Financial Services in 2004 as a wholly owned subsidiary of GTSI Corp. to respond to our government customer’s budget constraints and need for financial solutions. GTSI Financial Services offers lease and financing programs under existing contracts as an alternative to purchasing equipment. The subsidiary’s focus is to enable government customers to proactively manage technology lifecycles with existing budget limitations.

Competition

The government IT market is highly competitive and subject to rapid change. GTSI competes with a number of competitors including certain leading hardware manufacturers, systems integrators, resellers, commercial computer retail chains and distributors.

We believe that the principal competitive factors in the government IT market in which we compete include:

·Price;

·Expertise in government procurement processes;

·Breadth of product line;

·Customer and partner relationships;

·Technical expertise;

·Distribution capability;

·Available inventory; and

·Customer service and support.

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We believe that competition may increase in the future, which could require us to reduce prices, increase advertising expenditures or take other actions which may have adverse effects on our operating results. A number of our existing and potential competitors have greater financial, marketing and technological resources than GTSI. Some of our competitors have reduced their prices in an attempt to stimulate sales. Decreasing prices of computers and related technology products and accessories resulting from competition require us to sell a greater number of products to achieve the same level of sales and gross margin. If this trend continues and we are unable to attract new customers and sell increased quantities of products, our sales growth and profitability could be adversely affected. However, we believe we have a competitive advantage over certain of our competitors because of our procurement expertise and our ability to offer a centralized source for purchases of a wide variety of leading technology products from numerous manufacturers.

Backlog

We identify an order as backlog as soon as we receive and accept a written customer purchase order. Backlog fluctuates significantly from quarter to quarter because of the seasonality of government ordering patterns and changes in inventory availability of various products. Our total backlog includes orders that have not shipped (“unshipped backlog”) as well as orders that have shipped but cannot be recognized as revenue as of the date of the financial statements due to FOB destination shipping terms. Total backlog at December 31, 2004 was approximately $86.8 million compared to $102.8 million at December 31, 2003. Unshipped backlog at December 31, 2004 was approximately $81.5 million, compared to $87.4 million at December 31, 2003.

Employees

At February 25, 2005 we had 851 employees, including 579 in sales, marketing and contract management; 108 in operations; and 164 in finance, IT, human resources, legal and other support functions. None of our employees are represented by a labor union and we have experienced no material labor-related work stoppages.

Available Information

GTSI is traded on the NASDAQ National Market under the symbol GTSI. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements for our annual stockholders’ meeting, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our Web site at www.gtsi.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. All of GTSI’s current required Exchange Act filings with the SEC, as well as press releases and other investor relations’ information, may be obtained free of charge by request to: Investor Relations, GTSI Corp., 3901 Stonecroft Boulevard, Chantilly, VA 20151-1010. Telephone (703) 502-2540.

Risk Factors

There are many factors that affect our business and results of operations, some of which are beyond our control. The following is a description of some important factors that may cause actual results to differ materially from those in forward-looking statements and from historical trends.

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The seasonality of our business makes our future financial results less predictable, which may adversely affect our stock price.

Our results from operations have been, and are expected to continue to be, subject to fluctuations as a result of numerous factors. The factors which make it difficult to predict our future sales volume and profits include:

·the condition of the information technology industry in general,

·shifts in demand for hardware and software products,

·product life cycles,

·significant seasonal fluctuations in our sales as a result of government buying and funding patterns,

·fluctuations in our gross margins and the factors that contribute to this as described below,

·the availability of price protection, purchase discounts and rebate programs from vendors,

·how well we execute on our strategy and operating plans,

·changes in accounting rules, such as recording expenses for employee stock option grants, and

·customer order deferrals in anticipation of new product releases or upgrades from manufacturers.

As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a material effect on our business, results of operations, and financial condition that could adversely affect our stock price.

We expect gross margin to vary over time.

Overall gross margin levels may be negatively affected in the future by numerous factors including:

·timing and size of orders from customers,

·variation in mix of products sold,

·increases in product or shipping costs that we cannot pass on to customers,

·a shift in sales mix to more complex requirements on contracts with additional service elements,

·increased price competition, and

·increased warranty costs.

Any issue that compromises our relationship with agencies of the federal government would cause serious harm to our business.

Our sales are highly dependent on the government’s demand for IT products. Although we do not believe that the loss of any single agency or department would have a materially adverse effect on our results of operations, a material decline in overall sales to the government as a whole, or to certain key agencies thereof, could have such an effect. Among the key factors in maintaining our relationships with federal government agencies are:

·our performance on individual contracts and delivery orders,

·the strength of our professional reputation,

·the relationships of our key executives with customer personnel, and

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·our compliance with complex procurement laws and regulations related to the formation, administration and performance of federal government contracts.

To the extent that our performance does not meet customer expectations, or our reputation or relationships deteriorate, this would cause a negative effect on our revenue, profitability and cash flow. Noncompliance with government procurement regulations or contract provisions could result in substantial monetary fines or damages, suspension or debarment from doing business with the government, and civil or criminal liability.

Substantially all of our government contracts are terminable at any time at the government’s convenience or upon default. If a government customer terminates one of our contracts for convenience, we may recover, at most, only our incurred or committed costs, settlement expense, and profit on work completed prior to the termination. Upon termination of a government contract for default, the government may also seek to recover the costs of procuring the specified goods and services from a different contractor. The effect of unexpected contract terminations would negatively impact our financial results.

Our success is dependent on our ability to recruit, retain and motivate talented employees.

In addition to the low unemployment rate in the Washington, DC Metropolitan area, competition for experienced management and technical, sales and support personnel in the IT industry is substantial. Our rate of sales growth would be negatively affected if we are unable to expand the size of our sales force. Financial results are also affected by the addition of personnel or other expenses in anticipation of sales growth. To attract and retain the number of employees we need to grow our business, we may have to increase our compensation levels or incur higher recruiting costs in the future. This would adversely affect our financial performance. GTSI experiences employee turnover at rates comparable to those of other companies in the Northern Virginia area. We do not anticipate material changes to our employee turnover rate in 2005. However, a significant increase in turnover would likely have a material negative impact on our productivity.

We are exposed to inventory risks.

We are exposed to inventory risks as a result of balancing the need to maintain appropriate inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. We seek to minimize our inventory exposure through a variety of inventory management procedures and policies, vendor price protection and product return programs. If we ultimately determine that we have excess inventory, we may have to reduce our prices and write-down inventory, which in turn could result in lower gross margins.

Infrastructure failures could have a material adverse affect on our business.

We are highly dependent on our infrastructure in order to process orders, track inventory, ship products in a timely manner, prepare invoices to our customers and otherwise carry on our business in the ordinary course. Key to the success of our strategy to drive greater productivity and cost savings is the implementation of the final phase of our ERP system expected in 2005. If we experience problems with the implementation of this system, the resulting disruption could adversely affect our sales and margins. The transition to our new ERP system involves numerous risks including:

·difficulties in integrating the system with our current operations,

·diversion of management’s attention away from normal daily operations of our business,

·initial dependence on an unfamiliar system while training personnel in its use,

·increased demand on our support operations, and

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·potential delay in the processing of customer orders for shipment of products.

As a result of the above, our business, operating results and financial condition could be adversely affected.

We may not qualify as a small business for new contract awards.

GTSI maintains a “small business” status under its GSA Schedule contract, ITES contract and several BPAs it held in 2004 based upon its size status at the time of the contracts’ original award date. As a small business, GTSI enjoys a number of benefits, including being able to compete for small business orders, qualifying as a small business subcontractor, bidding pursuant to small purchase procedures directed to non-manufacturer small business, and offering government agencies an avenue to meet their internal small business purchase goals.

A company’s size status under a contract is based on the North American Industry Classification System (“NAICS”) Code referenced in the subject contract’s solicitation. Dependent on the NAICS Code referenced in a solicitation, GTSI may or may not qualify as a small business for new contract awards. Under a Federal Acquisition Regulation (FAR) Deviation issued on October 10, 2002 by GSA, GTSI will be required to recertify its size status on its GSA Schedule Contract no later than 2007. At such time, GTSI may not qualify as a small business for new orders under the GSA Schedule. In addition, new legislation or regulations may require GTSI to recertify its size status on its GSA Schedule sooner than 2007. We cannot predict whether we would continue to qualify as a small business at the time of recertification.

Our business depends on our vendor relationships and the availability of products.

We need to continue to obtain products at competitive prices from leading partners to provide a centralized source of price-competitive products for our customers and to be awarded government contracts. Sales of Panasonic, HP, Sun Microsystems and Cisco products comprise a substantial portion of our sales and we believe our relationships with these key partners are good. The loss of, or change in business relationship with, any of these or any other key vendors, or the diminished availability of their products, could reduce the supply and increase the costs of products we sell and negatively impact our financial results. Delays in vendor shipments of new or existing products or in the processing of incentives and credits due to GTSI would unfavorably influence our operating performance. In addition, we could be adversely affected if one or more key partners decided to:

·sell directly to the government,

·sell their products to our competitors on more favorable terms than to GTSI,

·allow additional resellers to represent their products, or

·restrict or terminate our rights to sell their products.

Adverse changes in federal government fiscal spending could have a negative effect on our business.

Changes in federal government spending policies or budget priorities could directly affect our financial performance. Among the factors that could materially harm our business are:

·significant decline in spending by the federal government in general or by specific departments or agencies in particular,

·changes in the structure, composition and/or buying patterns of the government,

·the adoption of new laws or regulations changing procurement practices, or

·delays in the payment of our invoices by government payment offices.

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These or other factors could cause federal government agencies and departments to reduce their purchases under contracts, to exercise their right to terminate contracts, or not to exercise options to renew contracts, any of which would cause us to lose future revenue.

ITEM 2.     PROPERTIES

GTSI’s primary business is conducted from a headquarters and distribution center located in Northern Virginia. We do not own any real property. Our headquarters are located in office space of approximately 165,000 square feet in Chantilly, Virginia under long-term leases with varying expiration dates through 2008. GTSI’s primary warehousing and distribution operations are located in a facility of approximately 140,000 square-feet in Chantilly, Virginia under a lease expiring in December 2006. GTSI also has offices in several other U.S. locations, as well as overseas in Germany. We are fully utilizing all of our facilities and believe they are in good condition and suitable for the conduct of our business. For additional information regarding our obligations under leases, see Note 14 of the consolidated financial statements in Part II, Item 8 of this Form 10-K.

ITEM 3.     LEGAL PROCEEDINGS

In November 2003, GTSI Corp. (“GTSI” or the “Company”) was served with a $25 million lawsuit, with treble damages, related to an alleged breach of contract due to the termination of Ichiban, Inc., a former subcontractor. This suit was filed in Virginia Circuit Court in Fairfax County, Virginia and follows the Company’s earlier lawsuit against the former subcontractor. In November 2004, plaintiff modified the claim eliminating treble damages. Management believes the remaining claims are without merit and intends to defend vigorously this lawsuit, but the ultimate outcome of this matter is uncertain.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2004.

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PART II

ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

GTSI’s common stock is traded on the NASDAQ National Market under the symbol GTSI. As of March 1, 2005, there were 378 stockholders of record of the Company’s common stock. The following stock prices are the high and low sales prices of GTSI’s common stock during the calendar quarters indicated.

Quarter	2004				2003
First	$	14.52	$	11.39	$	15.50	$	5.25
Second	$	12.63	$	10.10	$	9.64	$	6.65
Third	$	11.54	$	7.86	$	12.60	$	8.33
Fourth	$	11.12	$	8.44	$	13.93	$	10.00

The Company has never paid any cash dividends and does not anticipate paying cash dividends on its common stock in the foreseeable future.

GTSI’s transfer agent is Wachovia Bank, N.A., Shareholder Services Group, 1525 West W.T. Harris Blvd., 3C3, Charlotte, NC 28262-1153; telephone 1-800-829-8432.

The Annual Meeting of Stockholders is scheduled to be held at 9:00 a.m. on Thursday, April 21, 2005, at the Company’s headquarters located at 3901 Stonecroft Boulevard in Chantilly, Virginia.

The following table summarizes information regarding GTSI’s equity compensation plans as of December 31, 2004.

Plan Category	Number of Shares to be Issued upon Exercise of Outstanding Options (a)		Weighted Average Exercise Price of Outstanding Options (b)			Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (excluding shares reflected in column (a)) (c)
Equity compensation plans approved by stockholders		2,076,050		$	8.2734		767,500
Equity compensation plans not approved by stockholders*		972,000		$	5.9313		N/A
Total		3,048,050		$	7.5265		767,500

*Represents an aggregate of 372,000 shares issuable under options granted from time to time to persons (other than Mr. M.D. Young) not previously employed by the Company, as an inducement essential to such persons entering into employment agreements with the Company and 600,000 shares issuable under options granted to M. Dendy Young, GTSI’s Chairman and Chief Executive Officer, in 1995 in connection with a December 15, 1995 Employment Agreement between Mr. Young and the Company.

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ITEM 6.     SELECTED FINANCIAL DATA

The following selected consolidated financial data as of and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 have been derived from the consolidated audited financial statements. This selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and related notes included in this Annual Report on Form 10-K.

Statement of Operations Data:

	For the years ended December 31,
	2004		2003		2002		2001		2000
	(in thousands, except per share data)
Sales	$	1,076,148	$	954,118	$	934,730	$	783,496	$	677,754
Cost of sales	954,143		857,334		857,105		718,370		617,621
Gross margin	122,005		96,784		77,625		65,126		60,133
Operating expenses:
Selling, general and administrative	107,833		85,473		62,956		57,002		49,382
Depreciation and amortization	3,022		2,874		3,543		4,407		3,934
Impairment charge	—		5,972		—		—		—
Total operating expenses	110,855		94,319		66,499		61,409		53,316
Income from operations	11,150		2,465		11,126		3,717		6,817
Interest and other income, net	5,569		2,832		4,520		3,707		2,259
Income before taxes	16,719		5,297		15,646		7,424		9,076
Income tax provision (benefit)	6,455		2,118		6,113		2,938		(2,008		)
Net income before cumulative effect of SAB No. 101 adoption	10,264		3,179		9,533		4,486		11,084
Cumulative effect of SAB 101 adoption	—		—		—		—		467
Net income	$	10,264	$	3,179	$	9,533	$	4,486	$	10,617
Earnings per common share
Basic:
Basic earnings per share before cumulative effect of SAB No. 101 adoption	$	1.18	$	0.38	$	1.15	$	0.55	$	1.23
Cumulative effect per share of SAB No. 101 adoption	—		—		—		—		(0.05		)
Basic earnings per share	$	1.18	$	0.38	$	1.15	$	0.55	$	1.18
Diluted:
Diluted earnings per share before cumulative effect of SAB No. 101 adoption	$	1.09	$	0.35	$	1.04	$	0.50	$	1.20
Cumulative effect per share of SAB No. 101 adoption	—		—		—		—		(0.05		)
Diluted earnings per share	$	1.09	$	0.35	$	1.04	$	0.50	$	1.15
Weighted average common shares outstanding
Basic	8,664		8,349		8,302		8,144		9,021
Diluted	9,388		9,116		9,156		9,049		9,225

	December 31,
	2004		2003		2002		2001		2000
	(in thousands)
Balance Sheet Data:
Working capital	$	79,027	$	64,348	$	62,836	$	34,968	$	43,659
Total assets	$	296,386	$	268,761	$	224,918	$	252,452	$	227,065
Notes payable to banks	$	1,179	$	12,813	$	7,539	$	20,186	$	11,925
Long-term liabilities	$	3,473	$	1,522	$	1,640	$	2,403	$	2,145
Total liabilities	$	204,249	$	190,816	$	149,427	$	189,387	$	168,586
Stockholders’ equity	$	92,137	$	77,945	$	75,491	$	63,065	$	58,480

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our audited consolidated financial statements and notes included in Part II, Item 8 of this Annual Report on Form 10-K. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future period. We use the terms “GTSI,” “we,” “our,” and “us” to refer to GTSI Corp. and its subsidiaries.

Overview

GTSI is a recognized IT solutions leader, providing products and services primarily to federal government customers worldwide. One of our key differentiators is the extensive number of contract vehicles we have in our portfolio. For over two decades GTSI has served the public sector by partnering with global IT leaders such as Panasonic, HP, Cisco, Sun Microsystems and Microsoft. We seek to deliver maximum value through our broad range of products, customer service and ISO 9001:2000 certified distribution center. Through our Technology Practices, we deliver “best of breed” products and solutions to help our customers realize strong value for their IT investments.

We experienced some significant successes in 2004, including our annual revenue exceeding the $1 billion mark. We faced a number of challenges and we made significant progress in building an organization that can consistently deliver strong financial results. Our sales grew 12.8% during 2004, outpacing the underlying growth in government IT spending. We expect that GTSI will continue to outpace market growth in 2005.

As discussed in more detail throughout our MD&A:

·Our sales increased $122.0 million from 2003 to 2004, exceeding $1 billion for the first time in GTSI history.

·The buying and funding patterns of the government continue to have a significant positive effect on our sales and net income in the third and fourth quarters.

·Our gross margin increased as a percentage of sales.

·Our balance sheet remains solid, with no long-term debt.

·Cash provided by operating activities more than tripled to $16.8 million for the year ended December 31, 2004.

We have initiated a strategic three-year growth plan designed to capitalize on the government’s heightened demand for IT services and we plan to double our revenue to $2 billion, improve our productivity and increase our gross margins.  To double our sales we will continue to leverage the strong growth of personnel in our sales and marketing organization. In addition, we are selectively, but aggressively, hiring talented employees and expect our headcount to reach approximately 950 employees by the end of 2005. We expect to expand our sales from lease arrangements for IT products and solutions in 2005.  We have essentially completed the build-out of our ERP system. After full testing and retesting, extensive training and documentation of new work processes for SOX compliance, we plan to implement the final phase of our ERP capabilities throughout GTSI in the second quarter of 2005.

In addition to the implementation of the final phase of our ERP system, several other initiatives are underway to position GTSI to reach our strategic plan goal of increased productivity including proactive supply-chain management; customer, deal, and vendor profitability assessments; and order management improvements. Management is also evaluating various CRM solutions, including the future use of our existing CRM platform. If we select a new CRM Solution, we may incur an impairment charge for the write-off of our existing CRM software.

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We believe we can make significant improvements to net income. First, additional sales are expected to improve net income. Second, improved margin percentages are expected to increase bottom line growth. And third, we believe our productivity improvements will lower SG&A expense as a percentage of sales and improve net income margin.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We have included below our policies that are both important to our financial condition and operating results, and require management’s most subjective and complex judgments in determining the underlying estimates and assumptions. Actual results may differ from these estimates under different assumptions or conditions. Accounting estimates that management believes are most critical to our financial condition and operating results pertain to merchandise inventories, long-lived assets, warranties, contingencies and revenue recognition. We have discussed the application of these critical accounting estimates with the Audit Committee of our Board of Directors.

Merchandise Inventories

Our inventory is stated at the lower of average cost or market value. We record a provision for excess and obsolete inventory based on assumptions about future demand and market conditions. Our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess or obsolete inventory. In the future, if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, we would be required to increase our inventory allowance and our gross margin could be adversely affected.

During 2004 as a result of our physical inventory counts and other internal controls, we discovered two instances of inventory losses.  Losses of $0.7 million and $0.6 million were recorded, that were subsequently offset by an insurance settlement of $0.6 million. A second insurance claim is still pending. The outcome of the insurance claim, as well as the results of our ongoing investigations, could materially alter the amount of management’s estimate.

Long-Lived Assets

Long-lived assets, consisting primarily of capitalized software, furniture and equipment, are required to be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If the carrying value exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset, an impairment charge is recognized. During 2003, we determined that it was not in our best interest to continue with a highly customized ERP system due to the high level of development risk and the higher total cost of ownership associated with maintaining a customized solution. We changed our strategy to a standard ERP system (“GEMS”) to lower the risk and reduce the overall project expenses. Due to this change in strategy we estimated $6.0 million of the customized ERP solution would have no future value and recorded an impairment charge in 2003. If any future events indicate the carrying amount of GEMS may exceed its fair value, we will test for recoverability which would necessitate the use of significant assumptions regarding the fair value and undiscounted net cash flows expected. During 2004, we capitalized $5.5 million related to the ERP project.

Warranties

We offer warranties on sales of certain products specific to the terms of the customer agreements. Our standard warranties require us to repair or replace defective products reported to us during such warranty

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period at no cost to the customer. We record an estimate for warranty related costs at the time of sale based on our actual historical return rates and repair costs at the time of sale. We cannot guarantee that we will continue to experience the same warranty return rates or repair costs that we have in the past. Factors that impact our accrued warranty liability include the number of installed units under warranty contracts, the rate of unit failures, the cost of spare parts, and historical and anticipated cost per warranty claim under the warranty contract. As these factors are affected by actual experience and future expectations, we reevaluate the adequacy of our accrued warranty liability and adjust amounts as necessary.

Contingencies

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required. Review of certain aged payables during 2004 resulted in reversals of $10.1 million and $2.5 million during the second half of 2004. A new accrual for potential payroll tax liability was estimated at $0.8 million in 2004 for employees working in our office in Germany.

Revenue Recognition

The majority of our sales relates to physical products and is generally recognized when title to the products sold passes to the customer. Based on our standard shipping terms, title generally passes upon the customer’s receipt of the products. This requires us to analyze sales near the end of reporting periods to estimate the amount of products in transit to the customer that cannot be recognized as revenue. At the time of sale, we record an estimate for product returns based on historical experience. If actual product returns are greater than estimated by management, additional expense may be incurred.

Certain of our service and solution agreements contain multiple elements that sometimes require significant contract interpretation to determine the appropriate accounting, including whether the deliverables should be treated as separate units of accounting for revenue recognition purposes, and if so, how the price should be allocated among the deliverable elements and when to recognize revenue for each element.

Historical Results of Operations

The following table illustrates the percentage of sales represented by items in our consolidated statements of operations for the years ended December 31:

	2004		2003		2002
Sales	100.0	%	100.0	%	100.0	%
Cost of sales*	88.7		89.9		91.7
Gross margin	11.3		10.1		8.3
Operating expenses:
Selling, general and administrative	10.0		8.9		6.7
Depreciation and amortization	0.3		0.3		0.4
Impairment charge	—		0.6		—
Total operating expenses	10.3		9.8		7.1
Income from operations	1.0		0.3		1.2
Interest and other income, net	0.6		0.3		0.5
Income before taxes	1.6		0.6		1.7
Income tax provision	0.6		0.3		0.7
Net income	1.0	%	0.3	%	1.0	%

*As a result of adopting Emerging Issues Task Force Issue No. 02-16, “Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Product)”, we changed

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our reporting of certain vendor considerations. Beginning January 1, 2003, GTSI recorded vendor consideration as a reduction to Cost of Sales instead of as a reduction to Selling, General & Administrative expenses.

The following table sets forth the annual percentage changes in the dollar amounts of selected items within our consolidated statements of operations.

	Percentage Change
	2003 to 2004			2002 to 2003
Sales		12.8	%		2.1	%
Cost of sales		11.3	%		0.0	%
Gross margin		26.1	%		24.7	%
Operating expenses:
Selling, general and administrative		26.2	%		35.8	%
Depreciation and amortization		5.1	%		(18.9	)%
Impairment charge		(100.0	)%		100.0	%
Total operating expenses		17.5	%		41.8	%
Income from operations		352.3	%		(77.8	)%
Interest and other income, net		96.6	%		(37.3	)%
Income before taxes		215.6	%		(66.1	)%
Income tax provision		204.8	%		(65.4	)%
Net income		222.9	%		(66.7	)%

The following tables indicate, for the years ended December 31 (dollars in millions), the approximate sales by contract vehicle, vendor, and product category along with related percentages of total sales.

Contract Vehicles	2004				2003				2002
GSA Schedules	$	299.3	27.8	%	$	268.0	28.1	%	$	276.0	29.5	%
IDIQ Contracts	428.0		39.8		430.4		45.1		388.7		41.6
Open Market	238.0		22.1		159.7		16.7		107.0		11.5
Subcontracts and Other Contracts	110.8		10.3		96.0		10.1		163.0		17.4
Total	$	1,076.1	100.0	%	$	954.1	100.0	%	$	934.7	100.0	%

Top Five Vendors	2004				2003				2002
Panasonic	$	188.0	17.5	%	$	162.2	17.0	%	$	123.5	13.2	%
HP	153.4		14.3		139.3		14.6		167.7		17.9
Cisco	135.7		12.6		112.9		11.8		114.9		12.3
Sun Microsystems	131.8		12.2		130.1		13.6		110.6		11.8
Microsoft	53.7		5.0		66.5		7.0		95.6		10.2
Others	413.5		38.4		343.1		36.0		322.4		34.6
Total	$	1,076.1	100.0	%	$	954.1	100.0	%	$	934.7	100.0	%

Products	2004				2003				2002
Hardware	$	834.1	77.5	%	$	692.5	72.6	%	$	673.7	72.1	%
Software	155.7		14.5		154.5		16.2		196.4		21.0
Resold third-party service products	66.6		6.2		91.2		9.5		50.8		5.4
Services	19.7		1.8		15.9		1.7		13.8		1.5
Total	$	1,076.1	100.0	%	$	954.1	100.0	%	$	934.7	100.0	%

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2004 Compared with 2003

Sales

Sales consist of revenue from products delivered and services sold or rendered, net of allowances for customer returns and credits. Sales increased $122.0 million, or 12.8%, from $954.1 million in 2003 to $1.08 billion in 2004. The majority of this increase, by contract vehicle, is due to the $78.2 million increase in Open Market procurements resulting from the efforts of our expanded sales force. Sales in GSA Schedule and Subcontracts and Other Contracts categories increased 11.7% and 15.4%, respectively, from 2003 to 2004. IDIQ contract sales were relatively flat year over year.

An analysis of sales by product reveals our overall Sales increase was due to the $141.6 million rise in Hardware to $834.1 million in 2004 generated by increased sales of networking products, storage products and large server sales. This increase was partially offset by a $24.6 million decline in sales of resold third-party service products. Sales of services increased 23.9% from 2003 to 2004 to $19.7 million. We intend to grow our service revenue at a similar rate in 2005.

Although we offer our customers access to products from hundreds of vendors, 61.6% of our sales in 2004 were products from our top five vendor partners. As detailed in the preceding table, Panasonic remains our top vendor with product sales increasing $25.8 million from 2003 to 2004. Sales of Cisco and HP products also increased $22.8 million and $14.1 million, respectively, from the previous year. The increase in sales was also related to the $16.0 million decrease in backlog as of December 31, 2004 compared to 2003.

GTSI will be required to recertify our “small business” size status on our GSA Schedule Contract no later than 2007. At such time, we may not qualify as a small business. To mitigate any potential adverse affect on our sales from the loss of our small business status, GTSI has developed strategic relationships with small businesses that benefit from the small business benefits described in the Business section in Part I of this Form 10-K. GTSI acts as both a supplier and prime contractor to these small businesses. In addition, we further mitigate this risk by participating in the Mentor-Protégé Program offered under the SBAs 8(a) program, which is a business development initiative that helps socially and economically disadvantaged Americans gain access to economic opportunity. Through this program, we provide various forms of mentoring, expertise in key business areas and assistance to our protégé, Eyak Technology, LLC.

Gross Margin

Gross Margin increased $25.2 million, or 26.1%, from $96.8 million in 2003 to $122.0 million in 2004. Gross margin as a percentage of sales increased from 10.1% for 2003 to 11.3% in 2004. This increase was predominantly due to the reduction in Cost of Sales resulting from the $10.1 million non-cash extinguishment of aged vendor liabilities. Without the impact of this extinguishment, gross margin would have been 10.4% as a percentage of sales. Management is committed to continuing margin expansion. We have put in place new processes which we expect to continue to result in margin expansion including our centralized pricing initiatives.

Selling, General & Administrative Expenses

Selling, General & Administrative (“SG&A”) expenses for 2004 increased $22.5 million, or 25.5% from 2003. This increase was primarily related to approximately $6.9 million in compensation and benefits expense associated with our long-term investments in new employees to increase headcount company-wide and $6.1 million of additional commissions and commission accelerators paid on our increased sales. Management feels that by making these investments in personnel, we are now better positioned to take advantage of:

·  new opportunities in the State and Local marketplace utilizing the US Communities Contract;

·  additional federal government opportunities;

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·  sales to Prime Contractors through our Integrator Solutions Group; and

·  increased lease sales to the government.

In addition, we incurred expenses of $2.0 million in consulting fees for our Sarbanes-Oxley (“SOX”) compliance and approximately $1.7 million for continued implementation of our ERP system. Legal and accounting fees increased $1.6 million due to litigation costs and the internal control audit, performed by our independent registered public accounting firm as required by SOX. Total Selling, General & Administrative expense increased 1.1% as a percentage of sales from 2003 to 2004. Management has developed a new sales commission plan for 2005 to align commissions with the goals of our strategic growth plan.

Interest and Other Income, Net

Interest and Other Income, Net increased $2.7 million, or 96.6%, from 2003 to 2004. This increase is mainly due to approximately $3.2 million increase in interest income from the sales of our leases receivable. This increased income was partially offset by the continuing decline in prompt payment discounts received from vendors. Due to the economy, fewer vendors are offering this incentive. Interest and other expense remained flat year over year.

Income Taxes

We recorded a tax provision of $6.5 million for 2004, of which $3.9 million is due to the reversal of aged accrued liabilities, based on our expected annual effective tax rate of approximately 38.6%. For 2003 we recorded a tax provision of $2.1 million at an effective rate of 40.0%. The decrease in our effective tax rate from 2003 to 2004 is due to reduced state income taxes and a reduction in permanent non-deductible items as a percentage of earnings before taxes. The main difference between our effective tax rate in 2004 and the statutory rate are state income taxes.

2003 Compared with 2002

Sales

Net sales in 2003 increased $19.4 million to $954.1 million, or 2.1% over 2002. Sales under IDIQ and Open Market contracts increased $41.7 million and $52.7 million, respectively. IDIQ sales increased due primarily to increased sales on one of our mature contracts combined with full year sales on a contract that began at the end of 2002. Sales in the Subcontracts and Other Contracts category decreased 41.1% to $96.0 million due primarily to decreased volume on subcontracts with prime contractors, specifically on the FBI’s Trilogy contract. Our sales of Panasonic products increased $38.7 million, or 31.3%, from 2002 to 2003 replacing HP as our top vendor. Sun Microsystem’s product sales also marked a significant increase of 19.5% year over year. Sales of Microsoft declined $29.1 million, or 30.4% from 2002. This decline also contributed to our overall decrease in software sales. When reviewed by product type, this decrease was offset predominantly by the $40.4 million increase in sales from resold third-party service products related to the increased volume of productized service and maintenance contracts. Hardware sales also increased a moderate $18.8 million from 2002 to 2003.

Gross Margin

Gross Margin increased $19.2 million, or 24.7%, to $96.8 million from $77.6 million in 2002. Gross margin as a percentage of sales also increased to 10.1% for 2003 from 8.3% for 2002. This increase is due primarily to the January 1, 2003 adoption of Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Product)”, which resulted in recording certain vendor funds as a reduction in Cost of Sales instead of Selling,

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General & Administrative expenses. For comparative purposes, if we applied EITF No. 02-16 to the year ended December 31, 2002, our gross margin would have increased from $90.0 million to $96.8 million. The gross margin percentage would have increased from 9.6% for 2002 to 10.1% for 2003. The primary reason for the increase in margins on this comparative basis is due to an increase in the volume of the vendor incentive funds received in 2003 compared to 2002.

During the second quarter of 2003, our sales organization was successful in securing an order for software inventory that had been reserved for during 2002. As a result, we reversed a $1.4 million reserve. This benefit partially contributed to the increase in the gross margin percentage for the year.

Selling, General & Administrative Expenses

SG&A expenses for the year ended December 31, 2003 increased $21.8 million to $88.3 million from $66.5 million for 2002. A large portion of this increase was a result of the adoption of EITF No. 02-16. For comparative purposes, Selling, General & Administrative expenses for the year ended December 31, 2002 would have been $78.8 million if EITF No. 02-16 was applied to 2002. In addition to the impact of this new accounting pronouncement, Selling, General & Administrative expenses increased due to higher personnel costs due to increased headcount primarily in the Sales and Technology Team organizations. When an organization adds resources to its sales teams, there is a ramp-up period before these new sales personnel are fully optimized.

During 2002, we determined that it was remote that certain accrued obligations would need to be paid. Accordingly, the associated obligation of $1.4 million was reversed. SG&A expenses as a percentage of sales increased to 9.3% for 2003 from 7.1% in 2002. Applying the impact from EITF No. 02-16 to the year ended December 31, 2002 for comparison purposes, SG&A expenses would have been 8.4% in 2002.

Impairment charge

In the fourth quarter of 2003 we recorded an impairment charge of $6.0 million related to the impairment of capitalized software because we determined that it was not in our best interest to continue to pursue a highly customized ERP solution due to the high level of development risk and the higher total cost of ownership associated with maintaining a customized solution. We changed our strategy and decided to implement a standard ERP system that is expected to lower the risk, compress the delivery time, provide significant value sooner, and reduce overall project expenses. Due to this change in strategy, $6.0 million of the capitalized assets related to the customized solution was determined to have no future economic value. The enterprise software and hardware for a standard ERP system purchased to date will be fully utilized in the roll-out of the new ERP.

Interest and Other Income, Net

Interest and Other Income, Net is the amount of interest income, prompt payment discounts, and other income reduced by interest and other expenses. Interest and other income, net, decreased $1.7 million, from $4.5 million to $2.8 million, or 37.8%, in 2003 compared to 2002. Interest and other income decreased by $2.1 million and interest and other expense decreased $0.4 million over 2002. The decline in interest income is primarily due to a $1.3 million decrease in prompt payment discounts partially combined with a $0.4 million decrease in interest income from lease receivables. Other income decreased $0.3 million due primarily to a $0.5 million gain on the sale of equipment leases in the first quarter of 2002 that did not occur in 2003. Interest and other expense decreased $0.4 million from 2002 to 2003 due primarily to improved cash management practices allowing us to rely less on the Credit Facility throughout the year.

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Income Taxes

Our effective tax rate in 2002 was 39.1% resulting in a tax provision of $6.1 million. The difference between the effective rate and the statutory rate is primarily state taxes and permanent non-deductible items.

Seasonal Fluctuations

We have historically experienced and expect to continue to experience significant seasonal fluctuations in our operations as a result of government buying and funding patterns. The unpredictability of the factors affecting such seasonality makes our annual and quarterly financial results difficult to predict and subject to significant fluctuation. While sales to the U.S. Government are usually weaker in the first and second quarter and stronger in the third and fourth quarter, our Selling, General & Administrative expenses are more level throughout the year. As such, first and second quarter earnings are typically well below those of the third and fourth quarters. Our stock price could be adversely affected if any such financial results fail to meet the financial community’s expectations.

The following tables show our results of operations, sales by contract, and sales by vendor on a quarterly basis. This information has been included to provide additional insight into the seasonal nature of our business.

	2004
	Q1			Q2			Q3		Q4		Total
	(in millions except per share data)
Sales	$	178.6		$	239.0		$	330.6	$	327.9	$	1,076.1
Cost of sales	160.5			217.5			283.9		292.2		954.1
Gross margin	18.1			21.5			46.7		35.7		122.0
Selling, general & administrative expenses	21.7			24.6			30.4		34.2		110.9
(Loss) income from operations	(3.6		)	(3.1		)	16.3		1.5		11.1
Interest and other income, net	1.3			0.5			1.0		2.8		5.6
(Loss) income before taxes	(2.3		)	(2.6		)	17.3		4.3		16.7
Income tax (benefit) provision	(0.9		)	(1.0		)	6.8		1.5		6.4
Net (loss) income	$	(1.4	)	$	(1.6	)	$	10.5	$	2.8	$	10.3
Basic (loss) earnings per share	$	(0.16	)	$	(0.18	)	$	1.21	$	0.31	$	1.18
Diluted (loss) earnings per share	$	(0.16	)	$	(0.18	)	$	1.13	$	0.29	$	1.09

	2004 Quarter Ended
	March 31,				June 30,				September 30,				December 31,
	(dollars in millions)
Contract Vehicles
GSA Schedules	$	42.2	23.6	%	$	54.8	22.9	%	$	105.7	32.0	%	$	96.6	29.5	%
IDIQ Contracts	72.9		40.8		93.1		39.0		127.6		38.6		134.4		41.0
Open Market	36.0		20.2		59.8		25.0		72.9		22.0		69.3		21.1
Subcontracts and other contracts	27.5		15.4		31.3		13.1		24.4		7.4		27.6		8.4
Total	$	178.6	100.0	%	$	239.0	100.0	%	$	330.6	100.0	%	$	327.9	100.0	%
Top Five Vendors
Panasonic	$	34.4	19.3	%	$	36.2	15.1	%	$	65.6	19.8	%	$	51.8	15.8	%
HP	18.2		10.2		31.5		13.2		47.7		14.4		56.0		17.1
Cisco	23.1		12.9		20.8		8.7		50.1		15.1		41.7		12.7
Sun	20.4		11.4		37.4		15.6		40.3		12.2		33.7		10.3
Microsoft	7.7		4.3		8.3		3.5		28.8		8.7		8.9		2.7
Other	74.8		41.9		104.8		43.9		98.1		29.8		135.8		41.4
Total	$	178.6	100.0	%	$	239.0	100.0	%	$	330.6	100.0	%	$	327.9	100.0	%

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	2003
	Q1			Q2			Q3			Q4			Total
	(in millions except per share data)
Sales	$	178.9		$	189.7		$	273.1		$	312.4		$	954.1
Cost of sales	162.8			167.0			245.6			281.9			857.3
Gross margin	16.1			22.7			27.5			30.5			96.8
Selling, general & administrative expenses	19.7			21.6			22.6			24.4			88.3
Impairment charge	—			—			—			6.0			6.0
Total operating expenses	19.7			21.6			22.6			30.4			94.3
(Loss) income from operations	(3.6		)	1.1			4.9			0.1			2.5
Interest and other income, net	(0.7		)	(0.8		)	(0.8		)	(0.5		)	(2.8		)
(Loss) income before taxes	(2.9		)	1.9			5.7			0.6			5.3
Income tax (benefit) provision	(1.1		)	0.8			2.2			0.2			2.1
Net (loss) income	$	(1.8	)	$	1.1		$	3.5		$	0.4		$	3.2
Basic earnings per share	$	(0.21	)	$	0.14		$	0.42		$	0.04		$	0.38
Diluted earnings per share	$	(0.21	)	$	0.13		$	0.39		$	0.04		$	0.35

	2003 Quarter Ended
	March 31,				June 30,				September 30,				December 31,
	(dollars in millions)
Contract Vehicles
GSA Schedules	$	51.9	29.0	%	$	53.9	28.4	%	$	77.6	28.4	%	$	84.6	27.1	%
IDIQ Contracts	78.9		44.1		83.3		43.9		119.8		43.9		148.4		47.5
Open Market	27.0		15.1		28.5		15.0		50.5		18.5		53.7		17.2
Subcontracts and other contracts	21.1		11.8		24.0		12.7		25.2		9.2		25.7		8.2
Total	$	178.9	100.0	%	$	189.7	100.0	%	$	273.1	100.0	%	$	312.4	100.0	%
Top Five Vendors
Panasonic	$	34.8	19.5	%	$	33.6	17.7	%	$	48.4	17.7	%	$	45.4	14.5	%
HP	30.3		16.9		28.6		15.1		38.9		14.2		41.5		13.3
Sun Micro.	19.7		11.0		34.8		18.3		38.9		14.2		36.7		11.7
Cisco	20.5		11.5		18.1		9.5		32.2		11.8		42.1		13.5
Microsoft	14.9		8.3		17.1		9.0		19.3		7.1		15.2		4.9
Other	58.7		32.8		57.5		30.4		95.4		35.0		131.5		42.1
Total	$	178.9	100.0	%	$	189.7	100.0	%	$	273.1	100.0	%	$	312.4	100.0	%

Liquidity and Capital Resources

Cash flows for the year ended December 31,

	2004			2003			Change
	(in millions)
Cash provided by operating activities	$	16.8		$	4.6			$	12.2
Cash used in investing activities	$	(7.5	)	$	(7.9	)		$	(0.4	)
Cash (used in) provided by financing activities	$	(9.1	)	$	3.4			$	12.5

Cash provided by operating activities for the year ended December 31, 2004 was $16.8 million, an increase of $12.2 million from cash provided for the year ended December 31, 2003. This increase was primarily due to improved collections of trade accounts receivable. Total accounts receivable provided $10.7 million more to operations in 2004 compared to 2003. In the latter half of 2004, we implemented new processes

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related to cash management that we feel had, and will continue to have, a positive impact on cash from operations.

Cash used in investing activities was relatively constant from 2003 to 2004 and consisted principally of investments in our ERP system.

Cash used in financing activities of $9.1 million during 2004 was due primarily to the net payments on our line-of-credit of $11.6 million. This amount was partially offset by $3.4 million in proceeds from stock options and employee stock purchase plan activity. During 2003, we received cash proceeds of $5.3 million from net borrowings and used $4.0 million in the first half of 2003 to purchase GTSI’s common stock from third party shareholders. During the year ended December 31, 2004, we did not purchase any GTSI common stock.

Bank Credit Facility

We have a $125 million credit facility with a group of banks (the “Credit Facility”). The Credit Facility includes a revolving line of credit (the “Revolver”) and a provision for inventory financing of vendor products (the “Wholesale Financing Facility”). The Credit Facility, unless terminated earlier, will continue after the maturity date of February 28, 2006 from year to year, unless any party gives the other party written notice of termination not less than 90 days prior to the start of a new renewal period. We are currently negotiating with our lead lender to increase the size of the Credit Facility and add other partners. We expect to conclude these negotiations during the first half of 2005. Borrowing under the Revolver is limited to 85% of eligible accounts receivable. The Revolver is secured by substantially all of our assets. Borrowing under the Wholesale Financing Facility is limited to 100% of the value of our inventory. The Wholesale Financing Facility is secured by the underlying inventory. The Credit Facility carries an interest rate indexed to London Interbank Offered Rate (“LIBOR”) plus 1.75 percentage points. The Credit Facility also contains certain covenants as well as provisions specifying compliance with certain quarterly and annual financial ratios. In 2004, GTSI and its lenders signed three amendments to the Revolver to add a new lender and add GTSI’s wholly owned subsidiaries, Technology Logistics, Inc. and GTSI Financial Services, as borrowers.

At December 31, 2004 and 2003, GTSI’s interest rate under the Credit Facility was 4.17% and 2.88%, respectively. We were in compliance with all financial covenants set forth in the Credit Facility and had available credit of $59.0 million at December 31, 2004 and $90.4 million at December 31, 2003.

Capital Resources and Requirements

Our ongoing capital requirements depend on a variety of factors, including the extent to which we are able to fund the cash needs of our business from operations. During the first quarter of 2004, we were able to pay completely our notes payable to banks. We anticipate that we will continue to rely primarily on operating cash flow, vendor credit and our Wholesale Financing Facility to finance our operating cash needs. We believe that such funds should be sufficient to satisfy our near term anticipated cash requirements for operations. Nonetheless, we may seek additional sources of capital, including obtaining permanent financing over a longer term at fixed rates, to finance our working capital requirements or other strategic initiatives. GTSI believes that such capital sources will be available to us on acceptable terms, if needed. During 2004 and 2003 we made capital expenditures of $5.5 million and $6.0 million, respectively, for capitalized consulting costs associated with the implementation of our ERP system and the purchase of software for internal use, respectively.

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Contractual Obligations (in millions)

	Total	Less Than 1 Year		1-3 Years	3-5 Years
Operating Lease Obligations	$8.0		$2.9	$3.8	$1.3
Notes Payable to Banks	1.2		1.2	—	—
Total Contractual Obligations	$9.2		$4.1	$3.8	$1.3

At December 31, 2004 GTSI was obligated under an operating lease to provide our landlord with a letter of credit in the amount of $0.8 million as a security deposit for all tenant improvements associated with the lease. In February, 2005 an amendment to the lease was executed which reduced the letter of credit to $0.2 million. GTSI was also obligated to provide a letter of credit in the amount of $1.75 million to guarantee the performance by GTSI of all obligations under a customer contract. This letter of credit will expire on August 31, 2005.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004) “Share-Based Payment” (“FAS 123R”), which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” FAS 123R supersedes Accounting Principal Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and its related implementation guidance. Generally, the approach to accounting in FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant-date fair value of the award. As permitted by FAS No. 123, GTSI currently accounts for share-based payments to employees using the intrinsic value provisions of APB 25 and, as such, generally recognizes no compensation costs for employee stock options. Accordingly, the adoption of FAS 123R’s fair value method will have a significant impact on our results of operations, although it will have no impact on our overall financial position. The impact of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted FAS 123R in prior periods, the impact of that standard would have approximated the impact of FAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 1G to our consolidated financial statements in Part II, Item 8 of this Form 10-K. FAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flow in periods after adoption. FAS 123R is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005 and we will adopt the standard beginning July 1, 2005. The Statement offers several alternatives for implementation. At this time, management plans to use the modified prospective transition method. We are also evaluating the impact of FAS 123R on our employee stock purchase plan and may decrease our current 15% upfront purchase discount to employees.

In November 2004, the FASB issued SFAS No. 151 “Inventory Costs, an amendment of APB No. 43, Chapter 4,” (“FAS 151”) which clarifies the types of costs that should be expensed rather than capitalized as inventory. The amendments made by FAS 151 also clarify the circumstances under which fixed overhead costs associated with operating facilities used in inventory processing should be capitalized. FAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 24, 2004. We are presently analyzing the potential impact of this statement but do not expect the adoption of FAS 151 will have a significant impact on our financial position or results of operations.

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Outlook

As of December 31, 2004, our sales surpassed $1 billion for the first time. We have initiated a strategic three-year growth plan designed to capitalize on the government’s heightened demand for IT services and we plan to double our revenue to $2 billion, improve our productivity and increase our gross margins. To double our sales we will continue to leverage the strong growth of personnel in our sales and marketing organization. In addition, we are selectively, but aggressively, hiring talented employees and expect our headcount to reach approximately 950 employees by the end of 2005. We expect to expand our sales from lease arrangements for IT products and solutions in 2005. We have essentially completed the build-out of our ERP system. After full testing and retesting, extensive training and documentation of new work processes for SOX compliance, we plan to implement the final phase of our ERP capabilities throughout GTSI in the second quarter of 2005.

In addition to the implementation of the final phase of our ERP system, several other initiatives are underway to position GTSI to reach our strategic plan goal of increased productivity including proactive supply-chain management; customer, deal, and vendor profitability assessments; and order management improvements. Management is also evaluating various CRM solutions, including the future use of our existing CRM platform. If we select a new CRM Solution, we may incur an impairment charge for the write-off of our existing CRM software.

We believe we can make significant improvements to net income. First, additional sales are expected to improve net income. Second, improved margin percentages are expected to increase bottom line growth. And third, we believe our productivity improvements will lower SG&A expense as a percentage of sales and improve net income margin.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GTSI had a $125 million credit facility indexed at LIBOR plus 1.75 percentage points as of December 31, 2004. This variable rate credit facility subjects GTSI to potential borrowing cost exposure resulting from changes in interest rates. In recent years, we have not borrowed such significant amounts that any movement in interest rates has had a material effect on our earnings or cash flows. Accordingly, at current borrowing levels, we do not believe that any move in interest rates would have such an effect. If GTSI were to significantly increase borrowings under its Credit Facility, then future interest rate changes could potentially have such a material impact on earnings.

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ITEM 8.   FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of GTSI Corp.:

We have audited the accompanying consolidated balance sheets of GTSI Corp. and subsidiaries as of December 31, 2004 and 2003 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. Our audit also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GTSI Corp. and subsidiaries as of December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the financial statements, in 2003, the Company changed its method of accounting for certain consideration received from vendors.

We also have audited, in accordance with the standards of the Public Accounting Oversight Board (United States), the effectiveness of GTSI Corp.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework used by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
McLean, Virginia
March 11, 2005

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GTSI CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	December 31,				December 31,
	2004				2003
ASSETS
Current assets:
Cash		$	397			$	177
Accounts receivable, net		202,742				172,370
Leases receivable, net		7,864				9,618
Merchandise inventories		59,184				55,987
Other current assets		9,616				15,490
Total current assets		279,803				253,642
Property and equipment, net		15,183				10,670
Other assets		1,400				4,449
Total assets		$	296,386			$	268,761
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks		$	1,179			$	12,813
Accounts payable		173,218				152,435
Accrued liabilities		14,734				11,168
Deferred revenue		9,216				8,323
Accrued warranty liabilities		2,429				4,555
Total current liabilities		200,776				189,294
Other liabilities		3,473				1,522
Total liabilities		204,249				190,816
Commitments and contingencies—See Note 14
Stockholders’ equity
Preferred stock—$0.25 par value, 680,850 shares authorized; none issued or outstanding		—				—
Common stock—$0.005 par value, 20,000,000 shares authorized; 9,806,084 issued and 8,987,643 outstanding at December 31, 2004; and 9,806,084 issued and 8,505,045 outstanding at December 31, 2003		49				49
Capital in excess of par value		46,817				45,911
Retained earnings		50,395				40,131
Treasury stock, 818,441 shares at December 31, 2004 and 1,301,039 shares at December 31, 2003, at cost		(5,124		)		(8,146		)
Total stockholders’ equity		92,137				77,945
Total liabilities and stockholders’ equity		$	296,386			$	268,761

;x

The accompanying notes are an integral part of these financial statements.

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GTSI CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	For the Years Ended December 31,
	2004			2003			2002
SALES	$	1,076,148		$	954,118		$	934,730
COST OF SALES	954,143			857,334			857,105
GROSS MARGIN	122,005			96,784			77,625
SELLING, GENERAL & ADMINISTRATIVE EXPENSES	110,855			88,347			66,499
IMPAIRMENT CHARGE	—			5,972			—
TOTAL OPERATING EXPENSES	110,855			94,319			66,499
INCOME FROM OPERATIONS	11,150			2,465			11,126
INTEREST AND OTHER INCOME
Interest and other income	5,880			3,119			5,198
Interest and other expense	(311		)	(287		)	(678		)
Interest and other income, net	5,569			2,832			4,520
INCOME BEFORE INCOME TAXES	16,719			5,297			15,646
INCOME TAX PROVISION	6,455			2,118			6,113
NET INCOME	$	10,264		$	3,179		$	9,533
EARNINGS PER SHARE
Basic	$	1.18		$	0.38		$	1.15
Diluted	$	1.09		$	0.35		$	1.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	8,664			8,349			8,302
Diluted	9,388			9,116			9,156

The accompanying notes are an integral part of these financial statements.

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GTSI CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2004, 2003 and 2002
(In thousands)

	Common Stock						Capital in									Total
	Shares Outstanding			Amount			Excess of Par Value				Retained Earnings		Treasury Stock			Stockholders’ Equity
Balance, December 31, 2001		8,163			$	49		$	43,434		$	27,419	$	(7,837	)		$	63,065
Stock options exercised		406			—			201			—		2,298				2,499
Employee stock purchase plan		141			—			120			—		387				507
Common stock repurchase		(100	)		—			—			—		(797		)		(797		)
Tax benefit of stock options exercised		—			—			684			—		—				684
Net income		—			—			—			9,533		—				9,533
Balance, December 31, 2002		8,610			49			44,439			36,952		(5,949		)		75,491
Stock options exercised		355			—			155			—		882				1,037
Employee stock purchase plan		147			—			203			—		891				1,094
Common stock repurchase		(607	)		—			—			—		(3,970		)		(3,970		)
Tax benefit of stock options exercised		—			—			1,114			—		—				1,114
Net income		—			—			—			3,179		—				3,179
Balance, December 31, 2003		8,505			49			45,911			40,131		(8,146		)		77,945
Stock options exercised		398			—			(713		)	—		2,489				1,776
Employee stock purchase plan		85			—			262			—		533				795
Stock based compensation		—			—			480			—		—				480
Tax benefit of stock options exercised		—			—			877			—		—				877
Net income		—			—			—			10,264		—				10,264
Balance, December 31, 2004		8,988			$	49		$	46,817		$	50,395	$	(5,124	)		$	92,137

The accompanying notes are an integral part of these financial statements.

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GTSI CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	For the Years Ended December 31,
	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	10,264		$	3,179		$	9,533
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,022			2,874			3,543
Impairment charge	—			5,972			—
Loss on disposal of property and equipment	—			64			593
Stock based compensation	480			—			—
Deferred taxes	4,381			502			(421		)
Tax benefit of stock options exercised	877			1,114			684
Reversal of vendor payables	(10,120		)	—			—
Changes in operating assets and liabilities:
Accounts receivable	(30,372		)	(41,106		)	(779		)
Leases receivable	1,754			(1,410		)	28,851
Merchandise inventories	(3,197		)	52			5,395
Other assets	6,937			(2,271		)	(5,860		)
Accounts payable	30,903			30,003			(28,946		)
Accrued liabilities and warranty liabilities	2,333			5,728			2,397
Other liabilities	(444		)	(118		)	(763		)
Net cash provided by operating activities	16,818			4,583			14,227
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(7,535		)	(7,873		)	(3,871		)
Net cash used in investing activities	(7,535		)	(7,873		)	(3,871		)
CASH FLOWS FROM FINANCING ACTIVITES:
(Payment of) proceeds from bank notes	(11,634		)	5,274			(12,647		)
Purchase of treasury stock	—			(3,970		)	(797		)
Proceeds from employee stock purchase plan	795			1,094			507
Proceeds from exercises of stock options	1,776			1,037			2,499
Net cash (used in) provided by financing activities	(9,063		)	3,435			(10,438		)
NET INCREASE (DECREASE) IN CASH	220			145			(82		)
CASH AT BEGINNING OF YEAR	177			32			114
CASH AT END OF YEAR	$	397		$	177		$	32
CASH PAID DURING THE YEAR FOR:
Interest	$	214		$	299		$	770
Income taxes	$	2,708		$	1,796		$	4,347

The accompanying notes are an integral part of these financial statements.

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GTSI CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2004, 2003 and 2002

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.   Nature of Operations

GTSI Corp. (collectively with its subsidiaries, “GTSI” or the “Company”) is a recognized IT solutions leader, focusing predominantly on federal, state, and local government customers worldwide. For more than 20 years, the Company has delivered hardware, software and peripherals to public sector customers by teaming with global IT leaders like HP, Panasonic, Microsoft, Sun Microsystems, and Cisco. GTSI helps its customers do their jobs more effectively through a combination of a broad range of products and services, an extensive contract portfolio, and the Company’s ISO 9001:2000 Registered logistics.

GTSI uses its unique Enterprise Technology Practices of technical experts to support a wide range of integrated IT solutions in such areas as high performance computing, advanced networking, mobile and wireless, web portals, high availability storage, and information assurance. Additionally, GTSI markets and sells products through its web site, gtsi.com, providing convenient, customized shopping zones to meet the unique and changing needs of its customers.

GTSI’s primary business is conducted from a combined headquarters and distribution center located in Chantilly, Virginia, outside of Washington DC, and has offices throughout the United States as well as overseas in Germany.

B.   Principles of Consolidation

During 2004, the Company created two new wholly owned subsidiaries: GTSI Financial Services, Inc. and Technology Logistics, Inc. (“TLI”). The consolidated financial statements include the accounts of GTSI and all of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. Investments in which the Company does not control the investee but has the ability to exercise significant influence over its operating and financial policies are accounted for using the equity method of accounting.

C.   Revenue Recognition

Revenue is recognized when a customer order has been executed, the sales price is fixed and determinable, delivery of services or products has occurred, and collection of the sales price is considered probable and can be reasonably estimated. Revenue from hardware and software product sales is recognized when title to the products sold passes to the customer. Based upon the Company’s standard shipping terms, FOB destination, title passes upon the customer’s receipt of the products. The Company sells third-party services, such as maintenance contracts, and recognizes revenue on a net basis at the time of sale. The Company also sells extended warranty contracts to customers that extend the warranty offered by the manufacturer for additional years. Revenue from extended warranty contracts is recorded as deferred revenue and subsequently recognized over the term of the contract. Revenue from other services are recognized when the services are complete or on a time and materials basis. The Company may also enter into sales arrangements with customers that contain multiple elements or deliverables such as hardware, software, and services. The Company recognizes revenue from these transactions in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” Judgments and estimates are critical to determine if the multiple elements should be accounted for as separate accounting units. These judgments may relate to determining if the delivered item has stand alone value, if there is objective and reliable evidence of the fair value of undelivered items, and if delivery and performance of undelivered items is probable and substantially in the control of the

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vendor. Payments received before delivery has occurred or services have been rendered are recorded as deferred revenue.

In accordance with EITF 00-10, “Accounting for Shipping and Handling Fees and Costs,” the Company records freight billed to customers as Sales and the related shipping costs as Cost of Sales.

D.   Cash

Cash consists of all cash balances. Included in accounts payable at December 31, 2004 and 2003 are approximately $17.7 million and $7.7 million, respectively, which represent checks that were issued but had not cleared that would otherwise be considered a net overdraft.

E.   Concentration of Credit Risk

Accounts receivable principally represents amounts collectible from the U.S. Federal Government and prime contractors to the government. The Company periodically performs credit evaluations of its non-governmental customers and generally does not require collateral. The allowance for non-collection of receivables is based on historical trade receivable write-off experience. As of December 31, 2004 and 2003, trade accounts receivable from the federal government were $143.6 million and $122.9 million, respectively. Of these balances, trade receivables from the Department of Defense accounted for 43.7% and 51.6% in 2004 and 2003, respectively. No other single government department accounted for 10% or more of accounts receivable. Credit losses have been insignificant and within management’s expectations.

F.   Impairment of Long-Lived Assets

Long-lived assets, consisting primarily of furniture, equipment and capitalized software, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” Recoverability of long-lived assets is assessed by a comparison of the carrying amount to the estimated undiscounted future net cash flows expected to result from the use of the assets and their eventual disposition. If estimated undiscounted future net cash flows are less than the carrying amount, the asset is considered impaired and a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the asset.

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G.   Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations. Accordingly, no compensation cost for stock options granted to employees was reflected in net income, as all options granted had an exercise price equal to the fair market value of the Company’s common stock on the date of the grant. The following table illustrates, in accordance with the provisions of SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” the effect on net income and earnings per share if compensation costs for the Company’s stock options had been determined based on the fair value method consistent with the provisions of SFAS No. 123 “Accounting for Stock-Based Compensation” (in thousands, except per share data):

	2004			2003			2002
Net income—as reported	$	10,264		$	3,179		$	9,533
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(1,843		)	(1,647		)	(943		)
Net earnings—pro forma	$	8,421		$	1,532		$	8,590
Earnings per share—as reported
Basic	$	1.18		$	0.38		$	1.15
Diluted	$	1.09		$	0.35		$	1.04
Earnings per share—pro forma
Basic	$	0.97		$	0.18		$	1.03
Diluted	$	0.90		$	0.17		$	0.94

The Company modified its definition of an employee in its stock option plans to include employees of any entity that GTSI holds at least a 35% ownership interest. This modification triggered the requirement in Financial Accounting Standards Board (“FASB”) Interpretation No. 44 “Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB 25,” (“FIN 44”) to account for these modified awards as new awards to non-employees. As prescribed by FIN 44, the Company recorded a charge of approximately $480,000 ($295,000 net of taxes) during 2004 for stock-based compensation to non-employees based on the fair value method. No stock compensation expense to non-employees was included in net income in 2003 or 2002.

For disclosure purposes, the fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. Under the Black-Scholes model, the total value of options granted in 2004, 2003 and 2002 was $2.9 million, $4.3 million, and $2.8 million, respectively. These options would be amortized on a pro-forma basis based on the vesting schedule specified in the option agreement. The fair value of the Company’s stock-based option awards to employees was estimated assuming no expected dividends and the following weighted-average assumptions:

	2004		2003		2002
Expected life (in years)	4.2		4.0		4.0
Risk free interest rate	3.48	%	3.34	%	2.53	%
Expected volatility	62.7	%	78.1	%	77.95	%

Under the Black-Scholes Option pricing model, the fair value of options granted during 2004, 2003 and 2002 was $5.84, $6.24, and $5.55, respectively.

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H. Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“FAS 109”). Under FAS 109, deferred tax assets and liabilities are computed based on the estimated future tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. FAS 109 requires that a valuation allowance be established when necessary to reduce deferred tax assets to amounts expected to be realized.

I. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year end, and the reported amount of revenue and expenses during the year. Actual results could differ from those estimates. Management’s estimates and assumptions are evaluated on an ongoing basis and are based on historical experience, current conditions and available information. Significant items subject to such estimates and assumptions include valuation allowances for receivables and inventories, and reserves for future costs to be incurred under the Company’s warranty programs.

J. Marketing Development and Cooperative Advertising Funds

The costs of advertising are expensed as incurred. Certain vendors provide GTSI with sales incentive programs. Generally, the funds received under these programs are determined based on the Company’s purchases and/or sales of the vendor’s product. The funds are earned upon performance of specific promotional programs or upon completion of predetermined objectives dictated by the vendor.

On January 1, 2003 the Company adopted EITF Issue No. 02-16, “Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Products)” (“EITF 02-16”). This pronouncement requires that consideration from vendors, such as advertising support funds and sales volume incentives, be accounted for as a reduction to cost of sales unless certain requirements are met. In accordance with EITF 02-16, the Company recorded certain vendor considerations received in 2004 and 2003 as a reduction of Merchandise Inventories and a subsequent reduction in Cost of Sales when the related product is sold. During 2002, the Company recorded these items as a reduction to Selling, General & Administrative expenses. If EITF 02-16 was applied to 2002, the impact would have been a reduction to net income of approximately $13,000.

K. Fair Value of Financial Instruments

At December 31, 2004 and 2003, the recorded values of financial instruments such as notes payable to banks approximated their fair values based on the short-term maturities of these instruments. As of December 31, 2004 and 2003, the Company believes the carrying amount of its current and long-term lease receivables approximates their value since the lease receivables are discounted at an interest rate that approximates market.

L. New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“FAS 123R”), which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” FAS 123R supersedes APB 25 and its related implementation guidance. Generally, the approach to accounting in FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant-date fair value of the award. As permitted by FAS No. 123, the Company currently accounts for share-based payments to employees using the intrinsic value provisions of APB 25 and, as such, generally recognizes no

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compensation costs for employee stock options. Accordingly, the adoption of FAS 123R’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on GTSI’s overall financial position. The impact of adoption of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted FAS 123R in prior periods, the impact of that standard would have approximated the impact of FAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 1G to GTSI’s consolidated financial statements. FAS123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flow in periods after adoption. FAS 123R is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005 and GTSI will adopt the standard beginning July 1, 2005. The Statement offers several alternatives for implementation. At this time, management plans to use the modified prospective transition method. The Company is also evaluating the impact of FAS 123R to its employee stock purchase plan and may decrease the current 15% upfront purchase discount to employees.

In November 2004, the FASB issued SFAS No. 151 “Inventory Costs, an amendment of APB No. 43, Chapter 4,” (“FAS 151”) which clarifies the types of costs that should be expensed rather than capitalized as inventory. The amendments made by FAS 151 also clarify the circumstances under which fixed overhead costs associated with operating facilities used in inventory processing should be capitalized. FAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 24, 2004. The Company is presently analyzing the potential impact of this statement but does not expect the adoption of FAS 151 will have a significant impact on its financial position or results of operations.

M. Reclassifications

Certain amounts reported in previous years have been reclassified to conform to the 2004 presentation.

2. Accounts Receivable

Accounts receivable consists of the following at December 31, (in thousands):

	2004			2003
Trade accounts receivable	$	180,329		$	153,386
Vendor and other receivables	23,422			19,683
Total accounts receivable	203,751			173,069
Less: Allowance for doubtful accounts	(1,009		)	(699		)
Accounts receivable, net	$	202,742		$	172,370

Vendor and other receivables primarily result from items billed to suppliers under various sales incentive programs.

3. Leases Receivable

The Company sells products to certain customers under sales-type lease arrangements for terms of two or three years. The Company accounts for its sales-type leases according to the provisions of SFAS No. 13 “Accounting for Leases” and, accordingly, recognizes current and long-term lease receivables, net of unearned finance income, on the accompanying balance sheets. GTSI periodically sells lease receivables to various unrelated financing companies and accounts for those sales in accordance with SFAS No. 140 “Accounting for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a Replacement of FASB Statement No. 125” (“FAS 140”). In accordance with the criteria set forth in

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FAS 140, lease receivables amounting to $39.4 million in 2004 and $19.5 million in 2003 were accounted for as sales and, as a result, the related receivables have been excluded from the accompanying balance sheets.

Interest and other income includes $3.7 million, $0.5 million and $1.4 million in 2004, 2003 and 2002, respectively, of interest income from lease receivables.

Total future minimum lease payments and unearned finance income due from customers under lease arrangements are as follows (in thousands):

	Total Lease Payments Due to GTSI			Unearned Finance Income			Net Principal Due
2005		$	7,951		$	87		$	7,864
2006		445			36			409
2007		128			8			120
Total lease receivables		$	8,524		$	131		8,393
Less current portion								7,864
Long-term lease receivable								$	529

4. Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over estimated useful lives. Furniture, equipment, software and ERP system useful lives range from three to ten years. The useful life for leasehold improvements is the lesser of the term of the lease or the life of the improvement. Costs for maintenance and repairs are charged to expense when incurred. Property and equipment consists of the following at December 31 (in thousands):

	2004			2003
Office furniture and equipment	$	15,019		$	13,561
Computer software	11,901			11,829
Enterprise Resource Planning System	9,482			3,976
Leasehold improvements	5,184			5,041
	41,586			34,407
Less accumulated depreciation and amortization	(26,403		)	(23,737		)
Property and equipment, net	$	15,183		$	10,670

Depreciation and amortization expense was $3.0 million in 2004, $2.9 million in 2003 and $3.5 million in 2002. During 2004 the Company began amortizing $2.9 million of the $9.5 million ERP system. The remaining $6.6 million will begin being amortized in 2005 when the project is scheduled to be completed.

5. Inventory

Merchandise inventories are valued at the lower of cost or market. Cost is determined using a weighted average method. During the third quarter of 2004, GTSI recorded a charge of approximately $0.7 million in Cost of Sales for the loss of inventory and filed a comprehensive claim with its insurance carrier. The Company received proceeds of $0.6 million from the insurance settlement during the fourth quarter of 2004, resulting in a net charge to Cost of Sales  in 2004 of $0.1 million for this issue.

During October 2004, senior management was informed that certain integrated hardware components were missing from certain hardware delivered on a customer order. This matter is currently under investigation by the Company’s management and it is not clear where or when the loss occurred through the supply chain. The Company recorded a charge of approximately $0.6 million in Cost of Sales during

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the fourth quarter representing the book value of the missing integrated hardware components. GTSI has filed a comprehensive claim with its insurance carrier and management believes that it is reasonably possible that the Company will recover all, or a portion of, this claim. Should the Company be successful in its collection efforts, any proceeds collected will be netted against Cost of Sales for financial statement purposes. In accordance with SFAS No. 5 “Accounting for Contingencies,” no gain contingency has been recorded in GTSI’s financial statements.

During the second quarter of 2003, the Company’s sales organization was successful in securing an order for software inventory that had been reserved for during 2002. As a result, the Company reversed a $1.4 million reserve.

6. Notes Payable and Line of Credit

The Company has a $125 million credit facility with a group of banks (the “Credit Facility”). The Credit Facility includes a revolving line of credit (the “Revolver”) and a provision for inventory financing of vendor products (the “Wholesale Financing Facility”). The Credit Facility, unless terminated earlier, will continue after the maturity date of February 28, 2006 from year to year, unless any party gives the other party written notice of termination not less than 90 days prior to the start of a new renewal period. Borrowing under the Revolver is limited to 85% of eligible accounts receivable. The Revolver is secured by substantially all of the Company’s assets. Borrowing under the Wholesale Financing Facility is limited to 100% of the value of GTSI’s inventory. The Wholesale Financing Facility is secured by the underlying inventory. The Credit Facility carries an interest rate indexed to London Interbank Offered Rate (“LIBOR”) plus 1.75 percentage points. The Credit Facility also contains certain covenants as well as provisions specifying compliance with certain quarterly and annual financial ratios. In 2004, the Company and its lenders signed three amendments to the Revolver to add a new lender and add GTSI’s wholly owned subsidiaries, TLI and GTSI Financial Services, as borrowers.

At December 31, 2004 and 2003, GTSI’s interest rate under the Credit Facility was 4.17% and 2.88%, respectively. The weighted average interest rates for the years ended December 31, 2004, 2003 and 2002 were 3.23%, 2.96% and 3.50%, respectively. GTSI was in compliance with all financial covenants set forth in the Credit Facility and had available credit of $59.0 million at December 31, 2004 and $90.4 million at December 31, 2003.

7. Accounts Payable

SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” states that the judicial release from an obligation results in the extinguishment of a liability. Upon the expiration of the statute of limitations in 2004, GTSI was judicially released from obligations which resulted in the Company derecognizing $10.1 million in aged accrued payables. The impact to GTSI’s financial results was a non-cash increase to gross margin of $10.1 million and an increase to net income of $6.2 million ($0.66 per share) after taxes were applied.

During 2004, the Company conducted a comprehensive review of its accounts payable. As a result of this review, management concluded that an additional $2.5 million in aged accrued payables were no longer valid liabilities. The Company reversed these liabilities, resulting in a $2.5 million increase in gross margin and a $1.5 million ($0.17 per share) increase in net income. Management will continue to conduct such a review of its accounts payable on a quarterly basis, one year in arrears.

8. Stockholders’ Equity

Stock Options

The Company has two stockholder approved combination incentive and non-statutory stock option plans, the 1994 Stock Option Plan, as amended (“1994 Plan”) and the 1996 Stock Option Plan, as amended

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(“1996 Plan”). These plans provide for the granting of options to employees (both plans) and non-employee directors (only under the 1996 Plan) to purchase up to 2,500,000 and 300,000 shares, respectively, of the Company’s common stock. The Company has another stockholder approved plan, the 1997 Non-Officer Stock Option Plan (the “1997 Plan”) which provides for the granting of non-statutory stock options to employees (other than officers and directors) to purchase up to 300,000 shares of the Company’s common stock. In addition, GTSI has utilized a vehicle that allows a company without stockholder approval to offer stock options to prospective employees as an inducement to join GTSI (“Capitalization Vehicle”).

Under the 1997, 1996, and 1994 Plans, options have a term of up to ten years, generally vest over four years and option prices are required to be at not less than 100% of the fair market value of the Company’s common stock at the date of grant and, except in the case of non-employee directors, must be approved by the Board of Directors or its Compensation Committee. Options issued under the Capitalization Vehicle have a term of seven years, vest over four years and option prices typically equal the fair market value of the Company’s common stock on the date of approval by the Board of Directors.

In January 2003, the Company agreed that the unvested options held by one officer would automatically vest if a change in control of the Company occurs. The maximum compensation expense impact, if any, related to this change is $0.8 million. This change results in a new measurement date as required by FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation—An Interpretation of APB Opinion No. 25.” No compensation expense was recorded as a result of this modification at that time or to date because the Company is unable to estimate whether a change in control will occur. The compensation expense, if recorded, would not impact the Company’s cash flows or stockholders’ equity. On May 14, 2003, the stockholders of the Company approved a change to extend the exercise period for certain options granted to its non-employee directors following cessation from the Company to the earlier of the fifth anniversary of the cessation date or the expiration date of the respective option. The maximum compensation expense impact, if any, related to these changes, is $1.8 million. On March 18, 2004, the members of the Company’s Board of Directors formally waived this right, effectively negating the potential for compensation expense impact related to the extension of stock options. Also, during 2003, an executive submitted Company mature stock with a value of $1.1 million previously purchased on the open market to pay for the exercise of 100,000 stock options pursuant to the terms of the Company’s stock option plan, which resulted in a cashless exchange of stock options for Company stock.

The following summary presents changes in the Company’s stock options outstanding under all plans as of December 31, 2002, 2003 and 2004:

	Number of Option Shares		Weighted Average Exercise Price Per Share
Outstanding at January 1, 2002	2,905,508			$	4.55
Granted	572,000			$	9.50
Forfeited or canceled	(133,417	)		$	7.47
Exercised	(450,982	)		$	4.17
Outstanding at December 31, 2002	2,893,109			$	5.45
Granted	768,833			$	10.47
Forfeited or canceled	(124,833	)		$	7.84
Exercised	(426,192	)		$	5.64
Outstanding at December 31, 2003	3,110,917			$	6.57
Granted	558,500			$	11.28
Forfeited or canceled	(223,875	)		$	9.04
Exercised	(397,492	)		$	4.47
Outstanding at December 31, 2004	3,048,050			$	7.53

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The following table summarizes information on stock options outstanding at December 31, 2004:

Options Outstanding							Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price			Number Exercisable	Weighted Average Exercise Price
$1.43-2.85	75,000		5.4		$	2.81	75,000		$	2.81
$2.86-4.28	885,550		1.5		$	3.75	883,050		$	3.75
$4.29-5.70	276,250		2.6		$	5.07	274,000		$	5.08
$5.71-7.13	253,500		4.6		$	6.26	203,250		$	6.25
$7.14-8.55	235,500		6.0		$	8.21	193,500		$	8.24
$8.56-9.98	218,500		4.8		$	8.88	50,750		$	8.84
$9.99-11.40	723,500		5.2		$	11.01	254,252		$	11.02
$11.41-12.83	375,250		6.0		$	12.02	40,250		$	11.85
$12.84-14.25	5,000		5.0		$	13.67	2,500		$	13.67
	3,048,050		4.0		$	7.53	1,976,552		$	5.84

The following table sets forth the number of options exercisable and available for grant as of December 31, 2004:

Plan	Options Exercisable		Options Available for grant
1994 plan		39,250		1,217
1996 plan		1,123,602		754,791
1997 plan		34,700		11,492
Capitalization Vehicle		779,000		N/A

Employee Stock Purchase Plan

GTSI has established an Employee Stock Purchase Plan (“ESPP”). Eligible employees may elect to set aside, through payroll deduction, up to 15% of their compensation to purchase common stock of the Company. The maximum number of shares that an eligible employee may purchase during any offering period is equal to 5% of such employee’s compensation for the 12 calendar-month period prior to the commencement of an offering period divided by 85% of the fair market value of a share of common stock on the first day of the offering period. The ESPP is implemented through one offering during each six-month period beginning January 1 and July 1. The ESPP purchase price is 85% of the lower of the fair market value of a share of common stock on the first day or the last day of the offering period. The Company uses its treasury shares to fulfill the obligation of both the employee withholding and the discount.

The table below summarizes the number of shares purchased by employees under the ESPP during the offering periods indicated:

Offering period ended	Number of shares purchased		Purchase price
December 31, 2004		40,994		$	8.93
June 30, 2004		44,098		$	9.73
December 31, 2003		81,314		$	7.44
June 30, 2003		65,780		$	7.44
December 31, 2002		77,858		$	6.67
June 30, 2002		63,269		$	6.67

43

The weighted average fair market value of shares under the ESPP was $9.35 in 2004, $7.44 in 2003, and $6.67 in 2002. GTSI has reserved 1,650,000 shares of common stock for the ESPP, of which 871,107 were available for future issuance as of December 31, 2004.

Purchase of Capital Stock

The Company purchased $0 and $4.0 million of GTSI’s common stock in 2004 and 2003, respectively. The shares purchased in 2003 were authorized under two stock purchase plans approved by GTSI’s Board of Directors. In February 2000, the Board of Directors approved a plan for the purchase of common stock with a limit of up to $5.25 million. In January 2002, the Board of Directors authorized the use of up to an additional $5.0 million for the purchase of outstanding shares of the Company’s common stock, provided the per share price did not exceed the market price. As of December 31, 2004, $2.7 million remained available for use in purchasing common stock. Common stock purchased for the Company’s treasury are generally reissued upon the exercise of employee stock options and for the employee stock purchase plan.

9. Earnings Per Share

Basic earnings per share are calculated by dividing net income by the weighted average shares outstanding during the period. Diluted earnings per share are computed similarly to basic earnings per share, except that it includes the dilutive effect of the assumed exercise of stock options. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts) for the years ended December 31:

	2004		2003		2002
Basic earnings per share:
Net income	$	10,264	$	3,179	$	9,533
Weighted average shares outstanding	8,664		8,349		8,302
Basic earnings per share	$	1.18	$	0.38	$	1.15
Diluted earnings per share:
Net income	$	10,264	$	3,179	$	9,533
Weighted average shares outstanding	8,664		8,349		8,302
Incremental shares attributable to the assumed exercise of outstanding stock options	724		767		854
Weighted average shares and equivalents	9,388		9,116		9,156
Diluted earnings per share	$	1.09	$	0.35	$	1.04

10. Income Taxes

The provision for income taxes consists of the following (in thousands):

	Years Ended December 31,
	2004		2003		2002
Current:
Federal	$	1,826	$	1,373	$	5,769
State	248		243		765
	2,074		1,616		6,534
Deferred:
Federal	3,858		427		(372		)
State	523		75		(49		)
	4,381		502		(421		)
Total income tax provision	$	6,455	$	2,118	$	6,113

44

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and the amounts recorded for income tax purposes. The components of the deferred tax assets and liabilities are as follows at December 31 (in thousands):

	2004			2003
Deferred tax assets:
Accounts receivable and inventory allowances	$	376		$	270
Accrued warranty	1,047			1,760
Bid and proposal costs	433			466
Vacation accrual	499			440
Depreciation	—			965
Rent abatement	99			129
Other reserves	551			987
Prepaid revenue	—			584
Deferred revenue	221			—
Total deferred tax assets	3,226			5,601
Deferred tax liabilities:
Web site development costs	(35		)	(109		)
Software development costs	(2,463		)	(631		)
Depreciation	(248		)	—
Total deferred tax liabilities	(2,746		)	(740		)
Net deferred tax assets	$	480		$	4,861

The following is a reconciliation of the statutory U.S. income tax rate to the Company’s effective tax rate:

	Years Ended December 31,
	2004			2003			2002
Statutory rate		34.5	%		34.0	%		34.0	%
State income taxes, net of federal benefit		3.3			4.0			4.6
Other		0.8			2.0			0.5
Effective tax rate		38.6	%		40.0	%		39.1	%

A tax benefit from the exercise of stock options of $0.9 million, $1.1 million, and $0.7 million was recorded for the years ended December 31, 2004, 2003 and 2002, respectively.

11. Impairment Charge

During 2003 the Company recorded an impairment charge related to a highly customized enterprise resource planning (“ERP”) system. The Company changed its strategy and began implementing a standard ERP system to compress the delivery time and provide significant value sooner. Due to this change in strategy, the Company wrote-off $6.0 million of capitalized customization expenses determined to have no future economic value.

45

12.   Interest and Other Income, Net

Interest and other income, net comprises the following for the years ended December 31 (in thousands):

	2004			2003			2002
Income from prompt payment of vendor invoices	$	1,390		$	2,243		$	3,567
Interest income from lease receivables	3,745			526			930
Other interest income	399			254			320
Other income	346			96			381
Total interest and other income	5,880			3,119			5,198
Less interest and other expense	(311		)	(287		)	(678		)
Total interest and other income, net	$	5,569		$	2,832		$	4,520

13.   401(k) Plan

Effective April 1991, GTSI adopted the Employees’ 401(k) Investment Plan (the “Plan”), a savings and investment plan intended to be qualified under Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”). All employees of the Company who are at least 21 years of age are eligible to participate. The Plan is voluntary and allows participating employees to make pretax contributions, subject to limitations under the Code, of a percentage (not to exceed 30%) of their total compensation. Employee contributions are fully vested at all times. GTSI matches employee contributions 50% of the first five percent of eligible pay. In 2004, 2003 and 2002, the Company contributed approximately $1.0 million, $1.0 million and $0.9 million to the Plan, respectively.

14.   Commitments and Contingencies

Product Warranties

GTSI offers extended warranties on certain products which are generally covered for three or five years beyond the warranty provided by the manufacturer. Products under extended warranty require repair or replacement of defective parts at no cost to the customer. The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under its extended warranty contracts. The following table summarizes the activity related to product warranty liabilities for the years ended December 31 (in thousands):

	2004			2003
Accrued warranties at beginning of year	$	4,555		$	4,404
Charges made against warranty liabilities	(2,074		)	(5,004		)
Adjustments to warranty reserves	(1,659		)	1,038
Accruals for additional warranties sold	1,607			4,117
Accrued warranties at end of year	$	2,429		$	4,555

Revenue from extended warranty contracts is recorded as Deferred Revenue and subsequently recognized over the term of the contract. The following table summarizes the activity related to the deferred warranty revenue for the years ended December 31 (in thousands):

	2004			2003
Deferred warranty revenue at beginning of year	$	2,819		$	1,996
Deferred warranty revenue recognized	(1,384		)	(1,213		)
Revenue deferred for additional warranties sold	1,163			2036
Deferred warranty revenue at end of year	$	2,598		$	2,819

46

Lease Commitments

The Company conducts its operations from leased real properties, which include offices and warehouses. These obligations expire at various dates through 2008. Most of the leases contained renewal options at inception, some of which have been exercised. Rent expense for the years ended December 31, 2004, 2003 and 2002 was approximately $2.4 million, $2.5 million and $2.0 million, respectively. Future minimum lease payments under operating leases that had initial or remaining non-cancelable lease terms in excess of one year at December 31, 2004 are as follows (in thousands):

2005	$	2,943
2006	2,397
2007	1,414
2008	1,286
Thereafter	—
Total minimum lease payments	$	8,040

Letter of Credit

GTSI was obligated under an operating lease to provide its landlord with a letter of credit in the amount of $0.8 million at December 31, 2004 and $1.0 million at December 31, 2003, as a security deposit for all tenant improvements associated with the lease.

At December 31, 2004, GTSI was obligated under a customer contract to provide a second letter of credit in the amount of $1.75 million to guarantee the performance by company of all obligations under this agreement. This obligation will expire on August 31, 2005.

Contingencies

In December of 2004, the Company became aware that a potential payroll tax liability existed for employees working in GTSI’s office in Germany. Management determined that a tax liability was probable and, as a result, the Company accrued approximately $0.8 million in accrued liabilities.

Legal Proceedings

The Company is occasionally involved in various lawsuits, claims, and administrative proceedings arising in the normal course of business. The Company believes that any liability or loss associated with such matters, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations.

As previously reported in the Company’s periodic filings with the SEC, in November 2003, GTSI was served with a $25 million lawsuit, with treble damages, related to an alleged breach of contract due to the termination of Ichiban, Inc., a former subcontractor. This suit follows the Company’s earlier lawsuit against the former subcontractor. In November 2004, plaintiff modified the claim eliminating treble damages. Management continues to believe the claim is without merit and intends to vigorously defend this lawsuit, but the ultimate outcome of this matter is uncertain. Management is unable to estimate the amount GTSI may have to pay, if any, related to this matter. No amounts have been accrued as of December 31, 2004.

15.   Segment Reporting

GTSI engages in business activities as one operating segment that provides hardware, software and services primarily to the U. S. Federal Government. The Company’s chief operating decision maker evaluates

47

performance and determines resource allocation based on GTSI’s consolidated sales and operating results. The following table summarizes the Company’s sales for the years ended December 31 (in thousands):

Sales	2004		2003		2002
Hardware	$	834,144	$	692,543	$	673,700
Software	155,724		154,468		196,400
Resold third-party service products	66,618		91,211		50,808
Services	19,662		15,896		13,822
Total	$	1,076,148	$	954,118	$	934,730

Major Customers

All of GTSI’s sales are earned from United States’ entities. Sales to multiple agencies and departments of the U.S. Federal Government, either directly or through system integrators, accounted for approximately 95%, 98% and 97% of the Company’s consolidated sales during 2004, 2003, and 2002, respectively.

16.   Selected Quarterly Financial Data (unaudited)

The following summary illustrates selected quarterly financial data for the two years ended December 31, 2004. GTSI has historically experienced significant seasonal fluctuations in its operations as a result of government buying and funding patterns. Results of any one or more quarters are not necessarily indicative of annual results or continuing trends.

	2004
	Q1			Q2			Q3*		Q4		Total
	(in thousands, except per share data)
Sales	$	178,623		$	238,990		$	330,645	$	327,890	$	1,076,148
Gross margin	$	18,082		$	21,537		$	46,723	$	35,663	$	122,005
Net (loss) income	$	(1,381	)	$	(1,553	)	$	10,454	$	2,744	$	10,264
Basic (loss) earnings per share	$	(0.16	)	$	(0.18	)	$	1.21	$	0.31	$	1.18
Diluted (loss) earnings per share	$	(0.16	)	$	(0.18	)	$	1.13	$	0.29	$	1.09

	2003
	Q1			Q2		Q3		Q4		Total
Sales	$	178,858		$	189,737	$	273,066	$	312,457	$	954,118
Gross margin	$	16,074		$	22,756	$	27,497	$	30,457	$	96,784
Net (loss) income	$	(1,763	)	$	1,149	$	3,470	$	323	$	3,179
Basic (loss) earnings per share	$	(0.21	)	$	0.14	$	0.42	$	0.04	$	0.38
Diluted (loss) earnings per share	$	(0.21	)	$	0.13	$	0.39	$	0.04	$	0.35

* See note 7.

17.   Subsequent Events

On February 11, 2005 GTSI and its landlord executed a second amendment to the lease for the Company’s headquarters to reduce the letter of credit from $0.8 million to $0.2 million.

On March 3, 2005, the Company’s Board of Directors approved the acceleration of the vesting of unvested stock options with a strike price above $10.05 previously awarded to employees, officers and directors under GTSI’s stock option plans (see Note 8). Forfeiture of these accelerated options occurs on the date of termination, if the individual’s termination date from GTSI is prior to the original vesting date of such options. The vesting of these options was accelerated to avoid recognizing compensation expense in future financial statements upon the adoption of SFAS 123R.

48

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

None.

ITEM 9A.   CONTROLS AND PROCEDURES

As of the end of the period covered by this report, based on our management’s evaluation, with the participation of GTSI’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rules13a-15(e) or 15d – 15(e) under the Securities Exchange Act of 1934, as amended) our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There was no change in our internal control over financial reporting during our fourth quarter of fiscal 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

INTERNAL CONTROL REPORT OF MANAGEMENT

The management of GTSI is responsible for establishing and maintaining adequate internal control over financial reporting. GTSI’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

GTSI’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment we believe that, as of December 31, 2004, the Company’s internal control over financial reporting is effective based on those criteria.

GTSI’s independent registered public accounting firm has issued an audit report on our assessment of the Company’s internal control over financial reporting. This report appears on page 50.

Management of GTSI Corp.

49

Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting

The Board of Directors and Stockholders of GTSI Corp.:

We have audited management’s assessment, included in the accompanying Internal Control Report of Management, that GTSI Corp. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). GTSI Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that GTSI Corp. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, GTSI Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2004 consolidated financial statements of GTSI Corp and financial statement schedule and our report dated March 11, 2005 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
McLean, VA
March 11, 2005

50

PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated by reference to the sections of the Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on April 21, 2005 (the “Proxy Statement”) entitled “Proposal 1—Election of Directors,” “Executive Officers,” “Common Stock Ownership of Principal Stockholders and Management—Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Ethics,” “Audit Fees,” and “Audit Committee.” The Proxy Statement will be filed with the Commission within 120 days after December 31, 2004.

ITEM 11.   EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Election of Directors—Compensation of Directors” and “Executive Compensation and Other Information.”

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to the section of the Proxy Statement entitled “Common Stock Ownership of Principal Stockholders and Management.”

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Proposal 1—Election of Directors—Class 1 Nominees,” “Compensation of Directors,” “Executive Compensation and Other Information—Employment Agreements and Termination of Employment and Change of Control Arrangements” And “Certain Relationships and Related Transactions.”

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Audit Committee” and “Audit Fees.”

51

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K:

(a)   Financial Statements

The consolidated financial statements of GTSI Corp. and subsidiaries filed are as follows:

Financial Statement Schedules

The financial statement schedules of GTSI Corp. and subsidiaries filed are as follows:

All other schedules are omitted because they are not applicable, or the required information is shown in the financial statements or the notes thereto.

Exhibits

The exhibits set forth in the Exhibit Index are filed as part of this Annual Report on Form 10-K.

(b)   Reports on Form 8-K:

On November 2, 2004, GTSI furnished a report on Form 8-K under Item 2 relating to its press release of financial information for the three and nine month periods ended September 30, 2004, and monthly sales.

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on March 15, 2005 on its behalf by the undersigned thereunto duly authorized.

GTSI CORP.
By:	/s/ M. DENDY YOUNG
	M. Dendy Young
	Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 11, 2005 by the following persons on behalf of the registrant and in the capacities indicated.

/s/ M. DENDY YOUNG

M. Dendy Young

Chairman and Chief Executive Officer

(Principal Executive Officer)

/s/ THOMAS A. MUTRYN

Thomas A. Mutryn

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ THOMAS HEWITT

Thomas Hewitt

Director

/s/ LEE JOHNSON

Lee Johnson

Director

/s/ JOSEPH KEITH KELLOGG, JR.

Joseph Keith Kellogg, Jr.

Director

/s/ STEVEN KELMAN

Steven Kelman

Director

/s/ JAMES J. LETO

James J. Leto

Director

/s/ BARRY REISIG

Barry Reisig

Director

53

/s/ LAWRENCE J. SCHOENBERG

Lawrence J. Schoenberg

Director

/s/ JOHN M. TOUPS

John M. Toups

Director

/s/ DANIEL R. YOUNG

Daniel R. Young

Director

54

GTSI CORP.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
SCHEDULE II

Years Ended December 31,	2004		2003		2002
Allowance for Doubtful Accounts
Balance at beginning of period	$	699	$	834	$	1,413
Balance at end of period	$	1,009	$	699	$	834

All other schedules are omitted since the required information is not present or is not present in amount sufficient to required submission of the schedule, or because the information is included in the consolidated financial statements or notes thereto.

55

EXHIBIT INDEX

Exhibit Number	Description
3.1	Restated Certificate of Incorporation(1)
3.2	Bylaws, as amended(4)
10.1	GTSI Employees’ 401(k) Investment Plan, and amendments No. 1, 2 and 3 thereto (filed herewith)*
10.2	Employee Stock Purchase Plan, as amended to date*(4)
10.3	1994 Stock Option Plan, as amended to date*(3)
10.4	1996 Stock Option Plan, as amended to date*(4)
10.5	1997 Non-Officer Stock Option Plan, as amended to date*(3)
10.6	Lease dated August 11, 1995 between the Company and Security Capital Industrial Trust, and Amendments for distribution center facility(5)
10.7	Lease dated December 10, 1997 between the Company and Petula Associates, Ltd. and Amendment for headquarters facility(5)
10.8	Employment Agreement dated January 1, 2001 between the Registrant and M. Dendy Young*(1)
10.9	Offer Letter dated June 28, 2001 between the Registrant and Terri Allen*(2)
10.10	Non-Qualified Stock Option Agreement effective July 31, 2001 between the Registrant and Terri Allen*(3)
10.11	Credit Facilities Agreement, dated as of October 23, 2003, among the Registrant, certain lenders named in such agreement, and GE Commercial Distribution Finance Corporation, as a Lender and as Agent(6)
10.12	First Amendment to Credit Facilities Agreement, dated March 12, 2004, among the Company, certain lenders named in such agreement, and GE Commercial Distribution Finance Corporation, as a Lender and as Agent (filed herewith)
10.13	Second Amendment to Credit Facilities Agreement, dated as of July 29, 2004, among the Company, certain lenders named in such agreement and GE Commercial Distribution Finance Corporation, as a Lender and as Agent(5)
10.14	Third Amendment to Credit Facilities Agreement, dated as of November 22, 2004, among the Company, certain lenders named in such agreement and GE Commercial Distribution Finance Corporation, as a Lender and as Agent (filed herewith)
10.15	Offer Letter dated December 31, 2002 between the Registrant and Thomas Mutryn*(3)
10.16	Non-Qualified Stock Option Agreement effective January 28, 2003 between the Registrant and Thomas Mutryn*(3)
10.17	Second Amendment to Deed of Lease dated February 11, 2005 between the Company and AG/ARG Avion, L.L.C. (successor-in-interest to Petula Associates, Ltd.) for headquarters facility. (filed herewith)
10.18	GTSI Corp. Long Term Incentive Plan*(7)
10.19	GTSI 2005 Executive Incentive Compensation Plan* (filed herewith)
10.20	Form of GTSI Change of Control Agreement* (filed herewith)
14.1	Code of Ethics(6)
23.1	Consent of Ernst & Young LLP (filed herewith)
31.1	Section 302 Certification of Chief Executive Officer (filed herewith)
31.2	Section 302 Certification of Chief Financial Officer (filed herewith)
32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer (filed herewith)

*Management contracts and compensatory plans and arrangements required to be filed pursuant to Item 15 (c).

56

(1)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000.

(2)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001.

(3)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002.

(4)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004.

(5)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2004.

(6)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.

(7)Incorporated by reference to Appendix B of the Registrant’s 2004 Proxy Statement.

57

EX-10.1

Exhibit 10.1

GTSI EMPLOYEES’ 401(k)
INVESTMENT PLAN

TABLE OF CONTENTS

INTRODUCTION
ARTICLE I	FORMAT AND DEFINITIONS
ARTICLE I
Section 1.01	Format
Section 1.02	Definitions
ARTICLE II	PARTICIPATION
Section 2.01	Active Participant
Section 2.02	Inactive Participant
Section 2.03	Cessation of Participation
ARTICLE III	CONTRIBUTIONS
Section 3.01	Employer Contributions
Section 3.01A	Rollover Contributions
Section 3.02	Forfeitures
Section 3.03	Allocation
Section 3.04	Contribution Limitation
Section 3.05	Excess Amounts
ARTICLE IV	INVESTMENT OF CONTRIBUTIONS
ARTICLE V	BENEFITS
Section 5.01	Retirement Benefits
Section 5.02	Death Benefits
Section 5.03	Vested Benefits
Section 5.04	When Benefits Start
Section 5.05	Withdrawal Benefits
Section 5.06	Loans to Participants
Section 5.07	Distributions Under Qualified Domestic Relations Orders
ARTICLE VI	DISTRIBUTION OF BENEFITS
Section 6.01	Automatic Forms of Distribution
Section 6.02	Optional Forms of Distribution
Section 6.03	Election Procedures
Section 6.04	Notice Requirements

3

ARTICLE VII	DISTRIBUTION REQUIREMENTS
Section 7.01	Application
Section 7.02	Definitions
Section 7.03	Distribution Requirements
ARTICLE VIII	TERMINATION OF THE PLAN
ARTICLE IX	ADMINISTRATION OF THE PLAN
Section 9.01	Administration
Section 9.02	Expenses
Section 9.03	Records
Section 9.04	Information Available
Section 9.05	Claim and Appeal Procedures
Section 9.06	Delegation of Authority
Section 9.07	Exercise of Discretionary Authority
ARTICLE X	GENERAL PROVISIONS
Section 10.01	Amendments
Section 10.02	Direct Rollovers
Section 10.03	Mergers and Direct Transfers
Section 10.04	Provisions Relating to the Insurer and Other Parties
Section 10.05	Employment Status
Section 10.06	Rights to Plan Assets
Section 10.07	Beneficiary
Section 10.08	Nonalienation of Benefits
Section 10.09	Construction
Section 10.10	Legal Actions
Section 10.11	Small Amounts
Section 10.12	Word Usage
Section 10.13	Change in Service Method
Section 10.14	Military Service

4

INTRODUCTION

The Primary Employer previously established a 401(k) plan on April 1, 1991.

The Primary Employer is of the opinion that the plan should be changed. It believes that the best means to accomplish these changes is to completely restate the plan’s terms, provisions and conditions. The restatement, effective January 1, 1997, is set forth in this document and is substituted in lieu of the prior document.

This restatement is made retroactively to reflect the law changes made through the Internal Revenue Service Restructuring and Reform Act of 1998. The provisions of this Plan apply as of the effective date of the restatement except as provided in the attached addendums which reflect the operation of the Plan between the effective date of the restatement and the date this restatement is adopted and identify those provisions which are not amended retroactively.

The restated plan continues to be for the exclusive benefit of employees of the Employer. All persons covered under the plan on December 31, 1996, shall continue to be covered under the restated plan with no loss of benefits.

It is intended that the plan, as restated, shall qualify as a profit sharing plan under the Internal Revenue Code of 1986, including any later amendments to the Code.

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ARTICLE I

FORMAT AND DEFINITIONS

SECTION 1.01—FORMAT.

Words and phrases defined in the DEFINITIONS SECTION of Article I shall have that defined meaning when used in this Plan, unless the context clearly indicates otherwise.

These words and phrases have an initial capital letter to aid in identifying them as defined terms.

SECTION 1.02—DEFINITIONS.

Account means, for a Participant, his share of the Plan Fund. Separate accounting records are kept for those parts of his Account that result from:

(a)Elective Deferral Contributions

(b)Matching Contributions

(c)Qualified Nonelective Contributions

(d)Other Employer Contributions

(e)Rollover Contributions

If the Participant’s Vesting Percentage is less than 100% as to any of the Employer Contributions, a separate accounting record will be kept for any part of his Account resulting from such Employer Contributions and, if there has been a prior Forfeiture Date, from such Contributions made before a prior Forfeiture Date.

A Participant’s Account shall be reduced by any distribution of his Vested Account and by any Forfeitures. A Participant’s Account shall participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund. His Account is subject to any minimum guarantees applicable under the Annuity Contract or other investment arrangement and to any expenses associated therewith.

Accrual Computation Period means a consecutive 12-month period ending on the last day of each Plan Year, including corresponding consecutive 12-month periods before April 1, 1991.

ACP Test means the nondiscrimination test described in Code Section 401(m)(2) as provided for in subparagraph (d) of the EXCESS AMOUNTS SECTION of Article III.

Active Participant means an Eligible Employee who is actively participating in the Plan according to the provisions in the ACTIVE PARTICIPANT SECTION of Article II.

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ADP Test means the nondiscrimination test described in Code Section 401 (k)(3) as provided for in subparagraph (c) of the EXCESS AMOUNTS SECTION of Article III.

Affiliated Service Group means any group of corporations, partnerships or other organizations of which the Employer is a part and which is affiliated within the meaning of Code Section 414(m) and regulations thereunder. Such a group includes at least two organizations one of which is either a service organization (that is, an organization the principal business of which is performing services), or an organization the principal business of which is performing management functions on a regular and continuing basis. Such service is of a type historically performed by employees. In the case of a management organization, the Affiliated Service Group shall include organizations related, within the meaning of Code Section 144(a)(3), to either the management organization or the organization for which it performs management functions. The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group.

Annual Compensation means, for a Plan Year, the Employee’s Compensation for the Compensation Year ending with or within the consecutive 12-month period ending on the last day of the Plan Year.

Annuity Contract means the annuity contract or contracts into which the Primary Employer enters with the Insurer for guaranteed benefits, for the investment of Contributions in separate accounts, and for the payment of benefits under this Plan. The term Annuity Contract as it is used in this Plan shall include the plural unless the context clearly indicates the singular is meant.

Annuity Starting Date means, for a Participant, the first day of the first period for which an amount is payable as an annuity or any other form.

Beneficiary means the person or persons named by a Participant to receive any benefits under the Plan when the Participant dies. See the BENEFICIARY SECTION of Article X.

Claimant means any person who makes a claim for benefits under this Plan. See the CLAIM AND APPEAL PROCEDURES SECTION of Article IX.

Code means the Internal Revenue Code of 1986, as amended.

Compensation means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III and Article XI, the total earnings, except as modified in this definition, paid or made available to an Employee by the Employer during any specified period.

“Earnings” in this definition means wages within the meaning of Code Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. Earnings must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401 (a)(2)). The amount reported in the “Wages, Tips and Other Compensation” box on Form W-2 satisfies this definition.

For any Self-employed Individual, Compensation means Earned Income.

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Compensation shall exclude reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation (other than elective contributions), and welfare benefits.

Compensation shall also include elective contributions. For this purpose, elective contributions are amounts contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Employee under Code Section 125, 402(e)(3), 402(h)(1)(B), or 403(b). Elective contributions also include compensation deferred under a Code Section 457 plan maintained by the Employer and employee contributions “picked up” by a governmental entity and, pursuant to Code Section 414(h)(2), treated as Employer contributions. For years beginning after December 31, 1997, elective contributions shall also include amounts contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Employee under Code Section 132(f)(4).

For purposes of the EXCESS AMOUNTS SECTION of Article 111, the Employer may elect to use an alternative nondiscriminatory definition of Compensation in accordance with the regulations under Code Section 414(s).

For Plan Years beginning on or after January 1, 1994, the annual Compensation of each Participant taken into account for determining all benefits provided under the Plan for any determination period shall not exceed $150,000, as adjusted for increases in the cost-of-living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any determination period beginning in such calendar year.

If a determination period consists of fewer than 12 months, the annual limit is an amount equal to the otherwise applicable annual limit multiplied by a fraction. The numerator of the fraction is the number of months in the short determination period, and the denominator of the fraction is 12.

If Compensation for any prior determination period is taken into account in determining a Participant’s contributions or benefits for the current Plan Year, the Compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that determination period. For this purpose, in determining contributions or benefits in Plan Years beginning on or after January 1, 1994, the annual compensation limit in effect for determination periods beginning before that date is $150,000.

Compensation means, for a Leased Employee, Compensation for the services the Leased Employee performs for the Employer, determined in the same manner as the Compensation of Employees who are not Leased Employees, regardless of whether such Compensation is received directly from the Employer or from the leasing organization.

Compensation Year means the consecutive 12-month period ending on the last day of each Plan Year, including corresponding periods before April 1, 1991.

Contingent Annuitant means an individual named by the Participant to receive a lifetime benefit after the Participant’s death in accordance with a survivorship life annuity.

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Contributions means

Elective Deferral Contributions, Matching Contributions,
Qualified Nonelective Contributions, Discretionary Contributions, Rollover Contributions

as set out in Article III, unless the context clearly indicates only specific contributions are meant.

Controlled Group means any group of corporations, trades, or businesses of which the Employer is a part that are under common control. A Controlled Group includes any group of corporations, trades, or businesses, whether or not incorporated, which is either a parent-subsidiary group, a brother-sister group, or a combined group within the meaning of Code Section 414(b), Code Section 414(c) and regulations thereunder and, for purposes of determining contribution limitations under the CONTRIBUTION LIMITATION SECTION of Article III, as modified by Code Section 415(h) and, for the purpose of identifying Leased Employees, as modified by Code Section 144(a)(3). The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group and any other employer required to be aggregated with the Employer under Code Section 414(o) and the regulations thereunder.

Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

Discretionary Contributions means discretionary contributions made by the Employer to fund this Plan. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Distributee means an Employee or former Employee. In addition, the Employee’s (or former Employee’s) surviving spouse and the Employee’s (or former Employee’s) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse.

Earned Income means, for a Self-employed Individual, net earnings from self-employment in the trade or business for which this Plan is established if such Self-employed Individual’s personal services are a material income producing factor for that trade or business. Net earnings shall be determined without regard to items not included in gross income and the deductions properly allocable to or chargeable against such items. Net earnings shall be reduced for the employer contributions to the Employer’s qualified retirement plan(s) to the extent deductible under Code Section 404.

Net earnings shall be determined with regard to the deduction allowed to the Employer by Code Section 164(f) for taxable years beginning after December 31, 1989.

Elective Deferral Contributions means contributions made by the Employer to fund this Plan in accordance with elective deferral agreements between Eligible Employees and the Employer.

Elective deferral agreements shall be made, changed, or terminated according to the provisions of the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Elective Deferral Contributions shall be 100% vested and subject to the distribution restrictions of Code Section 401(k) when made. See the WHEN BENEFITS START SECTION of Article V.

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Eligible Employee means any Employee of the Employer who meets the following requirement. His employment classification with the Employer is the following:

Nonbargaining class. Not represented for collective bargaining purposes by any collective bargaining agreement between the Employer and employee representatives, if retirement benefits were the subject of good faith and if two percent or less of the Employees who are covered pursuant to that agreement are professionals as defined in section 1.410(b)-9 of the regulations. For this purpose, the term “employee representatives” does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

Not a nonresident alien, within the meaning of Code Section 7701(b)(1)(B), who receives no earned income, within the meaning of Code Section 911(d)(2), from the Employer which constitutes income from sources within the United States, within the meaning of Code Section 861(a)(3), or who receives such earned income but it is all exempt from income tax in the United States under the terms of an income tax convention.

Eligible Retirement Plan means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a) or a qualified trust described in Code Section 401(a), that accepts the Distributee’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.

Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; (ii) any distribution to the extent such distribution is required under Code Section 401 (a)(9); (iii) any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV) received after December 31, 1998; (iv) the portion of any other distribution(s) that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and (v) any other distribution(s) that is reasonably expected to total less than $200 during a year.

Employee means an individual who is employed by the Employer or any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o). A Controlled Group member is required to be aggregated with the Employer.

The term Employee shall include any Self-employed Individual treated as an employee of any employer described in the preceding paragraph as provided in Code Section 401(c)(1). The term Employee shall also include any Leased Employee deemed to be an employee of any employer described in the preceding paragraph as provided in Code Section 414(n) or (o).

Employer means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III, the Primary Employer. This will also include any successor corporation or firm of the Employer which shall, by written agreement, assume the obligations of this Plan or any Predecessor Employer which maintained this Plan.

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Employer Contributions means

Elective Deferral Contributions Matching Contributions
Qualified Nonelective Contributions Discretionary Contributions

as set out in Article III and contributions made by the Employer to fund this Plan in accordance with the provisions of the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI, unless the context clearly indicates only specific contributions are meant.

Employment Commencement Date means the date an Employee first performs an Hour-of-Service.

Entry Date means the date an Employee first enters the Plan as an Active Participant. See the ACTIVE PARTICIPANT SECTION of Article II.

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

Fiscal Year means the Primary Employer’s taxable year. The last day of the Fiscal Year is December 31.

Forfeiture means the part, if any, of a Participant’s Account that is forfeited. See the FORFEITURES SECTION of Article III.

Forfeiture Date means, as to a Participant, the date the Participant incurs five consecutive Vesting Breaks in Service.

Highly Compensated Employee means any Employee who:

(a)was a 5-percent owner at any time during the year or the preceding year, or

(b)for the preceding year had compensation from the Employer in excess of $80,000 and, if the Employer so elects, was in the top-paid group for the preceding year. The $80,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period is the calendar quarter ending September 30, 1996.

For this purpose the applicable year of the plan for which a determination is being made is called a determination year and the preceding 12-month period is called a look-back year. If the Employer makes a calendar year data election, the look-back year shall be the calendar year beginning with or within the look-back year. The Plan may not use such election to determine whether Employees are Highly Compensated Employees on account of being a 5-percent owner.

In determining who is a Highly Compensated Employee, the Employer does not make a top-paid group election. In determining who is a Highly Compensated Employee, the Employer does not make a calendar year data election.

Calendar year data elections and top-paid group elections, once made, apply for all subsequent years unless changed by the Employer. If the Employer makes one election, the Employer is not required to make the other. If both elections are made, the look-back year in determining the top-paid group must

11

be the calendar year beginning with or within the look-back year. These elections must apply consistently to the determination years of all plans maintained by the Employer which reference the highly compensated employee definition in Code Section 414(q), except as provided in Internal Revenue Service Notice 97-45 (or superseding guidance). The consistency requirement will not apply to determination years beginning with or within the 1997 calendar year, and for determination years beginning on or after January 1, 1998 and before January 1, 2000, satisfaction of the consistency requirement is determined without regard to any nonretirement plans of the Employer.

The determination of who is a highly compensated former Employee is based on the rules applicable to determining Highly Compensated Employee status as in effect for that determination year, in accordance with section 1.414(q)-1T, A-4 of the temporary Income Tax Regulations and Internal Revenue Service Notice 97-45.

In determining whether an Employee is a Highly Compensated Employee for years beginning in 1997, the amendments to Code Section 414(q) stated above are treated as having been in effect for years beginning in 1996.

The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the compensation that is considered, and the identity of the 5-percent owners, shall be made in accordance with Code Section 414(q) and the regulations thereunder.

Hour-of-Service means the following:

(a)Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period.

(b)Each hour for which an Employee is paid, or entitled to payment, by the Employer because of a period of time in which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding provisions of this subparagraph (b), no credit will be given to the Employee:

(1)for more than 501 Hours-of-Service under this subparagraph (b) because of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period); or

(2)for an Hour-of-Service for which the Employee is directly or indirectly paid, or entitled to payment, because of a period in which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker’s or workmen’s compensation, or unemployment compensation, or disability insurance laws; or

(3)for an Hour-of-Service for a payment which solely reimburses the Employee for medical or medically related expenses incurred by him.

For purposes of this subparagraph (b), a payment shall be deemed to be made by, or due from the Employer, regardless of whether such payment is made by, or due from the Employer, directly or indirectly through, among others, a trust fund or insurer, to which the Employer contributes or

12

pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.

(c)Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours-of-Service shall not be credited both under subparagraph (a) or subparagraph (b) above (as the case may be) and under this subparagraph (c). Crediting of Hours-of-Service for back pay awarded or agreed to with respect to periods described in subparagraph (b) above will be subject to the limitations set forth in that subparagraph.

The crediting of Hours-of-Service above shall be applied under the rules of paragraphs (b) and (c) of the Department of Labor Regulation 2530.200b-2 (including any interpretations or opinions implementing such rules); which rules, by this reference, are specifically incorporated in full within this Plan. The reference to paragraph (b) applies to the special rule for determining hours of service for reasons other than the performance of duties such as payments calculated (or not calculated) on the basis of units of time and the rule against double credit. The reference to paragraph (c) applies to the crediting of hours of service to computation periods.

Hours-of-Service shall be credited for employment with any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o) and the regulations thereunder for purposes of eligibility and vesting. Hours-of-Service shall also be credited for any individual who is considered an employee for purposes of this Plan pursuant to Code Section 414(n) or (o) and the regulations thereunder.

Solely for purposes of determining whether a one-year break in service has occurred for eligibility or vesting purposes, during a Parental Absence an Employee shall be credited with the Hours-of-Service which otherwise would normally have been credited to the Employee but for such absence, or in any case in which such hours cannot be determined, eight Hours-of-Service per day of such absence. The Hours-of-Service credited under this paragraph shall be credited in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period; or in all other cases, in the following computation period.

Inactive Participant means a former Active Participant who has an Account. See the INACTIVE PARTICIPANT SECTION of Article 11.

Insurer means Principal Life Insurance Company and any other insurance company or companies named by the Trustee or Primary Employer.

Investment Fund means the total of Plan assets, excluding the guaranteed benefit policy portion of any Annuity Contract. All or a portion of these assets may be held under the Trust Agreement.

The Investment Fund shall be valued at current fair market value as of the Valuation Date. The valuation shall take into consideration investment earnings credited, expenses charged, payments made, and changes in the values of the assets held in the Investment Fund.

The Investment Fund shall be allocated at all times to Participants, except as otherwise expressly provided in the Plan. The Account of a Participant shall be credited with its share of the gains and losses of the Investment Fund. That part of a Participant’s Account invested in a funding arrangement

13

which establishes one or more accounts or investment vehicles for such Participant thereunder shall be credited with the gain or loss from such accounts or investment vehicles. The part of a Participant’s Account which is invested in other funding arrangements shall be credited with a proportionate share of the gain or loss of such investments. The share shall be determined by multiplying the gain or loss of the investment by the ratio of the part of the Participant’s Account invested in such funding arrangement to the total of the Investment Fund invested in such funding arrangement.

Investment Manager means any fiduciary (other than a trustee or Named Fiduciary)

(a)who has the power to manage, acquire, or dispose of any assets of the Plan;

(b)who (i) is registered as an investment adviser under the Investment Advisers Act of 1940; (ii) is not registered as an investment adviser under such Act by reason of paragraph (1) of section 203A(a) of such Act, is registered as an investment adviser under the laws of the state (referred to in such paragraph (1)) in which it maintains its principal office and place of business, and, at the time it last filed the registration form most recently filed by it with such state in order to maintain its registration under the laws of such state, also filed a copy of such form with the Secretary of Labor, (iii) is a bank, as defined in that Act; or (iv) is an insurance company qualified to perform services described in subparagraph (a) above under the laws of more than one state; and

(c)who has acknowledged in writing being a fiduciary with respect to the Plan.

Late Retirement Date means the first day of any month which is after a Participant’s Normal Retirement Date and on which retirement benefits begin. If a Participant continues to work for the Employer after his Normal Retirement Date, his Late Retirement Date shall be the earliest first day of the month on or after the date he ceases to be an Employee. An earlier or a later Retirement Date may apply if the Participant so elects. An earlier Retirement Date may apply if the Participant is age 70 1/2. See the WHEN BENEFITS START SECTION of Article V.

Leased Employee means any person (other than an employee of the recipient) who, pursuant to an agreement between the recipient and any other person (“leasing organization”), has performed services for the recipient (or for the recipient and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided by the leasing organization to a Leased Employee, which are attributable to service performed for the recipient employer, shall be treated as provided by the recipient employer.

A Leased Employee shall not be considered an employee of the recipient if:

(a)such employee is covered by a money purchase pension plan providing (i) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code Section 415(c)(3), but for years beginning before January 1, 1998, including amounts contributed pursuant to a salary reduction agreement which are excludible from the employee’s gross income under Code Sections 125, 402(e)(3), 402(h)(1)(B), or 403(b), (ii) immediate participation, and (iii) full and immediate vesting, and

14

(b)Leased Employees do not constitute more than 20 percent of the recipient’s nonhighly compensated work force.

Loan Administrator means the person(s) or position(s) authorized to administer the Participant loan program.

The Loan Administrator is Benefits Manager.

Matching Contributions means contributions made by the Employer to fund this Plan which are contingent on a Participant’s Elective Deferral Contributions. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Monthly Date means each Yearly Date and the same day of each following month during the Plan Year beginning on such Yearly Date.

Named Fiduciary means the person or persons who have authority to control and manage the operation and administration of the Plan.

The Named Fiduciary is the Employer.

Nonhighly Compensated Employee means an Employee of the Employer who is not a Highly Compensated Employee.

Nonvested Account means the excess, if any, of a Participant’s Account over his Vested Account. Normal Form means a single life annuity with installment refund.

Normal Retirement Age means the age at which the Participant’s normal retirement benefit becomes nonforfeitable if he is an Employee. A Participant’s Normal Retirement Age is the older of age 65 or his age on the date 5 years after the first day of the Plan Year in which his Entry Date occurred.

Normal Retirement Date means the earliest first day of the month on or after the date the Participant reaches his Normal Retirement Age. Unless otherwise provided in this Plan, a Participant’s retirement benefits shall begin on a Participant’s Normal Retirement Date if he has ceased to be an Employee on such date and has a Vested Account. Even if the Participant is an Employee on his Normal Retirement Date, he may choose to have his retirement benefit begin on such date. An earlier Retirement Date may apply if the Participant is age 70 1/2. See the WHEN BENEFITS START SECTION of Article V.

Owner-employee means a Self-employed Individual who, in the case of a sole proprietorship, owns the entire interest in the unincorporated trade or business for which this Plan is established. If this Plan is established for a partnership, an Owner-employee means a Self-employed Individual who owns more than 10 percent of either the capital interest or profits interest in such partnership.

Parental Absence means an Employee’s absence from work:

(a)by reason of pregnancy of the Employee,

(b)by reason of birth of a child of the Employee,

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(c)by reason of the placement of a child with the Employee in connection with adoption of such child by such Employee, or

(d)for purposes of caring for such child for a period beginning immediately following such birth or placement.

Participant means either an Active Participant or an Inactive Participant. Period of Military Duty means, for an Employee who served as a member of the armed forces of the United States, and

(b)who was reemployed by the Employer at a time when the Employee had a right to reemployment in accordance with seniority rights as protected under Chapter 43 of Title 38 of the U. S. Code,

the period of time from the date the Employee was first absent from active work for the Employer because of such military duty to the date the Employee was reemployed.

Plan means the 401(k) plan of the Employer set forth in this document, including any later amendments to it.

Plan Administrator means the person or persons who administer the Plan. The Plan Administrator is the Employer.

Plan Fund means the total of the Investment Fund and the guaranteed benefit policy portion of any Annuity Contract. The Investment Fund shall be valued as stated in its definition. The guaranteed benefit policy portion of any Annuity Contract shall be determined in accordance with the terms of the Annuity Contract and, to the extent that such Annuity Contract allocates contract values to Participants, allocated to Participants in accordance with its terms. The total value of all amounts held under the Plan Fund shall equal the value of the aggregate Participants’ Accounts under the Plan.

Plan Year means a period beginning on a Yearly Date and ending on the day before the next Yearly Date.

Predecessor Employer means a firm of which the Employer was once a part (e.g., due to a spinoff or change of corporate status) or a firm absorbed by the Employer because of a merger or acquisition (stock or asset, including a division or an operation of such company).

Primary Employer means GOVERNMENT TECHNOLOGY SERVICES, INC.

Qualified Joint and Survivor Annuity means, for a Participant who has a spouse, an immediate survivorship life annuity with installment refund, where the survivorship percentage is 50% and the Contingent Annuitant is the Participant’s spouse. A former spouse will be treated as the spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p).

The amount of benefit payable under the Qualified Joint and Survivor Annuity shall be the amount of benefit which may be provided by the Participant’s Vested Account.

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Qualified Nonelective Contributions means contributions made by the Employer to fund this Plan (other than Elective Deferral Contributions) which are 100% vested and subject to the distribution restrictions of Code Section 401(k) when made. See the EMPLOYER CONTRIBUTIONS SECTION of Article III and the WHEN BENEFITS START SECTION of Article V.

Qualified Preretirement Survivor Annuity means a single life annuity with installment refund payable to the surviving spouse of a Participant who dies before his Annuity Starting Date. A former spouse will be treated as the surviving spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p).

Quarterly Date means each Yearly Date and the third, sixth, and ninth Monthly Date after each Yearly Date which is within the same Plan Year.

Reentry Date means the date a former Active Participant reenters the Plan. See the ACTIVE PARTICIPANT SECTION of Article 11.

Retirement Date means the date a retirement benefit will begin and is a Participant’s Early, Normal, or Late Retirement Date, as the case may be.

Rollover Contributions means the Rollover Contributions which are made by an Eligible Employee or an Inactive Participant according to the provisions of the ROLLOVER CONTRIBUTIONS SECTION of Article III.

Self-employed Individual means, with respect to any Fiscal Year, an individual who has Earned Income for the Fiscal Year (or who would have Earned Income but for the fact the trade or business for which this Plan is established did not have net profits for such Fiscal Year).

Totally and Permanently Disabled means that a Participant is disabled, as a result of sickness or injury, to the extent that he is prevented from engaging in any substantial gainful activity, and is eligible for and receives a disability benefit under Title II of the Federal Social Security Act.

Trust Agreement means an agreement of trust between the Primary Employer and Trustee established for the purpose of holding and distributing the Trust Fund under the provisions of the Plan. The Trust Agreement may provide for the investment of all or any portion of the Trust Fund in the Annuity Contract.

Trust Fund means the total funds held under the Trust Agreement.

Trustee means the party or parties named in the Trust Agreement. The term Trustee as it is used in this Plan is deemed to include the plural unless the context clearly indicates the singular is meant.

Valuation Date means the date on which the value of the assets of the Investment Fund is determined. The value of each Account which is maintained under this Plan shall be determined on the Valuation Date. In each Plan Year, the Valuation Date shall be the last day of the Plan Year. At the discretion of the Plan Administrator, Trustee, or Insurer (whichever applies), assets of the Investment Fund may be valued more frequently. These dates shall also be Valuation Dates.

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Vested Account means the vested part of a Participant’s Account. The Participant’s Vested Account is determined as follows.

If the Participant’s Vesting Percentage is 100%, his Vested Account equals his Account.

If the Participant’s Vesting Percentage is less than 100%, his Vested Account equals the sum of (a) and (b) below:

(a)The part of the Participant’s Account that results from Employer Contributions made before a prior Forfeiture Date and all other Contributions which were 100% vested when made.

(b)The balance of the Participant’s Account in excess of the amount in (a) above multiplied by his Vesting Percentage.

If the Participant has withdrawn any part of his Account resulting from Employer Contributions, other than the vested Employer Contributions included in (a) above, the amount determined under this subparagraph (b) shall be equal to
P(AB + D) - D as defined below:

© The Participant’s Vesting Percentage.

AB The balance of the Participant’s Account in excess of the amount in (a) above.

DThe amount of the withdrawal resulting from Employer Contributions, other than the vested Employer Contributions included in (a) above.

The Participant’s Vested Account is nonforfeitable.

Vesting Break in Service means a Vesting Computation Period in which an Employee is credited with 500 or fewer Hours-of-Service. An Employee incurs a Vesting Break in Service on the last day of a Vesting Computation Period in which he has a Vesting Break in Service.

Vesting Computation Period means a consecutive 12-month period ending on the last day of each Plan Year, including corresponding consecutive 12-month periods before April 1, 1991.

Vesting Percentage means the percentage used to determine the nonforfeitable portion of a Participant’s Account attributable to Employer  Contributions which were not 100% vested when made.

A Participant’s Vesting Percentage is shown in the following schedule opposite the number of whole years of his Vesting Service.

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VESTING SERVICE	VESTING PERCENTAGE
(whole years)
Less than 1	0
1	20
2	40
3	60
4	80
5 or more	100

The Vesting Percentage for a Participant who is an Employee on or after the date he reaches Normal Retirement Age or Early Retirement Age shall be 100%. The Vesting Percentage for a Participant who is an Employee on the date he becomes Totally and Permanently Disabled or dies shall be 100%.

If the schedule used to determine a Participant’s Vesting Percentage is changed, the new schedule shall not apply to a Participant unless he is credited with an Hour-of-Service on or after the date of the change and the Participant’s nonforfeitable percentage on the day before the date of the change is not reduced under this Plan. The amendment provisions of the AMENDMENTS SECTION of Article X regarding changes in the computation of the Vesting Percentage shall apply.

Vesting Service means one year of service for each Vesting Computation Period in which an Employee is credited with at least 1,000 Hours-of-Service.

However, Vesting Service is modified as follows: Period of Military Duty included:

A Period of Military Duty shall be included as service with the Employer to the extent it has not already been credited. For purposes of crediting Hours-of-Service during the Period of Military Duty, an Hour-of-Service shall be credited (without regard to the 501 Hour-of-Service limitation) for each hour an Employee would normally have been scheduled to work for the Employer during such period.

Controlled Group service included:

An Employee’s service with a member firm of a Controlled Group while both that firm and the Employer were members of the Controlled Group shall be included as service with the Employer.

Yearly Date means April 1, 1991, and each following January 1.

Years of Service means an Employee’s Vesting Service disregarding any modifications which exclude service.

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ARTICLE II

PARTICIPATION

SECTION 2.01—ACTIVE PARTICIPANT.

(a)An Employee shall first become an Active Participant (begin active participation in the Plan) on the earliest Monthly Date on which he is an Eligible Employee and has met the eligibility requirement set forth below. This date is his Entry Date.

(1)He is age 21 or older.

Each Employee who was an Active Participant under the Plan on December 31, 1996, shall continue to be an Active Participant if he is still an Eligible Employee on January 1, 1997, and his Entry Date shall not change.

If a person has been an Eligible Employee who has met all of the eligibility requirements above, but is not an Eligible Employee on the date which would have been his Entry Date, he shall become an Active Participant on the date he again becomes an Eligible Employee. This date is his Entry Date.

In the event an Employee who is not art Eligible Employee becomes an Eligible Employee, such Eligible Employee shall become an Active Participant immediately if such Eligible Employee has satisfied the eligibility requirements above and would have otherwise previously become an Active Participant had he met the definition of Eligible Employee. This date is his Entry Date.

(b)An Inactive Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour-of-Service as an Eligible Employee. This date is his Reentry Date.

Upon again becoming an Active Participant, he shall cease to be an Inactive Participant.

(c)A former Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour-of-Service as an Eligible Employee. This date is his Reentry Date.

There shall be no duplication of benefits for a Participant under this Plan because of more than one period as an Active Participant.

SECTION 2.02—INACTIVE PARTICIPANT.

An Active Participant shall become an Inactive Participant (stop accruing benefits under the Plan) on the earlier of the following:

(a)the date the Participant ceases to be an Eligible Employee, or

(b)the effective date of complete termination of the Plan under Article VIII.

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An Employee or former Employee who was an Inactive Participant under the Plan on December 31, 1996, shall continue to be an Inactive Participant on January 1, 1997. Eligibility for any benefits payable to the Participant or on his behalf and the amount of the benefits shall be determined according to the provisions of the prior document, unless otherwise stated in this document.

SECTION 2.03—CESSATION OF PARTICIPATION.

A Participant shall cease to be a Participant on the date he is no longer an Eligible Employee and his Account is zero.

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ARTICLE III

CONTRIBUTIONS

SECTION 3.01—EMPLOYER CONTRIBUTIONS.

Employer Contributions shall be made without regard to current or accumulated net income, earnings or profits of the Employer. Notwithstanding the foregoing, the Plan shall continue to be designed to qualify as a profit sharing plan for purposes of Code Sections 401(a), 402, 412, and 417. Such Contributions shall be equal to the Employer Contributions as described below:

(a)The amount of each Elective Deferral Contribution for a Participant shall be equal to a portion of Compensation as specified in the elective deferral agreement. An Employee who is eligible to participate in the Plan may file an elective deferral agreement with the Employer. The Participant shall modify or terminate the elective deferral agreement by filing a new elective deferral agreement. The elective deferral agreement may not be made retroactively and shall remain in effect until modified or terminated.

The elective deferral agreement to start or modify Elective Deferral Contributions shall be effective on the first day of the first pay period following the pay period in which the Participant’s Entry Date (Reentry Date, if applicable) or any following Quarterly Date occurs. The elective deferral agreement must be entered into on or before the date it is effective.

The elective deferral agreement to stop Elective Deferral Contributions may be entered into on any date. Such elective deferral agreement shall be effective on the first day of the pay period following the pay period in which the elective deferral agreement is entered into.

Elective Deferral Contributions must be a whole percentage of Compensation and cannot be less than 1% nor more than 15% of Compensation for the pay period.

Elective Deferral Contributions are fully (100%) vested and nonforfeitable.

(b)The Employer may make discretionary Matching Contributions. The percentage of Elective Deferral Contributions matched, if any, shall be a percentage as determined by the Employer. If the Employer makes a Matching Contribution, the percentage of Elective Deferral Contributions matched shall not be more than 100%.

Matching Contributions are calculated based on Elective Deferral Contributions and Compensation for the Plan Year. Matching Contributions shall be made for all persons who meet the allocation requirements of the ALLOCATION SECTION of this article.

Any percentage determined by the Employer shall apply to all eligible persons for the entire Plan Year.

Matching Contributions are fully (100%) vested and nonforfeitable.

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(c)Qualified Nonelective Contributions may be made for each Plan Year in an amount determined by the Employer.

Qualified Nonelective Contributions are 100% vested and subject to the distribution restrictions of Code Section 401(k) when made.

(d)Discretionary Contributions may be made for each Plan Year in an amount determined by the Employer.

Discretionary Contributions are subject to the Vesting Percentage.

No Participant shall be permitted to have Elective Deferral Contributions, as defined in the EXCESS AMOUNTS SECTION of this article, made under this Plan, or any other qualified plan maintained by the Employer, during any taxable year, in excess of the dollar limitation contained in Code Section 402(g) in effect at the beginning of such taxable year.

An elective deferral agreement (or change thereto) must be made in such manner and in accordance with such rules as the Employer may prescribe (including by means of voice response or other electronic system under circumstances the Employer permits) and may not be made retroactively,

Employer Contributions are allocated according to the provisions of the ALLOCATION SECTION of this article.

A portion of the Plan assets resulting from Employer Contributions (but not more than the original amount of those Contributions) may be returned if the Employer Contributions are made because of a mistake of fact or are more than the amount deductible under Code Section 404 (excluding any amount which is not deductible because the Plan is disqualified). The amount involved must be returned to the Employer within one year after the date the Employer Contributions are made by mistake of fact or the date the deduction is disallowed, whichever applies. Except as provided under this paragraph and Article VIII, the assets of the Plan shall never be used for the benefit of the Employer and are held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for defraying reasonable expenses of administering the Plan.

SECTION 3.01A—ROLLOVER CONTRIBUTIONS.

A Rollover Contribution may be made by an Eligible Employee or an Inactive Participant if the following conditions are met:

(a)The Contribution is of amounts distributed from a plan that satisfies the requirements of Code Section 401(a) or from a “conduit” individual retirement account described in Code Section 408(d)(3)(A). In the case of an Inactive Participant, the Contribution must be of an amount distributed from another plan of the Employer, or a plan of a Controlled Group member, that satisfies the requirements of Code Section 401(a).

(b)The Contribution is of amounts that the Code permits to be transferred to a plan that meets the requirements of Code Section 401(a).

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(c)The Contribution is made in the form of a direct rollover under Code Section 401(a)(31) or is a rollover made under 402(c) or 408(d)(3)(A) within 60 days after the Eligible Employee or Inactive Participant receives the distribution.

(d)The Eligible Employee or Inactive Participant furnishes evidence satisfactory to the Plan Administrator that the proposed rollover meets conditions (a), (b), and (c) above-

A Rollover Contribution shall be allowed in cash only and must be made according to procedures set up by the Plan Administrator.

If the Eligible Employee is not an Active Participant when the Rollover Contribution is made, he shall be deemed to be an Active Participant only for the purpose of investment and distribution of the Rollover Contribution. Employer Contributions shall not be made for or allocated to the Eligible Employee until the time he meets all of the requirements to become an Active Participant.

Rollover Contributions made by an Eligible Employee or an Inactive Participant shall be credited to his Account. The part of the Participant’s Account resulting from Rollover Contributions is fully (100%) vested and nonforfeitable at all times. A separate accounting record shall be maintained for that part of his Rollover Contributions consisting of voluntary contributions which were deducted from the Participant’s gross income for Federal income tax purposes.

SECTION 3.02—FORFEITURES.

The Nonvested Account of a Participant shall be forfeited as of the earlier of the following:

(a)the date the Participant dies (if prior to such date he had ceased to be an Employee), or

(b)the Participant’s Forfeiture Date.

All or a portion of a Participant’s Nonvested Account shall be forfeited before such earlier date if, after he ceases to be an Employee, he receives, or is deemed to receive, a distribution of his entire Vested Account or a distribution of his Vested Account derived from Employer Contributions which were not 100% vested when made, under the RETIREMENT BENEFITS SECTION of Article V, the VESTED BENEFITS SECTION of Article V, or the SMALL AMOUNTS SECTION of Article X. The forfeiture shall occur as of the date the Participant receives, or is deemed to receive, the distribution. If a Participant receives, or is deemed to receive, his entire Vested Account, his entire Nonvested Account shall be forfeited. If a Participant receives a distribution of his Vested Account from Employer Contributions which were not 100% vested when made, but less than his entire Vested Account from such Contributions, the amount to be forfeited shall be determined by multiplying his Nonvested Account from such Contributions by a fraction. The numerator of the fraction is the amount of the distribution derived from Employer Contributions which were not 100% vested when made and the denominator of the fraction is his entire Vested Account derived from such Contributions on the date of distribution.

A Forfeiture shall also occur as provided in the EXCESS AMOUNTS SECTION of this article.

Forfeitures shall be determined at least once during each Plan Year. Forfeitures may first be used to pay administrative expenses. Forfeitures of Matching Contributions which relate to excess amounts as provided in the EXCESS AMOUNTS SECTION of this article, which have not been used to pay administrative

24

expenses, shall be applied to reduce the earliest Employer Contributions made after the Forfeitures are determined. Any other Forfeitures which have not been used to pay administrative expenses shall be applied to reduce the earliest Employer Contributions made after the Forfeitures are determined. Upon their application to reduce Employer Contributions, Forfeitures shall be deemed to be Employer Contributions.

If a Participant again becomes an Eligible Employee after receiving a distribution which caused all or a portion of his Nonvested Account to be forfeited, he shall have the right to repay to the Plan the entire amount of the distribution he received (excluding any amount of such distribution resulting from Contributions which were 100% vested when made). The repayment must be made in a single sum (repayment in installments is not permitted) before the earlier of the date five years after the date he again becomes an Eligible Employee or the end of the first period of five consecutive Vesting Breaks in Service which begin after the date of the distribution.

If the Participant makes the repayment above, the Plan Administrator shall restore to his Account an amount equal to his Nonvested Account which was forfeited on the date of distribution, unadjusted for any investment gains or losses. If no amount is to be repaid because the Participant was deemed to have received a distribution, or only received a distribution of Contributions which were 100% vested when made, and he again performs an Hour-of-Service as an Eligible Employee within the repayment period, the Plan Administrator shall restore the Participant’s Account as if he had made a required repayment on the date he performed such Hour-of-Service. Restoration of the Participant’s Account shall include restoration of all Code Section 411(d)(6) protected benefits with respect to that restored Account, according to applicable Treasury regulations. Provided, however, the Plan Administrator shall not restore the Nonvested Account if (i) a Forfeiture Date has occurred after the date of the distribution and on or before the date’of repayment and (ii) that Forfeiture. Date would result in a complete forfeiture of the amount the Plan Administrator would otherwise restore.

The Plan Administrator shall restore the Participant’s Account by the close of the Plan Year following the Plan Year in which repayment is made. Permissible sources for the restoration of the Participant’s Account are Forfeitures or special Employer Contributions. Such special Employer Contributions shall be made without regard to profits. The repaid and restored amounts are not included in the Participant’s Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article.

SECTION 3.03—ALLOCATION.

A person meets the allocation requirements of this section if he is an Active Participant on the last day of the Plan Year and has at least 1,000 Hours-of-Service during the latest Accrual Computation Period ending on or before that date.

Elective Deferral Contributions shall be allocated to Participants for whom such Contributions are made under the EMPLOYER CONTRIBUTIONS SECTION of this article. Such Contributions shall be allocated when made and credited to the Participant’s Account.

Matching Contributions shall be allocated to the persons for whom such Contributions are made under the EMPLOYER CONTRIBUTIONS SECTION of this article. Such Contributions shall be allocated as of the last day of the Plan Year and shall be credited to the person’s Account.

Qualified Nonelective Contributions shall be allocated as of the last day of the Plan Year to each person who was an Active Participant on the last day of the Plan Year. Such Qualified Nonelective

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Contributions shall be allocated only to Nonhighly Compensated Employees. The amount allocated to such person for the Plan Year shall be equal to such Qualified Nonelective Contributions multiplied by the ratio of such person’s Annual Compensation for the Plan Year to the total Annual Compensation of all such persons. This amount shall be credited to the person’s Account.

Discretionary Contributions shall be allocated as of the last day of the Plan Year using Annual Compensation for the Plan Year. The amount allocated shall be determined as follows:

STEP ONE: The allocation in this step one shall be made to each person meeting the allocation requirements of this section and each person who is entitled to a minimum contribution under the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI. Each such person’s allocation shall be an amount equal to the Discretionary Contributions multiplied by the ratio of such person’s Annual Compensation to the total Annual Compensation of all such persons. Such amount shall not exceed 3% of such person’s Annual Compensation. The allocation for any person who does not meet the allocation requirements of this section shall be limited to the amount necessary to fund the minimum contribution.

STEP TWO: The allocation in this step two shall be made to each person meeting the allocation requirements of this section. Each such person’s allocation shall be equal to any amount remaining after the allocation in step one multiplied by the ratio of such person’s Annual Compensation to the total Annual Compensation of all such persons.

This amount shall be credited to the person’s Account.

If Leased Employees are Eligible Employees, in determining the amount of Employer Contributions allocated to a person who is a Leased Employee, contributions provided by the leasing organization which are attributable to services such Leased Employee performs for the Employer shall be treated as provided by the Employer. Those contributions shall not be duplicated under this Plan.

SECTION 3.04—CONTRIBUTION LIMITATION.

(a)Definitions. For the purpose of determining the contribution limitation set forth in this section, the following terms are defined.

Annual Additions means the sum of the following amounts credited to a Participant’s account for the Limitation Year:

(1)employer contributions;

(2)employee contributions; and

(3)forfeitures.

Annual Additions to a defined contribution plan shall also include the following:

(4)amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code Section 415(l)(2), which are part of a pension or annuity plan maintained by the Employer,

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(5)amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits, allocated to the separate account of a key employee, as defined in Code Section 419A(d)(3), under a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer; and

(6)allocations under a simplified employee pension.

For this purpose, any Excess Amount applied under (e) below in the Limitation Year to reduce Employer Contributions shall be considered Annual Additions for such Limitation Year.

Compensation means wages within the meaning of Code Section 3401 (a) for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of employment or the services performed (such as the exception for agricultural labor in Code Section 3401 (a)(2)).

For any Self-employed Individual, Compensation shall mean Earned Income.

For purposes of applying the limitations of this section, Compensation for a Limitation Year is the Compensation actually paid or made available in gross income during such Limitation Year.

For Limitation Years beginning after December 31, 1997, for purposes of applying the limitations of this section, Compensation paid or made available during such Limitation Year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount which is contributed or deferred by the Employer at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125, 132(f)(4), or 457.

Defined Benefit Plan Fraction means a fraction, the numerator of which is the sum of the Participant’s Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of (i) 125 percent of the dollar limitation determined for the Limitation Year under Code Sections 415(b)(1 )(A) and (d) or (ii) 140 percent of the Highest Average Compensation, including any adjustments under Code Section 415(b)(5).

Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code Section 415 for all Limitation Years beginning before January 1, 1987.

Defined Contribution Dollar Limitation means, for Limitation Years beginning after December 31, 1994, $30,000, as adjusted under Code Section 415(d).

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Defined Contribution Plan Fraction means a fraction, the numerator of which is the sum of the Annual Additions to the Participant’s account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant’s nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the Annual Additions attributable to all welfare benefit funds, individual medical accounts, and simplified employee pensions, maintained by the Employer), and the denominator of which is the sum of the maximum aggregated amounts for the current and all prior Limitation Years of service with the Employer (regardless of whether a defined contribution plan was maintained by the Employer). The maximum aggregate amount in any Limitation Year is the lesser of (i) 125 percent of the dollar limitation under Code Section 415(c)(1)(A) after adjustment under Code Section 415(d) or (ii) 35 percent of the Participant’s Compensation for such year.

If the Employee was a participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (i) the excess of the sum of the fractions over 1.0 times (ii) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the plan made after May 5, 1986, but using the Code Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987.

The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat all employee contributions as Annual Additions.

Employer means the employer that adopts this Plan, and all members of a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), all commonly controlled trades or businesses (as defined in Code Section 415(c) as modified by Code Section 415(h)) or affiliated service groups (as defined in Code Section 414(m)) of which the adopting employer is a part, and any other entity required to be aggregated with the employer pursuant to regulations under Code Section 414(0).

Excess Amount means the excess of the Participant’s Annual Additions for the Limitation Year over the Maximum Permissible Amount.

Highest Average Compensation means the average Compensation for the three consecutive Limitation Years while he was an Employee (actual consecutive Limitation Years while he was an Employee, if employed less than three years) that produces the highest average.

Limitation Year means the consecutive 12-month period ending on each December 31. It the Limitation Year is other than the calendar year, execution of this Plan (or any amendment to this Plan changing the Limitation Year) constitutes the Employer’s adoption of a written resolution electing the Limitation Year. If the Limitation Year is amended to a different consecutive 12-month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

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Maximum Permissible Amount means the maximum Annual Addition that may be contributed or allocated to a Participant’s Account under the Plan for any Limitation Year. This amount shall not exceed the lesser of:

(1)The Defined Contribution Dollar Limitation, or

(2)25 percent of the Participant’s Compensation for the Limitation Year.

The compensation limitation referred to in (2) shall not apply to any contribution for medical benefits (within the meaning of Code Section 401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition under Code Section 415(l)(1) or 419A(d)(2).

If a short Limitation Year is created because of an amendment changing the Limitation Year to a different consecutive 12-month period, the Maximum Permissible Amount will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction:

Number of months in the short Limitation Year

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Projected Annual Benefit means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the Participant would be entitled under the terms of the plan assuming:

(1)the Participant will continue employment until normal retirement age under the plan (or current age, if later), and

(2)the Participant’s Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Plan will remain constant for all future Limitation Years.

(b)If the Participant does not participate in, and has never participated in, another qualified plan maintained by the Employer or a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer, or an individual medical account, as defined in Code Section 415(1)(2), maintained by the Employer, or a simplified employee pension, as defined in Code Section 408(k), maintained by the Employer, which provides an Annual Addition, the amount of Annual Additions which may be credited to the Participant’s Account for any Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in this Plan. If the Employer Contribution that would otherwise be contributed or allocated to the Participant’s Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, the amount contributed or allocated shall be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Permissible Amount.

(c)Prior to determining the Participant’s actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant on the basis of a reasonable estimation of the Participant’s Compensation for the Limitation Year, uniformly determined for all Participants similarly situated.

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(d)As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of the Participant’s actual Compensation for the Limitation Year.

(e)If a reasonable error in estimating a Participant’s Compensation for the Limitation Year, a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any individual under the limits of Code Section 415, or under other facts and circumstances allowed by the Internal Revenue Service, there is an Excess Amount, the excess will be disposed of as follows:

(1)Any Elective Deferral Contributions (plus attributable earnings), to the extent they would reduce the Excess Amount, will be distributed to the Participant. Concurrently with the distribution of such Elective Deferral Contributions, any Matching Contributions which relate to any Elective Deferral Contributions distributed in the preceding sentence, to the extent such application would reduce the Excess Amount, will be applied as provided in (2) or (3) below:

(2)If after the application of (1) above an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant’s Account will be used to reduce Employer Contributions for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary.

(3)If after the application of (1) above an Excess Amount still exists, and the Participant is not covered by the Plan at the end of the Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer Contributions for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary.

(4)If a suspense account is in existence at any time during a Limitation Year pursuant to this (e), it will participate in the allocation of investment gains or losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participant’s Accounts before any Employer Contributions may be made to the Plan for that Limitation Year. Excess Amounts held in a suspense account may not be distributed to Participants or former Participants.

(f)This (f) applies if, in addition to this Plan, the Participant is covered under another qualified defined contribution plan maintained by the Employer, a welfare benefit fund maintained by the Employer, an individual medical account maintained by the Employer, or a simplified employee pension maintained by the Employer which provides an Annual Addition during any Limitation Year. The aggregate Annual Additions under all such qualified defined contribution plans, welfare benefit funds, individual medical accounts, and simplified employee pensions for the Limitation Year will not exceed the Maximum Permissible Amount. Any reduction necessary shall be made first to the profit sharing plans, then to all other such qualified defined contribution plans and welfare benefit funds, individual medical accounts, and simplified employee pensions and, if necessary, by reducing first those that were most recently allocated. Simplified employee pensions shall be deemed to be allocated first, followed by welfare benefit funds and individual medical accounts. However, elective deferral contributions shall be the last

30

contributions reduced before the simplified employee pension, welfare benefit fund, or individual medical account is reduced.

(g)If the Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant’s Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any Limitation Year. The Projected Annual Benefit shall be limited first. If the Participant’s annual benefit(s) equal his Projected Annual Benefit, as limited, then Annual Additions to the defined contribution plan(s) shall be limited to the extent needed to reduce the sum to 1.0 in the same manner in which the Annual Additions are limited to meet the Maximum Permissible Amount. This subparagraph shall cease to apply effective as of the first Limitation Year beginning on or after January 1, 2000.

SECTION 3.05—EXCESS AMOUNTS.

(a)Definitions. For the purposes of this section, the following terms are defined:

ACP means the average (expressed as a percentage) of the Contribution Percentages of the Eligible Participants in a group.

APP means the average (expressed as a percentage) of the Deferral Percentages of the Eligible Participants in a group.

Aggregate Limit means the greater of:

(1)The sum of:

(i)125 percent of the greater of the ADP of the Nonhighly Compensated Employees for the prior Plan Year or the ACP of the Nonhighly Compensated Employees under the plan subject to Code Section 401(m) for the Plan Year beginning with or within the prior Plan Year of the cash or deferred arrangement, and

(ii)the lesser of 200 percent or 2 percent plus the lesser of such ADP or ACP.

(2)The sum of:

(i)125 percent of the lesser of the ADP of the Nonhighly Compensated Employees for the prior Plan Year or the ACP of the Nonhighly Compensated Employees under the plan subject to Code Section 401(m) for the Plan Year beginning with or within the prior Plan Year of the cash or deferred arrangement, and

(ii)the lesser of 200 percent or 2 percent plus the greater of such ADP or ACP.

If the Employer has elected to use the current testing method, then, in calculating the Aggregate Limit for a particular Plan Year, the Nonhighly Compensated Employees’ ADP and ACP for that Plan Year, instead of the prior Plan Year, is used.

Contribution Percentage means the ratio (expressed as a percentage) of the Eligible Participant’s Contribution Percentage Amounts to the Eligible Participant’s Compensation for the Plan Year

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(whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). For an Eligible Participant for whom such Contribution Percentage Amounts for the Plan Year are zero, the percentage is zero.

Contribution Percentage Amounts means the sum of the Participaht Contributions and Matching Contributions (that are not Qualified Matching Contributions taken into account for purposes of the ADP Test) made under the Plan on behalf of the Eligible Participant for the Plan Year. Such Contribution Percentage Amounts shall not include Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the Contributions to which they relate are Excess Elective Deferrals, Excess Contributions, or Excess Aggregate Contributions. Under such rules as the Secretary of the Treasury shall prescribe, in determining the Contribution Percentage the Employer may elect to include Qualified Nonelective Contributions under this Plan which were not used in computing the Deferral Percentage. The Employer may also elect to use Elective Deferral Contributions in computing the Contribution Percentage so long as the ADP Test is met before the Elective Deferral Contributions are used in the ACP Test and continues to be met following the exclusion of those Elective Deferral Contributions that are used to meet the ACP Test.

Deferral Percentage means the ratio (expressed as a percentage) of Elective Deferral Contributions under this Plan on behalf of the Eligible Participant for the Plan Year to the Eligible Participant’s Compensation for the Plan Year (whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). The Elective Deferral Contributions used to determine the Deferral Percentage shall include Excess Elective Deferrals (other than Excess Elective Deferrals of Nonhighly Compensated Employees that arise solely from Elective Deferral Contributions made under this Plan or any other plans of the Employer or a Controlled Group member), but shall exclude Elective Deferral Contributions that are used in computing the Contribution Percentage (provided the ADP Test is satisfied both with and without exclusion of these Elective Deferral Contributions). Under such rules as the Secretary of the Treasury shall prescribe, the Employer may elect to include Qualified Nonelective Contributions and Qualified Matching Contributions under this Plan in computing the Deferral Percentage. For an Eligible Participant for whom such contributions on his behalf for the Plan Year are zero, the percentage is zero.

Elective Deferral Contributions means any employer contributions made to a plan at the election of a participant, in lieu of cash compensation, and shall include contributions made pursuant to a salary reduction agreement or other deferral mechanism. With-respect—to—any taxable year, a participant’s Elective Deferral Contributions are the sum of all employer contributions made on behalf of such participant pursuant to an election to defer under any qualified cash or deferred arrangement described in Code Section 401(k), any salary reduction simplified employee pension plan described in Code Section 408(k)(6), any SIMPLE IRA plan described in Code Section 408(p), any eligible deferred compensation plan under Code Section 457, any plan described under Code Section 501 (c)(18), and any employer contributions made on behalf of a participant for the purchase of an annuity contract under Code Section 403(b) pursuant to a salary reduction agreement. Elective Deferral Contributions shall not include any deferrals properly distributed as excess annual additions.

Eligible Participant means, for purposes of determining the Deferral Percentage, any Employee who is otherwise entitled to make Elective Deferral Contributions under the terms of the Plan for the Plan Year. Eligible Participant means, for purposes of determining the Contribution

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Percentage, any Employee who is eligible (i) to make a Participant Contribution or an Elective Deferral Contribution (if the Employer takes such contributions into account in the calculation of the Contribution Percentage), or (ii) to receive a Matching Contribution (including forfeitures) or a Qualified Matching Contribution. If a Participant Contribution is required as a condition of participation in the Plan, any Employee who would be a Participant in the Plan if such Employee made such a contribution shall be treated as an Eligible Participant on behalf of whom no Participant Contributions are made.

Excess Aggregate Contributions means, with respect to any Plan Year, the excess of:

(1)The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over

(2)The maximum Contribution Percentage Amounts permitted by the ACP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages).

Such determination shall be made after first determining Excess Elective Deferrals and then determining Excess Contributions.

Excess Contributions means, with respect to any Plan Year, the excess of:

(1)The aggregate amount of employer contributions actually taken into account in computing the Deferral Percentage of Highly Compensated Employees for such Plan Year, over

(2)The maximum amount of such contributions permitted by the ADP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in the order of the Deferral Percentages, beginning with the highest of such percentages).

Such determination shall be made after first determining Excess Elective Deferrals.

Excess Elective Deferrals means those Elective Deferral Contributions that are includible in a Participant’s gross income under Code Section 402(g) to the extent such Participant’s Elective Deferral Contributions for a taxable year exceed the dollar limitation-under—such Code section. Excess Elective Deferrals shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant’s taxable year.

Matching Contributions means employer contributions made to this or any other defined contribution plan, or to a contract described in Code Section 403(b), on behalf of a participant on account of a Participant Contribution made by such participant, or on account of a participant’s Elective Deferral Contributions, under a plan maintained by the Employer or a Controlled Group member.

Participant Contributions means contributions made to the plan by or on behalf of a participant that are included in the participant’s gross income in the year in which made and that are maintained under a separate account to which the earnings and losses are allocated.

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Qualified Matching Contributions means Matching Contributions which are subject to the distribution and nonforfeitability requirements under Code Section 401 (k) when made.

Qualified Nonelective Contributions means any employer contributions (other than Matching Contributions) which an employee may not elect to have paid to him in cash instead of being contributed to the plan and which are subject to the distribution and nonforfeitability requirements under Code Section 401 (k) when made.

(b)Excess Elective Deferrals. A Participant may assign to this Plan any Excess Elective Deferrals made during a taxable year of the Participant by notifying the Plan Administrator in writing on or before the first following March 1 of the amount of the Excess Elective Deferrals to be assigned to the Plan. A Participant is deemed to notify the Plan Administrator of any Excess Elective Deferrals that arise by taking into account only those Elective Deferral Contributions made to this Plan and any other plan of the Employer or a Controlled Group member. The Participant’s claim for Excess Elective Deferrals shall be accompanied by the Participant’s written statement that if such amounts are not distributed, such Excess Elective Deferrals will exceed the limit imposed on the Participant by Code Section 402(g) for the year in which the deferral occurred. The Excess Elective Deferrals assigned to this Plan cannot exceed the Elective Deferral Contributions allocated under this Plan for such taxable year.

Notwithstanding any other provisions of the Plan, Elective Deferral Contributions in an amount equal to the Excess Elective Deferrals assigned to this Plan, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Elective Deferrals for such taxable year.

The Excess Elective Deferrals shall be adjusted for income or loss. The income or loss allocable to such Excess Elective Deferrals shall be equall to the income or loss allocable to the Participant’s Elective Deferral Contributions for the taxable year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Elective Deferrals. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such taxable year (as of the end of such taxable year) of the Participant’s Account resulting from Elective Deferral Contributions.

Any Matching Contributions which were based on the Elective Deferral—Contributions which are distributed as Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be forfeited.

(c)ADP Test. As of the end of each Plan Year after Excess Elective Deferrals have been determined, the Plan must satisfy the ADP Test. The ADP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1)Prior Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

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(i)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 1.25; or

(ii)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2, and

B.the difference between such ADPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Elective Deferral Contributions, for purposes of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ADP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ADP for these Eligible Participants.

(2)Current Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

(i)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or

(ii)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and

B.the difference between such ADP’s is not more than 2.

If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) the Plan otherwise meets one of the conditions specified in Internal Revenue Service Notice 98-1 (or superseding guidance) for changing from the current year testing method.

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

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The Deferral Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferral Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if treated as Elective Deferral Contributions for purposes of the ADP Test) allocated to his account under two or more arrangements described in Code Section 401(k) that are maintained by the Employer or a Controlled Group member shall be determined as if such Elective Deferral Contributions (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single arrangement. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. The foregoing notwithstanding, certain plans shall be treated as separate if mandatorlly disaggregated under the regulations of Code Section 401(k).

In the event this Plan satisfies the requirements of Code Section 401(k), 401 (a) (4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by determining the Deferral Percentage of Employees as if all such plans were a single plan. Any adjustments to the Nonhighly Compensated Employee ADP for the prior year shall be made in accordance with Internal Revenue Service Notice 98-1 (or superseding guidance), unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401(k) only if they have the same plan year and use the same testing method for the ADP Test.

For purposes of the ADP Test, Elective Deferral Contributions, Qualified Nonelective Contributions, and Qualified Matching Contributions must be made before the end of the 12-month period immediately following the Plan Year to which the contributions relate.

The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP Test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in such test.

If the Plan Administrator should determine during the Plan Year that the ADP Test is not being met, the Plan Administrator may limit the amount of future Elective Deferral Contributions of the Highly Compensated Employees.

Notwithstanding any other provisions of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts such Excess Contributions were allocated for the preceding Plan Year. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of employer contributions taken into account in calculating the ADP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all of the Excess Contributions have been allocated. for purposes of the preceding sentence, the “largest amount” is determined after distribution of any Excess Contributions. If such excess amounts are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

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Excess Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article.

The Excess Contributions shall be adjusted for income or loss. The income or loss allocable to such Excess Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Elective Deferral Contributions (and, if applicable, Qualified Nonelective Contributions or Qualified Matching Contributions, or both) for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Elective Deferral Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if such contributions are included in the ADP Test).

Excess Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Elective Deferral Contributions. If such Excess Contributions exceed the balance in the Participant’s Account resulting from Elective Deferral Contributions, the balance shall be distributed from the Participant’s Account resulting from Qualified Matching Contributions (if applicable) and Qualified Nonelective Contributions, respectively.

Any Matching Contributions which were based on the Elective Deferral Contributions which are distributed as Excess Contributions, plus any income and minus any loss allocable thereto, shall be forfeited.

(d)ACP Test. As of the end of each Plan Year, the Plan must satisfy the ACP Test. The ACP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1)Prior Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

(i)The ACP for the Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Yearshall not—exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan 1’aar multiplied by 1.25; or

(ii)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2. and

B.the difference between such ACPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Participant Contributions, provides for Matching Contributions, or both, for purposes

37

of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ACP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ACP for these Eligible Participants.

(2)Current Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

(i)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or

(ii)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and

B.the difference between such ACPs is not more than 2.

If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) the Plan otherwise meets one of the conditions specified in Internal Revenue Service Notice 98-1 (or superseding guidance) for changing from the current year testing method.

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

Multiple Use. If one or more Highly Compensated Employees participate in both a cash or deferred arrangement and a plan subject to the ACP Test maintained by the Employer or a Controlled Group member, and the sum of the ADP and ACP of those Highly Compensated Employees subject to either or both tests exceeds the Aggregate Limit, then the Contribution Percentage of those Highly Compensated Employees who also participate in a cash or deferred arrangement will be reduced in the manner described below for allocating Excess Aggregate Contributions so that the limit is not exceeded. The amount by which each Highly Compensated Employee’s Contribution Percentage is reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are determined after any corrections required to meet the ADP Test and ACP Test and are deemed to be the maximum permitted under such tests for the Plan Year. Multiple use does not occur if either the ADP or ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP, respectively, of the Nonhighly Compensated Employees.

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The Contribution Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in Code Section 401(a) or arrangements described in Code Section 401(k) that are maintained by the Employer or a Controlled Group member shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. The foregoing notwithstanding, certain plans shall be treated as separate if mandatorily disaggregated under the regulations of Code Section 401(m).

In the event this Plan satisfies the requirements of Code Section 401(m), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. Any adjustments to the Nonhighly Compensated Employee RCP for the prior year shall be made in accordance with Internal Revenue Service Notice 98-1 (or superseding guidance), unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401 (m) only if they have the same plan year and use the same testing method for the ACP Test.

For purposes of the ACP Test, Participant Contributions are considered to have been made in the Plan Year in which contributed to the Plan. Matching Contributions and Qualified Nonelective Contributions will be considered to have been made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year.

The Employer shall maintain records. sufficient to demonstrate satisfaction of the ACP Test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in such test.

Notwithstanding any other provisions of this Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if not vested, or distributed, if vested, no later than the last day of each Plan Year to Participants to whose Accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest Contribution Percentage Amounts taken into account in calculating the ACP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all of the Excess Aggregate Contributions have been allocated. For purposes of the preceding sentence, the “largest amount” is determined after distribution of any Excess Aggregate Contributions. If such Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

Excess Aggregate Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article.

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The Excess Aggregate Contributions shall be adjusted for income or loss. The income or loss allocable to such Excess Aggregate Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Contribution Percentage Amounts for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Aggregate Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Contribution Percentage Amounts.

Excess Aggregate Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Participant Contributions that are not required as a condition of employment or participation or for obtaining additional benefits from Employer Contributions. If such Excess Aggregate Contributions exceed the balance in the Participant’s Account resulting from such Participant’s Contributions, the balance shall be forfeited, if not vested, or distributed, if vested, on a pro-rata basis from the Participant’s Account resulting from Contribution Percentage Amounts.

(e)Employer Elections. The Employer has not made an election to use the current year testing method.

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ARTICLE IV

INVESTMENT OF CONTRIBUTIONS

SECTION 4.01—INVESTMENT AND TIMING OF CONTRIBUTIONS.

The handling of Contributions is governed by the provisions of the Trust Agreement, the Annuity Contract, and any other funding arrangement in which the Plan Fund is or may be held or invested. To the extent permitted by the Trust Agreement, Annuity Contract, or other funding arrangement, the parties named below shall direct the Contributions to the guaranteed benefit policy portion of the Annuity Contract, any of the investment options available under the Annuity Contract, or any of the investment vehicles available under the Trust Agreement and may request the transfer of amounts resulting from those Contributions between such investment options and investment vehicles or the transfer of amounts between the guaranteed benefit policy portion of the Annuity Contract and such investment options and investment vehicles. A Participant may not direct the Trustee or Insurer to invest the Participant’s Account in collectibles. Collectibles mean any work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or other tangible personal property specified by the Secretary of the Treasury. However, for tax years beginning after December 31, 1997, certain coins and bullion as provided in Code Section 408(m)(3) shall not be considered collectibles. To the extent that a Participant who has investment direction fails to give timely direction, the Primary Employer shall direct the investment of his Account, If the Primary Employer has investment direction, such Account shall be invested ratably in the guaranteed benefit policy portion of the Annuity Contract, the investment options available under the Annuity Contract, or the investment vehicles available under the Trust Agreement in the same manner as the Accounts of all other Participants who do not direct their investments. The Primary Employer shall have investment direction for amounts which have not been allocated to Participants. To the extent an investment is no longer available, the Primary Employer may require that amounts currently held in such investment be reinvested in other investments.

At least annually, the Named Fiduciary, shall review all pertinent Employee information and Plan data in order to establish the funding policy of the Plan and to determine appropriate methods of carrying out the Plan’s objectives. The Named Fiduciary shall inform the Trustee and any Investment Manager of the Plan’s short-term and long-term financial needs so the investment policy can be coordinated with the Plan’s financial requirements.

(a)Employer Contributions other than Elective Deferral Contributions: The Particpant shall direct the investment of such Employer Contributions and transfer of amounts resulting from those Contributions.

(b)Elective Deferral Contributions: The Participant shall direct the investment of Elective Deferral Contributions and transfer of amounts resulting from those Contributions.

(c)Rollover Contributions: The Participant shall direct the investment of Rollover Contributions and transfer of amounts resulting from those Contributions.

However, the Named Fiduciary may delegate to the Investment Manager investment discretion for Contributions and amounts which are not subject to Participant direction.

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The Employer shall pay to the Insurer or Trustee, as applicable, the Elective Deferral Contributions and Qualified Nonelective Contributions for each Plan Year not later than the end of the 12-month period immediately following the Plan Year for which they are deemed to be paid.

All Contributions are forwarded by the Employer to the Trustee to be deposited in the Trust Fund or to the Insurer to be deposited under the Annuity Contract, as applicable. Contributions that are accumulated through payroll deduction shall be paid to the Trustee or Insurer, as applicable, by the earlier of (i) the date the Contributions can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which the Contributions would otherwise have been paid in cash to the Participant.

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ARTICLE V

BENEFITS

SECTION 5.01—RETIREMENT BENEFITS.

On a Participant’s Retirement Date, his Vested Account shall be distributed to him according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.02—DEATH BENEFITS.

If a Participant dies before his Annuity Starting Date, his Vested Account shall be distributed according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.03—VESTED BENEFITS.

If an Inactive Participant’s Vested Account is not payable under the SMALL AMOUNTS SECTION of Article X, he may elect, but is not required, to receive a distribution of his Vested Account after he ceases to be an Employee. The Participant’s election shall be subject to his spouse’s consent as provided in the ELECTION PROCEDURES SECTION of Article VI. A distribution under this paragraph shall be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI.

A Participant may not elect to receive a distribution under the provisions of this section after he again becomes an Employee until he subsequently ceases to be an Employee and meets the requirements of this section.

If an Inactive Participant does not receive an earlier distribution, upon his Retirement Date or death, his Vested Account shall be distributed according to the provisions of the RETIREMENT BENEFITS SECTION or the DEATH BENEFITS SECTION of Article V.

The Nonvested Account of an Inactive Participant who has ceased to be an Employee shall remain a part of his Account until it becomes a Forfeiture. However, if he again becomes an Employee so that his Vesting Percentage can increase, the Nonvested Account may become a part of his Vested Account.

SECTION 5.04—WHEN BENEFITS START.

(a)Unless otherwise elected, benefits shall begin before the 60th day following the close of the Plan Year in which the latest date below occurs:

(1)The date the Participant attains age 65 (or Normal Retirement Age, if earlier).

(2)The 10th anniversary of the Participant’s Entry Date.

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(3)The date the Participant ceases to be an Employee.

Notwithstanding the foregoing, the failure of a Participant and spouse to consent to a distribution while a benefit is immediately distributable, within the meaning of the ELECTION PROCEDURES SECTION of Article VI, shall be deemed to be an election to defer the start of benefits sufficient to satisfy this section.

The Participant may elect to have his benefits begin after the latest date for beginning benefits described above, subject to the following provisions of this section. The Participant shall make the election in writing. Such election must be made before his Normal Retirement Date or the date he ceases to be an Employee, if later. The election must describe the form of distribution and the date benefits will begin. The Participant shall not elect a date for beginning benefits or a form of distribution that would result in a benefit payable when he dies which would be more than incidental within the meaning of governmental regulations.

Benefits shall begin on an earlier date if otherwise provided in the Plan. For example, the Participant’s Retirement Date or Required Beginning Date, as defined in the DEFINITIONS SECTION of Article VII.

(b)The Participant’s Vested Account which results from Elective Deferral Contributions and Qualified Nonelective Contributions may not be distributed to a Participant or to his Beneficiary (or Beneficiaries) in accordance with the Participant’s or Beneficiary’s (or Beneficiaries’) election, earlier than separation from service, death, or disability. Such amount may also be distributed upon:

(1)	Termination of the Plan, as permitted in Article VIII.
(2)	The disposition by the Employer, if the Employer is a corporation, to an unrelated corporation of substantially all of the assets, within the meaning of Code Section 409(d)(2), used in a trade or business of the Employer if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with the corporation acquiring such assets.
(3)	The disposition by the Employer, if the Employer is a corporation, to an unrelated entity of the Employer’s interest in a subsidiary, within the meaning of Code Section 409(d)(3), if the Employer continues to maintain the Plan, but only with respect to Employees who continue employment with such subsidiary.
(4)	The attainment of age 59 1/2 as permitted in the WITHDRAWAL BENEFITS SECTION of this article.
(5)	The hardship of the Participant as permitted in the WITHDRAWAL BENEFITS SECTION of this article.

All distributions that may be made pursuant to one or more of the foregoing distributable events will be a retirement benefit and shall be distributed to the Participant according to the distribution of benefit provisions of Article VI. In addition, distributions that are triggered by (1),

44

(2) and (3) above must be made in a lump sum. A lump sum shall include a distribution of an annuity contract.

SECTION 5.05—WITHDRAWAL BENEFITS.

A Participant who has attained age 59 1 /2 may withdraw any part of his Vested Account which results from the following Contributions:

Elective Deferral Contributions Matching Contributions

Qualified Nonelective Contributions Discretionary Contributions Rollover Contributions

A Participant may make only two such withdrawals in any 12-month period.

A Participant may withdraw any part of his Vested Account which results from the following Contributions:

Elective Deferral Contributions Matching Contributions Discretionary Contributions Rollover Contributions

In the event of hardship due to an immediate and heavy financial need. Withdrawals from the Participant’s Account resulting from Elective Deferral Contributions shall be limited to the amount of the Participant’s Elective Deferral Contributions. Immediate and heavy financial need shall be limited to: (i) expenses incurred or necessary for medical care, described in Code Section 213(d), of the Participant, the Participant’s spouse, or any dependents of the Participant (as defined in Code Section 152); (ii) purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the Participant, his spouse, children, or dependents; (iv) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant’s principal residence; or (v) any other distribution which is deemed by the Commissioner of Internal Revenue to be made on account of immediate and heavy financial need as provided in Treasury regulations.

No withdrawal shall be allowed which is not necessary to satisfy such immediate and heavy financial need. Such withdrawal shall be deemed necessary only if all of the following requirements are met: (i) the distribution is not in excess of the amount of the immediate and heavy financial need (including amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution); (ii) the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer; (iii) the Plan, and all other plans maintained by the Employer, provide that the Participant’s elective contributions and participant contributions will be suspended for at least 12 months after receipt of the hardship distribution; and (iv) the Plan, and all other plans maintained by the Employer, provide that the Participant may not make elective contributions for the Participant’s taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant’s elective contributions for the taxable year of the hardship distribution. The Plan

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will suspend elective contributions and participant contributions for 12 months and limit elective deferrals as provided in the preceding sentence. A Participant shall not cease to be an Eligible Participant, as defined in the EXCESS AMOUNTS SECTION of Article III, merely because his elective contributions or participant contributions are suspended.

A request for withdrawal shall be made in such manner and in accordance with such rules as the Employer will prescribe for this purpose (including by means of voice response or other electronic means under circumstances the Employer permits). Withdrawals shall be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI. A forfeiture shall not occur solely as a result of a withdrawal.

SECTION 5.06—LOANS TO PARTICIPANTS.

Loans shall be made available to all Participants on a reasonably equivalent basis. For purposes of this section, and unless otherwise specified, Participant means any Participant or Beneficiary who is a party-in-interest as defined in ERISA. Loans shall not be made to Highly Compensated Employees in an amount greater than the amount made available to other Participants.

No loans will be made to any shareholder-employee or Owner-employee. For purposes of this requirement, a shareholder-employee means an employee or officer of an electing small business (Subchapter S) corporation who owns (or is considered as owning within the meaning of Code Section 318(a)(1)), on any day during the taxable year of such corporation, more than 5 percent of the outstanding stock of the corporation.

A loan to a Participant shall be a Participant-directed investment of his Account. The loan is a Trust Fund investment but no Account other than the borrowing Participant’s Account shall share in the interest paid on the loan or bear any expense or loss incurred because of the loan.

The number of outstanding loans shall be limited to one. No more than one loan shall be approved for any Participant in any 1 2-month period. The minimum amount of any loan shall be $1,000.

Loans must be adequately secured and bear a reasonable rate of interest.

The amount of the loan shall not exceed the maximum amount that may be treated as a loan under Code Section 72(p) (rather than a distribution) to the Participant and shall be equal to the lesser of (a) or (b) below:

(a)$50,000, reduced by the highest outstanding loan balance of loans during the one-year period ending on the day before the new loan is made.

(b)The greater of (1) or (2), reduced by (3) below:

(1)One-half of the Participant’s Vested Account.

(2)$10,000.

(3)Any outstanding loan balance on the date the new loan is made.

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For purposes of this maximum, a Participant’s Vested Account does not include any accumulated deductible employee contributions, as defined in Code Section 72(o)(5)(B), and all qualified employer plans, as defined in Code Section 72(p)(4), of the Employer and any Controlled Group member shall be treated as one plan.

The foregoing notwithstanding, the amount of such loan shall not exceed 50 percent of the amount of the Participant’s Vested Account. For purposes of this maximum, a Participant’s Vested Account does not include any accumulated deductible employee contributions, as defined in Code Section 72(o)(5)(B). No collateral other than a portion of the Participant’s Vested Account (as limited above) shall be accepted. The Loan Administrator shall determine if the collateral is adequate for the amount of the loan requested.

A Participant must obtain the consent of his spouse, if any, to the use of the Vested Account as security for the loan. Spousal consent shall be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan to be so secured is made. The consent must be in writing, must acknowledge the effect of the loan, and must be witnessed by a plan representative or a notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan. A new consent shall be required if the Vested Account is used for collateral upon renegotiation, extension, renewal, or other revision of the loan. No consent shall be required if subparagraph (d) of the ELECTION PROCEDURES SECTION of Article VI applies.

If a valid spousal consent has been obtained in accordance with the above, or spousal consent is not required, then, notwithstanding any other provision of this Plan, the portion of the Participant’s Vested Account used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the Vested Account payable at the time of the death or distribution, but only if the reduction is used as repayment of the loan. If spousal consent is required and less than 100 percent of the Participant’s Vested Account (determined without regard to the preceding sentence) is payable to the surviving spouse, then the Vested Account shall be adjusted by first reducing the Vested Account by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse.

Each loan shall bear a reasonable fixed rate of interest to be determined by the Loan Administrator. In determining the interest rate, the Loan Administrator shall take into consideration fixed interest rates currently being charged by commercial lenders for loans of comparable risk on similar terms and for similar durations, so that the interest will provide for a return commensurate with rates currently charged by commercial lenders for loans made under similar circumstances. The Loan Administrator shall not discriminate among Participants in the matter of interest rates; butloans granted at different times may bear different interest rates in accordance with the current appropriate standards.

The loan shall by its terms require that repayment (principal and interest) be amortized in level payments, not less frequently than quarterly, over a period not extending beyond five years from the date of the loan. If the loan is used to acquire a dwelling unit, which within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant, the repayment period may extend beyond five years from the date of the loan. The period of repayment for any loan shall be arrived at by mutual agreement between the Loan Administrator and the Participant and if the loan is for a principal residence, shall not be made for a period longer than the repayment period consistent with commercial practices.

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The Participant shall make an application for a loan in such manner and in accordance with such rules as the Employer shall prescribe for this purpose (including by means of voice response or other electronic means under circumstances the Employer permits). The application must specify the amount and duration requested.

Information contained in the application for the loan concerning the income, liabilities, and assets of the Participant will be evaluated to determine whether there is a reasonable expectation that the Participant will be able to satisfy payments on the loan as due. Additionally, the Loan Administrator will pursue any appropriate further investigations concerning the creditworthiness and credit history of the Participant to determine whether a loan should be approved.

Each loan shall be fully documented in the form of a promissory note signed by the Participant for the face amount of the loan, together with interest determined as specified above.

There will be an assignment of collateral to the Plan executed at the time the loan is made.

In those cases where repayment through payroll deduction is available, installments are so payable, and a payroll deduction agreement shall be executed by the Participant at the time the loan is made. Loan repayments that are accumulated through payroll deduction shall be paid to the Trustee by the earlier of (i) the date the loan repayments can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which such amounts would otherwise have been paid in cash to the Participant.

Where payroll deduction is not available, payments in cash are to be timely made. Any payment that is not by payroll deduction shall be made payable to the Employer or the Trustee, as specified in the promissory note, and delivered to the Loan Administrator, including prepayments, service fees and penalties, if any, and other amounts due under the note. The Loan Administrator shall deposit such amounts into the Plan as soon as administratively practicable after they are received, but in no event later than the 15th business day of the month after they are received.

The promissory note may provide for reasonable fate payment penalties and service fees. Any penalties or service fees shall be applied to all Participants in a nondiscriminatory manner. If the promissory note so provides, such amounts may be assessed and collected from the Account of the Participant as part of the loan balance.

Each loan may be paid prior to maturity, in part or in full, without penalty or service fee, except as may be set out in the promissory note.

The Plan shall suspend loan payments for a period not exceeding one year during which an approved unpaid leave of absence occurs other than a military leave of absence. The Loan Administrator shall provide the Participant a written explanation of the effect of the suspension of payments upon his loan.

If a Participant separates from service (or takes a leave of absence) from the Employer because of service in the military and does not receive a distribution of his Vested Account, the Plan shall suspend loan payments until the Participant’s completion of military service or until the Participant’s fifth anniversary ‘of commencement of military service, if earlier, as permitted under Code Section 414(u). The Loan Administrator shall provide the Participant a written explanation of the effect of his military service upon his loan.

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If any payment of principal and interest, or any portion thereof, remains unpaid for more than 90 days after due, the loan shall be in default. For purposes of Code Section 72(p), the Participant shall then be treated as having received a deemed distribution regardless of whether or not a distributable event has occurred.

Upon default, the Plan has the right to pursue any remedy available by law to satisfy the amount due, along with accrued interest, including the right to enforce its claim against the security pledged and execute upon thecollateral as allowed by law. The entire principal balance whether or not otherwise then due, along with accrued interest, shall become immediately due and payable without demand or notice, and subject to collection or satisfaction by any lawful means, including specifically, but not limited to, the right to enforce the claim against the security pledged and to execute upon the collateral as allowed by law.

In the event of default, foreclosure on the note and attachment of security or use of amounts pledged to satisfy the amount then due shall not occur until a distributable event occurs in accordance with the Plan, and shall not occur to an extent greater than the amount then available upon any distributable event which has occurred under the Plan.

All reasonable costs and expenses, including but not limited to attorney’s fees, incurred by the Plan in connection with any default or in any proceeding to enforce any provision of a promissory note or instrument by which a promissory note for a Participant loan is secured, shall be assessed and collected from the Account of the Participant as part of the loan balance.

If payroll deduction is being utilized, in the event that a Participant’s available payroll deduction amounts in any given month are insufficient to satisfy the total amount due, there will be an increase in the amount taken subsequently, sufficient to make up the amount that is then due. If any amount remains past due more than 90 days, the entire principal amount, whether or not otherwise then due, along with interest then accrued, shall become due and payable, as above.

If no distributable event has occurred under the Plan at the time that the Participant’s Vested Account would otherwise be used under this provision to pay any amount due under the outstanding loan, this will not occur until the time, or in excess of the extent to which, a distributable event occurs under the Plan. An outstanding loan will become due and payable in full 60 days after a Participant ceases to be an Employee and a party-in-interest as defined in ERISA or after complete termination of the Plan.

SECTION 5.07—DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS.

The Plan specifically permits distributions to an Alternate Payee under a qualified domestic relations order as defined in Code Section 414(p), at any time, irrespective of whether the Participant has attained his earliest retirement age, as defined in Code Section 414(p), under the Plan. A distribution to an Alternate Payee before the Participant has attained his earliest retirement age is available only if the order specifies that distribution shall be made prior to the earliest retirement age or allows the Alternate Payee to elect a distribution prior to the earliest retirement age.

Nothing in this section shall permit a Participant to receive a distribution at a time otherwise not permitted under the Plan nor shall it permit the Alternate Payee to receive a form of payment not permitted under the Plan.

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The benefit payable to an Alternate Payee shall be subject to the provisions of the SMALL AMOUNTS SECTION of Article X if the value of the benefit does not exceed $5,000 ($3,500 for Plan Years beginning before August 6, 1997).

The Plan Administrator shall establish reasonable procedures to determine the qualified status of a domestic relations order. Upon receiving a domestic relations order, the Plan Administrator shall promptly notify the Participant and the Alternate Payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and each Alternate Payee, in writing, of its determination. The Plan Administrator shall provide notice under this paragraph by mailing to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations. The Plan Administrator may treat as qualified any domestic relations order entered into before January 1, 1985, irrespective of whether it satisfies all the requirements described in Code Section 414(p).

If any portion of the Participant’s Vested Account is payable during the period the Plan Administrator is making its determination of the qualified status of the domestic relations order, a separate accounting shall be made of the amount payable. If the Plan Administrator determines the order is a qualified domestic relations order within 18 months of the date amounts are first payable following receipt of the order, the payable amounts shall be distributed in accordance with the order. If the Plan Administrator does not make its determination of the qualified status of the order within the 18-month determination period, the payable amounts shall be distributed in the manner the Plan would distribute if the order did not exist and the order shall apply prospectively if the Plan Administrator later determines the order is a qualified domestic relations order.

The Plan shall make payments or distributions required under this section by separate benefit checks or other separate distribution to the Alternate Payee(s).

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ARTICLE VI

DISTRIBUTION OF BENEFITS

SECTION 6.01—AUTOMATIC FORMS OF DISTRIBUTION.

Unless an optional form of benefit is selected pursuant to a qualified election within the election period (see the ELECTION PROCEDURES SECTION of this article), the automatic form of benefit payable to or on behalf of a Participant is determined as follows:

(a)Retirement Benefits. The automatic form of retirement benefit for a Participant who does not die before his Annuity Starting Date shall be:

(1)The Qualified Joint and Survivor Annuity for a Participant who has a spouse.

(2)The Normal Form for a Participant who does not have a spouse.

(b)Death Benefits. The automatic form of death benefit for a Participant who dies before his Annuity Starting Date shall be:

(1)A Qualified Preretirement Survivor Annuity for a Participant who has a spouse to whom he has been continuously married throughout the one-year period ending on the date of his death. The spouse may elect to start receiving the death benefit on any first day of the month on or after the Participant dies and by the date the Participant would have been age 701/2. If the spouse dies before benefits start, the Participant’s Vested Account, determined as of the date of the spouse’s death, shall be paid to the spouse’s Beneficiary.

(2)A single-sum payment to the Participant’s Beneficiary for a Participant who does not have a spouse who is entitled to a Qualified Preretirement Survivor Annuity.

Before a death benefit will be paid on account of the death of a Participant who does not have a spouse who is entitled to a Qualified Preretirement Survivor Annuity, it must be established to the satisfaction of a plan representative that the Participant does not have such a spouse.

SECTION 6.02—OPTIONAL FORMS OF DISTRIBUTION.

(a)Retirement Benefits. The optional forms of retirement benefit shall be the following: (i) a straight life annuity; (ii) single life annuities with certain periods of 5, 10 or 15 years; (iii) a single life annuity with installment refund; (iv) survivorship life annuities with installment refund and survivorship percentages of 50%, 66 2/3% or 100%; (v) fixed period annuities for any period of whole months which is not less than 60 and does not exceed the Life Expectancy, as defined in Article VII, of the Participant where the Life Expectancy is not recalculated; and (vi) a full flexibility option. A single sum payment is also available.

The full flexibility option is an optional form of benefit under which the Participant receives a distribution each calendar year, beginning with the calendar year in which his Annuity Starting Date occurs. The Participant may elect the amount to be distributed each year (not less than

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$1,000). The amount payable in his first Distribution Calendar Year, as defined in Article VII, must satisfy the minimum distribution requirements of Article VII for such year. Distributions for later Distribution Calendar Years, as defined in Article VII, must satisfy the minimum distribution requirements of Article VII for such years. If the Participant’s Annuity Starting Date does not occur until his second Distribution Calendar Year, as defined in Article VII, the amount payable for such year must satisfy the minimum distribution requirements of Article VII for both the first and second Distribution Calendar Years, as defined in Article VII.

If the Plan is amended to eliminate or restrict an optional form of distribution and the Plan provides a single sum distribution form that is otherwise identical to the optional form of distribution eliminated or restricted, the amendment shall not apply to any distribution with an Annuity Starting Date earlier than the first day of the second Plan Year following the Plan Year in which the amendment is adopted.

Election of an optional form is subject to the qualified election provisions of the ELECTION PROCEDURES SECTION of this article and the distribution requirements of Article VII.

Any annuity contract distributed shall be nontransferable. The terms of any annuity contract purchased and distributed by the Plan to a Participant or spouse shall comply with the requirements of this Plan.

(b)Death Benefits. The optional forms of death benefit are a single-sum payment and any annuity that is an optional form of retirement benefit. However, the full flexibility option shall not be available if the Beneficiary is not the spouse of the deceased Participant.

Election of an optional form is subject to the qualified election provisions of the ELECTION PROCEDURES SECTION of this article and the distribution requirements of Article VII.

SECTION 6.03—ELECTION PROCEDURES.

The Participant, Beneficiary, or spouse shall make any election under this section in writing. The Plan Administrator may require such individual to complete and sign any necessary documents as to the provisions to be made. Any election permitted under (a) and (b) below shall be subject to the qualified election provisions of (c) below.

(a)Retirement Benefits. A Participant may elect his Beneficiary or Contingent Annuitant and soay elect to have retirement benefits distributed under any of the optional forms of retirement benefit available in the OPTIONAL FORMS OF DISTRIBUTION SECTION of this article.

(b)Death Benefits. A Participant may elect his Beneficiary and may elect to have death benefits distributed under any of the optional forms of death benefit available in the OPTIONAL FORMS OF DISTRIBUTION SECTION of this article.

If the Participant has not elected an optional form of distribution for the death benefit payable to his Beneficiary, the Beneficiary may, for his own benefit, elect the form of distribution, in like manner as a Participant.

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The Participant may waive the Qualified Preretirement Survivor Annuity by naming someone other than his spouse as Beneficiary.

In lieu of the Qualified Preretirement Survivor Annuity described in the AUTOMATIC FORMS OF DISTRIBUTION SECTION of this article, the spouse may, for his own benefit, waive the Qualified Preretirement Survivor Annuity by electing to have the benefit distributed under any of the optional forms of death benefit available in the OPTIONAL FORMS OF DISTRIBUTION SECTION of this article.

(c)Qualified Election.  The Participant, Beneficiary or spouse may make an election at any time during the election period. The Participant, Beneficiary, or spouse may revoke the election made (or make a new election) at any time and any number of times during the election period. An election is effective only if it meets the consent requirements below.

(1)Election Period for Retirement Benefits. The election period as to retirement benefits is the 90-day period ending on the Annuity Starting Date. An election to waive the Qualified Joint and Survivor Annuity may not be made before the date the Participant is provided with the notice of the ability to waive the Qualified Joint and Survivor Annuity. If the Participant elects a full flexibility option, he may revoke his election at any time before his first Distribution Calendar Year, as defined in Article VII. When he elects to have benefits begin again, he shall have a new Annuity Starting Date. His election period for this election is the 90-day period ending on the Annuity Starting Date for the optional form of retirement benefit elected.

(2)Election Period for Death Benefits. A Participant may make an election as to death benefits at any time before he dies. The spouse’s election period begins on the date the Participant dies and ends on the date benefits begin. The Beneficiary’s election period begins on the date the Participant dies and ends on the date benefits begin.

An election to waive the Qualified Preretirement Survivor Annuity may not be made by the Participant before the date he is provided with the notice of the ability to waive the Qualified Preretirement Survivor Annuity. A Participant’s election to waive the Qualified Preretirement Survivor Annuity which is made before the first day of the Plan Year in which he reaches age 35 shall become invalid on such date. An election made by a Participant after he ceases to bean Employee will not become invalid on the first day of the Plan Year in which he reaches age 35 with respect to &ath benefits from that part of his Account resulting from Contributions made before he ceased to be an Employee.

(3)Consent to Election. If the Participant’s Vested Account exceeds $5,000 ($3,500 for Plan Years beginning before August 6, 1997), any benefit which is (i) immediately distributable or (ii) payable in a form other than a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity, requires the consent of the Participant and the Participant’s spouse (or where either the Participant or the spouse has died, the survivor). Such consent shall also be required if the Participant’s Vested Account at the time of any prior distribution exceeded $5,000 ($3,500 for Plan Years beginning before August 6, 1997). The rule in the preceding sentence shall not apply effective October 17, 2000. However, consent will still be required if the Participant had previously had an Annuity Starting Date with respect to any portion of such Vested Account.

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The consent of the Participant or spouse to a benefit which is immediately distributable must not be made before the date the Participant or spouse is provided with the notice of the ability to defer the distribution. Such consent shall be made in writing.

The consent shall not be made more than 90 days before the Annuity Starting Date. Spousal consent is not required for a benefit which is immediately distributable in a Qualified Joint and Survivor Annuity. Furthermore, if spousal consent is not required because the Participant is electing an optional form of retirement benefit that is not a life annuity pursuant to (d) below, only the Participant need consent to the distribution of a benefit payable in a form that is not a life annuity and which is immediately distributable. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent that a distribution is required to satisfy Code Section 401 (a)(9) or Code Section 415.

In addition, upon termination of this Plan, if the Plan does not offer an annuity option (purchased from a commercial provider), and if the Employer (or any entity within the same Controlled Group) does not maintain another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)), the Participant’s Account balance will, without the Participant’s consent, be distributed to the Participant. However, if any entity within the same Controlled Group maintains another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) then the Participant’s Account will be transferred, without the Participant’s consent, to the other plan if the Participant does not consent to an immediate distribution.

A benefit is immediately distributable if any part of the benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the older of Normal Retirement Age or age 62.

If the Qualified Joint and Survivor Annuity is waived, the spouse has the right to limit consent only to a specific Beneficiary or a specific form of benefit. The spouse can relinquish one or both such rights. Such consent shall be made in writing. The consent shall not be made more than 90 days before the Annuity Starting Date. If the Qualified Preretirement Survivor Annuity is waived, the spouse has the right to limit consent only to a specific Beneficiary. Such consent shall be in writing. The spouse’s consent shall be witnessed by a plan representative or notary public. The spouse’s consent must acknowledge-the-effect of the election, including that the spouse had the right to limit, consent only to a specific Beneficiary or a specific form of benefit, if applicable, and that the relinquishment of one or both such rights was voluntary. Unless the consent of the spouse expressly permits designations by the Participant without a requirement of further consent by the spouse, the spouse’s consent must be limited to the form of benefit, if applicable, and the Beneficiary (including any Contingent Annuitant), class of Beneficiaries, or contingent Beneficiary named in the election.

Spousal consent is not required, however, if the Participant establishes to the satisfaction of the plan representative that the consent of the spouse cannot be obtained because there is no spouse or the spouse cannot be located. A spouse’s consent under this paragraph shall not be valid with respect to any other spouse. A Participant may revoke a prior election without the consent of the spouse. Any new election will require a new spousal consent, unless the consent of the spouse expressly permits such election by the

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Participant without further consent by the spouse. A spouse’s consent may be revoked at any time within the Participant’s election period.

(d)Special Rule for Profit Sharing Plans. This subparagraph (d) applies if the Plan is not a direct or indirect transferee after December 31, 1984, of a defined benefit plan, money purchase plan, target benefit plan, stock bonus plan, or profit sharing plan which is subject to the survivor annuity requirements of Code Sections 401(a)(11) and 417. If the above condition is met, spousal consent is not required for electing an optional form of retirement benefit that is not a life annuity. If such condition is not met, such consent requirements shall be operative.

SECTION 6.04—NOTICE REQUIREMENTS.

(a)Optional Forms of Retirement Benefit and Right to Defer. The Plan Administrator shall furnish to the Participant and the Participant’s spouse a written explanation of the optional forms of retirement benefit in the OPTIONAL FORMS OF DISTRIBUTION SECTION of this article, including the material features and relative values of these options, in a manner that would satisfy the notice requirements of Code Section 417(a)(3) and the right of the Participant and the Participant’s spouse to defer distribution until the benefit is no longer immediately distributable.

The Plan Administrator shall furnish the written explanation by a method reasonably calculated to reach the attention of the Participant and the Participant’s spouse no less than 30 days, and no more than 90 days, before the Annuity Starting Date.

The Participant (and spouse, if applicable) may waive the 30-day election period if the distribution of the elected form of retirement benefit begins more than 7 days after the Plan Administrator provides the Participant (and spouse, if applicable) the written explanation provided that: (i) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider the decision of whether or not to elect a distribution and a particular distribution option, (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation is provided to the Participant, and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant.

(b)Qualified Joint and Survivor Annuity. The Plan Administrator shall furnish to the Participant a written explanation of the following the terms and conditions of the Qualified Joint and Survivor Annuity; the Participant’s right to make, and the effect of, an election to waive the Qualified Joint and Survivor Annuity; the rights of the Participant’s spouse; and the right to revoke an election and the effect of such a revocation.

The Plan Administrator shall furnish the written explanation by a method reasonably calculated to reach the attention of the Participant no less than 30 days, and no more than 90 days, before the Annuity Starting Date.

The Participant (and spouse, if applicable) may waive the 30-day election period if the distribution of the elected form of retirement benefit begins more than 7 days after the Plan Administrator provides the Participant (and spouse, if applicable) the written explanation provided that:  the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect

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(with spousal consent, if applicable) a form of distribution other than a Qualified Joint and Survivor Annuity, (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant, and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant.

After the written explanation is given, a Participant or spouse may make a written request for additional information. The written explanation must be personally delivered or mailed (first class mail, postage prepaid) to the Participant or spouse within 30 days from the date of the written request. The Plan Administrator does not need to comply with more than one such request by a Participant or spouse.

The Plan Administrator’s explanation shall be written in nontechnical language and will explain the terms and conditions of the Qualified Joint and Survivor Annuity and the financial effect upon the Participant’s benefit (in terms of dollars per benefit payment) of electing not to have benefits distributed in accordance with the Qualified Joint and Survivor Annuity.

(c)Qualified Preretirement Survivor Annuity. The Plan Administrator shall furnish to the Participant a written explanation of the following: the terms and conditions of the Qualified Preretirement Survivor Annuity; the Participant’s right to make, and the effect of, an election to waive the Qualified Preretirement Survivor Annuity; the rights of the Participant’s spouse; and the right to revoke an election and the effect of such a revocation.

The Plan Administrator shall furnish the written explanation by a method reasonably calculated to reach the attention of the Participant within the applicable period. The applicable period for a Participant is whichever of the following periods ends last:

(1)the period beginning one year before the date the individual becomes a Participant and ending one year after such date; or

(2)the period beginning one year before the date the Participant’s spouse is first entitled to a Qualified Preretirement Survivor Annuity and ending one year after such date.

If such notice is given before the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the flan Year in which the Participant attains age 35, an additional notice shall be given within such period. If a Participant ceases to be an Employee before attaining age 35, an additional notice shall be given within the period beginning one year before the date he ceases to be an Employee and ending one year after such date.

After the written explanation is given, a Participant or spouse may make a written request for additional information. The written explanation must be personally delivered or mailed (first class mail, postage prepaid) to the Participant or spouse within 30 days from the date of the written request. The Plan Administrator does not need to comply with more than one such request by a Participant or spouse.

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The Plan Administrator’s explanation shall be written in nontechnical language and will explain the terms and conditions of the Qualified Preretirement Survivor Annuity and the financial effect upon the spouse’s benefit (in terms of dollars per benefit payment) of electing not to have benefits distributed in accordance with the Qualified Preretirement Survivor Annuity.

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ARTICLE VII

DISTRIBUTION REQUIREMENTS

 SECTION 7.01—APPLICATION.

The optional forms of distribution are only those provided in Article VI. An optional form of distribution shall not be permitted unless it meets the requirements of this article. The timing of any distribution must meet the requirements of this article.

SECTION 7.02—DEFINITIONS.

For purposes of this article, the following terms are defined:

Applicable Life Expectancy means Life Expectancy (or Joint and Last Survivor Expectancy) calculated using the attained age of the Participant for Designated Beneficiary) as of the Participant’s (or Designated Beneficiary’s) birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date Life Expectancy was first calculated. If Life Expectancy is being recalculated, the Applicable Life Expectancy shall be the Life Expectancy so recalculated. The applicable calendar year shall be the first Distribution Calendar Year, and if Life Expectancy is being recalculated, such succeeding calendar year.

Designated Beneficiary means the individual who is designated as the beneficiary under the Plan in accordance with Code Section 401(a)(9) and the regulations thereunder.

Distribution Calendar Year means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to (e) of the DISTRIBUTION REQUIREMENTS SECTION of this article.

5-percent Owner means a 5-percent owner as defined in Code Section 416. A Participant is treated as a 5-percent Owner for purposes of this article if such Participant is a 5-percent Owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 1/2.

In addition, a Participant is treated as a 5-percent Owner for purposes of this article if such Participant becomes a 5-percent Owner in a later Plan Year. Such Participant’s Required Beginning Date shall not be later than the April 1 of the calendar year following the calendar year in which such later Plan Year ends.

Once distributions have begun to a 5-percent Owner under this article, they must continue to be distributed, even if the Participant ceases to be a 5-percent Owner in a subsequent year.

Joint and Last Survivor Expectancy means joint and last survivor expectancy computed using the expected return multiples in Table VI of section 1.72-9 of the Income Tax Regulations.

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Unless otherwise elected by the Participant by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Participant and shall apply to all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated.

Life Expectancy means life expectancy computed using the expected return multiples in Table V of section 1.72-9 of the Income Tax Regulations.

Unless otherwise elected by the Participant (or spouse, in the case of distributions described in (e)(2)(ii) of the DISTRIBUTION REQUIREMENTS SECTION of this article) by the time distributions are required to begin, life expectancy shall be recalculated annually. Such election shall be irrevocable as to the Participant (or spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated.

Participant’s Benefit means:

(a)The Account balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions or forfeitures allocated to the Account balance as of the dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date.

(b)Exception for Second Distribution Calendar Year. For purposes of (a) above, if any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the Required Beginning Date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year.

Required Beginning Date means, for a Participant who is a 5-percent Owner, the April 1 of the calendar year following the calendar year in which he attains age 70 1/2.

Required Beginning Date means, for any Participant who is not a 5-percent Owner, the April 1 of the calendar year following the later of the calendar year in which he attains age 70 1/2 or the calendar year in which he retires.

The preretirement age 70 1/2 distribution option is only eliminated with respect to Participants who reach age 70 1/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated such option. The preretirement age 70 1/2 distribution is an optional form of benefit under which benefits payable in a particular distribution form (including any modifications that may be elected after benefits begin) begin at a time during the period that begins on or after January 1 of the calendar year in which the Participant attains age 70 1/2 and ends April 1 of the immediately following calendar year.

The options available for Participants who are not 5-percent Owners and attained age 70 1/2 in calendar years before the calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated the preretirement age 70 1/2 distribution shall be the following. Any such Participant attaining age 70 1/2 in years after 1995 may elect by April 1 of the calendar year following the calendar year in which he attained age 70 1/2 (or by December 31,

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1997 in the case of a Participant attaining age 70 1/2 in 1996) to defer distributions until the calendar year following the calendar year in which he retires. Any such Participant attaining age 70 1/2 in years prior to 1997 may elect to stop distributions which are not purchased annuities and recommence by the April 1 of the calendar year following the year in which he retires. There shall be a new Annuity Starting Date upon recommencement.

SECTION 7.03—DISTRIBUTION REQUIREMENTS.

(a)General Rules.

(1)Subject to the AUTOMATIC FORMS OF DISTRIBUTION SECTION of Article VI, joint and survivor annuity requirements, the requirements of this article shall apply to any distribution of a Participant’s interest and shall take precedence over any inconsistent provisions of this Plan. Unless otherwise specified, the provisions of this article apply to calendar years beginning after December 31, 1984.

(2)All distributions required under this article shall be determined and made in accordance with the proposed regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the proposed regulations.

(3)With respect to distributions under the Plan made on or after June 14, 2001, for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the regulations under Code Section 401(a)(9) that were proposed on January 17, 2001 (the 2001 Proposed Regulations), notwithstanding any provision of the Plan to the contrary. If the total amount of required minimum distributions made to a Participant for 2001 prior to June 14, 2001, are equal to or greater than the amount of required minimum distributions determined under the 2001 Proposed Regulations, then no additional distributions are required for such Participant for 2001 on or after such date. If the total amount of required minimum distributions made to a Participant for 2001 prior to June 14, 2001, are less than the amount determined under the 2001 Proposed Regulations, then the amount of required minimum distributions for 2001 on or after such date will be determined so that the total amount of required minimum distributions for 2001 is the amount determined under the 2001 Proposed Regulations. These provisions shall continue in effect until the last calendar year beginning before the effective date of final regulations under Code Section 401(a)(9) or such other date as may be published by the Internal Revenue Service.

(b)Required Beginning Date. The entire interest of a Participant must be distributed or begin to be distributed no later than the Participant’s Required Beginning Date.

(c)Limits on Distribution Periods. As of the first Distribution Calendar Year, distributions, if not made in a single sum, may only be made over one of the following periods (or combination thereof):

(1)the life of the Participant,

(2)the life of the Participant and a Designated Beneficiary,

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(3)a period certain not extending beyond the Life Expectancy of the Participant, or

(4)a period certain not extending beyond the Joint and Last Survivor Expectancy of the Participant and a Designated Beneficiary.

(d)Determination of Amount to be Distributed Each Year. If the Participant’s interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the Required Beginning Date:

(1)Individual Account.

(i)If a Participant’s Benefit is to be distributed over

A.a period not extending beyond the Life Expectancy of the Participant or the Joint Life and Last Survivor Expectancy of the Participant and the Participant’s Designated Beneficiary, or

B.a period not extending beyond the Life Expectancy of the Designated Beneficiary,

the amount required to be distributed for each calendar year beginning with the distributions for the first Distribution Calendar Year, must be at least equal to the quotient obtained by dividing the Participant’s Benefit by the Applicable Life Expectancy.

(ii)For calendar years beginning before January 1, 1989, if the Participant’s spouse is not the Designated Beneficiary, the method of distribution selected must assure that at least 50 percent of the present value of the amount available for distribution is paid within the Life Expectancy of the Participant.

(iii)For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first Distribution Calendar Year shall not be less than the quotient obtained by dividing the Participant’s Benefit by the lesser of:

A.the Applicable Life Expectancy, or

B.if the Participant’s spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed regulations.

Distributions after the death of the Participant shall be distributed using the Applicable Life Expectancy in (1)(i) above as the relevant divisor without regard to section 1.401(a)(9)-2 of the proposed regulations.

(iv)The minimum distribution required for the Participant’s first Distribution Calendar Year must be made on or before the Participant’s Required Beginning Date. The minimum distribution for other calendar years, including the minimum distribution for

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the Distribution Calendar Year in which the Participant’s Required Beginning Date occurs, must be made on or before December 31 of that Distribution Calendar Year.

(2)Other Forms. If the Participant’s Benefit is distributed in the form of an annuity purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of Code Section 401(a)(9) and the proposed regulations thereunder.

(e)Death Distribution Provisions.

(1)Distribution Beginning Before Death. If the Participant dies after distribution of his interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant’s death.

(2)Distribution Beginning After Death.

(i)If the Participant dies before distribution of his interest begins, distribution of the Participant’s entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death except to the extent that an election is made to receive distributions in accordance with A or B below:

A.if any portion of the Participant’s interest is payable to a Designated Beneficiary, distributions may be made over the life or over a period certain not greater than the Life Expectancy of the Designated Beneficiary beginning on or before December 31 of the calendar year immediately following the calendar year in which the Participant died;

B.if the Designated Beneficiary is the Participant’s surviving spouse, the date distributions are required to begin in accordance with A above shall not be earlier than the later of:

1.December 31 of the calendar year immediately following the calendar year in which the Participant died, or

2.December 31 of the calendar year in which the Participant would have attained age 70 1/2.

(ii)If the Participant has not made an election pursuant to this (e)(2) by the time of his death, the Participant’s Designated Beneficiary must elect the method of distribution no later than the earlier of:

A.December 31 of the calendar year in which distributions would be required to begin under this subparagraph, or

B.December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant.

(iii)If the Participant has no Designated Beneficiary, or if the Designated Beneficiary does not elect a method of distribution, distribution of the Participant’s entire interest

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must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(3)For purposes of (e)(2) above, if the surviving spouse dies after the Participant, but before payments to such spouse begin, the provisions of (e)(2) above, with the exception of (e)(2)(i)(B) therein, shall be applied as if the surviving spouse were the Participant.

(4)For purposes of this (e), distribution of a Participant’s interest is considered to begin on the Participant’s Required Beginning Date (or if (e)(3) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to (e)(2) above). If distribution in the form of an annuity irrevocably begins to the Participant before the Required Beginning Date; the date distribution is considered to begin is the date distribution actually begins.

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ARTICLE VIII

TERMINATION OF THE PLAN

The Employer expects to continue the Plan indefinitely but reserves the right to terminate the Plan in whole or in part at any time upon giving written notice to all parties concerned. Complete discontinuance of Contributions constitutes complete termination of the Plan.

The Account of each Participant shall be fully (100%) vested and nonforfeitable as of the effective date of complete termination of the Plan. The Account of each Participant who is included in the group of Participants deemed to be affected by the partial termination of the Plan shall be fully (100%) vested and nonforfeitable as of the effective date of the partial termination of the Plan. The Participant’s Account shall continue to participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund until his Vested Account is distributed.

A Participant’s Account which does not result from the Contributions listed below may be distributed to the Participant after the effective date of the complete termination of the Plan:

Elective Deferral Contributions Qualified Nonelective Contributions

A Participant’s Account resulting from such Contributions may be distributed upon complete termination of the Plan, but only if neither the Employer nor any Controlled Group member maintain or establish a successor defined contribution plan (other than an employer stock ownership plan as defined in Code Section 4975(e)(7), a simplified employee pension plan as defined in Code Section 408(k) or a SIMPLE IRA plan as defined in Code Section 408(p)) and such distribution is made in a lump sum. A distribution under this article shall be a retirement benefit and shall be distributed to the Participant according to the provisions of Article VI.

The Participant’s entire Vested Account shall be paid in a single sum to the Participant as of the effective date of complete termination of the Plan if (i) the requirements for distribution of Elective Deferral Contributions in the above paragraph are met and (ii) consent of the Participant is not required in the ELECTION PROCEDURES SECTION of Article VI to distribute a benefit which is immediately distributable. This is a small amounts payment. The small amounts payment is in full settlement of all benefits otherwise payable.

Upon complete termination of the Plan, no more Employees shall become Participants and no more Contributions shall be made.

The assets of this Plan shall not be paid to the Employer at any time, except that, after the satisfaction of all liabilities under the Plan, any assets remaining may be paid to the Employer. The payment may not be made if it would contravene any provision of law.

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ARTICLE IX

ADMINISTRATION OF THE PLAN

SECTION 9.01—ADMINISTRATION.

Subject to the provisions of this article, the Plan Administrator has complete control of the administration of the Plan. The Plan Administrator has all the powers necessary for it to properly carry out its administrative duties. Not in limitation, but in amplification of the foregoing, the Plan Administrator has complete discretion to construe or interpret the provisions of the Plan, including ambiguous provisions, if any, and to determine all questions that may arise under the Plan, including all questions relating to the eligibility of Employees to participate in the Plan and the amount of benefit to which any Participant, Beneficiary, spouse or Contingent Annuitant may become entitled. The Plan Administrator’s decisions upon all matters within the scope of its authority shall be final.

Unless otherwise set out in the Plan or Annuity Contract, the Plan Administrator may delegate recordkeeping and other duties which are necessary for the administration of the Plan to any person or firm which agrees to accept such duties. The Plan Administrator shall be entitled to rely upon all tables, valuations, certificates and reports furnished by the consultant or actuary appointed by the Plan Administrator and upon all opinions given by any counsel selected or approved by the Plan Administrator.

The Plan Administrator shall receive all claims for benefits by Participants, former Participants, Beneficiaries, spouses, and Contingent Annuitants. The Plan Administrator shall determine all facts necessary to establish the right of any Claimant to benefits and the amount of those benefits under the provisions of the Plan. The Plan Administrator may establish rules and procedures to be followed by Claimants in filing claims for benefits, in furnishing and verifying proofs necessary to determine age, and in any other matters required to administer the Plan.

SECTION 9.02—EXPENSES.

Expenses of the Plan, to the extent that the Employer does not pay such expenses, may be paid out of the assets of the Plan provided that such payment is consistent with ERISA. Such expenses include, but are not limited to, expenses for bonding required by ERISA; expenses for recordkeeping and other administrative services; fees and expenses of the Trustee or Annuity Contract; expenses for investment education service and direct costs that the Employer incurs with respect to the Plan.

SECTION 9.03—RECORDS.

All acts and determinations of the Plan Administrator shall be duly recorded. All these records, together with other documents necessary for the administration of the Plan, shall be preserved in the Plan Administrator’s custody.

Writing (handwriting, typing, printing), photostating, photographing, microfilming, magnetic impulse, mechanical or electrical recording, or other forms of data compilation shall be acceptable means of keeping records.

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SECTION 9.04—INFORMATION AVAILABLE.

Any Participant in the Plan or any Beneficiary may examine copies of the Plan description, latest annual report, any bargaining agreement, this Plan, the Annuity Contract or any other instrument under which the Plan was established or is operated. The Plan Administrator shall maintain all of the items listed in this section in its office, or in such other place or places as it may designate in order to comply with governmental regulations. These items may be examined during reasonable business hours. Upon the written request of a Participant or Beneficiary receiving benefits under the Plan, the Plan Administrator shall furnish him with a copy of any of these items. The Plan Administrator may make a reasonable charge to the requesting person for the copy.

SECTION 9.05—CLAIM AND APPEAL PROCEDURES.

A Claimant must submit any required forms and pertinent information when making a claim for benefits under the Plan.

If a claim for benefits under the Plan is denied, the Plan Administrator shall provide adequate written notice to the Claimant whose claim for benefits under the Plan has been denied. The notice must be furnished within 90 days of the date that the claim is received by the Plan Administrator. The Claimant shall be notified in writing within this initial 90-day period if special circumstances require an extension of time needed to process the claim and the date by which the Plan Administrator’s decision is expected to be rendered. The written notice shall be furnished no later than 180 days after the date the claim was received by the Plan Administrator.

The Plan Administrator’s notice to the Claimant shall specify the reason for the denial; specify references to pertinent Plan provisions on which denial is based; describe any additional material and information needed for the Claimant to perfect his claim for benefits; explain why the material and information is needed; inform the Claimant that any appeal he wishes to make must be in writing to the Plan Administrator within 60 days after receipt of the Plan Administrator’s notice of denial of benefits and that failure to make the written appeal within such 60-day period renders the Plan Administrator’s determination of such denial final, binding and conclusive.

If the Claimant appeals to the Plan Administrator, the Claimant (or his authorized representative) may submit in writing whatever issues and comments the Claimant (or his authorized representative) feels are pertinent. The Claimant (or his authorized representative) may review pertinent Plan documents. The Plan Administrator shall reexamine all facts related to the appeal and make a final determination as to whether the denial of benefits is justified under the circumstances. The Plan Administrator shall advise the Claimant of its decision within 60 days of his written request for review, unless special circumstances (such as a hearing) would make rendering a decision within the 60-day limit unfeasible. The Claimant must be notified within the 60-day limit if an extension is necessary. The Plan Administrator shall render a decision on a claim for benefits no later than 120 days after the request for review is received.

SECTION 9.06—DELEGATION OF AUTHORITY.

All or any part of the administrative duties and responsibilities under this article may be delegated by the Plan Administrator to a retirement committee. The duties and responsibilities of the retirement committee shall be set out in a separate written agreement.

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SECTION 9.07—EXERCISE OF DISCRETIONARY AUTHORITY.

The Employer, Plan Administrator, and any other person or entity who has authority with respect to the management, administration, or investment of the Plan may exercise that authority in its/his full discretion, subject only to the duties imposed under ERISA. This discretionary authority includes, but is not limited to, the authority to make any and all factual determinations and interpret all terms and provisions of the Plan documents relevant to the issue under consideration. The exercise of authority will be binding upon all persons; will be given deference in all courts of law; and will not be overturned or set aside by any court of law unless found to be arbitrary and capricious or made in bad faith.

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ARTICLE X

GENERAL PROVISIONS

SECTION 10.01—AMENDMENTS.

The Employer may amend this Plan at any time, including any remedial retroactive changes (within the time specified by Internal Revenue Service regulations), to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

An amendment may not diminish or adversely affect any accrued interest or benefit of Participants or their Beneficiaries nor allow reversion or diversion of Plan assets to the Employer at any time, except as may be required to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

No amendment to this Plan shall be effective to the extent that it has the effect of decreasing a Participant’s accrued benefit. However, a Participant’s Account may be reduced to the extent permitted under Code Section 41 2(c)(8). For purposes of this paragraph, a Plan amendment which has the effect of decreasing a Participant’s Account with respect to benefits attributable to service before the amendment shall be treated as reducing an accrued benefit. Furthermore, if the vesting schedule of the Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee’s right to his employer-derived accrued benefit shall not be less than his percentage computed under the Plan without regard to such amendment.

No amendment to the Plan shall be effective to eliminate or restrict an optional form of benefit with respect to benefits attributable to service before the amendment except as provided in the MERGERS AND DIRECT TRANSFERS SECTION of this article and below:

(a)The Plan is amended to eliminate or restrict the ability of a Participant to receive payment of his Account balance under a particular optional form of benefit and the amendment satisfies the condition in (1) and the Plan satisfies the condition in (2) below:

(1)The amendment provides a single sum distribution form that is otherwise identical to the optional form of benefit eliminated or restricted. For purposes of this condition (1), a single sum distribution form is otherwise. Identical only if it is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the Participant) except with respect to the timing of payments after commencement.

(2)The Plan provides that the amendment shall not apply to any distribution with an Annuity Starting Date earlier than the earlier of:

(i)the 90th day after the date the Participant receiving the distribution has been furnished a summary that reflects the amendment and that satisfies the ERISA requirements at 29 CFR 2520.104b-3 relating to a summary of material modifications, or

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(ii)the first day of the second Plan Year following the Plan Year in which the amendment is adopted.

(b)The Plan is amended to eliminate or restrict in-kind distributions and the conditions in Q&A 2(b)(2)(iii) in section 1.411 (d)-4 of the regulations are met.

If, as a result of an amendment, an Employer Contribution is removed that is not 100% immediately vested when made, the applicable vesting schedule shall remain in effect after the date of such amendment. The Participant shall not become immediately 100% vested in such Contributions as a result of the elimination of such Contribution except as otherwise specifically provided in the Plan.

An amendment shall not decrease a Participant’s vested interest in the Plan. If an amendment to the Plan, or a deemed amendment in the case of a change in top-heavy status of the Plan as provided in the MODIFICATION OF VESTING REQUIREMENTS SECTION of Article XI, changes the computation of the percentage used to determine that portion of a Participant’s Account attributable to Employer Contributions which is nonforfeitable (whether directly or indirectly), each Participant or former Participant

(c)who has completed at least three Years of Service on the date the election period described below ends (five Years of Service if the Participant does not have at least one Hour-of-Service in a Plan Year beginning after December 31, 1988) and

(d)whose nonforfeitable percentage will be determined on any date after the date of the change

may elect, during the election period, to have the nonforfeitable percentage of his Account that results from Employer Contributions determined without regard to the amendment. This election may not be revoked. If after the Plan is changed, the Participant’s nonforfeitable percentage will at all times be as great as it would have been if the change had not been made, no election needs to be provided. The election period shall begin no later than the date the Plan amendment is adopted, or deemed adopted in the case of a change in the top-heavy status of the Plan, and end no earlier than the 60th day after the latest of the date the amendment is adopted (deemed adopted) or becomes effective, or the date the Participant is issued written notice of the amendment (deemed amendment) by the Employer or the Plan Administrator.

SECTION 10.02—DIRECT ROLLOVERS.

Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

Any distributions made under the SMALL AMOUNTS SECTION of this article (or which are small amounts payments made under Article VIII at complete termination of the Plan) which are Eligible Rollover Distributions and for which the Distributee has not elected to either have such distribution paid to him or to an Eligible Retirement Plan shall be paid to the Distributee.

SECTION 10.03—MERGERS AND DIRECT TRANSFERS.

The Plan may not be merged or consolidated with, nor have its assets or liabilities transferred to, any other retirement plan, unless each Participant in the plan would (if the plan then terminated) receive a benefit

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immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer (if this Plan had then terminated). The Employer may enter into merger agreements or direct transfer of assets agreements with the employers under other retirement plans which are qualifiable under Code Section 401(a), including an elective transfer, and may accept the direct transfer of plan assets, or may transfer plan assets, as a party to any such agreement. The Employer shall not consent to, or be a party to a merger, consolidation, or transfer of assets with a defined benefit plan if such action would result in a defined benefit feature being maintained under this Plan.

Notwithstanding any provision of the Plan to the contrary, to the extent any optional form of benefit under the Plan permits a distribution prior to the Employee’s retirement, death, disability, or severance from employment, and prior to plan termination, the optional form of benefit is not available with respect to benefits attributable to assets (including the post-transfer earnings thereon) and liabilities that are transferred, within the meaning of Code Section 414(l), to this Plan from a money purchase pension plan qualified under Code Section 401(a) (other than any portion of those assets and liabilities attributable to voluntary employee contributions).

The Plan may accept a direct transfer of plan assets on behalf of an Eligible Employee. If the Eligible Employee is not an Active Participant when the transfer is made, the Eligible Employee shall be deemed to be an Active Participant only for the purpose of investment and distribution of the transferred assets. Employer Contributions shall not be made for or allocated to the Eligible Employee, until the time he meets all of the requirements to become an Active Participant.

The Plan shall hold, administer, and distribute the transferred assets as a part of the Plan. The Plan shall maintain a separate account for the benefit of the Employee on whose behalf the Plan accepted the transfer in order to reflect the value of the transferred assets.

Unless a transfer of assets to the Plan is an elective transfer as described below, the Plan shall apply the optional forms of benefit protections described in the AMENDMENTS SECTION of this article to all transferred assets.

A Participant’s protected benefits may be eliminated upon transfer between qualified defined contribution plans if the conditions in Q&A 3(b)(1) in section 1.411(d)-4 of the regulations are met. The transfer must meet all of the other applicable qualification requirements.

A Participant’s protected benefits may be eliminated upon transfer between qualified plans (both defined benefit and defined contribution) if the conditions in Q&A 3(c)(1) in section 1.411 (d)-4 of the regulations are met. Beginning January 1, 2002, if the Participant is eligible to receive an immediate distribution of his entire nonforfeitable accrued benefit in a single sum distribution that would consist entirely of an eligible rollover distribution under Code Section 401(a)(31), such transfer will be accomplished as a direct rollover under Code Section 401(a)(31). The rules applicable to distributions under the plan would apply to the transfer, but the transfer would not be treated as a distribution for purposes of the minimum distribution requirements of Code Section 401 (a)(9).

SECTION 10.04—PROVISIONS RELATING TO THE INSURER AND OTHER PARTIES.

The obligations of an Insurer shall be governed solely by the provisions of the Annuity Contract. The Insurer shall not be required to perform any act not provided in or contrary to the provisions of the Annuity

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Contract. Each Annuity Contract when purchased shall comply with the Plan. See the CONSTRUCTION SECTION of this article.

Any issuer or distributor of investment contracts or securities is governed solely by the terms of its policies, written investment contract, prospectuses, security instruments, and any other written agreements entered into with the Trustee with regard to such investment contracts or securities.

Such Insurer, issuer or distributor is not a party to the Plan, nor bound in any way by the Plan provisions. Such parties shall not be required to look to the terms of this Plan, nor to determine whether the Employer, the Plan Administrator, the Trustee, or the Named Fiduciary have the authority to act in any particular manner or to make any contract or agreement.

Until notice of any amendment or termination of this Plan or a change in Trustee has been received by the Insurer at its home office or an issuer or distributor at their principal address, they are and shall be fully protected in assuming that the Plan has not been amended or terminated and in dealing with any party acting as Trustee according to the latest information which they have received at their home office or principal address.

SECTION 10.05—EMPLOYMENT STATUS.

Nothing contained in this Plan gives an Employee the right to be retained in the Employer’s employ or to interfere with the Employer’s right to discharge any Employee.

SECTION 10.06—RIGHTS TO PLAN ASSETS.

An Employee shall not have any right to or interest in any assets of the Plan upon termination of employment or otherwise except as specifically provided under this Plan, and then only to the extent of the benefits payable to such Employee according to the Plan provisions.

Any final payment or distribution to a Participant or his legal representative or to any Beneficiaries, spouse or Contingent Annuitant of such Participant under the Plan provisions shall be in full satisfaction of all claims against the Plan, the Named Fiduciary, the Plan Administrator, the Insurer, the Trustee, and the Employer arising under or by virtue of the Plan.

SECTION 10.07—BENEFICIARY.

Each Participant may name a Beneficiary to receive any death benefit (other than any income payable to a Contingent Annuitant) that may arise out of his participation in the Plan. The Participant may change his Beneficiary from time to time. Unless a qualified election has been made, for purposes of distributing any death benefits before the Participant’s Retirement Date, the Beneficiary of a Participant who has a spouse who is entitled to a Qualified Preretirement Survivor Annuity shall be the Participant’s spouse. The Participant’s Beneficiary designation and any change of Beneficiary shall be subject to the provisions of the ELECTION PROCEDURES SECTION of Article VI. It is the responsibility of the Participant to give written notice to the Insurer of the name of the Beneficiary on a form furnished for that purpose.

With the Employer’s consent, the Plan Administrator may maintain records of Beneficiary designations for Participants before their Retirement Dates. In that event, the written designations made by Participants

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shall be filed with the Plan Administrator. If a Participant dies before his Retirement Date, the Plan Administrator shall certify to the Insurer the Beneficiary designation on its records for the Participant.

If there is no Beneficiary named or surviving when a Participant dies, the Participant’s Beneficiary shall be the Participant’s surviving spouse, or where there is no surviving spouse, the executor or administrator of the Participant’s estate.

SECTION 10.08—NONALIENATION OF BENEFITS.

Benefits payable under the Plan are not subject to the claims of any creditor of any Participant, Beneficiary, spouse or Contingent Annuitant. A Participant, Beneficiary, spouse or Contingent Annuitant does not have any rights to alienate, anticipate, commute, pledge, encumber, or assign any of such benefits, except in the case of a loan as provided in the LOANS TO PARTICIPANTS SECTION of Article V. The preceding sentences shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant according to a domestic relations order, unless such order is determined by the Plan Administrator to be a qualified domestic relations order, as defined in Code Section 414(p), or any domestic relations order entered before January 1, 1985. The preceding sentences shall not apply to any offset of a Participant’s benefits provided under the Plan against an amount the Participant is required to pay the Plan with respect to a judgement, order, or decree issued, or a settlement entered into, on or after August 5, 1997, which meets the requirements of Code Sections 401(a)(13)(C) or (D).

SECTION 10.09—CONSTRUCTION.

The validity of the Plan or any of its provisions is determined under and construed according to Federal law and, to the extent permissible, according to the laws of the state in which the Employer has its principal office. In case any provision of this Plan is held illegal or invalid for any reason, such determination shall not affect the remaining provisions of this Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included.

In the event of any conflict between the provisions of the Plan and the terms of any Annuity Contract issued hereunder, the provisions of the Plan control.

SECTION 10.10—LEGAL ACTIONS.

No person employed by the Employer; no Participant, former Participant, or their Beneficiaries; nor any other person having or claiming to have an interest in the Plan is entitled to any notice of process. A final judgment entered in any such action or proceeding shall be binding and conclusive on all persons having or claiming to have an interest in the Plan.

SECTION 10.11—SMALL AMOUNTS.

If consent of the Participant is not required for a benefit which is immediately distributable in the ELECTION PROCEDURES SECTION of Article VI, a Participant’s entire Vested Account shall be paid in a single sum as of the earliest of his Retirement Date, the date he dies, or the date he ceases to be an Employee for any other reason (the date the Employer provides notice to the record keeper of the Plan of such event, if later). For purposes of this section, if the Participant’s Vested Account is zero, the Participant shall be deemed to have received a distribution of such Vested Account. If a Participant would have received a

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distribution under the first sentence of this paragraph but for the fact that the Participant’s consent was needed to distribute a benefit which is immediately distributable, and if at a later time consent would not be needed to distribute a benefit which is immediately distributable and such Participant has not again become an Employee, such Vested Account shall be paid in a single sum. This is a small amounts payment.

If a small amounts payment is made as of the date the Participant dies, the small amounts payment shall be made to the Participant’s Beneficiary (spouse if the death benefit is payable to the spouse). If a small amounts payment is made while the Participant is living, the small amounts payment shall be made to the Participant. The small amounts payment is in full settlement of benefits otherwise payable.

No other small amounts payments shall be made.

SECTION 10.12—WORD USAGE.

The masculine gender, where used in this Plan, shall include the feminine gender and the singular words, as used in this Plan, may include the plural, unless the context indicates otherwise.

The words “in writing” and “written,” where used in this Plan, shall include any other forms, such as voice response or other electronic system, as permitted by any governmental agency to which the Plan is subject.

SECTION 10.13—CHANGE IN SERVICE METHOD.

(a)Change of Service Method Under This Plan. If this Plan is amended to change the method of crediting service from the elapsed time method to the hours method for any purpose under this Plan, the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)The number of whole years of service credited to the Employee under the Plan as of the date the change is effective.

(2)One year of service for the applicable computation period in which the change is effective if he is credited with the required number of Hours-of-Service. If the Employer does not have sufficient records to determine the Employee’s actual Hours-of-Service in that part of the service period before the effective date of the change, the Hours-of-Service shall be determined using an equivalency. For any month in which he would be required to be credited with one Hour-of-Service, the Employee shall be deemed for purposes of this section to be credited with 190 Hours-of-Service.

(3)The Employee’s service determined under this Plan using the hours method after the end of the computation period in which the change in service method was effective.

If this Plan is amended to change the method of crediting service from the hours method to the elapsed time method for any purpose under this Plan, the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

(4)The number of whole years of service credited to the Employee under the Plan as of the beginning of the computation period in which the change in service method is effective.

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(5)the greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the Plan as of the date the change is effective.

(6)The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period in which the change in service method was effective.

(b)Transfers Between Plans with Different Service Methods. If an Employee has been a participant in another plan of the Employer which credited service under the elapsed time method for any purpose which under this Plan is determined using the hours method, then the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)The number of whole years of service credited to the Employee under the plan as of the date he became an Eligible Employee under this Plan.

(2)One year of service for the applicable computation period in which he became an Eligible Employee if he is credited with the required number of Hours-of-Service. If the Employer does not have sufficient records to determine the Employee’s actual Hours-of-Service in that part of the service period before the date he became an Eligible Employee, the Hours-of-Service shall be determined using an equivalency. For any month in which he would be required to be credited with one Hour-of-Service, the Employee shall be deemed for purposes of this section to be credited with 190 Hours-of-Service.

(3)The Employee’s service determined under this Plan using the hours method after the end of the computation period in which he became an Eligible Employee.

If an Employee has been a participant in another plan of the Employer which credited service under the hours method for any purpose which under this Plan is determined using the elapsed time method, then the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

(4)The number of whole years of service credited to the Employee under the other plan as of the beginning of the computation period under that plan in which he became an Eligible Employee under this Plan.

(5)The greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the other plan as of the date he became an Eligible Employee under this Plan.

(6)The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period under the other plan in which he became an Eligible Employee.

If an Employee has been a participant in a Controlled Group member’s plan which credited service under a different method than is used in this Plan, in order to determine entry and vesting, the provisions in (b) above shall apply as though the Controlled Group member’s plan were a plan of the Employer.

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Any modification of service contained in this Plan shall be applicable to the service determined pursuant to this section.

SECTION 10.14—MILITARY SERVICE.

Notwithstanding any provision of this Plan to the contrary, the Plan shall provide contributions, benefits, and service credit with respect to qualified military service in accordance with Code Section 414(u). Loan repayments shall be suspended under this Plan as permitted under Code Section 414(u).

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ARTICLE XI

TOP-HEAVY PLAN REQUIREMENTS

SECTION 11.01—APPLICATION.

The provisions of this article shall supersede all other provisions in the Plan to the contrary.

For the purpose of applying the Top-heavy Plan requirements of this article, all members of the Controlled Group shall be treated as one Employer. The term Employer, as used in this article, shall be deemed to include all members of the Controlled Group, unless the term as used clearly indicates only the Employer is meant.

The accrued benefit or account of a participant which results from deductible employee contributions shall not be included for any purpose under this article.

The minimum vesting and contribution provisions of the MODIFICATION OF VESTING REQUIREMENTS and MODIFICATION OF CONTRIBUTIONS SECTIONS of this article shall not apply to any Employee who is included in a group of Employees covered by a collective bargaining agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, including the Employer, if there is evidence that retirement benefits were the subject of good faith bargaining between such representatives. For this purpose, the term “employee representatives” does not include any organization more than half of whose members are employees who are owners, officers, or executives.

SECTION 11.02—DEFINITIONS.

For purposes of this article the following terms are defined: Aggregation Group means:

(a)each of the Employer’s qualified plans in which a Key Employee is a participant during the Plan Year containing the Determination Date (regardless of whether the plan was terminated) or one of the four preceding Plan Years,

(b)each of the Employer’s other qualified plans which allows the plan(s) described in (a) above to meet the nondiscrimination requirement of Code Section 401(a)(4) or the minimum coverage requirement of Code Section 410, and

(c)any of the Employer’s other qualified plans not included in (a) or (b) above which the Employer desires to include as part of the Aggregation Group. Such a qualified plan shall be included only if the Aggregation Group would continue to satisfy the requirements of Code Section 401(a)(4) and Code Section 410.

The plans in (a) and (b) above constitute the “required” Aggregation Group. The plans in (a), (b), and (c) above constitute the “permissive” Aggregation Group.

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Compensation means compensation as defined in the CONTRIBUTION LIMITATION SECTION of Article III. For purposes of determining who is a Key Employee in years beginning before January 1, 1998, Compensation shall include, in addition to compensation as defined in the CONTRIBUTION LIMITATION SECTION of Article Ill, elective contributions. Elective contributions are amounts excludible from the gross income of the Employee under Code Sections 125, 402(e)(3), 402(h)(1)(B), or 403(b), and contributed by the Employer, at the Employee’s election, to a Code Section 401(k) arrangement, a simplified employee pension, cafeteria plan, or tax-sheltered annuity. Elective contributions also include amounts deferred under a Code Section 457 plan maintained by the Employer.

Determination Date means as to any plan, for any plan year subsequent to the first plan year, the last day of the preceding plan year. For the first plan year of the plan, the last day of that year.

Key Employee means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was:

(a)an officer of the Employer if such individual’s annual Compensation exceeds 50 percent of the dollar limitation under Code Section 415(b)(1)(A).

(b)an owner (or considered an owner under Code Section 318) of one of the ten largest interests in the Employer if such individual’s annual Compensation exceeds 100 percent of the dollar limitation under Code Section 41 5(c)(1)(A).

(c)a 5-percent owner of the Employer, or

(d)a 1-percent owner of the Employer who has annual Compensation of more than $150,000.

The determination period is the Plan Year containing the Determination Date and the four preceding Plan Years.

The determination of who is a Key Employee shall be made according to Code Section 416(i)(1) and the regulations thereunder.

Non-key Employee means any Employee who is not a Key Employee.

Present Value means the present value of a participant’s accrued benefit under a defined benefit plan or purposes of establishing Present Value to compute the Top-heavy Ratio, any benefit shall be discounted only for 7.5% interest and mortality according to the 1971 Group Annuity Table (Male) without the 7% margin but with projection by Scale E from 1971 to the later of (a) 1974, or (b) the year determined by adding the age to 1920, and wherein for females the male age six years younger is used.

Top-heavy Plan means a plan which is top-heavy for any plan year beginning after December 31, 1983. This Plan shall be top-heavy if any of the following conditions exist:

(a)The Top-heavy Ratio for this Plan exceeds 60 percent and this Plan is not part of any required Aggregation Group or permissive Aggregation Group.

(b)This Plan is a part of a required Aggregation Group, but not part of a permissive Aggregation Group, and the Top-heavy Ratio for the required Aggregation Group exceeds 60 percent.

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(c)This Plan is a part of a required Aggregation Group and part of a permissive Aggregation Group and the Top-heavy Ratio for the permissive Aggregation Group exceeds 60 percent.

Top-heavy Ratio means:

(a)If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for this Plan alone or for the required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the five-year period ending on the Distribution Date(s)), both computed in accordance with Code Section 416 and the regulations thereunder. Both the numerator and denominator of the Top-heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Code Section 416 and the regulations thereunder.

(b)If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for any required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances under the aggregated defined contribution plan or plans of all Key Employees determined in accordance with (a) above, and the Present Value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with (a) above, and the Present Value of accrued benefits under the defined benefit plan or plans for all participants as of the Determination Date(s), all determined in accordance with Code Section 416 and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-heavy Ratio are increased for any distribution of an accrued benefit made in the five-year period ending on the Determination Date.

(c)For purposes of (a) and (b) above, the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (i) who is not a Key Employee but who was a Key Employee in a prior year or (ii) who has not been credited with at least an hour of service with any employer maintaining the plan at any time during the five-year period ending on the Determination Date will be disregarded. The calculation of the Top-heavy Ratio and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.

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The accrued benefit of a participant other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code Section 411(b)(1)(C).

SECTION 11.03—MODIFICATION OF VESTING REQUIREMENTS.

If a Participant’s Vesting Percentage determined under Article I is not at least as great as his Vesting Percentage would be if it were determined under a schedule permitted in Code Section 416, the following shall apply. During any Plan Year in which the Plan is a Top-heavy Plan, the Participant’s Vesting Percentage shall be the greater of the Vesting Percentage determined under Article I or the schedule below.

VESTING SERVICE	NONFORFEITABLE PERCENTAGE
(whole years)
Less than 2	0
2	20
3	40
4	60
5	80
6 or more	100

The schedule above shall not apply to Participants who are not credited with an Hour-of-Service after the Plan first becomes a Top-heavy Plan. The Vesting Percentage determined above applies to the portion of the Participant’s Account which is multiplied by a Vesting Percentage to determine his Vested Account, including benefits accrued before the effective date of Code Section 416 and benefits accrued before this Plan became a Top-heavy Plan.

If, in a later Plan Year, this Plan is not a Top-heavy Plan, a Participant’s Vesting Percentage shall be determined under Article I. A Participant’s Vesting Percentage determined under either Article I or the schedule above shall never be reduced and the election procedures of the AMENDMENTS SECTION of Article X shall apply when changing to or from the schedule as though the automatic change were the result of an amendment.

The part of the Participant’s Vested Account resulting from the minimum contributions required pursuant to the MODIFICATION OF CONTRIBUTIONS SECTION of this article (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or (D).

SECTION 11.04—MODIFICATION OF CONTRIBUTIONS.

During any Plan Year in which this Plan is a Top-heavy Plan, the Employer shall make a minimum contribution as of the last day of the Plan Year for each Non-key Employee who is an Employee on the last day of the Plan Year and who was an Active Participant at any time during the Plan Year. A Non-key Employee is not required to have a minimum number of Hours-of-Service or minimum amount of Compensation in order to be entitled to this minimum. A Non-key Employee who fails to be an Active Participant merely because his Compensation is less than a stated amount or merely because of a failure to make mandatory participant

79

contributions or, in the case of a cash or deferred arrangement, elective contributions shall be treated as if he were an Active Participant. The minimum is the lesser of (a) or (b) below:

(a)3 percent of such person’s Compensation for such Plan Year.

(b)The “highest percentage” of Compensation for such Plan Year at which the Employer’s contributions are made for or allocated to any Key Employee. The highest percentage shall be determined by dividing the Employer Contributions made for or allocated to each Key Employee during the Plan Year by the amount of his Compensation for such Plan Year, and selecting the greatest quotient (expressed as a percentage). To determine the highest percentage, all of the Employer’s defined contribution plans within the Aggregation Group shall be treated as one plan. The minimum shall be the amount in (a) above if this Plan and a defined benefit plan of the Employer are required to be included in the Aggregation Group and this Plan enables the defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410.

For purposes of (a) and (b) above, Compensation shall be limited by Code Section 401 (a)(17).

If the Employer’s contributions and allocations otherwise required under the defined contribution plan(s) are at least equal to the minimum above, no additional contribution shall be required. If the Employer’s total contributions and allocations are less than the minimum above, the Employer shall contribute the difference for the Plan Year.

The minimum contribution applies to all of the Employer’s defined contribution plans in the aggregate which are Top-heavy Plans. A minimum contribution under a profit sharing plan shall be made without regard to whether or not the Employer has profits.

If a person who is otherwise entitled to a minimum contribution above is also covered under another defined contribution plan of the Employer’s which is a Top-heavy Plan during that same Plan Year, any additional contribution required to meet the minimum above shall be provided in this Plan.

If a person who is otherwise entitled to a minimum contribution above is also covered under a defined benefit plan of the Employer’s which is a Top-heavy Plan during that same Plan Year, the minimum benefits for him shall not be duplicated. The defined benefit plan shall provide an annual benefit for him on, or adjusted to, a straight life basis equal to the lesser of:

(c)2 percent of his average compensation multiplied by his years of service, or

(d)20 percent of his average compensation.

Average compensation and years of service shall have the meaning set forth in such defined benefit plan for this purpose.

For purposes of this section, any employer contribution made according to a salary reduction or similar arrangement and employer contributions which are matching contributions, as defined in Code Section 401(m), shall not apply in determining if the minimum contribution requirement has been met, but shall apply in determining the minimum contribution required.

The requirements of this section shall be met without regard to any Social Security contribution.

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SECTION 11.05—MODIFICATION OF CONTRIBUTION LIMITATION.

If the provisions of subparagraph (g) of the CONTRIBUTION LIMITATION SECTION of Article III are applicable for any Limitation Year during which this Plan is a Top-heavy Plan, the contribution limitations shall be modified. The definitions of Defined Benefit Plan Fraction and Defined Contribution Plan Fraction in the CONTRIBUTION LIMITATION SECTION of Article III shall be modified by substituting “100 percent” in lieu of “125 percent.” In addition, an adjustment shall be made to the numerator of the Defined Contribution Plan Fraction. The adjustment is a reduction of that numerator similar to the modification of the Defined Contribution Plan Fraction described in the CONTRIBUTION LIMITATION SECTION of Article III, and shall be made with respect to the last Plan Year beginning before January 1, 1984.

The modifications in the paragraph above shall not apply with respect to a Participant so long as employer contributions, forfeitures, or nondeductible employee contributions are not credited to his account under this or any of the Employer’s other defined contribution plans and benefits do not accrue for such Participant under the Employer’s defined benefit plan(s), until the sum of his Defined Contribution and Defined Benefit Plan Fractions is less than 1.0.

This section shall cease to apply effective as of the first Limitation Year beginning on or after January 1, 2000.

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By executing this Plan, the Primary Employer acknowledges having counseled to the extent necessary with selected legal and tax advisors regarding the Plan’s legal and tax implications.

Executed this                                            day of                                                                                            ,                        

GOVERNMENT TECHNOLOGY SERVICES, INC. By:
	Title
	Defined Contribution Plan 8.0

82

OPERATIONAL HISTORY ADDENDUM TO

PRINCIPAL FINANCIAL GROUP DEFINED CONTRIBUTION PLAN DOCUMENTS

The following provisions apply for Plan Years during the transition period between the earliest effective date under the law changes, collectively referred to as GUST, and the date the Employer adopts the GUST restated plan.

Definition of Highly Compensated. Employee

a)For the Plan Years marked, the Employer made the top-paid group election.

•o 1997 o 1998 o 1999 o 2000 o 2001

b)For the Plan Years marked, the Employer made the calendar year data election.

•o 1997 o 1998 o 1999 o 2000 o 2001

c)For the Plan Year marked, the Employer made the calendar year election.

•o1997

ADP/ACP Testing

a)For the Plan Years marked, the Employer used the prior year testing method for the ADP/ACP test.

o 1997 ý 1998 ý 1999 ý 2000 o 2001

b)For the Plan Years marked, the Employer used the current year testing method for the PDP/ACP test.

ý 1997 o 1998 o 1999 o 2000 o 2001

Complete (c) and (d) below if this is a plan that was restated to a Principal Financial Group plan document after December 31, 1996 and the ADP and ACP tests. used different testing methods.

c)For the Plan Years marked, the Employer used the prior year testing method for the ADP test and the current year testing method for the ACP test.

o 1997 o 1998 o 1999 o 2000 o 2001

d)For the Plan Years marked, the Employer used the current year testing method for the ADP test and the prior year testing method for the ACP test.

o 1997 o 1998 o 1999 o 2000 o 2001

1

e)For the Plan Year marked, the Employer used 3% as the nonhighly compensated employees ADP.

o 1997 o 1998 o 1999 o 2000 o 2001

Distribution Requirements (Minimum Distributions)

a)The plan will apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the 2001 Proposed Regulations for distributions made on or after June 14, 2001, for calendar years beginning on or after January 1, 2001, unless otherwise specified below.

1)o These provisions will be applied for distributions made on or after                               for calendar years beginning on or after January 1, 2001. Such date shall be substituted for June 14, 2001, in the applicable provisions of the Plan.

2)o These provisions will be applied for all distributions made for calendar years beginning on or after January 1, 2001.

3)o These provisions will be applied for all distributions made for calendar years beginning on or after January 1, 2002. These provisions will not be applied for distributions made for the 2001 calendar year.

Compensation Definition (Qualified Transportation Fringe Benefits)

a)Amounts excludible from the gross income of the Employee by reason of Code Section 132(0(4) shall not be included in any definition of Compensation for years beginning before January 1, 2001, unless otherwise specified below.

1)o Such amounts shall be included for years beginning January 1.                                                     .. (Must be 1998, 1999, or 2000.)

Eligible Rollover Distributions (Hardship Distributions)

a)Hardship distributions made after December 31, 1998 are not Eligible Rollover Distributions, unless otherwise specified below.

1)o Hardship distributions made after December 31, 1999 are not Eligible Rollover Distributions.

2)o Hardship distributions made after are not Eligible Rollover Distributions. (Must be between January 1, 1999 and December 31, 1999)

401(k) Safe Harbor Provisions

a)For the Plan Years marked, the plan operated as a 401(k) safe harbor plan.

o 1999 o 2000 o 2001

2

b)The 401(k) safe harbor provisions satisfied the ADP/ACP test safe harbors as specified in the plan document, unless otherwise specified below.

1)o The 401(k) safe harbor provisions satisfied the ADP/ACP test safe harbors for the 1999 Plan Year for

o ADP/ACP                     o ADP only

2)o The 401(k) sale harbor provisions satisfied the ADP/ACP test safe harbors for the 2000 Plan Year for

o ADP/ACP                     o ADP only

3)o The 401(k) safe harbor provisions satisfied the ADP/ACP test safe harbors for the 2001 Plan Year for

o ADP/ACP                     o ADP only

c)The ADP Test Safe Harbor was satisfied using the contributions specified in the plan document, unless otherwise specified below.

1)o For the 1999 Plan Year the ADP Test Safe Harbor was satisfied using

o Qualified matching contribution - basic formula.

o Qualified matching contribution - enhanced formula

o Qualified nonelective contribution

2)o For the 2000 Plan Year the ADP Test Safe Harbor was satisfied using

o Qualified matching contribution - basic formula.

o Qualified matching contribution - enhanced formula

o Qualified nonelective contribution.

3

Complete these sections it the plan restated to a Principal Financial Group plan document after December 31, 1996 or this is an individually designed plan document.

Small Amounts (Involuntary Distributions.)

a)The involuntary distribution cash out limit (small amounts limit) was $3,500 for Plan Years beginning before August 6, 1997 and was increased to $5,000 for Plan Years beginning on or after August 7, 1997, unless otherwise specified below.

Sub.

1)o The involuntary distribution cash out limit was increased to $5,000 on                 . (The date the plan restated to a Principal Financial Group prototype or individually designed plan document with the above involuntary distribution cash out limit or an earlier date if applicable.)

2)o Prior to            the involuntary distribution cash out limit was          not included in the plan document         $        Note (3) and (4) are only available on an individually designed plan document.

3)ý The involuntary distribution cash out limit is stated in the plan document.

4)o The involuntary distribution cash out limit is not included in the plan document

4

Repeal of Family Aggregation

a)For the Plan Years marked, the Employer applied the family aggregation rules for determining the amount of contributions made for or allocated to a member.

o 1997 o 1998 o 1999 o 2000 o 2001

5

GTSI Corp.

3901 Stonecroft boulevard Chantilly, VA2015I-1010

AMENDMENT TO ADD TRANSACTION PROCESSING SECTION

GTSI CORP. 401(K INVESTMENT PLAN)

The Plan named above gives the Employer the right to amend it at any time. According to that right, the Plan is amended effective as of the signature date below, as follows:

By adding to the Table of Contents the following Section 9.08:

Section 9.08             Transaction Processing By adding the following Section 9.08 to Article IX:

SECTION 9.08—TRANSACTION PROCESSING.

Transactions (including, but not limited to, investment directions, trades, loans, and distributions) shall be processed as soon as administratively practicable after proper directions are received from the Participant or such other parties. No guarantee is made by the Plan, Plan Administer, Trustee, Insurer, or Employer that such transactions will be processed on a daily or other basis, and no guarantee is made in any respect regarding the processing time of such transactions.

Nothwithstanding any other provision of the Plan, the Employer, the Plan Administrator, or the Trustee reserves the right to not value an investment option on any given Valuation Date for any reason deemed appropriate by the Employer, the Plan Administrator, or the Trustee. Administrative practicality will be determined by legitimate business factors (including, but not limited to, failure of systems or computer programs, failure of the means of the transmission of data, force majeure, the failure of a service provider to timely receive values or prices, and correction for errors or omissions or the errors or omissions of any service provider) and in no event will be deemed to be less than 14 days. The processing date of a transaction shall be binding for all purposes of the Plan and considered the applicable Valuation Date for any transaction.

This amendment is made an integral part of the aforesaid Plan and is controlling over the terms of said Plan with respect to the particular items addressed expressly herein. All other provisions of the Plan remain unchanged and controlling.

1

Unless otherwise stated on any page of this amendment, eligibility for benefits and the amount of any benefits payable to or on behalf of an individual who is an Inactive Participant on the effective date(s) stated above, shall be determined according to the provisions of the aforesaid Plan as in effect on the day before he became an Inactive Participant.

Signed this 31 day of			December 2003
For the Employer
By	/s/ Bridget Atkinson
Bridget Atkinson
Title		VP, HR

2

TO COMPLY WIH THE 401(a)(9) FINAL AND TEMPORARY REGULATIONS

TO COMPLY WIH THE 401(a)(9) FINAL AND TEMPORARY REGULATIONS

Plan Name GTSI CORP. 401(K)INVESTMENT PLAN

The plan named above gives the Employer the right to amend it at any time. According to that right, the Plan is amended by adopting the model amendment set forth below.

The plan’s existing minimum distribution provisions are superseded to the extent they are inconsistent with the provisions of this model amendment, but those provisions that are not inconsistent (such as the plan’s definition of required beginning date) shall be retained. The plan’s minimum distribution provisions are amended as follows:

ARTICLE VII. MINIMUM DISTRIBUTION REQUIREMENTS. Section 1. General Rules

1.1.Effective Date. The provisions of this article will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

1.2.Coordination with Minimum Distribution Requirements Previously in Effect- This amendment is not-effective until calendar years beginning with the 2003 calendar year, therefore, no coordination is required.

1.3.Precendence. The requirements of this article will take precedence over any inconsistent provisions of the plan.

1.4.Requirements of Treasury Regulations Incorporated. All distributions required under this article will be determined and made in accordance with the Treasury regulations under section 401(a)(9) of the Internal Revenue Code.

1.5TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this article, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tai. Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the plan that relate to section 242(b)(2) of TEFRA.

Section 2. Time and Manner of Distribution.

2.1Required Beginning Date. The participant’s entire interest will be distributed, or begin to be distributed, to the participant no later than the participant’s required beginning date.

2.2.Death of Participant Before Distributions Begin. If the participant dies before distributions begin, the participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(a)if the participant’s surviving spouse is the participant’s sole designated beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the participant would have attained age 70 1/2 if later, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the participant’s entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

(b)If the participant’s surviving spouse is not the participant’s sole designated beneficiary, then distributions will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the participant’s entire interest will be distributed to the designated beneficiary by December of the calendar year containing the fifth anniversary of the participant’s death.

(c)If there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, the participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

(d)If the participant’s surviving spouse is the participant’s sole designated beneficiary and the surviving spouse dies after the participant but before distributions to the surviving spouse begin, this section 2.2, other than section 2.2(a), will apply as if the surviving spouse were the participant.

For purposes of this section 2.2. and section 4, unless section 2.2(d) applies, distributions are considered to begin on the participant’ required beginning date. If section 2.2(d) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under section 2.2(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the participant before

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the participant’s required beginning date (or to the participant’s surviving spouse before the date distributions are required begin to the surviving spouse under section 2.2(a)), the date distributions are considered to begin is the date distributions actually commence.

2.3.Forms of Distribution. Unless the participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with sections 3 and 4 of this article. If the participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of section 40l(a)(9) of the code and the Treasury regulations.

Section 3. Required Minimum Distributions During Participant’s Lifetime.

3.1.Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the participant’s lifetime, the minimum amount that will distributed for each distribution calendar year is the lesser of:

(a)the quotient obtained by dividing the participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)—9 of the Treasury regulations, using the participant’s age as of the participant’s birthday in the distribution calendar year; or

(b)if the participant’s sole designated beneficiary for the distribution calendar year is the participant’s spouse, the quotient obtained by dividing the participant’s account balance by the number in the Joint and Last Survivor Table set forth in section l-401(a)(9)-9 of the Treasury regulations, using the participant’s and spouse’s attained ages as of the participant’s and spouse’s birthdays in the distribution calendar year.

3.2.Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this section 3 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the participant’s date of death.

Section 4. Required Minimum Distributions After Participant’s Death.

4.1.Death On or After Date Distributions Begin.

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(a)Participant Survived by Designated Beneficiary. If the participant dies on or after the date distributions begin and there is a designated beneficiary; the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the longer of the remaining life expectancy of the participant or the remaining life expectancy of the participant’s designated beneficiary, determined as follows:

(1)The participant’s remaining life expectancy is calculated using the age of the participant in the year of death, reduced by one for each subsequent year.

(2)If the participant’s surviving spouse is the participant’s sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(3)If the participant’s surviving spouse is not the participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the participant’s death, reduced by one for each subsequent year.

(b)No Designated Beneficiary. If the participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after Vie year of the participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the participant’s remaining life expectancy calculated using the age of the participant in the year of death, reduced by one for each subsequent year.

4.2.Death Before Date Distributions Begin.

(a)Participant Survived by Designated Beneficary. If the participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the remaining life expectancy of the

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the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the remaining life expectancy of the participant’s designated beneficiary, determined as provided in section 4.1, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the participant’s entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

(b)No Designated Beneficiary. If the participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, distribution of the participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

(c)Death of surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the participant dies before the date distributions begin, the participant’s surviving spouse is the participant’s sole designated beneficiary, and the surviving spouse dies before the distributions are required to begin to the surviving spouse under section 2.2(a), this section 4.2 will apply as if the surviving spouse were the participant.

Section 5. Definitions.

5.1.Designated beneficiary. The individual who is designated as the beneficiary under the BENEFICIARY SECTION of Article X of the plan and is the designated beneficiary under section 401(a)(9) of the Internal Revenue Code and section 1-401(a)(9)-I, Q&A-4, of the Treasury regulations.

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5.2.Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the participant’s death, the first distribution calendar year is the calender year immediately preceding the calendar year which contains the participant’s required beginning date. For distributions beginning after the participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under section 2.2. The required minimum distribution for the participant’s first distribution calendar year will be made on or before the participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution year in which the participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

5.3.Life expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury regulations.

5.4.Participant’s account balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

5.5.Required beginning date. The date specified in the DEFINITIONS SECTION of Article VII of the plan.

Section 6. Election to Allow Participants or Beneficiaries to Elect 5-Year Rule.

Participants or beneficiaries may elect on an individual basis whether the 5-year rule or the life expectancy rule in sections 2.2 and 4.2 of Article VII of the plan applies to distributions after the death of a participant who has a designated beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under section 2.2 of Article VII of the plan, or by September 30 of the calendar year which contains the fifth anniversary of the participant’s (or, if applicable, surviving spouse’s) death. If neither the participant nor beneficiary makes an election under this paragraph, distributions will be made in accordance with the life expectancy rule under sections 2.2 and

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4.2 of Article vii of the plan.

Section 7. Election to Allow Designated Beneficiary Receiving Distributions Under 5-Year Rule to Elect Life Expectancy Distributions.

A designated beneficary who is receiving payments under the 5-year rule may make a new election to receive payments under the life expectancy rule until December 31, 2003, provided that all amounts that would have been required to be distributed under the life expectancy rule for all distribution calendar years before 2004 are distributed by the earlier of December 31, 2003 or the end of the 5-year period.

This amendment is made an integral part of the aforesaid Plan and is controlling over the terms of said Plan with respect to the particular items addressed expressly therein. All other provisions of the Plan remain unchanged and controlling.

Unless otherwise stated on any page of this amendment, eligibility for benefits and the amount of any benefits payable to or on behalf of an individual who is an Inactive Participant on the effective date(s) stated above, shall be determined according to the provisions of the aforesaid Plan as in effect on the day before he became an Inactive Participant.

Signing this amendment, the Employer, as plan sponsor, has made the decision to adopt this plan amendment. The Employer is acting in reliance on its own discretion and on the legal and tax advice of its own advisors, and not that of any member of the Principal Financial Group or any representative of a member company of the Principal Financial Group.

Signed this 31st day of December 2003
For the Employer,
By	/s/ Bridget Atkinson
	Bridget Atkinson
	VP HR
	Business Title

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GOOD FAITH
COMPLIANCE AMENDMENT FOR THE
ECONOMIC GROWTH OF 2001 (EGTRRA)

This amendment of the Plan is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). This amendment is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided, this amendment shall be effective as of the first day of the first Plan Year beginning after December 31, 2001.

This amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment

Government Technology

The Plan named above gives the Employer the right to amend it at any time. According to that right, the Plan is amended as follows:

INCREASE IN COMPENSATION LIMIT

For Plan Years beginning on and after January 1, 2002, the annual Compensation of each Participant taken into account for determining all benefits provided under the Plan for any determination period shall not exceed $200,000, as adjusted for increases in the cost-of-living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any determination period beginning in such calendar year.

If Compensation for any prior determination period is taken into account in determining a Participant’s contributions or benefits for the current Plan Year, the Compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that determination period. For this purpose, in determining contributions or benefits in Plan Years beginning on or after January 1, 2002, the annual Compensation limit in effect for determination periods beginning before that date is $200,000.

LIMITATIONS ON CONTRIBUTIONS

Effective date. This section shall be effective for Limitation Years beginning after December 31, 2001.

Maximum Annual Addition. Except to the extent permitted in the Catch-up Contributions section of this amendment that provides for catch-up contributions under EGTRRA section 631 and Code Section 414(v), if applicable, the Annual Addition that may be contributed or allocated to a Participant’s Account underthe Plan for any Limitation Year shall not exceed the lesser of:

a)       $40,000, as adjusted for increases in the cost-of-living under Code Section 415(d), or

b)       100 percent of the Participant’s Compensation, for the Limitation Year.

The compensation limitation referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code Section 401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition.

Elective Deferral Limits. The cap (or the choice to not include a cap) on Elective Deferral Contributions will not change, unless otherwise specified below.

a)       (Increase the cap.) Increase the cap on Elective Deferral Contributions to                                    % of Compensation.

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b)       (Remove the cap.) The cap on Elective Deferral Contributions shall no longer apply.

c)       (Add a cap.) The Plan does not currently cap Elective Deferral Contributions. A participant may not defer more than            % of his Compensation for (Select one.)

i)o for the Plan Year

ii)o for the pay period.

iii)o for the month.

Voluntary After-tax Contributions. Voluntary Contributions will not be added to the Plan, unless otherwise specified below.

Modification of definition of Eligible Rollover Distribution to exclude hardship distributions. For purposes of the DIRECT ROLLOVER Section, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the Distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan.

Plan implementing the requirements of Code Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such catch-up contributions.

a)        Catch-up Contributions are not permitted.

DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS

Effective date. This section shall apply to distributions made after December 31, 2001.

Modification of definition of Eligible Retirement Plan. For purposes of the DIRECT ROLLOVER Section. an Eligible Retirement Plan shall also mean an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p).

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Modification of definition of Eligible Rollover Distribution to include after-tax employee contributions. For purposes of the DIRECT ROLLOVER Section, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

ROLLOVERS FROM OTHER PLANS

The Plan will accept Participant Rollover Contributions and/or direct rollovers of distributions made after December 31, 2001 from the types of plans specified below beginning January 1, 2002. The Plan will accept all of the following sources of rollovers, unless otherwise specified in (a) below

Direct Rollovers

The Plan will accept a direct rollover of an Eligible Rollover Distribution from:

p a qualified plan described in Code Section 401 (a) or 403(a), including after-tax employee contributions.

ii)	an annuity contract described in Code Section 403(b), excluding after-tax employee contributions.
iii)	an eligible plan under Code Section 457(b) which Is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

Participant Rollover Contributions from Other Plans

The Plan will accept a Participant contribution of an Eligible Rollover Distribution from:

i)       a qualified plan described in Code Section 401 (a) or 403(a).

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ii)	an annuity contract described in Code Section 403(b).
iii)	an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

Participant Rollover Contributions from IRAs

The Plan will accept a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b) that is eligible to be rolled over and would otherwise be includible in gross income.

(Select (a) if you want to allow only certain sources of rollovers.)

a) o  The Plan will accept Participant Rollover Contributions and/or direct rollovers of distributions made after December 31, 2001 from the types of plans specified below beginning January 1, 2002. (Select any that apply.)

Direct Rollovers

The Plan will accept a direct rollover of an Eligible Rollover Distribution from:

i)	o  a qualified plan described in Code Section 401 (a) or 403(a), including after-tax employee contributions,
ii)	o  a qualified plan described in Code Section 401(a) or 403(a), excluding after-tax employee contributions. (Cannot select if (i) is selected.).
iii)	o  an annuity contract described in Code section 403(b), excluding after-tax employee contributions.
iv)	o  an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

Participant Rollover Contributions from Other Plans

The Plan will accept a Participant contribution of an Eligible Rollover Distribution from:

i)	o  a qualified plan described in Code Section 401 (a) or 403(a).
ii)	o  an annuity contract described in Code Section 403(b).
iii)	o  an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

Participant Rollover Contributions from IRAs

The Plan will accept a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b) that is eligible to be rolled over and would otherwise be ineludible in gross income, unless otherwise specified below.

i)Participant Rollover Contributions from IRAs are not permitted.

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ROLLOVERS DISREGARDED IN INVOLUNTARY CASH-OUTS

Rollover Contributions will be included in determining the value of account balances for involuntary distributions, unless otherwise specified below. (NOTE Can only select (a) if the Plan is not subject to the qualified joint and survivor annuity requirements of Code Sections 401(a)(11) and 417.)

a) Rollover Contributions are excluded in determining the value of the Participant’s nonforfeitable balance for purposes of the Plan’s involuntary cash-out rules for distributions made after                                                                                  ,                                  (No earlier than December 31, 2001.) with respect to Participants who separated from service after                   ,                   . (The date may be earlier than December 31, 2001.)

REPEAL OF MULTIPLE USE TEST

The multiple use test described in Treasury Regulation section 1.401(m)-2 and the EXCESS AMOUNTS Section shall not apply for Plan Years beginning after December 31, 2001.

DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT

Effective date. This section shall apply for distributions due to severance from employment occurring after December 31, 2001 and distributions that are processed after December 31, 2001 regardless of when the severance from employment occurred.

New distributable event - Distribution Upon Severance From Employment. A Participant’s Elective Deferral Contributions, Qualified Nonelective Contributions, Qualified Matching Contributions, and earnings attributable to these Contributions shall be distributed on account of the Participant’s severance from employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed.

SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION

If the Plan allows hardship distributions and the deemed hardship provisions are used, the suspension period following a hardship distribution will be decreased, unless otherwise specified in (a) below. A Participant who receives a distribution of elective deferrals after December 31, 2001, on account of hardship shall be prohibited from making elective deferrals and participant contributions under this and all other plans of ours for six months after receipt of the distribution-A Participant who receives a distribution of elective deferrals in calendar year 2001 on account of hardship shall be prohibited from making elective deferrals and participant contributions under this and all other plans of ours for six months after receipt of the distribution or until January 1, 2002, if later.

a)The suspension period will not change. (Not available for 401 (k) Safe Harbor plans.)

MODIFICATION OF TOP-HEAVY RULES

Effective date. This section shall apply for purposes of determining whether the Plan is a Top-heavy Plan for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Code Section 416(c) for such years. This section amends the TOP HEAVY PLAN REQUIREMENTS Section of the Plan.

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Determination of top-heavy Status.

Key Employee means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was:

a) an officer of ours if such individual’s annual Compensation is more than $130,000 (as adjusted under Code Section 416(1)(1) for Plan Years beginning after December 31, 2002),

b) a 5-percent owner of us, or

c) a 1-percent owner of us who has annual Compensation of more than $150,000.

The determination period is the Plan Year containing the Determination Date.

The determination of who is a Key Employee shall be made according to Code Section 416(1)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

Determination of present values and amounts. This section shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of Employees as of the Determination Date.

Distributions during year ending on the Determination Date. The present values of accrued benefits and the amounts of account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the one-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i) In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “five-year period’ for one-year period

Employees not performing services during year ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for us during the one-year period ending on the Determination Date shall not be taken into account.

Minimum benefits.

Matching contributions. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Code Section 401(m).

Contributions under other plans. We may provide in the Plan that the minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Code Section 401(k)(12) and matching contributions with respect to which the requirements of Code Section 401(m)(11) are met).

PLAN LOANS FOR OWNER-EMPLOYEES AND SHAREHOLDER EMPLOYEES

Effective for plan loans made after December 31, 2001, plan provisions prohibiting loans to any shareholder-employee or Owner-employee shall cease to apply

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Signed this 28^th day of December, 2001

/s/ Susan Estes

Susan Estes

Title

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AMENDMENT NO. I

AMENDMENT NO. I

GTSI EMPLOYEES’ 401(k) INVESTMENT PLAN

The Plan named above gives the Employer the right to amend it at any time. According to that right, the plan is amended as of January 1, 2002, as follows:

By striking the Title Page and substituting the following: GTSI CORP. 401(k) INVESTMENT PLAN

The provisions and conditions set forth on any page of this amendment are a part of the Plan as fully as if recited over the signature(s) below.

Unless otherwise stated on any page of this amendment, eligibility for benefits and the amount of such benefits payable to or on behalf of an individual who is an Inactive Participant on the effective date(s) stated above, shall be determined according to the provisions of the Plan as in effect on the day before he became an Inactive Participant.

By signing this amendment, the Employer acknowledges having counseled to the extent necessary with selected legal and tax advisors regarding the amendment’s legal and tax implications.

Signed this 14^th day of November, 2002

GTSI Corp.
By	/s/ Bridget Atkinson
Bridget Atkinson
VP, Human Resources

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Your plan is an important legal document. This sample plan has been prepared based on our understanding of the desired provisions. It may not fit your situation. You should consult with your lawyer on the plan’s legal and tax implications. Neither Principal Life Insurance Company nor its agents can be responsible for the legal or tax aspects of the plan nor its appropriateness for your situation. If you wish to change the provisions of this sample plan, you may ask us to prepare new sample wording for you and your lawyer to review.

EX-10.12

Exhibit 10.12

FIRST AMENDMENT TO

CREDIT FACILITIES AGREEMENT

This FIRST AMENDMENT TO CREDIT FACILITIES AGREEMENT (this “Agreement”) is entered into and effective as of March 12, 2004, by and among GTSI Corp, a Delaware corporation (“Borrower”), GE Commercial Distribution Finance Corporation (“GECDF”), as Administrative Agent, and GECDF and the other Lenders.

Recitals:

A.Borrower, Administrative Agent and Lenders are party to that certain Credit Facilities Agreement dated as of October 20 2003 (the “Original Credit Agreement”).

B.Administrative Agent, Lenders and Borrower have agreed to the provisions set forth herein on the terms and conditions contained herein.

Agreement

Therefore, in consideration of the mutual agreements herein and other sufficient consideration, the receipt of which is hereby acknowledged, Borrower, Administrative Agent and the Lenders hereby agree as follows:

1.Definitions.  All references to the “Agreement” or the “Credit Agreement” in the Original Credit Agreement and in this Agreement shall be deemed to be references to the Original Credit Agreement as it may be amended, restated, extended, renewed, replaced, or otherwise modified from time to time.  Capitalized terms used and not otherwise defined herein have the meanings given them in the Original Credit Agreement.

2.Effectiveness of Agreement.  This Agreement shall become effective as of the date first written above, but only if this Agreement has been executed by Borrower, Administrative Agent and the Lenders, and only if all of the documents listed on Exhibit A to this Agreement have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Administrative Agent and the Lenders, and the other fundings required by this Agreement have occurred.

3.New Lender.

3.1.In connection with this Agreement, and simultaneously with its effectiveness and certain fundings as set forth herein, SunTrust Bank (“New Lender”) will become a Lender for all purposes under the Original Credit Agreement and Loan Documents together with the existing Lender (the “Existing Lender”).  Simultaneously with the effectiveness of this Agreement and certain fundings as set forth herein, Exhibit 3 to the Original Credit Agreement is deleted and replaced with the Exhibit 3 attached hereto.

3.2.Upon the full and complete execution of this Agreement, the Administrative Agent shall arrange, and each Lender (including New Lender and the Existing Lender) shall fully cooperate, in making or receiving, as directed by the Administrative Agent, wire transfers and fund transfers reasonably necessary to effectuate the pro-rata shares set forth on Exhibit 3.  Upon such transfer of funds, this

Agreement shall be effective and such effectiveness shall relate back to 8:00 a.m. St. Louis time on the date of this Agreement.

3.3.New Lender agrees that, to the extent it has purchased and assumed or be found to have purchased and assumed from Existing Lender any interest in any Loan that it has purchased and assumed such interest, without recourse and without representation or warranty except as expressly set forth in Section 3.4.  Such purchase and assumption shall include that portion of the Existing Lender’s obligations to fund unfunded Approvals equal to its percentage of the Floorplan Loans.

3.4.Existing Lender represents and warrants that it is the legal and beneficial owner of its Loans and that such interest is free and clear of any adverse claim.

3.5.New Lender (i) confirms, covenants and agrees that it has received a copy of the Original Credit Agreement and all prior amendments (if any), the Loan Documents, together with copies of the Financial Statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and become a Lender, and confirms and covenants that it has entered into this Agreement and agreed to become a Lender based on its own credit analysis and decision and without reliance upon any information provided by, or statement made by, Administrative Agent or any other Lender; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, any Existing Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Original Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Original Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Original Credit Agreement and the other Loan Documents are required to be performed by it as a Lender; and (vi) promptly provide to Administrative Agent any U.S. Internal Revenue Service or other forms required under the Original Credit Agreement.

3.6.Upon the effectiveness of this Agreement and the funding by the New Lender of the amounts directed to be funded by it by the Administrative Agent as set forth in Section 3.2 hereof, such New Lender shall be a Lender for all purposes under the Original Credit Agreement and the other Loan Documents.  From and after the effective date of this Agreement, the Administrative Agent shall make all payments under the Original Credit Agreement and the Notes consistent with the pro-rata shares of the Lenders.

4.Amendment.  The Original Credit Agreement is hereby amended as follows:

4.1.Termination.  A new Section 3.7 is hereby added to the Credit Agreement as follows:

3.7.Co-Lender’s Share; Terminating Lender.Until all of the Loan Obligations are fully and indefeasibly paid, no Letters of Credit remain outstanding, the Letter of Credit Exposure is irreversibly zero and all Facilities are terminated, each Lender must, subject to Section 18.4 of the Agreement, retain its pro-rata share of all of the Aggregate Facilities that have not been previously terminated in accordance with this Agreement and perform all of its obligations as a Lender hereunder.  Notwithstanding the preceding sentence, not less than 105 (one hundred five) days prior to the Initial Maturity Date and each anniversary of the Initial Maturity Date thereafter (each a “Maturity Date”), each Lender shall notify Administrative Agent in writing whether or not it desires to terminate the Aggregate Facilities as of the next Maturity Date.  Any Lender giving such notice

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shall be known as a “Terminating Lender.”  The Administrative Agent shall deliver to each other Lender any such notice received from a Terminating Lender immediately upon the Administrative Agent’s receipt.  In the absence of timely notice required above, Lender shall be deemed to have expressed its desire to renew the Agreement and to continue as a Lender hereunder through the next Maturity Date.  Provided that (i) no Event of Default has occurred and is continuing, (ii) Terminating Lender has given timely notice of its desire to terminate the Aggregate Facilities as of the next Maturity Date, and (iii) the Aggregate Facilities are to be renewed by Borrower and the remaining Lender(s), then, as of the Maturity Date, a Terminating Lender shall, at the direction of Administrative Agent, assign its pro-rata share of the Aggregate Facilities to either a substitute Lender or the remaining Lender(s) on a pro-rata basis.  Such Lender(s) shall pay the Terminating Lender in full for its pro-rata share of all Loan Obligations, including the outstanding Loans and accrued but unpaid interest and fees.  Thereafter, such Terminating Lender shall be released from its obligations as a Lender hereunder.

4.2.Maturity.  Section 6.1.2.3 of the Original Credit Agreement is deleted and replaced with the following:

6.1.2.3.Maturity.   Borrower shall repay the entire amount of the Aggregate Revolving Loan on February 28, 2005 (“Initial Maturity Date”), unless the Aggregate Revolving Loan Facility continues after the Initial Maturity Date as provided below in this Section 6.1.2.3.  Borrower shall repay the amount of the Swingline Loans on demand.  The Aggregate Revolving Loan Facility will continue from year to year on each anniversary of the Initial Maturity Date unless Borrower or the Required Lenders give each party hereto written notice of termination of not less than 90 days prior to the start of a renewal period.  Each of the Aggregate Floorplan Loan Facility, the Interim Floorplan Loan Facility and the Swingline Facility are discretionary and may be terminated at any time as set forth herein, with or without notice or demand as set forth herein; provided, however, if Borrower shall give notice of termination of the Aggregate Revolving Loan Facility, then such notice shall be deemed to be notice of termination for all Facilities in which case Borrower shall pay the entire amount of the outstanding Loan Obligations upon the effective date of such notice of termination, including payment of cash collateral satisfactory to Administrative Agent as security for Borrower’s obligation to reimburse Administrative Agent or the Letter of Credit Issuer, as the case may be, for 105% of all draws and expenses under all outstanding Letters of Credit and 100% of any unfunded Approvals, in which case such Approvals shall be otherwise paid in accordance with the applicable Statements of Transaction.

4.3.Maximum Total Liabilities to Tangible Net Worth.  Section 15.3 of the Original Credit Agreement is deleted and replaced with the following:

15.3Maximum Total Liabilities to Tangible Net Worth.  Borrower covenants that the ratio of Total Liabilities minus Subordinated Indebtedness to Tangible Net Worth plus Subordinated Indebtedness calculated as of the last day of each fiscal month specified in the table below, shall not be more than the ratio specified in such table opposite said fiscal month

Fiscal Month Ended	Maximum Ratio
Each July 31, August 31, and September 30	6.00:1.00
Each January 31, February 28/29, March 31, April 30, May 31, June 30, October 31, November 30 and December 31	4.00:1.00

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4.4.Additional Definitions.  The following defined terms are hereby added to Exhibit 2.1 Glossary and Index of Defined Terms:

COMMITMENT — a Lender’s pro rata share of the Aggregate Facilities.

EXISTING DEFAULT — a Default which has occurred and is continuing, or an Event of Default which has occurred, and which has not been waived in writing by the Required Lenders.

5.Representations and Warranties of Borrower.  Borrower hereby represents and warrants to Administrative Agent and the Lenders that (i) Borrower’s execution of this Agreement has been duly authorized by all requisite action of Borrower; (ii) no consents are necessary from any third parties for Borrower’s execution, delivery or performance of this Agreement, (iii) this Agreement, the Credit Agreement, and each of the other Loan Documents, constitute the legal, valid and binding obligations of Borrower enforceable against each such Borrower in accordance with their terms, except to the extent that the enforceability thereof against Borrower may be limited by bankruptcy, insolvency or other laws affecting the enforceability of creditors rights generally or by equity principles of general application, (iv) except as disclosed on the supplemental disclosure schedule attached hereto as Exhibit B and the disclosure schedule attached to the Original Credit Agreement, all of the representations and warranties contained in Section 12 of the Credit Agreement are true and correct with the same force and effect as if made on and as of the date of this Agreement, and (v) after giving effect to this Agreement, there is no Existing Default.

6.Reaffirmation.  Borrower hereby represents, warrants, acknowledges and confirms that (i) the Credit Agreement and the other Loan Documents remain in full force and effect, (ii) Borrower has no defenses to its obligations under the Credit Agreement and the other Loan Documents, (iii) the Security Interests of the Administrative Agent (held for the ratable benefit of the Lenders) under the Security Documents secure all the Loan Obligations under the Credit Agreement, continue in full force and effect, and have the same priority as before this Agreement, and (iv) Borrower has no claim against Administrative Agent or any Lender arising from or in connection with the Credit Agreement or the other Loan Documents and any such claim is hereby irrevocably waived and released and discharged forever.

7.Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Missouri without giving effect to choice or conflicts of law principles thereunder.

8.Fees and Expenses.  Borrower shall promptly pay to Administrative Agent an amount equal to 50% of all reasonable and documented third party fees, costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this First Amendment to Credit Facilities Agreement (notwithstanding the fact that Section 18.5 of the Original Credit Agreement may otherwise require Borrower to pay all of such fees, costs and expenses), and the 50% balance thereof shall be paid by the Administrative Agent.

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9.Section Titles.  The section titles in this Agreement are for convenience of reference only and shall not be construed so as to modify any provisions of this Agreement.

10.Counterparts; Facsimile Transmissions.  This Agreement may be executed in one or more counterparts and on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures to this Agreement may be given by facsimile or other electronic transmission, and such signatures shall be fully binding on the party sending the same.

11.Incorporation By Reference.  Administrative Agent, Lenders and Borrower hereby agree that all of the terms of the Loan Documents are incorporated in and made a part of this Agreement by this reference.

12.Notice—Oral Commitments Not Enforceable.  The following notice is given pursuant to Section 432.045 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.  TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

13.Statutory Notice-Insurance.  The following notice is given pursuant to Section 427.120 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS.  THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL.  YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT.  IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.  THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

{remainder of page intentionally left blank; signature page immediately follows}

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written.

GTSI CORP., as Borrower
By:	/s/ Thomas A. Mutryn
Name: Thomas A. Mutryn
Title: Senior Vice President and Chief Financial Officer
GE COMMERCIAL DISTRIBUTION FINANCE CORPORATION,
as Administrative Agent and a Lender
By:	/s/ David Mintert
Name: David Mintert
Title: Vice President of Operations
SUNTRUST BANK, as a Lender
By:	/s/ Mark Swaak
Name: R. Mark Swaak
Title: Vice President

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Exhibit A

Documents and Requirements

1.First Amendment to Credit Facilities Agreement.

2.Amended and Restated Revolving Note in the amount of $72,000,000.00 to GE Commercial Distribution Finance Corporation.

3.Revolving Note in the amount of $18,000,000.00 to SunTrust Bank.

4.Assignment and Acceptance Agreement between GE Commercial Distribution Finance Corporation and SunTrust Bank.

5.Notice of Borrowing Officers, certified by Secretary or Assistant Secretary of Borrower.

Exhibit B

Disclosure Schedule

Nothing, if nothing listed.

Exhibit 3

LENDERS’ FACILITIES AND PRO-RATA SHARES

LENDER	TOTALS(1)		REVOLVING LOAN FACILITY		FLOORPLAN LOAN FACILITY		PRO-RATA SHARES
GE Commercial Distribution Finance	$	100,000,000.00	$	72,000,000.00	$	60,000,000.00	80	%
SunTrust Bank	$	25,000,000.00	$	18,000,000.00	$	15,000,000.00	20	%
AGGREGATES	$	125,000,000.00	$	90,000,000.00	$	75,000,000.00	100.00000	%

(1)  Subject to the Total Aggregate Credit Facility Limit of $125,000,000 - which can be composed in any combination of Aggregate Revolving Loans (subject to the $90,000,000 Aggregate Revolving Loan Facility) and Aggregate Floorplan Loans (subject to the $75,000,000 Aggregate Floorplan Loan Facility).

EX-10.14

Exhibit 10.14

THIRD AMENDMENT TO

CREDIT FACILITIES AGREEMENT

This THIRD AMENDMENT TO CREDIT FACILITIES AGREEMENT (this “Agreement”) is entered into and effective as of November 22, 2004, by and among GTSI Corp, a Delaware corporation (“GTSI”), Technology Logistics, Inc., a Delaware corporation (“TLI”), separately and collectively as “Borrower,” GE Commercial Distribution Finance Corporation (“GECDF”), as Administrative Agent, and GECDF and the other Lenders.

Recitals:

A.GTSI, Administrative Agent and Lenders are party to that certain Credit Facilities Agreement dated as of October 20, 2003, as amended by that certain First Amendment to Credit Facilities Agreement dated as of March 12, 2004, as further amended by that certain Second Amendment to Credit Facilities Agreement dated as of July 29, 2004 (the “Original Credit Agreement”).

B.The Original Credit Agreement contemplates that new Subsidiaries of GTSI may be created by GTSI from time to time with the consent of the Administrative Agent in accordance with the terms of the Original Credit Agreement.

C.GTSI desires to form a new subsidiary, GTSI Financial Services, Inc., a Delaware corporation (“GTSIFS”).  The Administrative Agent and the Lenders hereby consent thereto, pursuant to the terms, conditions and provisions contained herein.

Agreement

Therefore, in consideration of the mutual agreements herein and other sufficient consideration, the receipt of which is hereby acknowledged, GTSI, TLI, Administrative Agent and the Lenders hereby agree as follows:

1.Definitions. All references to the “Agreement” or the “Credit Agreement” in the Original Credit Agreement and in this Agreement shall be deemed to be references to the Original Credit Agreement as it may be amended (by this Agreement and others), restated, extended, renewed, replaced, or otherwise modified from time to time.  Capitalized terms used and not otherwise defined herein have the meanings given them in the Original Credit Agreement.

2.Effectiveness of Agreement. This Agreement shall become effective as of the date first written above, but only if this Agreement has been executed by each of GTSI, TLI, Administrative Agent and the Lenders, and only if all of the documents listed on Exhibit A to this Agreement have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Administrative Agent and the Lenders, by each of GTSI, TLI, and/or GTSIFS, as applicable.  Each document, note, certificate or agreement listed on Exhibit A and signed by GTSI, TLI, or GTSIFS, as applicable, is and shall be deemed (together with all prior documents, notes, certificates and other agreements defined as Loan Documents in the Original Credit Agreement) to be a “Loan Document.”

3.Consent to Creation New Subsidiary – GTSI Financial Services, Inc. Pursuant to Section 14.20.1 of the Original Credit Agreement, Administrative Agent hereby consents to GTSI creating GTSIFS as a wholly-owned subsidiary of GTSI for the purpose of financing lease transactions, provided, however, that

all documents and requirements listed on Exhibit A are provided to the Administrative Agent.  For all purposes under this Agreement, the Original Credit Agreement, and the Loan Documents, and hereafter, all references to “Covered Person” or “Covered Persons” shall, among others, be deemed to include each of GTSI, TLI, and GTSIFS.

4.Amendments to Credit Agreement. The Original Credit Agreement is hereby amended as follows:

4.1.Replacement Exhibit 3. Exhibit 3 of the Original Credit Agreement is hereby deleted and replaced with a new Exhibit 3, attached hereto.

4.2.Floorplan Loan. The first sentence of Section 3.2.1 of the Original Credit Agreement is deleted and replaced with the following:

“3.2.1.Floorplan Loan Facility Generally.   Each Lender may, subject to the terms and conditions hereof, make available to Borrower such Lender’s pro-rata share (as listed on Exhibit 3) of an “Aggregate Floorplan Loan Facility” that is One Hundred Twenty-Five Million Dollars ($125,000,000) by funding such Lender’s pro-rata share thereof as provided for herein.”

4.3. Addition of USA PATRIOT Act Notice and OFAC/BSA Provision.  Section 20 of the Original Credit Agreement is hereby amended by adding the following new sections thereto:

“20.16.  Customer Identification - USA PATRIOT Act Notice.  Administrative Agent hereby notifies each Borrower that, pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (as amended from time to time (including any successor statute) and together with all rules promulgated thereunder, collectively, the “Act”), Lenders are required to obtain, verify and record information that identifies the Borrowers and Guarantors, which information includes the name and address of the Borrowers and Guarantors and other information that will allow Lender to identify the Borrowers and Guarantors in accordance with the Act.

“20.17.  OFAC/BSA Provision.  Each Borrower shall (a) ensure that neither it nor any Person who owns a controlling interest in or otherwise controls such Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury, or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loans to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause each Person who owns a controlling interest in or otherwise controls the Borrower to comply, with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.”

5.Representations and Warranties of Borrower.  Each Borrower hereby represents and warrants to Administrative Agent and the Lenders that (i) Borrowers’ execution of this Agreement has been duly authorized by all requisite action of each Borrower; (ii) no consents are necessary from any third parties for Borrowers’ execution, delivery or performance of this Agreement, (iii) this Agreement, the Original Credit Agreement, and each of the other Loan Documents, constitute the legal, valid and binding obligations of each Borrower enforceable against each such Borrower in accordance with their terms, except to the extent that the enforceability thereof against Borrowers may be limited by bankruptcy, insolvency or other laws affecting the enforceability of creditors rights generally or by equity principles of general application, (iv) except as disclosed on the supplemental disclosure schedule attached hereto as Exhibit B and the disclosure schedule attached to the Original Credit Agreement, all of the representations

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and warranties contained in Section 11 of the Credit Agreement are true and correct with the same force and effect as if made on and as of the date of this Agreement, and (v) after giving effect to this Agreement, there is no Existing Default.

6.Reaffirmation. Each Borrower hereby represents, warrants, acknowledges and confirms that (i) the Original Credit Agreement and the other Loan Documents remain in full force and effect as amended by this Agreement, (ii) no Borrower has a defense to its obligations under the Original Credit Agreement and the other Loan Documents, (iii) the Security Interests of the Administrative Agent (held for the ratable benefit of the Lenders) under the Security Documents secure all the Loan Obligations under the Original Credit Agreement, continue in full force and effect, and have the same priority as before this Agreement, and (iv) no Borrower has a claim against Administrative Agent or any Lender arising from or in connection with the Original Credit Agreement or the other Loan Documents and any such claim is hereby irrevocably waived and released and discharged forever.

7.Governing Law. This Agreement shall be governed by and construed under the laws of the State of Missouri without giving effect to choice or conflicts of law principles thereunder.

8.Fees and Expenses. Borrowers shall promptly pay to Administrative Agent an amount equal to all reasonable and documented third party fees, costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Third Amendment to Credit Facilities Agreement.

9.Section Titles. The section titles in this Agreement are for convenience of reference only and shall not be construed so as to modify any provisions of this Agreement.

10.Counterparts; Facsimile Transmissions. This Agreement may be executed in one or more counterparts and on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures to this Agreement may be given by facsimile or other electronic transmission, and such signatures shall be fully binding on the party sending the same.

11.Incorporation By Reference. Administrative Agent, Lenders and Borrowers hereby agree that all of the terms of the Loan Documents are incorporated in and made a part of this Agreement by this reference.

12.Notice—Oral Commitments Not Enforceable. The following notice is given pursuant to Section 432.045 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.  TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

13.Statutory Notice-Insurance. The following notice is given pursuant to Section 427.120 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

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UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS.  THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL.  YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT.  IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.  THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written.

GTSI CORP, as a Borrower
By:	/s/ Thomas A. Mutryn
Name: Thomas A. Mutryn
Title: Senior Vice President and Chief Financial Officer
TECHNOLOGY LOGISTICS, INC., as a Borrower
By:	/s/ Todd Leto
Name: Todd Leto
Title: Vice President of Operations
GE COMMERCIAL DISTRIBUTION FINANCE CORPORATION,
as Administrative Agent and a Lender
By:	/s/ David Mintert
Name: David Mintert
Title: Vice President of Operations
SUNTRUST BANK, as a Lender
By:	/s/ R. Mark Swaak
Name: R. Mark Swaak
Title: Vice President

4

Exhibit A

Documents and Requirements

1.Third Amendment to Credit Facilities Agreement.

2.Unlimited Guaranty of Loan Obligations executed by GTSI Financial Services.

3.Security Agreement executed by GTSI Financial Services.

4.UCC Prefiling Authorization Letter and UCC Filing with Secretary of State of the state of formation of GTSI Financial Services.

5.Post-Filing UCC records search to confirm first priority.

6.Stock Pledge Agreement executed by GTSI relative to its entire interest in GTSI Financial Services.

7.Secretary’s Certificate of GTSI Financial Services, including resolutions authorizing execution and delivery of the Unlimited Guaranty of all Loan Obligations, the Security Agreement granting Administrative Agent a lien on all assets to secure the Unlimited Guaranty, and each document executed in connection therewith, incumbency certificate, certified formation documents and bylaws.

8.Secretary’s Certificate of GTSI certifying resolutions of Board of Directors authorizing pledge of stock interests of GTSI Financial Services.

9.Good Standing Certificate of GTSI Financial Services from the Secretary of State of Delaware.

10.Current Insurance Certificates for Borrower and each Covered Person evidencing that Borrower and each Covered Person, including GTSI Financial Services has in force insurance meeting the applicable requirements of the Original Credit Agreement.

11.Form of leases to be entered into by GTSI Financial Services as lessor.

12.Financial Statements of GTSI Financial Services.

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Exhibit B

Disclosure Schedule

Nothing, if nothing listed.

6

Exhibit 3

LENDERS’ FACILITIES AND PRO-RATA SHARES

LENDER	TOTALS(1)		REVOLVING LOAN FACILITY		FLOORPLAN LOAN FACILITY		PRO-RATA SHARES
GE Commercial Distribution Finance	$	100,000,000.00	$	72,000,000.00	$	100,000,000.00	80	%
SunTrust Bank	$	25,000,000.00	$	18,000,000.00	$	25,000,000.00	20	%
AGGREGATES	$	125,000,000.00	$	90,000,000.00	$	125,000,000.00	100.00000	%

(1) Subject to the Total Aggregate Credit Facility Limit of $125,000,000 - which can be composed in any combination of Aggregate Revolving Loans (subject to the $90,000,000 Aggregate Revolving Loan Facility) and Aggregate Floorplan Loans (subject to the $125,000,000 Aggregate Floorplan Loan Facility).

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EX-10.17

Exhibit 10.17

SECOND AMENDMENT TO DEED OF LEASE

THIS SECOND AMENDMENT TO DEED OF LEASE (this “Amendment”) is made and entered into as of February 11, 2005, by and between AG/ARG AVION, L.L.C., a Delaware limited liability company (“Landlord”), and GTSI CORP., a Delaware corporation (“Tenant.”)

WITNESSETH:

WHEREAS, Landlord (successor-in-interest to Petula Associates, Ltd.) and Tenant are parties to that certain Deed of Lease dated as of December 10, 1997, as amended by that certain First Amendment to Deed of Lease dated as of April 30, 2003 (as amended, the “Lease”), for certain land and improvements commonly known as 3901 Stonecroft Boulevard, Chantilly, Virginia; and

WHEREAS, Landlord and Tenant desire to modify the amount of the security deposit held under the Lease and make certain other modifications to the Lease in connection therewith, upon the terms and conditions and as more particularly set forth hereinbelow.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth hereinbelow and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Landlord and Tenant, intending legally to be bound, hereby agree as follows:

1.Security Deposit

(a)  Notwithstanding anything to the contrary contained in Section 3(E) of the Lease, in addition to the purpose set forth in Section 3(E)(1) of the Lease, Tenant agrees that the Security Deposit shall also serve as security for Tenant’s faithful performance of Tenant’s obligations under that certain Deed of Lease between Landlord and Tenant dated as of even date herewith for certain premises in the building located at 14700 Avion Parkway, Chantilly, Virginia, as amended from time to time (the “14700 Lease”), subject to the terms and conditions set forth in Section 3(E) of the Lease (as amended hereby) and Section 3(E) of the 14700 Lease.

(b)  Notwithstanding anything to the contrary contained in Section 3(E) of the Lease (i) during the period commencing on the date on which this Amendment is fully executed and delivered and expiring on December 31, 2006, the term “Required Amount” shall mean an amount equal to One Hundred Fifty Thousand Dollars ($150,000), (ii) from and after January 1, 2007, the term “Required Amount” shall mean an amount equal to Two Hundred Thousand Dollars ($200,000), and (iii) except as

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expressly set forth in clause (i) above, there shall be no further reductions in the Required Amount.  The Security Deposit (as so reduced and subsequently increased) shall continue to be in the form of one or more letters of credit meeting the criteria set forth in Section 3(E) of the Lease.

2.Default-Remedies.  Notwithstanding anything to the contrary contained in Section 22(A) of the Lease, (a) the period at the end of Section 22(A)(8) of the Lease is hereby deleted and replaced with the phrase “; and/or” and (b) the following language is hereby added to the Lease as a new clause (9) to Section 22(A):

(9)An “Event of Default” under the 14700 Lease (as defined in the Section Amendment to Deed of Lease).

3.Ratification. Except as otherwise expressly modified by the terms of this Amendment, the Lease shall remain unchanged and continue in full force and effect.  All terms, covenants and conditions of the Lease not expressly modified herein are hereby confirmed and ratified and remain in full force and effect, and, as further amended hereby, constitute valid and binding obligations of Tenant enforceable according to the terms thereof.

4.Authority. Tenant and each of the persons executing this Amendment on behalf of Tenant hereby covenants and warrants that Tenant is a duly organized corporation, validly existing and in good standing under the laws of the Commonwealth of Virginia, that Tenant has full right and authority to enter into this Amendment, and that the person signing on behalf of Tenant is authorized to do so on behalf of Tenant.

5.Binding Effect. All of the covenants contained in this Amendment, including, but not limited to, all covenants of the Lease as modified hereby, shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives and permitted successors and assigns.

6.Effectiveness. The submission of this Amendment shall not constitute an offer, and this Amendment shall not be effective and binding unless and until fully executed and delivered by each of the parties hereto.

7.Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one and the same Amendment.

8.Recitals.  The foregoing recitals are intended to be a material part of this Amendment and are incorporated herein by this reference.

9.Defined terms.  Unless otherwise provided herein, all terms used in this Amendment that are defined in the Lease shall have the meanings provided in the Lease.

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date first above written.

WITNESS:	LANDLORD:
	AG/ARG AVION, L.L.C.,
	a Delaware limited liability company
	By:	Advance Realty Management, Inc.,
		a New Jersey corporation, its agent
/s/ Nancy Teare	By:		/s/ David Fisher
	Name:		David Fisher
	Title:		Senior VP
WITNESS/ATTEST:	TENANT:
	GTSI CORP., a Delaware corporation
/s/ Charles E. DeLeon	By:		/s/ Thomas A. Mutryn
	Name:		Thomas A. Mutryn
	Title:		Senior VP and CFO

3

EX-10.19

Exhibit 10.19

GTSI

2005 EXECUTIVE INCENTIVE COMPENSATION PLAN

I.  Introduction

The 2005 Executive Incentive Compensation Plan, (“the Executive Plan” or the “Plan”), seeks to motivate and reward Executive employees for helping GTSI achieve and exceed its 2005 sales, financial and strategic goals. The Executive Plan focuses attention on specific performance measures that lead to increased net profit and shareholder value.

The provisions in this Plan apply to employees in Executive positions who are eligible for only this incentive Plan, which occur during the term of the Plan year, which begins January 1, 2005 and extends through December 31, 2005.

For calendar year 2005, there will be four measurement periods corresponding to the four (4) calendar quarters.    Each measurement period will be evaluated separately against the respective plan Earnings Before Tax (“EBT”) objective.

II.  Eligibility & Participation

Participation in this Plan is limitedto Executive employees.  Participants generally hold one of the following titles:  CEO, Senior Vice President, Group Vice President and Vice President.  The Compensation Committee of the Board of Directors specifically approves these employees for participation.  Participants in the Executive Plan are excluded from participating in other GTSI annual cash-based incentive plans (outside of the LTIP and stock).

Employees hired during the year will be eligible for a pro-rated incentive starting on their date of hire.  Part-time employees are eligible for a pro-rated incentive based on their scheduled time as a percent of a full-time schedule.  Those employees who transfer or are promoted from one position to another are eligible for pro-rated incentives for both their new position and prior position.

Eligibility for participation and receipt of compensation under the Plan are expressly conditioned upon strict compliance with GTSI’s policies and procedures regarding ethical business conduct, appropriate business practice, and proper handling of contacts with customer and government representatives, vendors, agents, brokers and other intermediaries.  GTSI has full authority to cancel incentive compensation eligibility if, in its sole discretion, it finds noncompliance with such policies and procedures.

III. Total Compensation

All Plan participants will receive a base salary and an incentive. The target incentive is usually expressed as a percent of the participant’s base salary.   In these cases, GTSI will calculate the target incentive amount by applying the target incentive percent to the base salary in effect as of the beginning of the designated period.

IV.  Target Incentive

Target incentive, which is expressed as a fixed dollar amount, is the amount earned for achieving 100% in all of the assigned incentive categories.  For employees who are participating in the Plan for a partial year, the target incentive amount is calculated by pro-rating the target incentive by the number of months they are eligible as defined in Section II.  Any increases in base salary received during the year will be reflected in the target for the next designated period.

The annual target incentives for the following positions are defined as follows:

Position	Annual Target Incentive as a Percentage of Base Salary
Chairman & CEO	100% (80% EBT; 20% MBO)
Sr. Vice President/CFO	40 – 50%
Group Vice President Sales and Vice President Sales	40% - 70% (at least 50% EBT with remainder based on MBO)

V.  Incentive Categories & Weighting

Participants are evaluated on attainment of defined objectives, on a period-by-period non-cumulative basis.

The following percentage applies for each designated period:

January – March	1/6th of the annual payout
April – June	1/6th of the annual payout
July – September	1/3rd of the annual payout
October – December	1/3rd of the annual payout

Over-achievement on the Executive Plan will yield a payout that is higher than the target incentive amount.  Conversely, underachievement will deliver a payout that is less than the target incentive amount.

At the end of each calculating period, the incentive amount earned for the Executive Plan will be the period’s achievement; interpolating the payout percent from the appropriate schedule and multiplying the result by the category’s target incentive amount.  The resulting payout will be rounded to the nearest dollar.

In the event of unusual nonrecurring events, GTSI may, at its sole discretion, adjust the incentive schedule to reflect more accurately the contributions of participants in the Plan.

Company Financial Goals (EBT)

•Earnings before Tax (consistent with GAAP accounting)

The Compensation Committee of the GTSI’s Board of Directors establishes the Company’s EBT goals and the attainment range/minimum and maximum payment levels.

VI. Incentive Calculation for Achievement of Company Financial Goals  – EBT

The 2005 Executive Plan has four (4) designated periods.  Each period is independent of the other and each period has three unique Company Financial Goal (EBT) achievement thresholds.  These thresholds represent (a) the entry point into the Plan; (b) 100% achievement of Plan; and (c) maximum payout of the Plan.  The range of achievement from entry to maximum payout is 0% to 200% payout of the Participant’s target incentive.

VII.  Administration

All incentive compensation earned under this Plan will be credited and scheduled to be paid within 45 days after the close of the quarter.

A participant must be an active employee as of the payment date to be eligible for payout under this plan.  The Plan is administered by the Vice President, Human Resources in coordination with Finance and the various department leaders, subject to approval by the CEO.

VIII.  Payment Terms Upon Separation of Employment or due to Death or Disability

Participants whose employment ends because of death or disability after completion of a designated period, but before payment, shall remain eligible for any incentive otherwise due for the designated period.   GTSI shall make such determination of the applicability of this provision, in its sole discretion.

X.  General Conditions

Participants who are on a performance improvement plan (PIP) at any time during a designated period are not eligible for an incentive payment for performance during such period (s).

All employees of the Company are employed in an “at will” capacity which means that either the employee or the Company may terminate the relationship at any time with the understanding that neither party has the obligation to base that decision on any reason other than their intent not to continue the employment relationship.  Nothing in this Plan shall in any way diminish or limit the Company’s right to terminate the employment of any employee at will at any time, in its sole discretion.

If any GTSI employee disputes any aspect of this Plan or any GTSI decision with respect to any incentive received under this Plan, the employee must submit written notice of the dispute to the direct supervisor within four months after the employee’s receipt of the applicable payment.  Failure to do so will constitute a waiver by the employee of any such complaint or claim.

GTSI reserves the right to revise any of the provisions of this Plan or to terminate the Plan itself at anytime during the year, without prior notice.  In any such case, GTSI will distribute the revisions or notice of termination to affected employees.

The issuance of this Plan does not, in any way, commit GTSI to pay a similar kind of compensation in any subsequent year.  GTSI may eliminate or reduce incentive compensation at any time during the year, without prior notice provided that payment is made for the period prior to the effective date of the change and the Plan participants are notified in writing.

EX-10.20

Exhibit 10.20

FORM OF GTSI CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (“Agreement”) is entered into as of January 01, 2005 (the “Effective Date”), by and between                                 (“Executive”) and GTSI Corp. (the “Company”), a Delaware corporation. The Agreement provides, without changing the nature of the at-will employment relationship, certain benefits if the Executive is terminated after the Company affects a change of control, all as outlined below.

1.  Terms and Termination Of Employment.

1. 1Definition. The capitalized terms used in this Agreement will have the meaning set out in Exhibit  A – Definitions.

1.2Change of Control Termination. In the event Executive’s employment with the Company is terminated without Cause, or the Executive resigns for Good Reason during the Change of Control Period, or events leading to Executive’s resignation for Good Reason are effected in anticipation of a Change of Control, including but not limited to an attempt to avoid the Company or its successor’s obligations under this Agreement, then the following will occur:

(a) Company will provide to Executive, within thirty (30) days after the effective date of such termination without Cause or resignation for Good Reason, a severance payment, subject to standard withholdings and deductions, in an amount equal to   [X]   months (“Period”) of the Executive’s Annual Total Target Compensation.  This amount will be paid for over a total of [X] months, payable in bi-monthly payments on GTSI’s normal pay periods. Payments will begin on the initial pay period following the Effective Date. In addition, the Company will provide, at its expense, said Executive with continued group health insurance benefits (medical, dental and vision) for Executive and Executive’s eligible dependents under COBRA for a period of up to [X] months following the effective date of Executives termination without Cause or resignation for Good Reason; or the Executive is gainfully employed at another place of work, whichever is sooner.

(b) Any unvested options in Company stock issued to Executive pursuant to the Company’s 1996 Stock Option Plan or Capitalization Plan will have their vesting accelerated in full so as to become one hundred percent (100%) vested and immediately exercisable in full as of the date of such termination.

(c) Prior to Executive gaining the right to receive, and in exchange for, the severance compensation, benefits and option acceleration provided in Sections 1.2 (a) and (b) above, to which Executive would not otherwise be entitled, Executive will first enter into and execute a release substantially in the form attached hereto as Exhibit B (the “Release”) upon Executive’s termination of employment. Unless the Release is executed by Executive and delivered to the Company within twenty-one (21) days (forty-five (45) days in the event of a group termination) after the termination of Executive’s employment with the Company, Executive will not receive any severance benefits provided under this Agreement, acceleration, if any, of Executive’s Options as provided in this Agreement will not apply and Executive’s options in such event may be exercised following the date of Executive’s termination only to the extent provided under their original terms in accordance with the applicable stock option plan and option agreements.

1.3  Gross-up Payment.

(a) In the event it is determined that any payment or distribution by the Company to or for the benefit of the Executive in accordance with Section 1.2 above (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the Executive will be entitled to receive an additional payment (a “Gross-up Payment”) in an amount such that, after payment by the Executive of the excise tax imposed by Section 4999 of the Code on the Gross-up Payment, the Executive retains an amount of the Gross-up Payment equal to the excise tax imposed upon the Payment. Executive and Company agree to use commercially reasonable efforts to reach mutual agreement, upon advise from each party’s tax advisors, regarding the applicable excise tax and the amount of the Gross-up Payment.

(b) The Executive will notify the Company in writing of any inquiry, claim or proceeding brought by the Internal Revenue Service, or other state or federal taxing authority, that would result in a requirement by the Company to pay the Gross-up Payment. The Executive will provide such notice within thirty (30) days of its receipt.

1.4  At-Will Employment. Executive’s relationship with the Company continues to be an at-will employment relationship. The Company or Executive has the right to terminate Executive’s employment with the Company at any time with or without Cause and with or without notice. Nothing in this Agreement confers upon the Executive any right to continue in the employ of the Company prior to, or after a Change of Control of the Company or in any way limit the rights of the Company, except as expressly stated herein, to discharge the Executive at any time prior to, or after the date of a Change of Control of the Company for any reason whatsoever, with or without cause.

2.   General Provisions.

2.1 Notices. Any notices provided will be in writing and will be deemed effective upon personal delivery (including, personal delivery by facsimile transmission), the day delivery is confirmed by a national courier, or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his/her address as listed on the Company payroll (which address may be changed by written notice).

2.2  Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability will not affect any other provision or any other jurisdiction, and such invalid or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to render it valid and enforceable consistent with the intent of the parties insofar as possible.

2.3 Waiver. Any waiver of a breach of any provisions of this Agreement will not be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

2.4  Entire Agreement; Survival. This Agreement, together with Executive’s offer letter (if any), the GTSI Non-Disclosure Agreement signed by the Executive (if any) forms the complete and exclusive statement of Executive’s employment with the Company, and will survive any Change of Control. This Agreement is entered into without reliance on any promise, representation, statement or agreement other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by Executive and another duly authorized officer of the Company. The terms and conditions of the Company’s Director and Officers Insurance Policy, that by their nature survive Executive’s termination of employment with the Company shall also survive any termination hereunder.

2.5  Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.

2.6  Attorneys’ Fees. If either party brings any action to enforce the rights hereunder, the prevailing party in any such action shall be entitled to recover his/her or its reasonable attorneys’ fees and costs incurred in connection with such action.

2.7  Governing Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the Commonwealth of Virginia as applied to contracts made and to be performed entirely within Virginia.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the Effective Date above written.

GTSI Corp.
		Executive	Date
By:
	M. Dendy Young
	Chief Executive Officer

GTSI Change of Control Provision, Exhibits

Exhibit A

Definitions

The following definitions will apply to the GTSI Change of Control Agreement:

(a) ”Total Target Average Annual Compensation” means the average of the Executive’s annual rate of base salary and incentive as in effect on the day prior to the termination without cause or resignation for Good Reason.

“Cause” means Executive’s (i) willful and continued failure to substantially perform his/her duties with the Company or willful and continued failure to substantially follow and comply with the specific and lawful directives of the CEO, as reasonably determined by the CEO (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after notice of resignation), after a written demand for substantial performance is delivered to the Executive by the CEO, which demand specifically identifies the manner in which the CEO believes that the Executive has not substantially performed his/her duties, (ii) conviction of any felony involving moral turpitude; (iii) engaging in illegal business practices or other practices contrary to the written policies of the Company; (iv) misappropriation of assets of the Company; (v) continual or repeated insobriety or drug use; (vi) continual or repeated absence for reasons other than disability or sickness; (vii) fraud; or (viii) embezzlement of Company funds.

“Change of Control” means (i) the acquisition by any individual or entity resulting in the control of 50% or more of outstanding shares of GTSI; (ii) a change in a majority of the Company Board of Directors (other than through an “act of God”) and clearly related to the acquisition if the change occurred during any 12 consecutive months, and the new directors were not elected by the Company’s stockholders or by a majority of the directors who were in office at the beginning of the 12 months; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation (and the consummation thereafter), other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation.

“Change of Control Period” means the period of time starting six (6) months prior to the date the Change of Control is effected and ending twenty-four (24) months following such Change of Control.

“Good Reason” means any one of the following events (so long as Executive tenders his resignation to the Company within sixty (60) days after the occurrence of the event which forms the basis for any termination for Good Reason and clearly related to the Change of Control event): (i) any reduction of the Executive’s then existing annual base salary or annual bonus target; (ii) any material reduction in the package of benefits and incentives, taken as a whole, provided to the Executive (except that employee contributions may be raised to the extent of any cost increases imposed by third parties as applied to the Company as a whole) or any action by the Company which would materially and adversely affect the Executive’s participation or reduce the Executive’s benefits under any such plans, except to the extent that such benefits and incentives are reduced as to be made equivalent to the benefits and incentives of all other executive officers of the Company and/or its successor or assign; (iii) any diminution of the Executive’s duties, responsibilities, authority, reporting structure, titles or offices, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith which is remedied by the Company immediately after notice thereof is given by the Executive; (iv) request that the Executive relocate to a work site that would increase the Executive’s one-way commute distance by more than thirty-five (35) miles from his then principal residence, unless the Executive accepts such relocation opportunity; (v) any material breach by the Company of its obligations under this Agreement; or (vi) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company.

Exhibit B

RELEASE AND OBLIGATION AGREEMENT

I understand that my position with GTSI Corp. (the “Company”) terminated effective                                (the “Separation Date”).  The Company has agreed that if I choose to sign this Release, the Company will, within thirty (30) days after the Effective Date of this Release and Obligation Agreement (“Release”), pay me certain severance benefits (minus the standard withholdings and deductions) pursuant to the terms of the GTSI Change of Control Agreement (the “Agreement”) entered into on                               between myself and the Company, and any agreements incorporated therein by reference.  I understand that I am not entitled to such severance benefits unless I sign and comply with this Release.  I further understand that, regardless of whether I sign this Release, the Company will pay me all of my accrued salary and paid time off through the Separation Date, to which I am entitled by law.

In consideration for the severance benefits I am receiving under the Agreement, I agree to the following:

Non-Compete. I agree that for [X] months from the Separation Date, I will not, without the prior written consent of GTSI’s CEO  (or equivalent), either directly or indirectly, for myself or on behalf of or in conjunction with any other person, company, partnership, corporation, business, group or other entity, as an officer, director, owner, partner, member, joint venture, or in any other capacity, whether as an employee, independent contractor, consultant, advisor or sales representative provide managerial services in support of a “Competitive Business”.  I understand that the term “Competitive Business” means and includes any business or activity (to include a division or group within a corporation), as it relates to the sales of information technology products and/or services to any U.S. federal, state of local government entity, and its annual sales primarily consist of Information Technology (“IT”) products and IT product-related solutions that are substantially the same as any material business or significant activity conducted by GTSI during my period of employment with GTSI; and has an office that is within fifty (50) miles of each and every one of GTSI’s place of business (including its facilities and employee’s home offices).  For purpose of clarification, but in no way limiting the foregoing, the federal, state or local business of the following companies will be considered Competitive Businesses:  Dell Corporation Public Sector, Northrop Grumman IT, APTIS, GovConnection, iGov, DLT Solutions, Lockheed Martin IT, Government Micro Resources, World Wide Technology, Insight Enterprises, Inc., Vion Corporation, and CDW-G.

Non-Solicitation of Employees. I also agree that for 6 months from the Separation Date, I will not, without the prior written consent of GTSI’s CEO (or equivalent) solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, as of the Separation Date or within 6 months prior to that date, was employed by GTSI or a subsidiary as an employee, manager or executive and with whom I had material contact during the course of his employment with GTSI (whether or not such person would commit a breach of contract).

Non-Solicitation of Customers and Non-Disparagement. I acknowledge that I owe GTSI a duty of loyalty, and to preserve and protect, among other things, GTSI’s Confidential Information, as well as GTSI’s relationships with its present and potential customers and partners. As a result, I agree that for 6 months from the Separation Date, I will not solicit or make any statement or do any act intended to cause such customer or partner to make use of or obtain from any person or business, services or goods which are similar or related to those offered by GTSI; or discuss with any other GTSI employee the present operations or formation and future operations of any business competing with or intended to compete with GTSI. I further agree, that my communications with any GTSI employee, customer, vendor, supplier and any competitor and any person associated with any media) which in any way relates to GTSI or to GTSI’s directors, officers, management or employees:  (1) will be truthful; and (2) will not disparage or undermine the reputation or business practices of GTSI or its directors, officers, management or employees.

Release: I hereby release GTSI and its officers, directors, agents, attorneys, employees, shareholders, parents, subsidiaries, and affiliates from any and all claims, liabilities, demands, causes of action, attorneys’ fees, damages, or obligations of every kind and nature, whether they are now known or unknown, arising at any time prior to the date I sign this Release.  This general release includes, but is not limited to:  all federal and state statutory and common law claims, claims related to my employment or the termination of my employment or related to breach of contract, tort, wrongful termination, discrimination, harassment, defamation, fraud, wages or benefits, or claims for any form of equity or compensation.  Notwithstanding the release in the preceding sentence, I am not releasing any right of

indemnification, or Company Director and Officer insurance protection, I may have for any liabilities and costs of defense (including without limitation reasonable attorneys’ fees) arising from my actions within the course and scope of my employment with the Company.

If I am forty (40) years of age or older as of the Separation Date, I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”).  I also acknowledge that the consideration given for the waiver in the above paragraph is in addition to anything of value to which I was already entitled.  I have been advised by this writing, as required by the ADEA that:  (a) my waiver and release do not apply to any claims that may arise after my signing of this Release; (b) I should consult with an attorney prior to executing this Release; (c) I have twenty-one (21) days (forty-five (45) days in the event of a group termination) within which to consider this Release (although I may choose to voluntarily execute this Release earlier); (d) I have seven (7) days following the execution of this release to revoke the Release; and (e) this Release will not be effective until the eighth day after this Release has been signed both by me and by the Company (“Release Effective Date”).

Agreed:
	Date	[Executive]

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements of GTSI Corp. on Form S-8 (File No. 333-29439, 333-62681, 333-78199, 333-59478, 333-88360, 333-112738, 333-117058, 333-44922) of our reports dated March 11, 2005 with respect to the consolidated financial statements and financial statement schedule of GTSI Corp., GTSI Corp. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of GTSI Corp. included in this Annual Report (Form 10-K) for the year ended December 31, 2004.

	/s/ Ernst & Young, LLP
McLean, Virginia
March 14, 2005

EX-31.1

Exhibit 31.1

Written Certification of Chief Executive Officer

I, M. Dendy Young, certify that:

1.  I have reviewed this annual report on Form 10-K of GTSI Corp.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13s-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and       procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrants’ internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based upon our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 15, 2005

/s/ M. DENDY YOUNG

M. Dendy Young

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Written Certification of Chief Financial Officer

I, Thomas A. Mutryn, certify that:

1.  I have reviewed this annual report on Form 10-K of GTSI Corp.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13s-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or cashed such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrants’ internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based upon our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrant’s board of directors:

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 15, 2005

/s/ THOMAS A. MUTRYN

Thomas A. Mutryn

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, M. Dendy Young, Chairman and Chief Executive Officer of GTSI Corp. (“the Company”) and Thomas A. Mutryn, Senior Vice President and Chief Financial Officer of the Company, certify that the Annual Report on Form 10-K for the year ended December 31, 2004 filed by GTSI Corp. with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents in all material respects, the financial condition and results of operations of GTSI Corp.

Date:March 15, 2005

/s/ M. DENDY YOUNG

M. Dendy Young

Chairman and Chief Executive Officer

/s/ THOMAS A. MUTRYN

Thomas A. Mutryn

Senior Vice President and Chief Financial Officer